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Pakistan

Flood-hit Pakistan should suspend debt repayments, says UN paper

  • 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
Published September 23, 2022

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.

Disease, malnutrition threaten to raise Pakistan flood toll: UN

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.

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 debts.

Pakistan will 'absolutely not' default on debt despite floods: Miftah Ismail

Finance Minister Miftah Ismail had earlier said that Pakistan will "absolutely not" default on debt obligations despite catastrophic floods, signalling there would be no major deviation from reforms designed to stabilise a struggling economy.

"The path to stability was narrow, given the challenging environment, and it has become narrower still," Ismail said.

"But if we continue to take prudent decisions - and we will - then we're not going to default. Absolutely not."

Despite the flood disaster, Ismail said that most stabilisation policies and targets were still on track, including increasing dwindling foreign exchange reserves.

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