Pakistan spends double paying off debt than it gets in flood aid

By Oxfam

The international aid agency Oxfam today called for Pakistan’s $55 billion debt to be dropped. Oxfam said 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 in advance of the Friends of Democratic Pakistan meeting today (Friday, October 15) in Brussels when Foreign Ministers will address the country’s short and long term needs.

Pakistan will pay $2.9 billion this year on servicing foreign debts. So far, governments have committed $1.5 billion to the relief effort. Rebuilding is way behind schedule and millions are homeless. Some two and a half months after the floods began, 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.

Oxfam does not call just for debt relief but calling on the Pakistani government to establish a transparent and accountable mechanism for the spending of freed-up funds, with parliament and civil society genuinely involved in decision-making on spending as well as in the monitoring of expenditure to ensure that the funds benefit the most vulnerable.
 
Consuelo Lopez-Zuriaga, Oxfam Head of Humanitarian Campaigns, said:

“Any rational person will see this as madness and maddening. 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.

“Pakistan’s debt has doubled in the past four years alone, and the government is currently spending more than four times as much per person on servicing external debt as it is on healthcare.

“Even before the floods, poverty in parts of Pakistan was dire. Almost one in ten children die before their fifth birthday. Teenage girls in the Federally Administered Tribal Provinces are more likely to die in childbirth than learn to read. And now more than 10,000 schools and 500 hospitals need to be rebuilt.

“If funds that are desperately needed for emergency aid and reconstruction are swallowed up in debt repayments, then Pakistan could face a poverty boom. The choice is clear – either we roll back debt or development suffers.”

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