(Bloomberg) -- Pakistan Prime Minister Shehbaz Sharif made an urgent appeal for debt relief from rich nations as catastrophic floods exacerbated by climate change displaced millions of people in the South Asian nation.
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Pakistan has debt obligations in the next two months, he said in an interview with Bloomberg Television in New York, adding that his government had just signed an agreement with the International Monetary Fund with “very tough conditionalities” that include taxes on petroleum and electricity.
The floods have submerged a third of the country and killed more than 1,500 people. United Nations Secretary General Antonio Guterres has called on the international community to help Pakistan financially as damages caused by the floods exceed $30 billion.
“We have spoken to European leaders and other leaders to help us in the Paris Club to get us a moratorium,” Sharif said in the interview, referring to the group of rich creditor nations. “Unless we get substantial relief, how can the world expect from us to stand on our own feet? It is simply impossible.”
He noted a “yawning gap” between what Pakistan is asking for and what is available, warning that the nation is facing the imminent threat of epidemics and other dangers. “God forbid this happens, all hell will break,” Sharif said.
Read More: Pakistan’s Dollar Bonds Plunge as the Country Seeks Debt Relief
Pakistan’s dollar bonds due 2022 dropped the most on record after the appeal. Its currency is among the worst performers against the US dollar globally this month and is trading close to its record low.
Notes due in 2031 pared some losses after Finance Minister Miftah Ismail reiterated the country will repay its $1 billion sovereign bond due in December on time. The nation is seeking debt relief from bilateral creditors and not from commercial bondholders, he said on Friday.
Pakistan Seeks Relief From Bilateral Creditors, Not Bondholders
In August, Pakistan secured a $1.1 billion loan from the IMF to avert default as political turmoil and the deadly flooding threatened the country’s economy. The IMF also increased the nation’s bailout package to $6.5 billion. Sharif said he’d spoken to the IMF and World Bank about immediate debt relief and would begin talks with China after the Paris Club. Pakistan owes $30 billion to China, or about a third of its total external debt.
The disaster in Pakistan -- already reeling from depleted currency reserves and the highest inflation in decades -- has affected 33 million people, more than the population of Australia. Pakistan is now in talks with Russia for gas supplies as well as wheat imports after expected production losses due to the floods, said Sharif.
Sharif took power in April after former Prime Minister Imran Khan was ousted in parliament following a high-profile clash with the military, which has ruled Pakistan for about half of its history and retains significant power. Now in opposition, the ex-cricket star has gained momentum holding protest rallies to demand snap elections that must be held by October 2023, though he faces legal trouble that could see him disqualified.
Billions of dollars of promised aid from the Middle East to bolster Pakistan’s hard-hit finances have yet to arrive. The nation’s foreign-exchange reserves stand at $8.3 billion, less than two months of import cover and below the standard benchmark of three months.
The economy is forecast to slow amid floods, policy tightening and efforts to tackle fiscal and external imbalances, according to the Asian Development Bank, which cut growth forecasts to 3.5% from 4.5% for the 2023 fiscal year this week.
A leaked United Nations policy memorandum has proposed the country should get its international debt suspended and restructure loans to limit the climate-change-fueled crisis, the Financial Times reported.
Things will not come back to normal, Sharif said in the interview. “I need to put our economy back on trail. I need to put our millions of people back in the rooms, busy again with the ordinary life in agriculture, in industry and getting jobs back,” he said.
“Time is running, and we’re racing against time,” he added. “Please help us avoiding this disaster.”
(Updates with finance minister comments, bond move in seventh paragraph)
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