Campaigners condemn IMF and World Bank’s ‘cynical’ loans to Pakistan

Jubilee Debt Campaign (1) has harshly criticised today’s announcements by the International Monetary Fund and World Bank of emergency loans to Pakistan, calling them ‘cynical’ and ‘dishonest’.

The IMF has announced an emergency loan of $450 million to the disaster-stricken country while the World Bank has ‘increased’ its $900 million loan to $1 billion.

But anti-poverty campaigners have been campaigning for the IMF to cancel Pakistan’s debt and all donors to provide aid in the form of grants not loans. Pakistan currently pays £3 billion per year (2) in repayments on its sharply increasing debt burden. The World Bank was accused of ‘playing with figures’, as its ‘additional’ $100 million was actually already earmarked for Pakistan, but has now been diverted into the emergency fund.

The IMF announced that it would release the next tranche of its ongoing loan programme to Pakistan – of $1.7 billion – once Pakistan has met conditions which are extremely unpopular in the country.

Nick Dearden, Director of Jubilee Debt Campaign, said:

“These two announcements today are nothing but cynical attempts to make it appear that these two international institutions are helping Pakistan, when in fact they are doing the opposite. Of course Pakistan desperately needs aid, but it is simply dishonest to dress up loans – some of which were already promised to the country – as new aid.

“Pakistan’s debt is totally unsustainable and unjust by any standards – based as it is on reckless lending by Western powers to military regimes in that country for decades (3). To continue to force Pakistan to repay these loans, giving even more loans in the meantime and forcing the country to implement economic conditions that will make poverty even worse, is reprehensible and reckless.”

Jubilee Debt Campaign calls on the British government to:

1. Call on all bilateral and multilateral creditors to institute a two year moratorium with no interest accrual on all of Pakistan's debt payments to free up $3 billion per year for recovery. This should be a first step towards permanent debt cancellation.
2. Use their World Bank seat to ensure that Pakistan is given aid in the form of grants not loans. We think this accords with the Government's pre-election policy paper on International Development, ‘One World Conservatism', to give grants rather than loans wherever possible and encourage the World Bank to do the same.
3. Support the auditing of Pakistan's debt to examine the legitimacy of these debts, and cancel those found to be unjust. Pakistani civil society should monitor spending of funds freed up by debt cancellation to make sure they are used for development purposes.

ENDS

For more information contact:
Nick Dearden, Director, Jubilee Debt Campaign, +44 207 324 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.

(2) 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.

(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’.