Japan and Saudi Arabia came to Pakistan’s rescue and pledged $900 million for flood rehabilitation after Western allies gave it the cold shoulder at the Pakistan Development Forum’s (PDF) meeting on Monday.
At the concluding day of forum organised to mobilise more international support for Pakistan’s flood-hit areas, the message from European countries and the US seemed to be “improve governance, introduce power and tax sector reforms and ensure transparency” before seeking new loans for reconstruction.
“Japan will provide an additional 500-million-dollar loan for rehabilitation of damaged roads in Khyber-Pakthunkhwa,” said Makido Kikuta, parliamentary vice minister of Japan. She said that $273 million would be provided as a soft loan and the remaining amount will be given through international development partners.
Meanwhile, Saudi Arabia announced $400 million for reconstruction of flood-affected areas. However, details are yet to be sorted out by both countries. According to the Damage and Needs Assessment report, the floods caused losses worth $10.05 billion and up to $8.9 billion were required to build back smarter.
US special envoy for Afghanistan and Pakistan Richard Holbrooke announced that the US will reallocate assistance funds to Pakistan to target recovery and reconstruction.
“As a demonstration of our sustained commitment to expanding our partnership with Pakistan, and in close consultation with our Congress, the US will commit up to $500 million of the first year of Kerry-Lugar-Berman funds – one third of the civilian assistance budget for the year,” he said. Holbrooke promised to ensure fast-track disbursement of this money, which is not a new commitment.
However, he made sure to mention that Pakistan needed to move away from the donor cycle and implement plans rapidly.
Andrew Mitchell, the British minister for international development, said that the immediate concerns were security and corruption. Andrew urged Pakistan to take the difficult path of reforms instead of looking towards “British taxpayers” to meet its needs.
“The Reformed General Sales Tax (RGST) implementation is a must. The government will have to tackle corruption and reform the energy sector,” he said. He also hinted at providing support for the Citizen Compensation Programme and in the education sector Punjab and Khyber-Pakthunkhwa, but he did not announce any assistance.
Representative of the International Monetary Fund Adnan Mazarei said that due to floods, Pakistan’s economic growth will remain around 2.7 per cent and inflation could be expected to go up to 15 per cent, 4 per cent more than the pre-floods scenario.
“We welcome the submission of the RGST bill in parliament and we think that this should be complemented with respective provincial bills,” he said. He said that due to food and construction related imports, the gap between Pakistan’s external payments and receipts would widen to 2.8 per cent of the total size of the economy. He said that additional external financing on concessions will reduce the debt sustainability risk and improve investors’ confidence.
However, Finance Minister Hafeez Shaikh defended the government. “Despite efforts for self-reliance we have to remain dependent on external assistance for some time,” Shaikh said. He said resource mobilisation, fiscal non-sustainability of public sector enterprises and greater fiscal autonomy to provinces were areas of grave concern.
Published in The Express Tribune, November 16th, 2010.
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