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

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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 the 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.

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.

Earlier this week, the UN secretary general, who also visited Pakistan recently, made a forceful address to world leaders gathered for the opening day of the General Assembly’s high-level debate.

Guterres repeated the appeal he first made during his visit where he urged lenders to consider debt reduction to help those nations that were facing a possible economic collapse.

“Creditors should consider debt reduction mechanisms such as debt-climate adaptation swaps,” he said again at the UNGA. “These could have saved lives and livelihoods in Pakistan, which is drowning not only in floodwater, but in debt.”

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