International aid agency Oxfam demanded cancellation of all multilateral and bilateral loans to Pakistan, and that debt relief be given on emergency assistance from the International Monetary Fund (IMF).
“After a week of talks with the IMF, Pakistan has not been given what it needs to recover from a disaster of this magnitude. This is a disappointingly inadequate response. Pakistan can not be expected to service debt as it struggles to cope,” Elizabeth Stuart, a senior policy advisor at Oxfam, said.
Pakistan’s external debt in 2010 amounted to $ 54.3 billion.
“A third of Pakistan’s budget revenues are currently spent on loan repayments. Pakistan’s resources must now be directed at recovery from this disaster, and a debt burden can not be allowed to impede recovery. The IMF together with all other multilateral and bilateral creditors should cancel the country’s debts,” Stuart said.
Money that would otherwise have been paid on debt service must be used to pay for reconstruction and poverty reduction, for example through a transparent line in the country’s budget which could be monitored by local civil society, Oxfam said.
The Pakistan government should also review its own budget allocations to ensure it is investing sufficiently in reconstruction and poverty alleviation, it said.
“Rebuilding will take years and billions of dollars, and a willingness on the part of the international community to help Pakistan get back on its feet,” she noted.