Pakistan: Donors urged to write off $53b debt

19 October 2010

Islamabad. A large number of people staged a rally here on Thursday with an aim to press international donors to step forward and write off the country’s massive $53 billion debt to guarantee the Pakistani people the ‘right to life’.

Carrying banners and placards, the participants of the rally, organised by the international aid agency, Oxfam, marched from National Press Club to Parliament House where speakers vowed to continue their struggle unless the international community shows seriousness towards this issue. The Oxfam representative said that the debt must be cancelled because of the level of destruction caused by the recent unprecedented flooding and the massive costs of immediate relief and longer-term reconstruction. The call comes ahead of the meeting of Friends of Democratic Pakistan today (Friday) in Brussels, where foreign ministers will address the issue of Pakistan’s short and long-term needs. The data provided by the Oxfam stated some two-and-a-half months since the floods struck the ‘UN Appeal’ is only one-third funded. Rebuilding the country will require a huge injection of funds. The Pakistan government has estimated that reconstruction may cost as much as $45 billion.

Some countries, including France, Japan, South Korea and China — all members of the Friends of Democratic Pakistan — have received more money from Pakistan than they have given in response to the flooding. France received $62 million in debt payments in the first nine months of the last financial year, more than 15 times its direct contribution to the flood response. Japan received $111 million, more than five times its contribution to the response. South Korea received four times as much, and China three times as much. The data further stated that at a time when Pakistan faces challenges such as terrorism and post-flood situation, the international financial institutions and donor countries should come forward and provide relief in particular reference with foreign debts.

The UN Human Rights Commission has adopted a number of resolutions on the issue of debt and structural adjustment Structural Adjustment Economic policies imposed by the IMF in exchange of new loans or the rescheduling of old loans.

Structural Adjustments policies were enforced in the early 1980 to qualify countries for new loans or for debt rescheduling by the IMF and the World Bank. The requested kind of adjustment aims at ensuring that the country can again service its external debt. Structural adjustment usually combines the following elements : devaluation of the national currency (in order to bring down the prices of exported goods and attract strong currencies), rise in interest rates (in order to attract international capital), reduction of public expenditure (’streamlining’ of public services staff, reduction of budgets devoted to education and the health sector, etc.), massive privatisations, reduction of public subsidies to some companies or products, freezing of salaries (to avoid inflation as a consequence of deflation). These SAPs have not only substantially contributed to higher and higher levels of indebtedness in the affected countries ; they have simultaneously led to higher prices (because of a high VAT rate and of the free market prices) and to a dramatic fall in the income of local populations (as a consequence of rising unemployment and of the dismantling of public services, among other factors).

. One such resolution, adopted in 1999, asserts that “The exercise of the basic rights of the people of the debtor countries to food, housing, clothing, employment, education, health services and a healthy environment cannot be subordinated to the implementation of the structural adjustment policies, growth programmes and economic reforms”. Farzana Bari, a social activist, while speaking on the occasion, said that recent calamity in Pakistan has rendered hundreds of thousands of people homeless and now it is quite a daunting task for the government to ensure their proper rehabilitation in their respective areas. She said that the International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
waived a debt of $268 million given to Haiti and after this the World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

also eased the life of Haitians by deferring repayment of its debt for five years. “The unprecedented rains have triggered a massive humanitarian crisis that has threatened the lives of millions of people including women and children. The international donors should also waive off foreign debts of Pakistan to help cope with the critical situation,” she said.

Farzana Bari said the affected people do not belong to a specific age group, but include infants to 80-year-olds and now all these people find themselves in a situation where they have lost all their property and assets. According to the flood data from the last 62 years, the country has suffered cumulative financial losses of more than Rs385 billion on account of 15 major floods. However, the damage done by the 2010 floods is far more than that figure. Consuelo Lopez-Zuriaga, Oxfam Head of Humanitarian Campaigns, said it is a moral and economic absurdity that while poverty-struck people in Pakistan are struggling to put their lives back together much richer countries like France and Japan are receiving vast sums of money in debt payments. “The debt burden cannot be allowed to impede the relief and reconstruction efforts. Pakistan needs aid and its debts dropped so that families can get back to their land and rebuild their homes and their lives,” he said.

Published by the pakistani newspaper The News



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