Thursday, September 2, 2010

Flood-ridden Pakistan ineligible for emergency debt relief

Matthew Berger in IPS: A loan deal between the International Monetary Fund (IMF) and flood-stricken Pakistan announced Thursday has drawn the ire of several NGOs that claim the deal represents an "inadequate" and "cynical" response to the disaster that is estimated to have affected the lives of millions.

The news of the loan follows more than a week of talks between Pakistani and IMF officials here, in which Pakistan hoped some of the terms of the 10.66 billion dollar loan granted in 2008 would be loosened in light of the floods which have left a dent in the Pakistani economy that is likely to last long after the floodwaters have receded. Those loan terms set deficit and inflation targets Pakistan has said it will be unable to meet in a post-flood economy. The IMF, for its part, as recently as June has called for Pakistan to take stronger steps to meet those reforms.

Efforts to maintain fiscal discipline, for instance, "proved initially successful, but since June 2009, the authorities have repeatedly exceeded the quarterly budget deficit targets under the program," an IMF statement said in June of this year. It also noted that inflation has been on the rise, reaching 13 percent in March.

But given the magnitude of the damage and suffering caused by the flood since late July, those macroeconomic and fiscal concerns should be irrelevant for the time being, some groups are saying. "Pakistan can not be expected to service debt as it struggles to cope," said Elizabeth Stuart, a senior policy advisor at Oxfam, a group of NGOs from three continents working worldwide to fight poverty.

"Pakistan’s resources must now be directed at recovery from this disaster, and a debt burden can not be allowed to impede recovery," Stuart said, noting a third of Pakistan’s budget revenues are currently spent on loan repayments….

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