The debt repayments and reconstruction loans with creditors should be suspended because of the added financial crisis of Pakistan due to recent catastrophic floods, a United Nations (UN) report has stated.
UN Development Program will share the memorandum with the government this week. The memorandum has stated that the creditors should consider debt relief for Pakistan so that the policymakers could be allowed to prioritize financing of disaster response over loan payment, Financial Times has reported.
The initial damage assessment made by Pakistan has been estimated at $30 billion. The government as well as UN Secretary-General Antonio Guterres have blamed climate change being the cause of flooding in the country.
Financial Times has further stated that the UN memo has proposed restructuring or swapping of Pakistan’s debts so that the creditors would let go of payments and Pakistan would be able to make investments in climate change resilient infrastructure.
Around 33 million Pakistanis have been affected by the floods that have killed more than 1,500 people along with billions of dollars in damage that has created concerns about whether the country would meet debts.
UN Secretary-General has already urged lenders to consider debt reduction to help possible economic collapse. Guterres has said at his address at the UNGA that debt reduction mechanisms such as debt-climate adaptation swaps should be considered that could save lives and livelihoods in Pakistan which is drowning in floodwater along with debts.