The case for debt swaps

Need to resolve issue amicably

The human suffering and the destruction of Pakistan’s infrastructure is not of the country’s making. Driven by global climate change Pakistan became a victim despite the fact that it contributes less than one percent to the global carbon footprint. The sheer scale of the calamity has stretched the country’s resources and capacities to the limit, thus necessitating support from the international community, particularly the industrialized nations, some of whom have made reckless use of fossil fuels that are responsible for climate change. As Prime Minister Shehbaz Sharif put it, countries like Pakistan who have done almost nothing to contribute to global warming, do not deserve to be amongst the frontline countries impacted the most by climate change.

At the end of his ‘solidarity visit’ to Pakistan, UN Secretary General António Guterres pledged to strongly advocate ‘debt swaps’ with the IMF and World Bank, as well as at the G-20 meeting, to enable poor and middle-income countries, including Pakistan, to use that money to invest in climate resilient, sustainable infrastructure and green transition of their economies. The initiative taken by Secretary General Guterres would be welcomed by the low income countries with limited resources to deal with the unavoidable impact of climate change. Climate crisis in these countries would otherwise turn into a significant poverty multiplier.

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A UN policy memorandum has suggested to Pakistan to suspend international debt repayments and seek restructuring of loans. Pakistan, whose external debts total about $100 billion, has been struggling with a balance-of-payments crisis that had strained its ability to repay loans even before the rains and floods devastated a large part of the country, three time the size of Secretay General Guterres’ native Portugal. Pakistan is virtually in a debt trap as it has to borrow more money every passing year to pay back its debt and support its budget. The UNDP argues that Islamabad and its creditors should find a longer-term solution that would involve lowering Pakistan’s debts to a sustainable level to enable the government to put people’s needs first. The real task is to persuade the rich countries to agree to the debt swap scheme. Pakistan has to ensure meanwhile that the scheme is not used to create differences with China.

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The Editorial Department of Pakistan Today can be contacted at: [email protected].

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