Pakistan has prepaid $ 1.17 billion debt to the Asian Development Bank (ADB) ahead of schedule and is hopeful of prepaying another $ 1 billion during 2004, Finance Minister Shaukat Aziz told a press briefing.
He said it would cut the foreign debt to $ 33.5 billion by June 2004 from $ 38.6 billion five years ago. The money would be wired on Thursday, without hurting Pakistan's forex reserves because many transactions of inflow and outflow occur these days.
Earlier in the morning, the finance minister handed over the cheque to ADB's Resident Representative Marshuk Ali Shah in the President House where President General Pervez Musharraf and Prime Minister Mir Zafarullah Khan Jamali were also present.
The president said, "It (prepayment) is a great achievement and will have a snowball effect on the economy by improving our balance of payments, drawing more investors and making additional funds available for the development projects."
He said, "It is a historic day for the country as a few years ago Pakistan was mired in debt and has come to this stage after a sea change creating current account surplus and reviving growth."
The expensive loans of $ 1.1 billion that were returned to the ADB carried interest rates in the range of 6.5 percent to 14 percent. It is estimated that nearly, $ 300 million have been saved, as the maturity period of 14 loans was 2009-2019.
The financing of this $ 1.17 billion came from various sources, including the SBP's Sinking Fund and raising from local and foreign market.
Out of a major loan of Ghazi Barotha of $ 300 million, $ 150 million was to be prepaid after giving the ADB assurance that work on the dam would be completed without delay. For that Wapda has recently asked the commercial banks to give it $ 50 million loan.
He said the prepayment reflected the country's resolve to reduce its debt burden, which for a long time had stifled the growth potential of the economy.
Tracing its effects on the availability of additional funds, the president said when his government took over in 1999, the debt-servicing liability as a proportion of the budget was over 64 percent, which meant only 36 percent was left for the development funds.
"As we kept reducing and restructuring our debt, the debt-servicing liability is shrinking," President Musharraf said, adding that with the $ 1.1 billion repayment, the liabilities have gone down further to around 30 percent.
"It means that instead of 36 percent, now we have 70 percent of the budget available for development," he added.
The president said that debt repayment has also improved the country's balance of payment position. "When we took over the balance of payment was in deficit of $ 4-5 billion. We now have converted it into a surplus and with today's prepayment it will further improve," he said.
The president said as a result of its overall impact on the economy the country would be able to draw more foreign investment.
Referring to the four years of robust reforms the government had undertaken to free the trapped economy, he said, the country's economic sovereignty had been restored and was no more dependent on foreign assistance.
"The macroeconomic stability has been achieved and growth potential of the economy is being unleashed," he added.
Prime Minister Jamali said that his government fully supported continuity and consistency of policies and continuation of structural reforms in every area.
He reiterated his government's commitment to increase economic growth and transferring its benefits to the people. Economic growth this year should be higher than the target of 5.3 percent, which will augur well for the people of Pakistan," he added.
Both the president and the prime minister while congratulating the finance minister and the economic team for the improvement in the balance of payments and overall economic situation said that their efforts have restored country's economic sovereignty.
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