Financing Pakistan’s ‘loss and damage’

Pakistan was estimated to need more than $16 billion over the next three years

Syed Mohammad Ali January 20, 2023
The writer is an academic and researcher. He is also the author of Development, Poverty, and Power in Pakistan, available from Routledge

Pakistan’s policymakers and politicians are patting themselves on their backs for having raised $9 billion — $1 billion more than what they had requested at the international donor conference in Geneva. This funding appeal was meant to secure desperately needed support to enable Pakistan to recover from last year’s devastating floods. However, a closer look at what sort of support Pakistan has managed to secure provides grounds for much less enthusiasm.

According to the government’s plan for flood recovery and rehabilitation, Pakistan was estimated to need more than $16 billion over the next three years to contend with the more immediate destruction caused by the mega-flooding event this past summer. The government committed to raising half of this amount itself, and it wanted the world community to provide it the remaining amount.

UN Secretary General Antonio Guterres co-hosted the donor conference with Prime Minister Shehbaz Sharif. The conference was held on the heels of the grudging recognition by rich countries to help poorer parts of the world contend with the ‘loss and damage’ primarily caused by their environmentally irresponsible behaviour.

What proportion of the pledged funds will materialise, and what conditionalities will be attached to how donor funds may be utilised by Pakistan is still unclear. Whether the incoming funds will be used to address genuine needs is also another major issue of concern. These are all important questions to pay greater heed to. However, let us here focus on issues related to the evolving international climate financing itself.

Pakistan will clearly need much more than $16 billion to deal with the long-term and multifaceted impacts of the massive flooding event in 2022. However, even if we focus on addressing the most immediate needs, it is important to note that the bulk of the disaster aid is meant to be provided by established international development financing entities including the World Bank, IMF and the Asian Development Bank. The Islamic Development Bank and the Chinese-led Asian Infrastructure Development Bank have also committed to helping Pakistan meet its disaster financing needs. Yet, besides commitments made by these international financial institutions, which are in the business of lending money to poorer countries, bilateral aid pledges in the form of outright grants are much more modest. It is estimated that Pakistan will receive only $1 billion in grants as per commitments made in Geneva, while the rest of the pledged amount will be in the form of loans that have to be repaid.

Developed countries were in fact obliged to help a poor country like Pakistan deal with climate impacts. In 1992, many rich countries agreed to provide financial support to help tackle climate change and to fast-track the transition to greener technologies in poorer countries. However, the extent of actual help provided to poorer countries remains grossly inadequate.

According to the website, Carbon Brief, most rich countries need to pay much more money to address the established climate financing target. The US alone is responsible for over half the historical emissions added to the atmosphere. It should thus have paid another $32 billion towards the annual $100 billion climate-finance target in 2020. Other historically polluting nations, such as the UK, Canada and Australia, have also been making much smaller financial contributions to the internationally agreed targets in comparison with their historical emission burden.

Conversely, countries like Germany, France and Japan have committed more funding for climate finance in proportion to their contributions to historical warming. However, much of this financing is also being routed through development lending agencies and it is hence in the form of loans which must be paid back, rather than in the form of bilateral or multilateral grants.

Taking note of these broader developments, Pakistan should have made a more compelling effort to seek debt write-offs and to demand climate financing in the form of grants rather than accepting more loans. Yet, this ideal opportunity to make richer countries directly pay for the havoc being caused by their irresponsible actions has been squandered.

Published in The Express Tribune, January 20th, 2023.

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