Malik urges government to invoke 'force majeure' to have foreign debts written off

Pakistan People's Party (PPP) Senator Rehman Malik on Thursday submitted a resolution in the Senate Secretariat urging the federal government to invoke "Force-Majeure Law" to have Pakistan's foreign debts written off from the International Monetary Fund (IMF), the World Bank, the United States Agency for International Development (USAID), and other international financial institutions.

"This House may discuss that the Government to invoke the Force-Majeure Law for write-off the foreign debts of Pakistan from IMF, World Bank and USAID and other International financial institutions due to coronavirus outbreak," reads the resolution submitted by Malik who is also the chairman of the Senate Standing committee on Interior.

"Pandemic COVID-19 is adversely affecting our economy by drying out our local revenue generation, almost stopped remittances and hence Pakistan will be unable to make the repayments and retire heavy foreign loans. 'Force Majeure Law' is the only option to be invoked in the given situation to sustain our economy," according to the resolution.

A letter written by Malik to Prime Minister Imran Khan is also attached with the resolution in which the senator has proposed to invoke the Force-Majeure Law for the write-off of debts of IMF, World Bank, USAID and other international financial institutions.

"By establishing Force-Majeure, IMF, World Bank, USAID etc. would be lawfully obliged to grant deferment for these repayments and possibly written off our loans-It is essential that such a claim under Force Majeure should be framed after thorough pre-vetting and evaluating our case and we need to draft well-prepared estimates that if the pandemic continues for a longer period, economic recovery would take much longer, hence we should seek relief of making repayments after 10 years with the request to condone the interest rate or asking for the entire loan to be written off-In support of our arguments, we will need an immaculate, verifiable record of the measures we have taken to mitigate the COVID-19 pandemic and the financial burdens that have been piled up due this pandemic-Our sincere effort to fulfil the commitments made in the past to IMF despite increasingly adverse economic circumstances, State Bank of Pakistan's policy decisions reflect our good intentions by not defaulting at the cost of the suffering of our common man by forcing the suggested reforms of IMF and others-The balance of loan statement should be prepared and duly certified by the state bank be enclosed with the letter and we must first try to mutually agree on the Force-Majeure situation with our creditors before opting for legal battle," the resolution says.

Force majeure is a commonly used clause in "contracts that essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations under the contract."

It merits a mention here that Prime Minister Imran Khan has recently appealed to developed economies, the United Nations and the international financial institutions to give debt relief to developing countries like Pakistan to enable them to effectively combat coronavirus.