A United Nations policy memo said on Friday that Pakistan’s creditors should consider debt relief in light of the flood crisis in the country, allowing Pakistan to suspend its debt repayment.
The Financial Times reported that a UN policy paper has said that the country should suspend debt repayment and restructure its loans with lenders to account for the damages and economic loss incurred by the flood crisis.
The UN Development Programme will share the memo with the Pakistani government sometime this week. According to the memo, debt relief should be offered by the creditors, so that Pakistani lawmakers can prioritise financing the flood relief effort, rather than loan repayment.
According to the report, the memo recommended that creditors should opt for ‘debt swapping’ or ‘debt restructuring’, where instead of paying back the countries, Pakistan would have to agree to invest in climate change policies and climate change-resilient infrastructure.
Meanwhile on Thursday, it was revealed that the World Bank had decided to provide $850 million immediately to Pakistan to help the country in flood relief efforts, infrastructure, agriculture, rural and urban development, and social service.