EDITORIAL: Prime Minister Shehbaz Sharif’s impassioned plea in his speech to the United Nations General Assembly as well as during his outreach with several heads of government on the sidelines has no doubt increased the country’s leverage with donors, bilateral as well as multilaterals. His poignant projection of life in Pakistan after the floods left many a foreign head of government commiserating with the Pakistani delegation and vowing assistance.
Sharif successfully blended the climate change impacts in the summer of 2022 all over the world, including Europe, the US, China and of course the worst affected Pakistan, as he stated, “for 40 days and 40 nights biblical flood poured on us.
Even today, swathes of the country are still under water. 33 million people including women and children are at high risk of health hazards….the undeniable truth is that the calamity has not been triggered by anything we have done….
It is time to ask why…time to ask what must be done. Our forests are burning. More heat waves are coming. We had a monster monsoon. It was the monsoon on steroids as was described by the UN Secretary General. Pakistan emits less than one percent of greenhouse gases.”
US Secretary of State Anthony Blinken reached out to Foreign Minister Bilawal Bhutto-Zardari in May this year before the onset of the floods to invite him to a food security meeting at UN headquarters in New York on 18 May 2022.
Prime Minister Shehbaz Sharif during his recent visit also met with President Biden who in his speech at the UNGA referred to the devastation caused by floods in Pakistan. To date the US has emerged as the largest bilateral donor to the flood victims.
It is important to note that the State Bank of Pakistan (SBP) reserves remain appallingly low at 8.69 billion dollars as of 9 September this year, after the International Monetary Fund (IMF) disbursement of 1.16 billion dollars, and deposits with the commercial banks estimated at 5.59 billion dollars, lower than the 5.97 billion dollars on 10 June 2022, raising questions about claimed cash inflows for flood relief from multilaterals/bilaterals and/or through the telethon.
The World Bank has pledged 2 billion dollars for flood relief and rehabilitation, money diverted from already pledged assistance, and the Asian Development Bank has announced assistance of 3 million dollars which is a proverbial drop in the ocean, given the extent of the damage.
However, the IMF has been ominously silent and while part of the silence can be blamed on our economic team for their negligence in failing to mention the floods in the Letter of Intent dated 16 August; yet one would assume that the Fund mission was fully aware of the damage from reports in the international media and inexplicably did not make appropriate adjustments in the extremely tight monetary and fiscal policy conditions as noted in the Memorandum of Economic and Financial Policies uploaded on its website this month.
In other words, with the world fully cognizant of the flood damage of biblical proportions as stated by Prime Minister Sharif there is little doubt that Pakistan’s leverage has increased somewhat with the Fund; however, to effectively channel that leverage to meet the needs of the flood victims rather than for political point scoring may require persuasive intervention from the US as well as a well informed and dedicated effort on the part of the newly-appointed negotiating team leaders notably Ishaq Dar as the Finance Minister (to be formally appointed today or tomorrow) and Jameel Ahmed Governor State Bank of Pakistan (appointed on 26 August 2022).
At present, debt repayment deferral (interest and repayment as and when due) has been requested and not yet approved by bilaterals.
However, it is suggested that given the extent of flood devastation the economic team may consider a request to be treated as a Heavily Indebted Poor Country (HIPC) for a year or two defined as one without adequate finances whose governments owe a huge amount to bilaterals and international banks – an initiative launched in 1996 by the IMF and World Bank with the aim of ensuring that no poor country faces a debt burden it cannot manage.
In 2005, to accelerate progress towards achieving sustainable development goals the HIPC initiative was supplemented by multilateral debt relief initiative that allows for 100 percent relief on eligible debts by three multilateral institutions including the IMF, World Bank and African Development Bank (of which Pakistan is not a member). Once the flood victims have been rehabilitated the HIPC status can be immediately withdrawn.
Copyright Business Recorder, 2022
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