Pakistan is seeking the rescheduling of $10 billion worth of debt owed to the Paris Club – a group of wealthy nations, to create breathing space for the cash-strapped government which is in the midst of efforts to rehabilitate more than 33 million people hit by devastating floods, according to a media report on Saturday.

Prime Minister Shehbaz Sharif also requested International Monetary Fund (IMF) Managing Director Kristalina Georgieva to provide upfront with the remaining loan of nearly $3 billion in November this year, The Express Tribune reported Finance Minister Miftah Ismail as saying on Friday.

“Given the climate-induced disaster in Pakistan, we are seeking debt relief from bilateral Paris Club creditors,” he said in a tweet.

It is the third time that Pakistan’s debt will be rescheduled by the 17 members of the Paris Club in the past 20 years. Earlier, after Pakistan became an ally of the US in the war against terror, the Paris Club rescheduled loans for 15 years. For the second time, the debt was rolled over for three to four years in the aftermath of the Covid-19 outbreak.

Breathing space

Pakistan’s public sector external debt stood at $97 billion as of June this year, of which it owed $9.7 billion to the Paris Club, according to the Ministry of Finance documents.

This year, Pakistan is scheduled to return $1.1 billion of Paris Club debt out of the total of $10 billion. Some $400 million of Japanese debt is maturing this year, followed by $300 million of France, $200 million of the US and around $100 million of Germany, according to the economic affairs ministry.

The rescheduling of $1.1 billion Paris Club debt will immediately create breathing space of about ₹260 billion that the country can utilise to help flood victims.

Ismail’s statement marks a departure from his earlier stance when he ruled out the possibility of debt rescheduling.

The finance minister said it was possible that the Paris Club member countries could roll over their bilateral debt without putting the condition of first getting the commercial loans rolled over.

Mammoth challenge

Ismail added that Pakistan was hopeful that the IMF would respond positively as the country was not in a position to meet the conditions and then get the remaining loan in three tranches.

IMF’s $1.1 billion tranches were released in September, which would be part of the next monthly debt bulletin.

However, the Paris Club debt rescheduling alone will not ease Pakistan’s problems. The country also owes $16 billion to non-Paris Club countries, mainly China, to which Islamabad has to pay $14.5 billion.

Overall, Pakistan faces a mammoth challenge to service over two-thirds, or $66 billion, of the total external public and publicly-guaranteed repayments in five years.