Pakistan debt plan to be signed

17 December 1999
FINANCE

A group of eight regional and international banks were on 12 December to sign an agreement with Pakistan over the rescheduling of $512 million worth of trade debt.

'If nothing else happens, we are on the cusp of finally closing this deal,' says one banker involved in the negotiations which have been running since May. 'I'm flying to Islamabad, and I'm looking forward to seeing this all signed away.'

The terms of the deal have not changed from the agreement reached in July for the outstanding debt to be rescheduled over a three-year period (MEED 16:7:99). But the final signing has been delayed by the mid-October military coup carried out by General Pervez Musharraf. Interest on the debt is to be paid at 100 basis points (bp) over Libor for the first year, 125 bp in the second year and 150 bp in the third.

The banker says that Pakistan has honoured the agreement so far, and paid all the necessary instalments due since 1 July. 'They have even agreed to bring forward the instalment scheduled for payment on 29 December, for fear of Y2K disruption,' he says.

The eight banks involved are Arab Banking Corporation, The Arab Investment Company, Dubai Islamic Bank, Faysal Islamic Bank of Bahrain (FIBB), ABN AMRO, Citibank, ANZ Investment Bank and Chase Manhattan Bank. The four regional institutions account for about 45 per cent of the total debt, or $230 million. FIBB has acted as agent for the deal, called the Pakistan Trade Maintenance Agreement.

Analysts say that Pakistan is making progress with a swaps programme to reschedule outstanding Eurobonds worth $610 million (see Pakistan). Restructuring of the country's $32,000 million foreign debt has been hampered by a determination on the part of the Paris Club to apply the principle of parity of treatment of the debt.

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