New Debt for Disaster for Pakistan?

For Immediate Release

Contact: 

Melinda St. Louis, Deputy Director, 202-441-7579

New Debt for Disaster for Pakistan?

Jubilee USA Network Calls for Immediate Debt Service Moratorium in Response to Disaster, Assistance in Grant Form

WASHINGTON - 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.

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Jubilee USA Network is an alliance of more than 80 religious denominations and faith communities, human rights, environmental, labor, and community groups working for the definitive cancellation of crushing debts to fight poverty and injustice in Asia, Africa, and Latin America.

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