Opportunity or Poisoned Chalice 

Ishtiaq Ahmed 

At a meeting co-hosted by Islamabad and United Nations and attended by 40 private donors and financial institutions, a massive package of 10 plus billion dollars was announced to help the victims of recent floods.

This is a welcomed news for hundreds and thousands of families whose lives have been devastated by the unprecedented floods in 2022. Last year’s floods killed at least 1,700 people, displaced 8 million more and destroyed infrastructure. It was estimated that Pakistan would need $16.3bn needs to begin to recover from the disaster.

It was difficult to see how a country already crippled by heavy debts and in deep economic crisis would be able to find huge funds required to recover from the devastation caused by the floods.

The pledge from the international community to commit exceeding $10 billion should help to lift some of the prevalent doom and gloom amongst the government circles and the flood-devastated communities.

The Islamic Development Bank, the World Bank and Saudi Arabia would be some of the biggest donors. The European Union, the US, China and France also be contributing.

Whilst welcoming the efforts of the government to mobilise the international community to pledge huge sums for the rehabilitation of Pakistan post floods, there remain a number of pertinent concerns that arise from the vagueness of the language being applied:

Foremost, figure of $10 billion is a pledge and not a cast iron commitment. As we know, pledges can be subject to stringent conditions and therefore can be withdrawn or withheld. The government has not revealed the terms and conditions surrounding the package announced. Therefore, we do not know what the government is committing to. This certainly takes some of the shine off of the government’s celebratory mood.

Pakistan’s Finance Minister Senator Ishaq Dar has explained that $8.7bn of the pledges were loans. He did not reveal the terms and conditions of these loans. The Prime Minister has said “we expect the terms to be lenient”. This suggests that even the government is not clear to what it is committing to.

The pledges are described as ‘loans’. The language applied by the finance minister and the prime minister clearly points to this. In common understanding, loans are normally required to be paid back.  Is this also the case with these ‘pledged loans?’

What is exactly meant by these’ pledged loans? What are the conditions, if and any? Is this a poisoned chalice for the country already in heavy burden of foreign debts? 

To the question how soon Pakistan can expect these pledges to actualise, the Prime Minister has said this depended on ‘us’. “The faster we can design and create feasibilities and impress them [donors], the faster these pledges will materialise.” 

This gives rise to further questions. Going by the past track record of Pakistani governments when it comes to robust governance, transparency and accountability, one does not feel too confident about  doing any better this time around. Would we be hearing from the government how it plans to overcome this embedded malaise?

We also know that these pledges will not solve Pakistan’s immediate dollar liquidity crisis. However, donors and the flood affected communities need to be reassured that the pledged funds will not be diverted to underwrite the national financial deficit and pending debt repayments.

The Prime Minister has vowed that the government would utilise “every penny” of the pledges made by the international community for the prosperity and rehabilitation of flood-hit people, which according to him would be materialised in the next three years.

90 percent of the pledges made by the international community would be project loans that would be rolled out over the next years.

This gives rise to a number of additional concerns: firstly, for those already living in impoverished conditions without food, shelter, clean eater and essential services, another three years would a long haul. We expect more human causalities. Another rain laden season is not too far away that would add more misery to hundreds of thousands. It is feared that the slow incremental release of funds maybe used to slow the recovery and rehabilitation work.

The concept of project loans seems to suggest that the international donors have no confidence in the government governance to ensure that these funds will be utilised for the intended purpose. This brings to fore the deficit of trust and confidence in government governance something that needs an immediate attention.

Finally, there is an innate fear that these pledged funds may end up filling the coffers of politicians and officials as it has happened repeatedly in the past,  hence, would not reach their intended destinations. The project targeted pledges may be a way to safeguard against this but to get the politicians and  officials, already rubbing their palms at the prospect of dollar pour down, to keep their claws off would be a challenge for the government and the international monitoring mechanisms.

Therefore, the substantial help from the international community for the flood victims is welcomed and the government is commended for its efforts but if  these substantial resources are not utilised for the benefit of the flood victims it could become a poisoned chalice for Pakistan and it’s beleaguered nation.

The author is a British citizen of Pakistani origin with a keen interest in Pakistani and international affairs.