Pakistan- a country of about 180 million people is ruled, most of the time, by the IFIs-backed military dictators who directly governed the country for 32 years (during its 63 years life) with full support of the imperialist west. These dictators, during their respective tenures, not only undermined the democratic institutions in the country but also incurred heavy debt to Pakistan, with almost 80% owed to IFIs, including IMF, World Bank and Asian Development Bank. The economic priorities of these dictators have been revolving around two Ds; Defence and debt servicing.

Natural disaster

In August 2010, Pakistan faced the worst-ever natural disaster of its history. About 20 million of its population was displaced due to huge devastation caused by the unprecedented floods. Major infrastructure was totally destroyed in southern parts of the country. The economic loss was counted in billion dollars. Pakistan plunged into real and worst human and economic crisis. It was almost impossible for the government of Pakistan to meet the basic requirements of its millions of displaced people as the international response to Pakistan was far less than the Tsunami and Haiti disasters — the world community provided only $229 million to Pakistan. This translates into $16.16 for each affected Pakistani person as compared to $1,087 every affected person in Haiti and $1,249 per affected person in the Indian Ocean tsunami.

Norwegian SlUG calls to cancel debt

Norwegian SLUG constantly highlighted the fact that international community led by America has cancelled debt as per a ‘humanitarian concern’ doctrine with Nigeria enjoying $18bn debt relief in 2005. Iraq received $30bn debt relief from the powerful Paris Club with 80% of its debts cancelled courtesy of US support. And the world cancelled the debt for Haiti in Jan 2010, owing to the effects of its awful earthquake. We told the IFIs and donors that Pakistan deserves equal if not preferential treatment to Nigeria and Iraq and must demand that its debts are cancelled too.

Legal arguments for debt cancelation

Norwegian SLUG also equipped the campaign with legal arguments in its favor. There are spaces in international laws, resolutions and protocols that can be invoked as legal justification to refuse the external debt and demand cancellation. One of these justifications is called rule of “State of Necessity”. This rule is characterized bya situation that jeopardizes the economic or political survival of a country- such as the situations which creates the factor of impossibility of fulfilling the very basic needs of the populations (health, education, food, water, housing etc).  The “State of Necessity” justifies the repudiating of debt, since it implies the establishing priorities among different obligations of the State. A natural calamity-like the one hitting Pakistan has given birth to the very factor of “State of Necessity”. Besides this the UN Human Rights Commission has adopted numerous resolutions on the issue of debt and structural adjustment. One such resolution was adopted in 1999, asserts that “The exercise of the basic rights of the people of the debtor countries to food, housing, clothing, employment, education, health services and a healthy environment cannot be subordinated to the implementation of the structural adjustment policies, growth programs and economic reforms” Then there is resolution of UN commission on International Law 1980, which says, “A state cannot be expected to close its schools, hospitals and universities, abandon public services to point of chaos, simply to have money to repay its foreign debts. The rule of “Moral Responsibility” is also worthy to mentioned. It is immoral to demand a calamity-hit poor country devote what available resources it has to repay creditors rather than satisfy fundamental needs of its people in misery. From moral point of view, the rights of creditors are insignificant in comparison with fundamental rights of populations. More over it is nothing short of criminal that a country as poor as Pakistan is bled of resources every year to repay borrowers who extended unjust loans to the dictators of country over decades. It is vital that desperately needed emergency aid is not effectively swallowed up in debt repayments.

Under the prevailing conditions, Pakistan must be able to mobilize all available resources toward relief and rehabilitation. Instead of sending billions in debt service out of the country, Pakistan should be able to divert those resources in recovery for its people in urgent need.   

Auditing public debt to cancel the illegitimate part

A significant part of the public debt in Pakistan is illegitimate since it results from deliberate policies by governments that have decided to systematically favor the moneyed classes to the detriment of other marginalized sections of society.  Dictators debts, donor-dictated mega faulty projects, IFIs neo-liberal conditions, Tax reductions on higher incomes, personal wealth, and the profits of private corporations have led public authorities to increase the public debt so as to compensate for the drop in government revenues. They have also raised the tax burden on low income households, that is, on the majority of the population.

Such a context clearly shows the illegitimacy of a significant part of the public debt. IMF loans were granted on conditions that run against the population’s economic and social interests. Worse yet, these conditions again favor banks and other financial institutions. They must therefore be regarded as illegitimate. Finally, in some cases governments have gone against the will of the people. Such a unilateral moratorium must be combined with the auditing of public loans (with citizen participation).

Pakistan Debt Cancellation Campaign charter of demands
A charter of demands was prepared by the Pakistan Debt Cancellation Campaign in consultation with the wider sections of the local society, to present to the donors/IFIs, government of Pakistan and civil society.

 What should IFIs/donor countries do?

· Total foreign debt cancellation, Pakistan owes both to IFIs and creditors; including multilateral and bilateral debts.

· Immediate suspension/freeze on external debt-servicing

· IFIs, creditors and donor countries should immediately abolish the odious debt, extended to undemocratic, dictatorial regimes in Pakistan

· Suspension of IMF-led structural adjustment program and economic reforms

· Extend maximum grants instead of new loans.

· IMF should expand the criteria for the new Post-Catastrophe Debt Relief Trust Fund including the crises created by other external economic shocks, to be able to provide debt cancellation and grant-equivalent assistance in response to such crises.

· IMF must use windfall profits from their gold sales for Pakistan’s debt cancellation.

· Transformation of official development assistance (ODA) into grants in reparation in the light of commitment made by the industrialized countries at 1992 Rio conference.

· The governmental aid should be enhanced and redirected to a “reparation fund”.

· IMF should expand the eligibility criteria for the Post-Castrophe Debt Relief Trust Fund so that it is a “Crisis” Debt Relief Trust Fund – available to countries facing severe natural disasters as well as other exogenous shocks.