The financial situation in Pakistan has become worse with the floods. At a macro level, Pakistan has lost infrastructure worth 30 billion dollars in the devastation caused by floods, according to reports. It will cost an arm and a leg to start on the road to recovery, and Pakistan does not even have enough to simply help the victims of the floods. The section of the population that has lost its homes and all sources of income was already the section that was badly hit by the high levels of inflation and poor governance. The floods took away whatever little they had left after being in such a poor economic situation. The country is suffering and will continue to do so until some sort of foreign aid or grants are provided.
Following devastating floods that worsened the nation’s economic crisis, Pakistan will request billions of dollars in loans from international lenders, according to a report published by the Financial Times. Prime Minister Shehbaz Sharif was also heard stating that the country is not seeking a rescheduling on its previous loans, it is asking for additional funds. Pakistan needs large sums of money in order to rebuild and rehabilitate its largely displaced population. There has been a lot of damage in terms of infrastructure due to the floods, and it will take billions of dollars to rebuild road networks that were washed away.
New Finance Minister Ishaq Dar was also heard saying that Pakistan is not in need of loans being written off, it just needs more time to pay them off. At a time when the country is at the risk of default, it has become crucial for the government to come up with some sort of measure to avoid the looming disaster. If international organizations and countries from which Pakistan has borrowed do write off the loans in light of the floods, it would be great for the country. However, this utopian expectation will never be fulfilled as currently, even extending the limit to pay off the loans is not being taken into account by the lenders. However, considering the devastation in the country, essentially due to climate change, Pakistan has a right to ask for an extension.
Climate change and its effects on third world countries are a direct result of the actions of the first world. Therefore, some leniency should be shown in the return of credit payments at such a time. On the other hand, Pakistan needs to develop better policies and improve its institutions so that it never reaches the brink of bankruptcy, with or without natural disasters.
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