Jubilee Plus Press Release

17th December, 2001.  
Contact: Romilly Greenhill Tel: 0207 089 2878
Rgreenhill.jubilee@neweconomics.org  

Jubilee Plus condemns Pakistan's Paris Club deal. 
Postponing the inevitable: Pakistan's creditors grant 6 month suspension on debt payments - but won't face reality of unpayable debts.

Jubilee Plus has condemned the outcome of negotiations between Pakistan and her rich country creditors at a meeting of the Paris Club last week. Ann Pettifor of Jubilee Plus at the New Economics Foundation said: "This deal shows contempt for the human rights of the people of Pakistan. Creditors continue to insist that despite the enormous risks and sacrifices made during the Afghan war, Pakistan's government should prioritise the interests of her foreign creditors over the right of her people to stability, clean water, education and health. These debts can only be paid at great cost to the human life chances of more than 40 million illiterate people in Pakistan. By turning their backs on Pakistan, the G7 and powerful commercial creditors are fostering even greater resentment towards the rich countries, and laying the ground for future instability in the region. Now more than ever, we need independent arbitration between international creditors and sovereign debtors." 

Pakistan's western allies, led by the US and Japan, are keen to buy off the unelected military government, and avoid social and economic collapse in Pakistan in the aftermath of the Afghan war. On Thursday 13th December, at a meeting of the club of rich country creditors - the so-called 'Paris Club' - G7 countries agreed to defer all debt repayments from Pakistan up to June 30 next year. Debt service payments on her colossal $61.7bn foreign and domestic debts had been eating up more than 60% of her tax revenues, undermining her ability to provide basic services for her population or secure law and order during the de-stabilising war in Afghanistan. 

While the Paris Club deal will help in the short-term, Pakistan will gain little relief from her creditors in the medium and long-term. Although repayment schedules have been lengthened, and a five year 'grace' period will be offered on repayments of principal on older loans, there will be no reduction in the stock of debt. This is a worse outcome than what had been promised to Pakistan. Before the meeting, it had been widely predicted that Pakistan was eligible for 'Naples Terms' under which up to 67% of commercial debts are cancelled and the remainder rescheduled. It is also a worse outcome than that offered to HIPC countries - and the IMF reports that Pakistan has all the indicators of a HIPC country. As a result Pakistan will not be receiving any debt relief from her multilateral creditors, the IMF and World Bank. Instead, these institutions are playing the old game of "magic roundabout" by providing new loans to pay off old loans, with the IMF taking the lead earlier this month, in adding yet another a $1.3bn to Pakistan's debt burden. 

The IMF's acceptance of Pakistan's shocking human development indicators; the Cold War nature of much of the debt (lent to President Zia to promote Cold War aims in Afghanistan); and Pakistan's reluctant, but vital role in a US-led war had led to calls by the Pakistan Freedom from Debt Coalition and Jubilee Plus for the G7 to guarantee generous HIPC-style debt relief. Our pleas went unheeded. While the deal may provide a welcome breathing space for Pakistan, her prospects for returning to economic, political and social stability will be severely hampered by her huge Cold War debt burden. The seeds are being sown for future instability.