The $10 billion pledge for Pakistan's flood relief
Recently Pakistani Premier Mian Shahbaz Sharif and his foreign minister Bilawal Bhutto Zardari were thumping their chests that they have secured over $10 Bn from global powers towards flood relief in Pakistan. In a special fundraising moot at Geneva, various institutions and countries have pledged this amount which is being projected by the Pakistani government as a donation using aggressive media propaganda since elections are due in Pakistan, but the reality is far from the truth. Let us analyze this in five simple points.
Pledge and not a firm commitment – One must understand that this amount is just a pledge and not a firm commitment. Earlier also there have been several such pledges in case of Pakistan and other countries and rarely they materialized. Interestingly there is no agreement signed till now. It is doubtful if the current pledge will remain firm or not?
Charity or Loan? As per a statement from the Pakistan government, top donors are Islamic Development Bank - $4.2bn, World Bank - $2bn, Asian Development Bank -$1.5bn, Saudi Arabia - $1bn & roll over of another $1bn which makes up to nearly 90% of the entire amount pledged. In addition, there are other pledges of about a billion dollars from multiple donors who pledged $100mn or less. While there can be reasons to believe that small amounts could be a form of donation, any amount over $500Mn cannot be a charity. So even if this pledge is materialized, this will turn into a whooping loan of over $9Bn with very less amount as charity.
Terms and Conditions of Loan – Pakistan has lost all its financial credibility & its credit ratings are pushed to extreme low. The country is on the verge of a sovereign default and under such circumstances, what will be the conditions of this over $9bn loan is a tough question. No loan is possible without an equal collateral which Pakistan doesn't have. The terrorist country is already under the dark shadows of the International Monetary Fund (IMF) where due to its non-compliance, the $1.1bn tranche of IMF loan is stuck in doldrums. It is understood that the conditions of this so-called flood relief pledge will not be easy, and it will be difficult to perceive whether Pakistan will be able to comply with these conditions to obtain these loans?
Distribution timelines & form of disbursal – Till now, the donors have fixed a general timeline of next three years to disburse this loan or grants. This is a very long time keeping in view that over 5.5 million people are rendered homeless due to floods in Pakistan, and they need immediate support in terms of shelter, food, and medicines. So far not even a single penny has arrived. Furthermore, it is not yet clear as to what is going to be the form of this disbursal. As far as loans are concerned, they will be disbursed only after Pakistan signs the agreements and puts the collaterals but as far as donations are concerned, the form of this donation is not yet clear. It can be in the form of food items, medicines, temporary shelters, or any other kind. Knowing Pakistan’s track record, it is near impossible to believe that any donor could remit this money in cash. In such a case, it will not relieve the burden on the Pakistan government which has to pay nearly $8.5bn by March and another $12.5bn by end June 2023.
Worsening situation in Pakistan everyday- As Pakistan is going through a tough phase and its forex reserves have been depleted to $4.1bn which included its entire 60+ tons of gold reserves too. This means that the State Bank of Pakistan does not have any liquid cash to pay for imports in the times of a worst food crisis where people are killing each other for a 5Kg bag of wheat flour. Under such a situation, the relevance of the so -called $10bn pledge made at Geneva will be full of dilemmas. Interestingly Pakistan’s iron brother China has also pulled out & is investing more money in Afghanistan & Africa than Pakistan today. The dragon understands well that if these global lenders arrive in Pakistan, its debt trap scandal will be exposed.
There are various aspects related to this so-called flood relief pledge. There is one factor which must be kept in mind while analyzing this and that is the upcoming elections in Pakistan and Mian Shahbaz Sharif led government of Pakistan just wants to pull their cart till the elections are over. They are making fake claims, giving unrealistic promises to their public and trying to justify their governance so that they may come in power again, but the present situation is difficult to comprehend, and the future of Pakistan lies in complete darkness.