Business

Oxfam calls for writing off Pakistan’s debt

Debt must be cancelled because of destruction caused by floods and relief reconstruction costs.

Ppi October 14, 2010

ISLAMABAD: The international aid agency, Oxfam has called for Pakistan’s $55 billion debt to be written off. Oxfam has said that the debt must be cancelled because of the level of destruction caused by the recent unprecedented floods and the massive costs of immediate relief and longer term reconstruction.

The call came in advance of the Friends of Democratic Pakistan meeting in Brussels on Thursday, when foreign ministers of donor countries will address Pakistan’s short and long-term needs.

The country will pay $2.9 billion this year on servicing foreign debts. Different governments have committed $1.5 billion to the relief effort so far. Two and a half months after the floods struck, only a third of the UN’s appeal has actually been funded.

Rebuilding the country will require a huge injection of funds and the Pakistan government has estimated that reconstruction may cost $45 billion.

Some countries, including France, Japan, South Korea and China - all members of the Friends of Democratic Pakistan - have received more money from Pakistan than they have given in response to the flooding.

France received $62 million in debt payments in the first nine months of the last financial year, which is more than 15 times its direct contribution to the flood response. Japan received $111 million, which is more than five times its contribution to the relief. South Korea received four times as much and China three times as much.

Consuelo Lopez-Zuriaga, Oxfam’s head of humanitarian campaigns, said “any rational person will see this as madness and maddening. It is a moral and economic absurdity that while poverty-stricken people in Pakistan are struggling to put their lives back together, much richer countries like France and Japan are receiving vast sums of money in debt payments. Pakistan’s debt has increased sharply in the past four years and the government is currently spending more than four times as much on servicing external debt per person as it is on healthcare.”

“If funds that are desperately needed for emergency aid and reconstruction are swallowed up in debt repayments, then Pakistan could face a poverty boom. The choice is clear - either we roll back debt or development suffers,” he added.

Published in The Express Tribune, October 15^th, 2010.

COMMENTS (1)

Meekal Ahmed | 14 years ago | Reply The $45 billion flood loss estimate is pie-in-the-sky. I think the PM said that based on unknown sources. The WB-ADB's estimate is if I recall correctly around $10 billion. That is a surprisingly low figure but more closer to the truth. As for Oxfam, they are deeply comitted experts and opinion-makers who have done a lot of good work in developing countries. Our debt has shot up in recent years to around 60% of GDP which is NOT a calamity. But of course debt services takes away resources that could be put to use elsewhere. There is always that "opportunity cost" and that will always be the case. If we spend more on debt service than on health, I think that is OUR problem and not the problem of donors. We have misplaced priorities -- and donors have misplaced priorities as well not willing to lend to some of the "soft" sectors. Debt has gone up because of exchange rate devaluation (part of the crisis in 2008 before we went to the IMF) and slow growth. Since that is the denominator in the debt-to-GDP calculation, if that becomes smaller the ratio will naturally become bigger even if debt stays constant.

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