Banks push for two years on Pakistan debt

02 July 1999
FINANCE

Banks working on the rescheduling of $510 million worth of Pakistan debt are pressing for the payment period to be stretched by no more than two years. However, some members of the group of eight creditor banks are understood to be prepared to accept a three-year solution, which is closer to the three-and-a-half-year package proposed by Pakistan.

The banks were to meet with Pakistani officials for the third time on 28 June for what was planned to be the final round of negotiations. The consortium is made up of The Arab Investment Company, ABC Islamic Bank, Faysal Islamic Bank of Bahrain, Dubai Islamic Bank, Citibank, ABN AMRO, ANZ Grindlays and Chase Manhattan (MEED 4:6:99). 'There's a fair chance that if no agreement can be reached on two years, the banks will settle for three,' says one banker involved in the deal.

The meeting follows a proposal put by Pakistan's Finance Minister Ishaq Dar and governor of the State Bank of Pakistan (central bank) during negotiations held on 17 June for the debt to be rescheduled over three-and-a- half years. A source close to the deal says that while the consortium was divided over the offer, more than half the banks were willing to accept it. Citibank was prominent among the institutions insisting on a two-year rescheduling, he says.

'The important thing now is to resolve the issue,' the banker says. 'On 28 June, the banks will either all offer two years, or all will offer three years. If agreement can't be reached, I suspect the consortium will dissolve and individual banks will conclude individual deals.' The lack of attractive alternatives is likely to encourage compromise. 'If no deal is reached, the only other option is to take the matter to the London Club, and no party wants that,' he says.

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