Pakistan must refuse debt repayments, divert amount for relief & rehabilitation of flood-hit communities

The Spark September 2010
This article is a reprint of a recently-issued statement by Abdul Khaliq Shah and Farooq Tariq of the Labour Party Pakistan’s Labour Relief Campaign.

Pakistan must refuse to pay the foreign debts and divert the amount into the relief and rehabilitation of the flood affectees. It is high time to change the priorities of the national budget and all those suggesting to cut the development budget and spend on flood affectees be stopped. There is an easy way out. Stop paying the debts owed to International Finance Institutions, donor countries and club.Pakistan is facing the worst disaster of its history. About 20 million of its population is badly affected by the recent huge devastation caused by angry floods. Major infrastructure is totally destroyed in major parts of the country.  The country has suffered a loss of about Rs250 billion only in the agricultural and livestock sectors and the flood recovery costs may run into billions of dollars. Pakistan is in real and worst human and economic crisis. Though international donors are announcing commitments for relief and rehabilitation, but these are peanuts vis-à-vis the degree of catastrophe.
We think this is the time, instead of begging for much-needed aid for relief and rehabilitation, Pakistan must stand up and announce unilateral suspension of repayment of foreign debts, owed to IFIs, donor countries and clubs. Currently Pakistan is paying about $ 3 billion on debt servicing every year. As Pakistan present foreign debt of $ 54 billion is increasing, the debt servicing will be up by the same ratio. Under the prevailing critical circumstances, we have to think about coping with this severe debt domination. Various laws and international protocols favor if Pakistan refuse to pay its debts right now, especially under the prevailing horrible circumstances, Pakistan is passing through.  To refuse payment of debts is not a new thing; many poor countries used this just and lawful right in the past.
There are spaces in international law that can be invoked as legal justification to refuse the external debt. One of these justifications is called “State of Necessity”. This rule is characterized by a situation that jeopardizes the economic or its political survival- such as the situations which creates the factor of impossibility of fulfilling the very basic needs of the populations (health, education, food, water, housing etc).  The “State of Necessity” justifies the repudiating of debt, since it implies the establishing priorities among different obligations of the state. Therefore, a natural calamity-like the one hitting Pakistan now creates the very factor of “State of Necessity”. The UN Human Rights Commission has adopted numerous resolutions on the issue of debt and structural adjustment. One such resolution was adopted in 1999, asserts that “The exercise of the basic rights of the people of the debtor countries to food, housing, clothing, employment, education, health services and a healthy environment cannot be subordinated to the implementation of the structural adjustment policies, growth programs and economic reforms”
Right now, state of Pakistan is no longer able to fulfill fundamental human needs of its flood-hit 20 million population. Pakistan is simply unable to repay or service its debt responsibilities. We cannot put our people at the mercy of this natural calamity, that is enormous than Tsunami. The first and foremost thing in such circumstances is the fulfillments of the all fundamental human needs of the populations, hit
by natural calamities and disasters. So this is high time for Pakistan to stand up to its creditors and say a big NO. Pakistan had already lost one such just opportunity in 2005 when devastating quake hit Kashmir, leaving millions of people in misery. This time it is more lethal calamity, and we should no more be silent.  Latin American countries including Argentine, Burkina Faso, Peru, Mexico, Paraguay, and Ecuador took such positions in the past.  Very recent IMF had to cancel all its debt, US $ 268 million owed by Haiti, after devastating earthquake hit Haiti in 2009.
The cancellation is given via the newly established Post-Catastrophe Debt Relief Trust Fund, which was set up for this purpose and which can now be accessed by other indebted, low income countries hit by disasters.  Another example is Argentine. The country went into serious crisis after 2001 economic crisis. Though Argentine leaders had always implemented unpopular policies dictated by IMF, it was the people of Argentine who come on the roads in 2001 to protest the debt domination. This popular action succeeded in altering the history. As a result country’s president announced the biggest unilateral suspension of foreign debt in history, a total of more than $ 80 billion, owed to private creditors, countries and Paris Club. Thus Argentine demonstrated that a country could stop debt repayments for a lengthy period of time. Pakistan’s total debt-to-GDP ratio has crossed 61 percent this fiscal year, breaching the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act. According to World Bank if Debt-to-GDP ratio exceeds the limit of 80%, the default is sure.
The major portion of budget is consumed by two Ds; Debt-servicing and Defense. We have to review allocations against these two Ds. Under the circumstances, there is no denying the fact that Pakistan’s single source of economy vulnerability is debt crisis. We do not have any other option to come out of this economic but to refuse repayment of debts.
We demand that this is high time for the State of Pakistan to announce unilateral suspension of the all external debts and divert that amount for the relief and rehabilitation of 20 million flood-hit people. The government should approach the newly created Post-Catastrophe Debt Relief trust Fund to get its foreign debt liabilities cancelled. The Government can also invoke the international protocol of “State of Necessity”, introduced by UN Human Rights Commission in 1999, to refuse payment of debts.As government is planning to review economic priorities and budget allocations, it must take steps to reduce military budget, cut non-development expenditures and other unnecessary heads. The amount, thus saved be shifted to social sector. We also demand that International Financial institutions and donor countries must repudiate the debt of Pakistan.
For more information on the Labour Relief Campaign visit:
http://www.laborpakistan.org/news58.htm