The United Nations General Assembly’s (UNGA’s) 77th Session from September 13-27 comes at a very crucial time for Pakistan, as the country suffers from unprecedented floods, while it was already facing a seriously uphill task of returning reportedly around $30 billion in external debt servicing in 2022.
In a recent article ‘Pakistan’s flood show that climate crisis is also a debt crisis’ published by Tribune, author Heidi Chow, who is Jubilee Debt Campaign’s executive director, indicated in this regard: ‘The country faces both the immediate challenges of immense displacement, homelessness, hunger, and the spread of water-borne diseases as well as the longer-term costs of rebuilding and reconstruction. Pakistan faces a deepening debt crisis to pay the costs of a climate catastrophe it did not cause. …Without urgent action to tackle the debt crisis, Pakistan will continue to take on more debt to meet the huge economic costs of both the debt crisis and the damage created by the floods, while still making repayments to its wealthy creditors. …Pakistan needs its debt repayments suspended with immediate effect to ensure that much needed resources are not sent out of the country to repay wealthy lenders at this crucial time. A longer-term solution would involve cancelling Pakistan’s debts down to a sustainable level to enable the government to put people’s needs before the profits of wealthy creditors.’
The floods, caused primarily by climate change-induced torrential rains, and glacier melting, have displaced around 33 million people, destroyed cotton and rice crops, and the standing water in Sindh – which has been most badly affected province by floods – may not allow sowing of wheat crop. Hence, while there is an urgent crisis of providing food and shelter to homeless people, winter brings news of serious food crisis, while significant reduction in cotton production will negatively affect country’s already dwindling exports, and will put further pressure on already high imports by cotton demand met through imports by the textile sector.
Highlighting the high risk of a food crisis that the country faced, a recent Foreign Policy (FP) published article ‘Pakistan’s flood crisis could become a food crisis’ pointed out the immense negative impact of floods on domestic food production, and export of rice for instance, along with creating higher importing demands to meet food shortages, and overall also putting further distress on already difficult balance of payments, and food inflation situation.
The article indicated, in this regard, as follows: ‘With crops, livestock, and agricultural land damaged or destroyed, Pakistan will struggle to feed itself and the countries that depend on its food exports. This risks exacerbating the global food market crunch triggered by coronavirus pandemic supply chain shocks and Russia’s invasion of Ukraine. According to preliminary estimates, 65 percent of Pakistan’s main food crops – including 70 percent of its rice – have been swept away during the floods, and 3 million livestock have died. Pakistan’s planning minister says 45 percent of agricultural land is now destroyed. …with so much land destroyed or damaged, the wheat harvest could be jeopardized; some farmers fear their land won’t be usable within the next three months. Pakistan will likely have to import more food, which could raise costs and worsen the country’s balance of payments crisis. Before the floods, food inflation was at 26 percent, and in recent days some costs have surged by as much as 500 percent. [Moreover] The country is the fourth-largest global rice exporter… [and] Any dramatic drop in exports will only add to global food insecurity…’
Estimated loss by floods, which was reportedly communicated by authorities to United Nations Secretary General (UNSG), Antonio Guterres – who visited the country a few days ago to witness first-hand the devastating effects of floods in Pakistan – stood at around $30 billion. And together with high global commodity supply driven inflation, with significant contribution from imported inflation at the back of deeply depreciated Rupee against the US dollar, high policy rate (although inflation has a strong cost-push determination), and a pro-cyclical IMF programme, all likely to reportedly shave off around 3 percent growth (growth has been estimated at around 5 percent for the current fiscal year). Recently, in this regard, an article ‘Pakistan’s floods may reveal China as a fair-weather friend’ published in Bloomberg highlighted: ‘the heaviest rains in decades have caused more than 1,300 deaths (the number is expected to rise sharply) and upended the lives of more than 30 million. Economic growth forecasts have been cut by more than half, to 2.3 percent; with rice and cotton crops ruined, even that is looking optimistic.’
The country, no doubt, is facing Herculean challenges— high debt repayment demands, flood damages, looming famine risk in the coming winter in the flood damaged areas, further pressure on imports on account of even more higher energy import prices as Europe, for instance, hunts for LNG along with much higher food importing needs. One must not therefore lose sight of the fact that rising economic challenges and political instability continue to gain strength, energy, or support from each other. While the political instability challenge requires coming together of purely domestic wisdom and dynamism of political players, the economic side needs a strong global response, in addition to much improved governance focus domestically.
Sadly, rich countries and multilateral institutions have not responded anywhere near the challenge at hand for the global South in general, and Pakistan even after the floods, may that be vaccine availability, meaningful debt relief, or adequate special drawing rights (SDRs) allocation since the start of the pandemic. It is in this context perhaps that UNSG lamented the serious lack of support by those who can, for those countries who urgently need it, by indicating that he would emphasize this during the 77th UNGA Session. Antonio Guterres indicated in this regard: ‘People need to see results in their everyday lives, or they will lose faith in their governments and institutions, and they lose hope in the future. And so, this year’s General Debate must be about providing hope and overcoming the divisions that are dramatically impacting the world.’ Moreover, in a related tweet, UNSG pointed out: ‘Our world is blighted by war, battered by climate chaos, scarred by hate, and shamed by poverty & hunger. This UNGA I will address these issues with concrete recommendations & a call to action. We need to come together around solutions – and we need to give hope.’
Given the immense economic challenge at hand, and deeply lukewarm international support up till now, including persistence of the International Monetary Fund (IMF) to continue to push sharp pro-cyclical conditionalities in the current programme, brings the current UNGA session as an immensely important platform for the government to engage the international community for much better support.
Moreover, an influential ‘Group of G-77’ (G-77) at the UN of countries from the global South, and where Pakistan is currently holding its chairmanship, should also play an active role towards greater international support of countries in providing meaningful debt relief – there are already international calls, in the wake of catastrophic floods, for forgiving what the country owes in external debt servicing for 2022– enhanced IMF SDR allocation (on similar lines as August 2021, and for which IMF does not require approval from US Congress, but approval from US Department of Treasury), and climate finance, on a priority basis to countries, which have contributed minimally to climate change, but which are among those affected most. The high importance of G-77 could be gauged from the fact that ‘The Group of 77 is the largest intergovernmental organization of developing countries in the United Nations, which provides the means for the countries of the South to articulate and promote their collective economic interests and enhance their joint negotiating capacity on all major international economic issues within the United Nations system…’
Here, most priority should perhaps be provided to Pakistan, suffering from climate change induced serious level of flooding, when the country’s contribution is less than 1 percent. In addition, the government should also engage the IMF to cut back on its pro-cyclical policy stance in the current programme, and to immediately stop its notorious policy of charging surcharges on late loan payments.
In addition to climate change, as it engages international community, including the IMF, Pakistan should also highlight the high risk of famine facing certain parts of the country in the coming winter; not to mention the increase in already high food inflation that the country is facing. In this regard, the country should explore the reportedly greater support IMF wishes to provide to food-challenged countries, as highlighted in a September 14, Bloomberg published article ‘IMF plans food-shock help as it weighs revamp of global role’ as follows: ‘The IMF has proposed to its board that the institution increase access to emergency financing for a year to low-income countries that are most vulnerable to the changes in the cost of food, which “has skyrocketed,” Managing Director Kristalina Georgieva said in a virtual interview with Center for Global Development President Masood Ahmed on Tuesday. About 50 nations meet the criteria, with 20 to 30 being in need “immediately,” Georgieva said.’
It is quite shocking though that while in the interview, the MD of the IMF highlighted that ‘So, why a food shock window in our emergency financing, because cost of living is a problem everywhere, but the part of cost of living that concerns food and the very availability of food is the most dramatic shock people and countries are experiencing. We want to help them go through this period of time…’ yet there was no mention of the catastrophic floods that Pakistan is facing, and among other immense challenges, the food crisis that this has created! And this in addition to no mention of floods in the recently released country report by IMF on Pakistan, as pointed out by a recent Business Recorder (BR) published article ‘IMF conveniently ignores devastation wrought by floods’ as follows: ‘The Fund report – combined seventh, and eighth reviews of the Extended Arrangement under the Extended Fund Facility (EFF) – uploaded on Friday did not take note of the devastating floods that have inundated one third of the country with 33 million displaced.’Dr Omer Javed, "Floods, food & debt crises, and 77th UNGA session," Business recorder. 2022-09-16.
Keywords: Economics , Monetary fund , Economic growth , Debt crisis , Fund Facility , Kristalina Georgieva , Masood Ahmed , Heidi Chow , Pakistan , Ukraine , China , UNGA , IMF , BR , MD , EFF