Case Study Analysis
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The external debt burden of the country was reduced through different mechanisms like conversion of loan into Aid (grant), debt write-off and debt to development swaps.
A brief description of measures taken by the government to reduce foreign debt is as under:
Loans written off: Under such type of conversion outstanding loan is completely converted into grant. In such loans, all obligations of debt servicing were waived off. During 2001-04, the sources claimed that the total foreign debt worth $1.561 billion had been written-off by Denmark, Netherlands, USA and UK.
Denmark had written-off foreign loan worth $18.44 million on December 17 2002, Netherlands written-off foreign loan to Pakistan $14.43 million on November 28 2002, USA written-off two loans worth $495.238 million and $1 billion on July 16 2004 and November 5 2001, respectively. The United Kingdom also written-off $33.33 million foreign loan to grant on November 5 2001, the sources claimed. Total volume of written foreign loans to grant was $1.561 billion.
Debt to development swap: It is defined as the cancellation of external debt in exchange for the debtor government’s commitment to mobilisze domestic resources (local currency or another asset) for an agreed purpose i.e. development programme.
Pakistan got debt rescheduling under Paris club arrangement in November 2001. Under the rescheduling agreement there was provision for debt to development swap on voluntary basis. Five donors countries, including Belgium, Canada, Germany, Italy and Norway have been entered into debt swap agreements with Pakistan under this arrangement.
The sources claimed that Pakistan and Belgium have signed a Memorandum of Understanding (MOU) on debt for development swap up to Euro 30 million to finance Pakistan Earthquake Fund (PEF) rehabilitation and reconstruction efforts and priority would be given to social infrastructure in the earthquake areas.
Pakistan and Canada have signed a MoU on April
The external debt burden of the country was reduced through different mechanisms like conversion of loan into Aid (grant), debt write-off and debt to development swaps.
A brief description of measures taken by the government to reduce foreign debt is as under:
Loans written off: Under such type of conversion outstanding loan is completely converted into grant. In such loans, all obligations of debt servicing were waived off. During 2001-04, the sources claimed that the total foreign debt worth $1.561 billion had been written-off by Denmark, Netherlands, USA and UK.
Denmark had written-off foreign loan worth $18.44 million on December 17 2002, Netherlands written-off foreign loan to Pakistan $14.43 million on November 28 2002, USA written-off two loans worth $495.238 million and $1 billion on July 16 2004 and November 5 2001, respectively. The United Kingdom also written-off $33.33 million foreign loan to grant on November 5 2001, the sources claimed. Total volume of written foreign loans to grant was $1.561 billion.
Debt to development swap: It is defined as the cancellation of external debt in exchange for the debtor government’s commitment to mobilisze domestic resources (local currency or another asset) for an agreed purpose i.e. development programme.
Pakistan got debt rescheduling under Paris club arrangement in November 2001. Under the rescheduling agreement there was provision for debt to development swap on voluntary basis. Five donors countries, including Belgium, Canada, Germany, Italy and Norway have been entered into debt swap agreements with Pakistan under this arrangement.
The sources claimed that Pakistan and Belgium have signed a Memorandum of Understanding (MOU) on debt for development swap up to Euro 30 million to finance Pakistan Earthquake Fund (PEF) rehabilitation and reconstruction efforts and priority would be given to social infrastructure in the earthquake areas.
Pakistan and Canada have signed a MoU on April