Serious debt distress in developing countries

‘external public debt risks in developing countries are on the rise and have been for several years Higher debt stocks, debt service and assessed risks by international institutions have led to intensified calls to strengthen debt restructuring initiatives while debt stocks remain relatively low, current costs of funding make debt service hard to sustain, with an expected peak in 2024-25 in 2022-26 we estimate that financing needs could represent USD2 5 trillion across all emerging and 4 developing countries, including USD300 billion for countries eligible to the imF Poverty Reduction and Growth trust (PRGt), and USD340 billion for Sub-Saharan countries those are large sums, which could trigger major debt crises it is therefore essential to reduce the cost of debt and enhance the resilience to shocks ’ – Excerpt from a November 2022 Finance for development lab published working paper The coming debt crisis: monitoring liquid and solvency risk’

WH at the covid-19 pandemic and the climate change crisis have exposed is that years of Neoliberalism, whereby investment significantly followed market signals of maximizing profits, rather than in making resilient economies, where meaningful investments went into strengthening for instance public health- and education sectors, and in moving towards a green, inclusive, sustainable economies at the same time another offshoot of the same neoliberal assault meant less regulation, and downsizing of the public sector and public investments, mainly under the prescription that governments should primarily facilitate the private sector, and allow underlying finance, and international capital movements largely free of government interference that, in time, weakened the public sector ’s capacity to deal with shocks as and when they arise, and even more importantly to predict them better so that public policy should be more proactive, which on the contrary continued to become more reactive, while outsourcing of what otherwise should have been done by governments, meant that the private sector made contracts under public-private partnerships that were not always in the best interest of public and at the same time also did not allow a balanced overall economy, which was diverse, and properly concentrated on developing sectors that although they did not give quick profits, were nonetheless important to give an example, while the SaRS (severe acute respiratory syndrome)– a form of coronavirus–hit in the early 2000s, and the virus continued to resurface as epidemics– like the meRS (middle east respiratory syndrome) version a number of years later– there was little attention of the pharmaceutical industry to move towards reaching an effective vaccine, while investments continued to pour into quick profit-making endeavours like body creams Hence, it was not until the coronavirus hit as a pandemic that panic set in, and resources set to flow towards making a vaccine the same appears to be the situation of ‘bird flu’ which is continuing to appear as a potential source for another pandemic, yet there is much less attention on preparing the public health sector and vaccine, for instance that needs to change quickly in terms of accumulation of debt in a significant way over the years in particular of the developing countries, where the assault of Neoliberalism, both through public policy, but also through programme conditionalities and policy prescription of the imF meant that public investments could not build a resilient, diversified economy that brought sustainable and significant growth in both domestic production–and in turn sustainably create economic growth momentum, especially that involved a larger segment of the economy resulting in accentuating inequality– on one hand, hurting tax collection efforts as well on the other, while on the other, exports growth in general and value-adding exports growth in particular, overall meant that developing countries invariably ran into greater deficit financing needs for both the fiscal- and current account another source of debt built-up was overboard monetary tightening for tackling inflation, wrongly perceiving it in developing countries as primarily an aggregate demand side issue, where in fact, aggregate supply and lack of governance consequences together at least played an equally important if not greater role

High policy rates were also kept as a wrong policy choice, to otherwise lure very volatile ‘hot money or foreign portfolio investment Hence high policy rate while they continued to cause domestic debt distress, and also hurt domestic production, exports and tax collection not to mention lack of public investments, also reduced economic space for greater foreign direct investment (FDi)

Hence overboard monetary tightening under the neoliberal assault of seeing inflation as primarily a monetary phenomenon, and also lack of capital controls or the role of the public sector in creating diversified and deep space for FDi Hence, current account and fiscal deficits over the years, added not only significantly to the debt buildup of developing countries, but lack of resilient, inclusive and sustainable economies, with weak public sectors, meant having high vulnerability when shocks like the pandemic hit, and as the climate change crisis continues to quickly unfold at the same time, while the debt composition of developing countries significantly transformed from primarily consisting of Paris Club countries and multilaterals, to being debt needs heavily funded by China and a number of private sector creditors, the debt restructuring framework, on the contrary, continues to lack properly including China and private creditors Highlighting this concern, a February 2022 editorial of The Financial Times, titled the Covid aftermath requires sovereign debt restructuring’ pointed out in this regard ‘Unlike in the past, when most were countries grouped in the Paris Club, or a few large international banks forming the london Club, there is now a plethora of private and official lenders What is needed is a modern equivalent of the Paris Club and the london Club: a framework where all creditors can get together and share the pain Sovereign debt overhangs can weigh on growth for years and even decades the only way to end them is for all creditors to accept comparable treatment as the Covid-19 aftermath throws countries into default, they must find ways to do exactly that ’ moreover, a January 17 Ft published article ‘We must tackle the looming global debt crisis before it s too late’ by martin Wolf highlighted the urgency of dealing with the significant debt distress that many developing countries find themselves in He pointed out in this regard ‘the shocks of the past three years have hit low and lower-middle income developing countries hard according to Kristalina Georgieva managing director of the imF “about 15 percent of low-income countries are already in debt distress and an additional 45 percent are at high risk of debt distress among emerging markets about 25 percent are at high risk and facing default-like borrowing spreads ” Sri lanka, Ghana and Zambia are already in default many more will follow Something must be done urgently ’ at the same time, the article highlighted a lack of effective debt restructuring framework as there exists no effective framework for bringing all these creditors together Nor is there any credible template for restructuring that debt the G20 created the Common Framework for Debt treatment”, to deal with the former difficulty But it is in practice a Paris Club-led process the other (and frequently much bigger) creditors are not really engaged according to the imF itself, the framework does not have traction equally, there is no approach to debt restructuring that is at all likely to deliver what is needed - a new start for heavily indebted crisis-hit countries ’ a lack of multilateral spirit is also not helping whereby on one hand, easy available, long-term finance is not being made available for countries to deal with their debt distress and at the same time avoid adopting austerity policies in an age of ‘Pandemicene’, and of the existential threat of fast-unf o l d i n g c l i m a t e c h a n g e c r i s i s r e q u i r i n g d e e p spending into the public health sector, and in creating green transformation of the economy, in addition to making welfare spending to undo the sharp consequences of a recession-causing pandemic in terms of safeguarding against poverty and inequality, both of which have seen a significant increase during the pandemic

Cl i m at e change is likely a contributing factor to the cold waves experienced in many countries around the world evidence of climate change includes rising global temperatures, changes in precipitation patterns, shrinking glaciers and ice sheets, rising sea levels, and increased ocean acidity all these factors can contribute to cold waves in different parts of the world the effects of climate change have been particularly more severe in the past few decades in just the last two years the world has seen a particularly harsh winter, with temperatures dipping well below average in many parts of the world, including Pakistan the extreme cold this year is likely a direct consequence of climate change

Due to the increasing levels of greenhouse gases in the atmosphere, the earth is getting warmer this in turn is disrupting the thermohaline circulation, the global ocean conveyor belt that helps regulate the earth s climate this disruption is leading to extreme weather events such as flash floods, hurricanes, and blizzards in Pakistan, the effects of climate change are particularly severe in the past decade, the country has witnessed numerous extreme weather events, including floods, droughts, and heat waves these extreme weather events have resulted in many casualties and significant economic losses this winter, the extreme cold has further exacerbated the effects of climate change leading to an increase in intense cold the effects of climate change can be seen across the world From the arctic to the antarctic the world is experiencing unprecedented levels of warming this all is about warming the extreme cold this year is a warning sign of the unprecedented cold that we may experience in the future a recent study by the international Panel on Climate Change has predicted that the world is likely to experience an increase in extreme cold events in the coming years this will lead to more snowfall, more extreme cold spells, and an increase in deaths due to the cold in Pakistan the effects of this extreme cold will be especially devastating the country lacks the infrastructure to deal with extreme cold, and its population will be particularly vulnerable in addition the country s economy is heavily dependent on agriculture, and extreme cold can have a devastating effect on crop production the effects of climate change are real and we must all take action to mitigate its effects We must reduce our carbon footprint, switch to renewable energy sources, and take other measures to reduce our impact on the environment Only then can we hope to safeguard our planet and future generations from the worst effects of climate change it is also important to raise awareness about the effects of climate change and the measures we can take to mitigate its effects We need to educate people about the importance of reducing their carbon footprint, conserving energy, and switching to sustainable practices We must also encourage governments to take action to reduce emissions and promote green technologies We must ensure that our policies are in line with our commitment to protecting the environment moreover it is also important to support research and development into renewable energy sources and green technologies this will help us mitigate the effects of climate change and create a more sustainable future for all We must also invest in adaptation measures to help vulnerable communities cope with the effects of climate change By acting now we can protect our planet and future generations from the worst effects of climate change it is also important to educate people about the importance of investing in adaptation measures such as planting trees and building infrastructure that can withstand extreme weather events the extreme cold this year is a stark reminder of the effects of climate change and the urgent need to act an important aspect is the impact of the extreme cold on vulnerable populations in Pakistan, such as the homeless and elderly these groups are particularly at risk during cold waves and may not have access to adequate shelter or warmth Similarly, the impact on the energy sector in Pakistan during cold waves is obvious as increased demand for heating can strain the power grid and lead to blackouts moreover, tourism in Pakistan will be affected as extreme cold can discourage visitors and negatively impact the tourism industry another aspect is the increased air pollution during cold waves as more people burn fossil fuels for heat which can have negative health effects Prior to the impact of the extreme cold on the livestock industry in Pakistan cold weather can cause stress on animals and lead to decreased production and even death this can have significant economic consequences for farmers and the agricultural industry and affects the natural ecosystems in Pakistan, as the cold weather can harm or kill off plants and animals, leading to changes in biodiversity Furthermore most of the population will examine the potential for increased water scarcity in Pakistan during cold waves, as the cold can cause a reduction in snow and ice melt which are important sources of water for the country the Pakistani government and local organizations hereby must put in efforts to mitigate the effects of cold waves, such as providing emergency shelters and assistance to vulnerable populations and promoting energyefficient heating solutions

The writer is a PhD scholar from Zhejiang University China Currently he is working in Weather and Climate Services Islamabad as a Research Analyst

TH e energy sector of Pakistan has been in a circular debt trap for a long, and the imF extended Fund Facility (eFF) arrangement also indicates that the country must cap its circular debt through the ‘Circular Debt management Plan’ (CDmP) total circular debt is around Rs 1400 billion and the immediate decrease of circular debt demanded by the imF is around Rs 952 billion

Dependent on thermal energy and victim of the fossil fuel mafia, Pakistan is facing today what we had planned in the early 1990s there is a long story about how multinationals with the help of bureaucracy made fools of politicians for restructuring WaPDa in 1992 i was covering WaPDa as a beat Reporter in the 1990s and still remember that line losses in 1992-95 were around 12 percent while the government with a single stroke of bureaucratic pen allowed independent Power Producers (iPPs) to enjoy 18 percent line losses We must remember that the burden of line losses falls on consumers who pay for line losses, not the iPPs or the government WaPDa s Strategic Plan 1992 re-structured WaPDa and only Hydel generation remained with WaPDa, while its other functions were unbundled Several public sector entities were installed including transmission and Dispatch Companies (NtDCl), Distribution Companies (DiSCOs) and Generation Companies (GeNCOs) the Private Power and infrastructure Board (PPiB) was established in 1994 to provide a one-window facility to independent Power Producers (iPPs) the above-mentioned arrangements provided huge opportunities for the District management Group (DmG) group now called the Pakistan administrative Service (PaS) group, for lucrative salaries and controlling the entire power structure of Pakistan and minimizing the role of practitioners and experts, like public sector engineers Private Sector Power Generation (PSPG) was inducted in Pakistan in 1994 these bureaucrats were now in a position to deal with a forthcoming lot of independent private power producers, and a regulatory body namely NePRa was created in 1997 where the DmG/PaS group ensured a monopoly

Since these arrangements, nothing is in the hands of politicians and the federal ministry and minister were made puppets of what the abovementioned authorities decide Since iPP was a lucrative commercial activity for everybody linked with this business, the hydel sector was totally ignored and for the next two decades nothing was done to plan for hydel energy resources By 2022, the share of thermal energy was over 69 percent, hydro was 27 percent and renewable energy share stood at 3 15 percent

Since thermal power generation occurs in far-flung areas therefore the length of transmission lines extended after the 1990s increased so the line losses increased Right now 500 kV/220 kV transmission lines length is 19,500 km in 2015, the Pml(N) government introduced the “Power Generation Policy 2015” to facilitate private investment in indigenous resources for controlling the import budget of foreign oil for thermal plants it must be remembered that according to iPP contracts, it is the responsibility of the government of Pakistan to provide imported oil to thermal plants that is the reason for circular debt many independent studies indicate that one of the major causes of the increase in energy unit price to consumers is line losses in the financial year 202122, the amount of power lost during transmission by distribution companies was recorded at 22 298 (GWh in the same fiscal, the financial effect of transmission and distribution losses as a result of the inability to reach National electric Power Regulatory authority (NePRa) goals was also calculated at Rs 520 3 billion the imF is directing Pakistan to finance an unbudgeted Rs 675 billion power subsidies with a mix of electricity tariff increases and other revenue-enhancing measures the government would soon enhance the price per unit which is already around Rs 24 per unit to domestic consumers according to insiders an increase of Rs 6 per unit for domestic consumers would be announced by June 2023 and then there would be an extra jump of Rs11 per unit and therefore the cost of one unit to domestic consumers would stand at around Rs 35 per unit (less than 500 units usage) in July 2023 a Wo r l d B a n k - f u n d e d “ Va r i a b l e R e n e wable energy integration and Planning Study” indicates that solar and wind power should be u rg e n t

Major investment is needed in the transmission system, including new automation and control systems, establishing more wind and solar energy facilities, and initiating small-siz e hydel projects

Small-siz e to medium-siz e hydel projects take two to five years for production while solar and wind energy can be produced in the shor test possible time

Pakistan’s total electricity generation capacity by 2030 everybody knows that expanding renewable energy will make electricity cheaper and will achieve greater energy security installation of solar and wind power facilities is possible with the proximity of the areas where energy supply is needed, therefore such facilities would have shorter lengths of energy transmission and line losses would reduce drastically a World Bank study indicates that Pakistan can save import of oil for energy production (thermal) of up to $5 billion over the next 20 years according to another report, utilizing just 0 071 percent of the country s area for solar photovoltaic (solar PV) power generation would meet Pakistan’s current electricity demand Pakistan has several well-known wind corridors and with average wind speeds of 7 87 m/s in 10 percent of its windiest areas; mostly in Balochistan while solar energy can be produced anywhere in Pakistan Nevertheless the installed capacity of solar and wind energy in Pakistan at just over 1500 mW, is just 4 percent of total capacity, equal to around 3 5 percent of total generation Hydel energy is increasing in Pakistan thanks to the CPeC project and Chinese intervention in Pakistan’s energy market moreover, the utilization of local coal for thermal energy production is also increasing anybody who has common sense understands that Pakistan can achieve over 24 000 mW of additional capacity by 2030 if we have coordinated and sustained efforts by both the federal and provincial governments major investment is needed in the transmission system, including new automation and control systems establishing more wind and solar energy facilities, and initiating small-size hydel projects Small-size to medium-size hydel projects take two to five years for production while solar and wind energy can be produced in the shortest possible time the only need to enhance cheaper energy is the will to achieve it and i am sure the imported fuel mafia would not loosen its grip over the energy sector and we will keep thinking about producing at least 50 percent of our total demand through clean and cheaper energy resources like hydel, solar and wind energy

Remember Pakistan is the heaven of mafias

The writer is an international award winning journalist who has been in the field since 1988 and appears in national and international media as analyst and political scientist

S e n d y o u r l e t t e r s t o : L e t t e r s t o E d i t o r, Pakistan today, 4 - S h a a re y F a t i m a J i n n a h L a h o re P a k i s t a n E - m a i l : l e t t e r s @ p a k i s t a n t o d a y c o m p k L e t t e r s s h o u l d b e a d d re s s e d t o Pakistan today e x c l u s i v e l y

Clean environment is a basic right

a catalogue of fundamental rights is included in the Constitution, but there is no article framing the fundamental right to a clean environment maybe it is time our politicians focused their energies on something positive But even if they do not, or cannot, there are ways to go about bringing in a change With an alarming decline in ecology due to climate change that has become a threat to the next generation a group of young people sued the federal government of the United States (Juliana v United States), asserting that the government’s actions that cause climate change violated the young generation s constitutional rights to life liberty and property as well as failed to protect essential public trust the suit was taken incuriously in the beginning even by the federal government and its lawyers who have since witnessed the Supreme Court denying largely the government s motions to delay or dismiss the case in a landmark decision, Judge aiken expressed that the right to climate system capable of sustaining human life is fundamental to a free and ordered society this opinion was ground-breaking in the US since the courts had never recognised the constitutional right to a stable climate thus, regardless of the fact that Pakistan does not have any constitutional provision for the protection of the environment, the US episode serves as a strong precedent for the courts in Pakistan to consider making a move, and shows how crucial it is to take action in this critical regard

While the US is one of the highest contributors of greenhouse gas emissions, Pakistan does not fall in that category However, poor governance and mismanagement of natural disasters also play a significant factor in the catastrophic effects that were other- wise preventable through strong early warning and surveillance systems

Since the Juliana case emphasised upon the US government to acknowledge the threats of climate change and its inefficiency in dealing with it, the case sets an example for the citizens of Pakistan, specifically the resilient youth, to demand their fundamental rights, and question the authorities about the mismanagement of natural calamities since 2010 it was during the hearing of a relevant case that it was discovered that the officials in charge of irrigation structures were responsible for inefficiency negligence or corrupt practices identified in departmental inquiries People in urban Sindh have a certain level of capacity to cope with the disastrous effects of climate change, but those in the rural Sindh have not been able to build such a resilience as they have been suffering from flash floods and heat waves for many a decade

For a climate-resilient society, it is critical for youth and everyone else to initiate or join efforts to build a strong and more accountable society

FARWA LASHARI KARACHI

Census and teachers

t H e Pakistan Bureau of Statistics (PBS) has issued a list of supervisors and enumerators to conduct the national census this duty is assigned to the teachers with those in BPS-17 or above being the supervisors and those in the lower grades being the enumerators as a result, teachers must now carry out censuses door to door teachers were not asked for consent instead their names were given against their will additionally, the election Commission of Pakistan (eCP) released another list carrying the names of teachers who would be doing election duties again, no teacher was asked for consent everything was done without giving the teachers a choice teachers refusing to comply for even the most logical and legitimate of reasons would face an inquiry at the very least a while ago, teachers in Sindh were given the assignment to survey the homes damaged by the floods that hit the country last year Surprisingly, no teacher received reimbursement for their trips or survey costs for that work they were not provided with even meals while on duty all the logistics had to be managed by the teachers themselves Prior to that, the National Command and Operation Centre (NCOC) had released a list of teachers who were to survey the common people to determine the rate of Covid vaccination and, yes, nobody had the courtesy to seek consent i can quote innumerable examples that make the life of government teachers one big nuisance Why are teachers given these assignments and so regularly? Why are teachers the most vulnerable ones when it comes to such assignments that have nothing to do with their professional duties? Why should teachers bear all the responsibilities?

People often say teachers are not respected in society When you knock on doors for surveys every two to four months, deal with people s wrath, and deal with offensive people who are not ready to engage in surveys how can you expect respect?

and the humiliation of teachers does not end there Following that, you must hear the stern instructions from your reporting officers How could anyone expect to respect teachers after all this? the authorities of all shades and hues should spare the teachers and allow them to do their job especially when the country already has the education sector largely in a pathetic condition

Dietar y habits

W H at has so far not been discussed in Pakistan is the association between eating habits and respect for climate change as is well-known climate change is a human-induced phenomenon and, this being so, includes humans’ consumption behaviour a special report released by United Nations intergovernmental Panel on Climate Change (iPCC) stated that by adopting a balanced diet, one can significantly mitigate individual carbon footprints this can be done by adopting the habit of taking a plant-based diet which is less taxing on the environment in addition, research has proved that our current food habits, based on animal and dairy products, have put food sustainability in jeopardy, leading to more and more increase in the size of the carbon footprint things can only change by spreading awareness and defining the nexus between climate change and eating habits Pakistan is an agricultural economy, and a big chunk of it is based on livestock and cattle rearing to attain this goal in Pakistan, along with government policies, we, as individuals, need to change our dietary pattern first the last year has brought Pakistan to the brink a series of rolling disasters including catastrophic flooding, political paralysis, exploding inflation, and a resurgent terror threat now risk sending a key if troubled global player into full-blown crisis if the worst comes to pass, as some experts warn, the catastrophe unfolding in Pakistan will have consequences far beyond its borders

“This is a country of 220 million people, with nuclear weapons and serious internal conflicts and divisions said Uzair Younus the director of the Pakistan initiative at the atlantic Council’s South asia Center “The world didn’t like the outflows of refugees and weapons that came from countries like Syria and Libya in comparison, Pakistan is magnitudes larger and more consequential ” if the economy remains in a moribund state, and there are shortages of goods and energy leading to a political crisis on the streets of major cities, that would also allow the Pakistani Taliban and other terrorist groups to begin hitting at the government more directly,” said Younus, who is also vice president of the asia Group, a strategic advisory firm We could see a significant weakening of the state and its capacity to impose order ” it is hard to overstate the difficulty of Pakistan’s current situation an unfortunate string of recent events combined with chronic mismanagement has created a potentially mortal threat to Pakistan’s political system

There are three crises intersecting at the moment in Pakistan: an economic crisis a political crisis and a security crisis that has grown since the fall of Kabul,” said Younus, who described the situation as the worst threat to Pakistan’s national cohesion since 1971” the year Bangladesh fought for and won its independence from Pakistan Pakistan’s foreign reserves have reportedly dwindled to a mere $3 7 billion, barely enough for a few weeks of energy imports to keep its cities and businesses running, while its public debt has grown to a staggering $270 billion Pakistan was particularly hard-hit by the war in Ukraine, which, along with other developing countries, forced it into a bidding war over scarce liquid natural gas that it has been unable to afford

The crushing weight of Pakistan’s debt has forced Prime Minister Shehbaz Sharif to beg the international Monetary Fund to restart a financial bailout that was put on hold early last year Negotiations are ongoing as the iMF is reportedly demanding painful concessions a