Economic woes, shifting ties complicate Pakistan’s flood recovery

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The government is keen to secure much-needed funding, but analysts say internal and external issues pose a risk.

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Islamabad, Pakistan – This week, Pakistan announced plans to host an international donor conference to help the country recover from catastrophic floods that caused widespread destruction and large financial losses this summer.

The United Nations and France have also proposed hosting a donor conference to raise funds for the country, which is among the most climate-vulnerable countries despite contributing less than one percent to global carbon emissions.

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But many analysts believe that global economic instability, a worsening energy crisis and Western questions about Pakistan’s geopolitical alliances mean that providing much-needed funding will remain a major challenge.

“When the 2010 floods started, Pakistan was the darling because of the ongoing war on terror, and donor fatigue was also significantly less,” said Ali Tauker Sheikh, an Islamabad-based climate change analyst, referring to the flood more than 10 years ago that killed about 2000 people.

“Right now, Western economies are fighting with themselves, and at the moment, our credibility has also suffered over the years.”

At its peak, recent floods have left more than a third of the country under water, particularly affecting the southern provinces of Sindh and Balochistan.

The latest government figures put the death toll at 1,725, including 643 children, with more than 33 million affected by what UN chief António Guterres called a “monsoon on steroids.”

The flooding damaged over 13,000 km (8,000 mi) of road networks; about 3,000 km (1,900 miles) of railroad tracks; over two million homes; hundreds of bridges; livestock and hundreds of thousands of acres of farmland.

After setting the initial damage figure at $10 billion, the government subsequently revised it to $30 billion. On Tuesday, Prime Minister Shehbaz Sharif said the World Bank had estimated the damage at $40 billion.

This month, the UN revised up the original emergency appeal from $160 million to $816 million. But Pakistani officials say the country has only received about $100 million so far, despite higher pledges from friendly countries and international organizations.

“More than $205 million in pledges have been made, of which $90 million has been committed or implemented,” a Ministry of Foreign Affairs (MFA) spokesman told Al Jazeera.

The spokesman said that the amount of all commitments made, including in response to the UN appeal, as well as individual multilateral and bilateral assistance, exceeds $1 billion.

Flooding in Pakistan (Al Jazeera)

“Economy in turmoil”

The flooding comes at a time when Pakistan’s economy is already in a precarious position, with a growing current account deficit, more than 20 percent inflation and a massive depreciation of the nation’s currency, the rupee.

The country managed to avert a default only in August, when it received $1.17 billion in funds from the International Monetary Fund.

Meanwhile, according to the latest World Bank report released earlier in October, poverty in Pakistan is likely to rise by 2.5 to 4 percentage points due to the floods. Nearly 20 percent of the 220 million people are already below the poverty line.

Speaking to the Financial Times this week, Sharif said the country is seeking additional funds for “mega-enterprises” such as infrastructure reconstruction and is seeking a moratorium or a restructuring of its debt obligations.

“There is a gap, a very serious gap that is widening every day between our demands and what we have received,” Sharif said.

Last month, while visiting the United States to attend a session of the United Nations General Assembly, Sharif told Bloomberg that Pakistan was talking to European leaders to help Pakistan get a moratorium.

“Lack of fiscal space”

Pakistan’s Planning Minister Ahsan Iqbal, who also leads reconstruction and flood rehabilitation, told the country’s national assembly on Monday that Pakistan is planning to host an international donor conference once damage assessments are completed.

But Uzair Yunus, director of the Pakistan Initiative at the Atlantic Council’s South Asia Center, said Pakistan’s macroeconomic performance will challenge the government to raise additional funds.

Some analysts also believe that Pakistan’s inability to generate funds is the result of its gradual shift towards China, one of the US’s main geopolitical rivals, to meet its economic and defense needs over the past decade. Pakistan’s external debt is over $130 billion, of which approximately $30 billion is owed to China, which has also invested heavily in Pakistan through its Belt and Road Initiative.

Yunus, however, said there are some domestic sources of money.

“According to the UN, about $17.4 billion a year is distributed to the elites, and redirecting some of these benefits to flood relief and recovery assistance can be very effective,” he said.

“Pakistan needs to realize that the hard work has to start at home. The state needs to find a way to mobilize additional resources by taxing domestic sectors that are granted tax breaks and privileges.”

Retired Lieutenant General Nadeem Ahmed, former head of Pakistan’s National Disaster Management Authority, also questioned the government’s strategy of putting more emphasis on infrastructure development.

“The government should focus on the people first,” he said. “We must invest foreign aid in people-centred projects and use our own resources to develop infrastructure. People need to be rehabilitated today, but large development projects will take time.”

Yunus agreed, stressing that the government must keep the people at the center of its rehabilitation and recovery plans.

“We need to hear the opinion of the people on the ground. As long as there is no long-term plan for human development, Pakistan will end up rebuilding things only to be washed away by the next disaster,” he said.

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