British charities call for debt cancellation for Pakistan
Jubilee Debt Campaign (1) is calling on the British government to exert pressure on international institutions to cancel Pakistan's debt.
The Pakistani government is currently in negotiations with the International Monetary Fund (IMF), the country’s most important creditor, to ask for debt relief for the disaster-stricken country. The IMF is believed to be insisting that Pakistan introduces a value-added-tax system and removes energy sector subsidies in order to receive further loans.
A range of charities and campaign groups (2) have joined the call for Western borrowers to take some responsibility for Pakistan's heavy indebtedness, largely run up under military dictatorships (3). They argue that Pakistan needs an immediate freeze on debt repayments, expressing fears that Pakistan's annual $3billion repayments (4) dwarf current levels of emergency aid.
They also expressed concern that international institutions like the World Bank had promised nearly $3 billion in new loans to Pakistan to withstand the disaster, rather than giving grant-aid, which will only add to Pakistan's enormous and unsustainable debt of $49 billion debt.
Campaigners argue that it is inappropriate for the IMF to hold the country to ransom amidst the current disaster, and that the regressive taxation system and reduction in energy subsidies which they are calling for will both hit the poorest in Pakistani society. They are calling on the British government to use their IMF and World Bank seats to call for an immediate debt freeze as a precursor to wider debt cancellation, and grant-aid, rather than loans, to aid the country's recovery and long-term development.
Nick Dearden, Director of Jubilee Debt Campaign said:
"The people of Pakistan have already shown their opposition to the reforms which the IMF is pushing on the country. It is unconscionable to use the disaster to continue arm-twisting the government on these reforms. The rest of the world has shown generosity in responding to the plight of the Pakistani people - the IMF needs to respond in a similar way and offer substantial debt cancellation to the country.
"We also call on the British government to pressure the IMF and World Bank into cancelling current debts and offering grant-aid for the future. There is no point in putting money into the country today, if you're going to pull it out again tomorrow - it simply condemns Pakistan to a future of poverty and dependence."
Jubilee Debt Campaign calls on the British government to:
- 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. All of Pakistan's resources should be directed at recovery, not repayment.
- Ensure that emergency disaster-related assistance, wherever possible, be in the form of grants instead of loans.
- 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.
ENDS
For more information contact:
Nick Dearden, Director, Jubilee Debt Campaign, +44 (0) 207 324 4724 or +44 (0) 7932 335464 or
NOTES
(1) Jubilee Debt Campaign is a UK coalition demanding 100% cancellation of unpayable and illegitimate developing country debts. For more information see www.jubileedebtcampaign.org.uk.
(2) British charities and campaign groups include: Methodist Relief and Development Fund, Christian Aid, World Development Movement, SPEAK, Commitment for Life, Share the World's Resources, Christian Socialist Movement
(3) Pakistan's debt rose rapidly under the military regime of General Musharraf (2001-8) from $32 to nearly $50 billion. In fact campaigners point out that the vast majority of Pakistan’s loans were run up under military governments, many offering little benefit to ordinary people. Pakistani groups like CADTM-Pakistan have long called for an audit of the debts, saying it is unjust for the poor of Pakistan to repay reckless loans that borrowers should never have lent. The group is currently calling on their government to repudiate its debts on the basis of a 'state of necessity'.
(4) Pakistan paid $2.9 billion in debt repayments in 2008, the last year for which statistics are available. Pakistan's debt repayments already amount to three times what the government spends on healthcare - in a country where 38% of under 5-year-olds are underweight, only 54% of people are literate, and 60% live below the poverty line.