Thursday, December 16, 2010

Pak, Italy govts agree to cancel 50% of Pak debt

Pak, Italy govts agree to cancel 50% of Pak debtStaff Report

ISLAMABAD: On the basis of the Paris Club Debt Rescheduling agreement of 2001, the government of Pakistan and Italy agreed to cancel 50% of the debt owed by Pakistan for the expenditure already incurred on Afghan refugees. The remaining 50% of the debt ($26.52 million & 58.74 million euros) was agreed to be swapped for the jointly agreed social and developmental projects under a “Debt for Development Swap Agreement” signed on November 4, 2006.

Debt conversion was to be effective in five annual tranches on June 30th of each year. Each annual tranche equal to 1/5th of the total debt amount shall be converted in Pak rupees at the exchange rate quoted by State Bank of Pakistan on that day and deposited in a counterpart fund operated through an assignment account. First tranche was deposited in 2007 and so far four tranches have been deposited. Estimated total funds under the debt swap are Rs 8.067 billion.

Funds under the debt swap agreement are to be utilised on jointly agreed projects aiming at socioeconomic development in the priority sectors of agriculture, health, education and basic infrastructure. To manage and oversee the utilisation of funds, a management committee has been established Co-chaired by Italian Ambassador and Secretary EAD with representation from all the provinces, Ministry of Finance, Planning Commission and Ministry of Foreign Affairs.

Utilisation of funds has been 33% of the existing projects in its first year i.e. by June 30, 2010 totaling an amount of Rs 940.91 million. Management committee, which is to be co-chaired by the Italian Ambassador, endorsed cancellation of this amount in its meeting held on August 11, 2010.

Third management committee meeting was held on August 11-19, 2010, which approved 23 projects worth Rs 3.137 billion. Terms of reference have been signed with 15 of them and the first semester. First semester installment for the projects with which the terms of reference have been signed, amounts to Rs 222.38 million.

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