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Pakistan is facing a twin crisis: climate-change-fueled floods that have displaced tens of millions and a crushing debt burden imposed by Western financial institutions. Pakistan’s debt should be canceled immediately.

The flood in Pakistan is a humanitarian crisis of epic proportions. Entire towns, vital infrastructure, homes, farmlands, and crops are being washed away. With a third of the land under water, 33 million people affected, and the death toll over a thousand and rising, the human and economic cost is set to be astronomical.

It is estimated that the extensive damage to the country will cost at least $10 billion. The country faces both the immediate challenges of immense displacement, homelessness, hunger, and the spread of water-borne diseases as well as the longer-term costs of rebuilding and reconstruction. Pakistan faces a deepening debt crisis to pay the costs of a climate catastrophe it did not cause.

Sherry Rehman, Pakistan’s minister for climate change, issued a stark warning that Pakistan is “at the ground zero” of “flash foods, multiple glacial lake outbursts, heatwaves and now the monster monsoon of the decade.” Pakistan has over seven thousand glaciers, the largest number outside the polar region. Warming global temperatures are making them melt faster and earlier, creating glacial lakes and adding vast amounts of water to rivers and streams. This year’s monsoon season started earlier and has lasted longer, as heavy torrents have added relentlessly to the buildup of excess water.

These factors make Pakistan the eighth-most climate-vulnerable country in the world — and yet it is responsible for less than 1 percent of global carbon emissions. Despite this, the people of Pakistan are paying a deadly price for a crisis that is not their fault but has been created in the Global North through centuries of fossil fuel extraction. Even with multiple warnings from experts and scientists to leave fossil fuels in the ground, new gas and oil projects continue to be approved in countries like the UK and the United States, with fatal consequences for places like Pakistan that are most exposed to the dangers of the climate emergency.

Rich countries promised finance to help lower-income countries deal with the impacts of climate change as a recognition of its responsibility for historic carbon emissions. But the target of $100 billion a year of climate finance by 2020 has never been reached nor is it anywhere near the trillions of dollars needed to meet the scale of the crisis. To make matters even worse, the finance that has been delivered has mostly been in the form of loans, not grants.

Pakistan was already in a debt crisis before the flash floods unleashed widespread destruction — with $12.5 billion of debt repayments due this year alone. International Monetary Fund loans have been used for years to make interest payments to reckless lenders — a further $1.1 billion was released this week — while the debt has continued to grow. The debt crisis has been exacerbated by the economic fallout of the pandemic as well as soaring food and energy prices driven by the war in Ukraine and speculation on commodities in financial markets.

Worsening global economic conditions had already pushed Pakistan to the brink of economic collapse. The debt crisis has meant that Pakistan continues to make its debt repayments to foreign creditors, even though this involves essential resources being diverted away from building climate resilience and investing in essential public services, leaving the country at the mercy of climate disasters.

Without urgent action to tackle the debt crisis, Pakistan will continue to take on more debt to meet the huge economic costs of both the debt crisis and the damage created by the floods while still making repayments to its wealthy creditors. These lenders include Western banks and bondholders that have purchased bonds at knockdown prices. If they are repaid in full, they are set to rake in huge profits. Private lenders have long used these shamelessly predatory actions to profiteer at every turn. But debt repayments to wealthy creditors should never be prioritized over human need — a fact even more true in the face of this extreme catastrophe.

Pakistan needs its debt repayments suspended with immediate effect to ensure that much needed resources are not sent out of the country to repay wealthy lenders at this crucial time. A longer-term solution would involve canceling Pakistan’s debts down to a sustainable level to enable the government to put people’s needs before the profits of wealthy creditors.

Rich governments also need to stop shirking their responsibilities and scale up the climate funding required to the tune of trillions of dollars. Crucially, this finance should be delivered in grants, not loans. And rich, polluting governments should also set up a fund for loss and damage to enable lower-income countries to fund rebuilding and reconstruction following climate disasters. This is not a matter of aid or charity but of compensation and reparations for centuries of fossil fuel extraction and carbon emissions by rich governments and corporations.

Pakistan is not an isolated case: fifty-four countries are currently in debt crises, and many of these countries are also on the front lines of the climate crisis. The two crises of climate and debt are inextricably connected. Unless wealthy creditors such as the International Monetary Fund, rich governments, and Western banks and hedge funds take concrete action on large-scale debt cancellation, debt will continue to act as an accelerator of climate chaos.

By Heidi Chow

Source: Jacobin 

 


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