Another Disaster for Pakistan as More Loans Announced

By Will McKitterick 9-14-2010

Pakistan is still in the midst of recovering from a devastating flood -- one of the worst humanitarian disasters in its history -- and already faces another possible disaster that is likely to prolong its people's suffering: a new IMF loan worth $450 million. On Tuesday, September 7, Jubilee USA joined a host of global advocacy groups in outcry against the IMF's decision to impose new loans on Pakistan, noting the ineffective and potentially disastrous effects this "aid" will have on the Pakistani people.

Jubilee USA and other advocacy groups remain concerned that most assistance to Pakistan has been in the form of loans instead of grants. Loans may provide cash needed now during short-term recovery efforts. Yet, as we have seen time and time again, Pakistan will quickly find itself in financial peril by the end of the year when it finishes paying previous loans back to the IMF.

Take, for example, the new loan which requires up to $15 million in interest payments this year. This combines with a $3 billion loan recently announced by the World Bank and the Asian Development Bank. How can the IMF expect Pakistan to fund its relief efforts with a $450 million loan, while simultaneously demanding that they pay $500 million plus interest back to the Fund by the end of the year to service their current debt? Inevitably, this new commitment will add to the country's already crushing $54 billion debt burden at a time when funds are desperately needed to provide relief for millions of Pakistani flood victims. It makes you wonder whose crunching the numbers at the IMF?

Clearly, like Haitians in their moment of tragedy, Pakistanis are prime candidates for debt relief. Sixty percent of the population lives in dire poverty, and the most affected victims of last weeks floods are some of the poorest people in the world. Nevertheless, according to the IMF, Pakistan does not qualify for its "Post Catastrophe Debt Relief Facility" because it fails to meet the World Bank and IMF's "low-income country" criteria. In the face of this technicality, Jubilee USA and its partners are rightfully calling on the IMF executive board, through influential shareholders like the U.S. government, to ensure that Pakistan receives the debt relief it needs in order to aid its people in recovery.

Since Jubilee USA began to advocate to the Obama administration for Pakistani debt relief on August 20, a growing chorus, including respected advocacy organizations such as Oxfam and Avaaz, have taken up the call. Even as the rest of the world struggles to find relief during these economically depressed times, the outpouring from antipoverty organizations and their activists in support of Pakistan proves that we are not short on compassion for fellow humans in need. Our leaders must acknowledge that debt relief for Pakistan is a moral imperative and begin to follow in the footsteps of the people's cries for social justice.

To combat the crisis facing Pakistan, we must call on the U.S. government to:

  1. Call on all bilateral and multilateral creditors to institute a two year moratorium with no interest accrual on all of Pakistan's debt payments in order to free up $3 billion per year for recovery. This should be a first step towards a debt audit and definitive debt cancellation.
  2. Ensure that emergency disaster-related assistance, wherever possible, be in the form of grants instead of loans.
  3. Lead with up-front funding for climate change related disaster preparation to save lives in the future.

Will McKitterick is the fall 2010 Communications and Development intern at Jubilee USA. He graduated from Clark University in 2010 with a major in international relations and a minor in international development. To take action to end the cycles of debt that plague countries like Pakistan, join Jubilee USA's rally in Washington, D.C. on October 8 in front of the World Bank and IMF. For more information, visit

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