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Melinda St. Louis, Deputy Director, 202-441-7579
Another Disaster for Pakistan as More Loans Announced
Jubilee USA Network Condemns New Loans as a Threat to Pakistan’s Future
WASHINGTON - September 7 - Jubilee USA joins global advocacy groups in an outcry against the new debt that Pakistan has been forced to borrow in light of the worst humanitarian disaster in its history. The $450 million emergency loan announced with much fanfare by the IMF late last week may provide needed cash now, but will be quickly nullified when Pakistan sends this year’s $500 million payment on previous loans back to the IMF.
The new loan, which will require up to $15 million in interest payments this year, joins $3 billion in loans recently announced by the World Bank and Asian Development Bank. This commitment adds to the country’s already crushing $54 billion debt burden.
While 60% of the Pakistani population lives in dire poverty, the country does not fit the World Bank and IMF’s criteria for a “low-income country.” Under the current IMF rules, Pakistan does not qualify for debt relief under the Fund’s new “Post Catastrophe Debt Relief Facility” because of this technicality. Jubilee USA calls on IMF shareholders, such as the US government, to lead in ensuring that Pakistan receives needed debt relief from the IMF and other creditors.
“It is shameful and short-sighted that, while everyone recognizes the dire situation of Pakistan and the high levels of poverty, the only new assistance they can get is market-rate loans that will be swallowed up by paying interest on past loans,” said Eric LeCompte, Executive Director of Jubilee USA Network. “Do we have to wait until the country’s income falls far enough for it to be considered “low-income”, so that they could potentially qualify for debt relief at some point in the future? Pakistan needs debt cancellation and grant support now.” LeCompte added.
While the new emergency loan itself does not have conditions attached to it, it was announced after the Pakistani government had agreed to IMF conditions for their current program. These conditions include instituting a “value-added tax” – a regressive consumption tax, which typically disproportionately affects the poor. LeCompte stated, “The poor in Pakistan, attempting to rebuild their lives after this flooding, should not be the ones to bear the brunt of raising government revenues. The IMF should not require economic conditions that harm the poor at this critical time.”
Since Jubilee USA began calling on the Obama administration to lead in debt relief on August 20, a growing chorus, including respected advocacy organizations such as Oxfam and Avaaz, have taken up the call.
Jubilee USA calls on the U.S. 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 a debt audit and definitive debt cancellation.
2) Ensure that emergency disaster-related assistance, wherever possible, be in the form of grants instead of loans.
3) Lead with up-front funding for climate change-related disaster preparation to save lives in the future.