Demand that our debt be cancelled

If Haiti recently can have its debt written-off in the wake of devastating natural calamities, why can't we?

Pakistan has incurred billions of dollars in losses due to the floods at a time when the national economy was already struggling. Our policy makers need to seriously rethink how to best salvage the country and prevent further misery.

The government has been requesting a reluctant international community to come to its aid. Humanitarian support has been arriving, in the form of logistical support and relief goods. More aid promises have been made, but the disbursals are slow, and how much of the pledged money will eventually reach Pakistan remains to be seen. Meanwhile, the IMF, World Bank and the Asian Development Bank have indicated their willingness to give us more loans. But is securing more loans a wise move, despite the present desperation to secure short-sighted reprieve? Our total external debt is projected to be around $74 billion by 2014-5. Servicing this debt, and our high defence expenditures, will not leave much money for anything else.

This situation has rightly motivated civil society groups to launch a campaign demanding a debt write-off for Pakistan. They are backed by the international Jubilee Debt Campaign, which considers it morally reprehensible for donors to force Pakistan to repay its loan obligations at this precarious stage.

These campaigners are pointing out how highly indebted countries such as Haiti have recently had their debt written-off in the wake of devastating natural calamities. While Pakistan does not have a similar debt situation as Haiti, the enormous losses caused to the economy due to the war against terror, coupled with the growing anxiety of the international community that nuclear-armed Pakistan does not destabilise, make our case fairly strong. The foreign minister recently alluded to the possibility of a debt write-off, but this option has to be pursued much more assertively. Nothing less than a complete parliamentary consensus on this urgent issue will make the donors take us more seriously.

Analysts are pointing out that this time around Pakistan’s debt crisis cannot be averted by a typical re-scheduling arrangement, as happened during the early years of the Musharraf government. Such arrangements serve only to delay the inevitable.

A large bulk of Pakistan’s external debt is due to the World Bank, ADB and the IMF. These institutions are not likely to write-off our loans, even if they are willing to lend us more in order to enable debt-servicing. What we need to focus on are debt write-offs from individual countries. America can throw its weight around to persuade other major bilateral donors – Japan, France, Germany, and the Saudis – to consider writing off our debt. Doing so may prove a much less costlier option for them in the longer run to help promote peace and security in this broader region.

Twice before, our leaders let go of ideal opportunities of using our geo-strategic nuance value to secure a write-off in lieu of very short-term aid, during the US-Soviet proxy war in Afghanistan and then after 9/11. However, there is still a lot of international anxiety about Pakistan, which can be leveraged to negotiate debt write-offs. To further convince donors, the government could even guarantee how the resulting fiscal relief will be utilised. Devoting a sustained flow of resources towards flood relief and rehabilitation, aiming to calm escalating tensions, and promoting widespread development are deserving issues which could benefit from the potential bilateral donor generosity.

Published in The Express Tribune, September 10^th, 2010.