The Governments of Japan and Pakistan agreed on debt deferral amounting to approx. US$200 million on October 22, 2021, as the second phase of “the G20 Debt Service Suspension Initiative (DSSI)”. Prior to this, both Governments agreed on the first debt deferral amounting to approx. US$370 million on April 27, 2021, under the same initiative. The total amount of deferred debt has reached approx. US$570 million, which will widen the fiscal space for the Government of Pakistan to restore its economy affected by the COVID-19 pandemic.
The concessional loans, subject to debt deferral, have been utilized for infrastructure development such as roads, tunnels, power plants and grids, irrigation, water supply, and drainage facilities in Pakistan from the early 1990s to the mid-2010s. These concessional loans have favorable conditions for Pakistan in terms of low interest rate, as well as long grace and repayment period. Under the second agreement, repayments for the debt and interest due between January 1 and June 30, 2021 will be rescheduled after December 15, 2022.
In addition to the debt deferral, Japan has also extended a total of US$23.5 million in grants to Pakistan for supplementing its counter-COVID-19 measures.