Aerial view of inundated villages and croplands in Sindh. Photo courtesy Twitter
A United Nations policy memo has advised Pakistan to suspend international debt repayments and restructure pending loans to cope with the financial crisis worsened by this year’s floods, the Financial Times reported on Friday.
The memorandum, which the publication said the U.N. Development Program would share with the Government of Pakistan this week, suggests the country’s creditors should consider debt relief so policymakers can prioritize financing disaster response over loan repayments. The memo has also proposed debt restructuring or swaps, with creditors waiving repayments in exchange for Islamabad pledging to invest in climate change-resilient infrastructure.
According to preliminary government estimates, Pakistan has suffered losses of $30 billion due to this year’s climate change-induced floods, which have impacted over 33 million people and destroyed millions of acres of crops and killed hundreds of thousands of livestock. In the past week, several global leaders, including U.S. President Joe Biden and U.N. Secretary General Antonio Guterres, have called on the global community to support the country as it recovers from the disaster.
In his address to the 77th session of the U.N. General Assembly, Guterres urged lenders to consider debt reduction for all countries facing economic collapse, with a focus on climate adaptation. “Creditors should consider debt reduction mechanisms such as debt-climate adaptation swaps,” he said. “These could have saved lives and livelihoods in Pakistan, which is drowning not only in floodwater, but in debt,” he added.