US envoy warns Pakistan of flood funding shortfall

The world will only be able to fund around 25 percent of the tens of billions of dollars needed to rebuild Pakistan after the floods, and its government will have to make up the shortfall, the U.S.envoy to the country warned Thursday.

Richard Holbrooke said America would not condition its assistance to the country, but warned that the U.S. Congress might not be generous if it felt that Pakistan was not taxing its own citizens enough.

Pakistan’s rich have traditionally not paid much tax on their income or their property – either because they evade them or are exempt – and the country’s collection rates are among the lowest in the world. Critics have pointed to this shortage of revenue in recent weeks as Pakistani leaders have sought international aid. The country’s economy is surviving on international assistance, and the floods are expected to badly slow economic growth further.

“I don’t want to withhold money they need, but I think we have to be clear that the Congress is going to be reluctant to give money if the money is filling in a gap because people are not paying taxes,” said Holbrooke during a visit to Karachi.

Monsoon rains triggered massive floods six weeks ago that spread across the country and are still continuing in parts of the south. Some 8 million people have been made homeless in what Pakistani and U.N. officials have said is one of the largest humanitarian disasters in living memory.

The United Nations said last week that it had received $310 million toward its initial emergency appeal, although private and bilateral donations bring the global total committed for Pakistan flood aid to roughly US$1.1 billion. On Sunday, donor nations are meeting in New York to appeal for more.

“Nobody has an accurate estimate of the reconstruction costs because we still don’t know what the damage has been, but it’s going to be in the tens of billions of dollars,” Holbrooke told business leaders in Karachi.

“The international community will never be able to put together that level of support because of all the other needs of the world in these areas, so your government is going to have do something about revenue because there is a clear shortfall,” he said.