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20.08.2010 12:05 Age: 3 yrs
Category: Press Releases
New Debt for Disaster for Pakistan?
Jubilee USA Network Calls for Immediate Debt Service Moratorium in Response to Disaster, Assistance in Grant Form
FOR IMMEDIATE RELEASE
August 20, 2010
Contact: Melinda St. Louis, Deputy Director, 202-441-7579
WASHINGTON, DC – Jubilee USA Network, an alliance of more than 75 religious denominations, human rights groups, and development agencies, raised concern over the World Bank and Asian Development Bank’s recent announcements to provide Pakistan with a $900 million and $2 billion loan respectively. Pakistan already pays $3 billion a year in debt service, carrying a foreign debt totaling $54 billion, and now risks a new debt crisis in the face of the worst natural disaster in its history.
“Pakistan must be able to mobilize all available resources toward recovery,” stated Eric LeCompte, Executive Director of Jubilee USA Network. “Instead of sending billions in debt service out of the country, Pakistan should be able to invest those resources in relief and recovery for its people. Furthermore, the international community should provide grant support instead of new loans that will push the country further into debt,” he added.
Despite initial estimates pricing Pakistan’s recovery at $20 billion over the next five years, only a fraction of needed assistance has been forthcoming from the international community. Jubilee USA applauds the Obama administration for promising $150 million in flood aid thus far, yet also calls on the administration to take leadership in ensuring that needed assistance does not add to the country’s already staggering debt burden, hindering future development.
As part of a comprehensive relief and recovery plan, the Administration should:
1. Call on all bilateral and multilateral creditors to immediately institute at least a two year moratorium with no accrued interest on all debt service payments from Pakistan. While this will free up $3 billion each year to direct toward the country’s initial recovery, the moratorium should only be a first step toward auditing Pakistan’s debt portfolio and negotiating definitive cancellation of Pakistan’s debt stock, as is called for by Pakastani civil society.
The US should use its substantial voting power and influence on the Boards of both the IMF, World Bank, and Asian Development Bank to secure a moratorium from these creditors, secure immediate agreements by all bilateral creditors to halt debt service payments, as well as negotiate definitive debt cancellation. All of Pakistan's resources should be directed at recovery, not repayment.
The international community has responded with debt service moratoria and debt cancellation in the wake of massive human catastrophes in the past: to Hurricane Mitch in Central America in 1998, the countries devastated by the 2004 tsunami, and to Haiti’s catastrophic earthquake in January 2010.
2. Ensure that emergency disaster-related assistance, wherever possible, be in the form of grants instead of loans. Time and again, countries facing tragedies like Pakistan’s catastrophic flooding are forced to mortgage their future as they borrow for relief and recovery efforts. Thus, the tragedy is magnified for years to come.
3. Lead efforts to establish up-front funding for climate change-related disaster preparation. With early warning systems, risk analysis, and preparation, Pakistan could have dramatically reduced the damage caused. The United States and other historically high greenhouse gas emitting countries must take responsibility for their climate debt to those who are least responsible for, and most vulnerable to, climate change.
Jubilee USA Network is an alliance of over 75 religious denominations, development agencies, human rights, and other organizations building the political will for poor country debt cancellation and more responsible global finance to fight poverty.