Flood-hit Pakistan should suspend debt repayments, says UN policy paper
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Pakistan should suspend international debt repayments and restructure loans with creditors after recent floods added to the country's financial crisis, the Financial Times reported on Friday, citing a UN policy memo.
The memorandum, which the UN Development Programme will share with Pakistan's government this week, states that the country's creditors should consider debt relief so that policymakers can prioritise financing its disaster response over loan repayment, the newspaper said.
Pakistan has earlier estimated the damage at $30 billion, and both the government and UN Secretary-General Antonio Guterres have blamed the flooding on climate change.
The memo further proposed debt restructuring or swaps, where creditors would let go of repayments in exchange for Pakistan agreeing to invest in climate change-resilient infrastructure, FT said.
Pakistan's largest creditors include Chinese lenders, to whom Islamabad owes more than $30bn accumulated through Beijing's Belt and Road Initiative, along with countries such as Japan and France, the World Bank, and commercial bondholders.
Pakistan, whose external debts total about $100bn, was struggling with a balance-of-payments crisis that strained its ability to repay loans even before unprecedented flooding recently. The country, which has been particularly hard hit by the global surge in commodity prices, received a $1.1bn bailout from the IMF last month.
The UNDP memo argues Islamabad and its creditors should find a longer-term solution that "would involve lowering Pakistan's debts down to a sustainable level to enable the government to put people's needs first".
Floods have affected 33 million Pakistanis, inflicted billions of dollars in damage, and killed over 1,500 people - creating concern that Pakistan will not meet its debts.
