By Muskan Naveed ISLAMABAD, March 24 (INP-WealthPK): The government of Pakistan and the Saudi Fund for Development (SFD) have signed two debt service agreements under the G20 Debt Service Suspension Initiative (DSSI) – which aims to give relief to developing countries in terms of debt servicing so that they can focus on fighting the fallouts of the coronavirus pandemic. The two agreements signed amounted to $846 million. Saudi Ambassador to Pakistan Nawaf bin Saeed Al-Malkiy and Saudi Fund for Development’s director general for Asia Dr. Saud Ayid Raishammari were present at the debt servicing signing ceremony. The external imbalances have been putting pressure on the Pakistani economy, which reels from twin deficits – current and fiscal – forcing the government to resort to increased internal and external borrowings to run its affairs. Interest payments on debt servicing account for 36% of the total budget. The government has also targeted to finance 94% of the Rs3.99 trillion fiscal deficit through borrowings. Although the recent rebasing of the Gross Domestic Product resulted in an improvement in the government’s public debt-to-GDP ratio, decreasing it from 83.5% to 71.8%, concerns persist as the government’s debt has recorded an increase of 16% year-on-year in January. The country’s external debt makes up a huge chunk of the total debt. External debt contributed 35% to the total public debt of Rs42.394 trillion recorded at the end of January. The situation was further exacerbated by the global pandemic – which is why the DSSI framework came at a crucial point for many developing countries. The initiative came into effect in May 2020 and is aimed at helping developing countries bootstrap so they can focus their efforts and resources on the pandemic and securing the most vulnerable people. The DSSI, which was initially to remain in effect from May 2020 to December 2021, has now been rescheduled and covers a period of six years with biannual payments starting in 2022. The amount suspended under the DSSI framework with the Saudi Development Fund is $846 million, while the total debt suspended as well as scheduled under the framework amounts to $3,688 million. Out of the total amount, $2,934 million has already been rescheduled, while negotiations for the remaining $754 million are ongoing and expected to come to fruition soon. Pakistan has also been able to secure financial support from other major lenders through the debt service suspension initiative under the G-20 DSSI – including China, the United Arab Emirates, World Bank, Asian Development Bank, Islamic Development Bank and other bilateral lenders. The DSSI has given the Pakistani economy the necessary fiscal space to recover from the shocks of Covid-19 pandemic.