Governance reform and Pakistan: does climate financing offer a chance?
One of the financial constraints facing Pakistan is its structural dependency on international financial organizations, such as the International Monetary Fund (IMF).
For decades, Pakistan was offered the opportunity to evolve into a stable economic force in South Asia, but sustained external interference in its immediate neighborhood compelled priorities to remain out of sync. One of the chief impediments to this day is U.S. military overreach in Afghanistan, costing billions in life and blood to distance the masses from tangible governance reform.
But catastrophic floods, and their drastic humanitarian implications, present a unique case. On the one hand, this climate-induced challenge risks significantly straining Pakistan’s modest economy. At the same time, it puts the spotlight on Pakistan’s dire climate financing needs, which offers the new ruling coalition a chance to redirect international assistance towards service delivery reforms for long-term promise. In recent times, substantive climate diplomacy from Islamabad has led to a landmark global consensus on a “loss and damages” climate fund, chiefly for Pakistan. Add to it the persistent threat of more climate-induced catastrophes in the future, and Islamabad has a solid case to secure billions in climate reparations from the world’s top polluters. This creates an opportunity for good governance, because funds need to be transparently utilized, and the public will welcome any tangible post-flood reconstruction effort.
Recent events make it clear that there is no downplaying Islamabad’s adverse exposure to the climate-induced flood catastrophe. It is one that was fueled by the world’s most powerful countries and top polluters. Some 20 million flood victims are already in dire need of assistance, suggesting that every ruling coalition in Pakistan must be allowed to complete its full democratic term. This is important because good governance, even on funds allocation, has suffered in Pakistan due to political protests and interrupted rule. “The climate-induced crisis in Pakistan has long-term implications for recovery and resilience in a context defined by systemic deficits in climate financing ... while flash appeals just for the humanitarian gap by the United Nations have received only 30% of the $816 million”, said Climate Minister Sherry Rehman this week. The stakes are high for Pakistan, but so is the value of reform if climate priorities are set in order.
One of the financial constraints facing Pakistan is its structural dependency on international financial organizations, such as the International Monetary Fund (IMF). IMF conditions economic reform and stability on a set of measures that contrast sharply with the relief expectations of the common Pakistani. Consider foreign demands to tighten government controls on energy pricing. These measures have added to public discontent, presupposed a “one-size-fits-all” global reform approach to Pakistan, and left the government with little options to cater to scores of flood victims under open skies. Despite an escalating war between Ukraine and Russia that has stymied economic recovery in the developing world, organizations such as the IMF continue to project an artificial sense of economic stability in climate-vulnerable countries. Pakistan deserves to be taken out of a seemingly endless cycle of loans.
Future climate financing can be an effective counter. First, it can lessen some of those external loan dependencies, and instead, concentrate governance autonomy in the coalition that represents popular will. Early optimism reflects in Islamabad’s framing of the floods as a matter of climate justice, and not a favor from the wealthiest polluters. That grammar (in ample display at the UN Climate Conference) allows it to press developed nations to commit to a formal institutional arrangement that is suited to the most vulnerable economies. Second, since billions in climate financing are difficult to attract, there will be added pressure on Pakistan’s governing elite to put the funds into post-reconstruction efforts with minimum delay in sight.
This sense of urgency has been short-lived in Pakistan of late. Successive political administrations have been compelled to leverage international financial organizations (IFOs) for counterproductive structural relief, adding to a soaring debt burden but barely reducing it. It is here that a simple reality check can put flood-hit Pakistan on the path to course correction: that international loans undermine, rather than promote, Islamabad’s mandate to govern autonomously.
The latter requires a fundamental redirection of climate funds to Pakistan’s high-return growth sectors. These include a budding technology industry and a fin-tech industry with strong integration potential overseas. As a result, sectors with greater financial accountability challenge the narrative that transparent fund utilization in Pakistan is virtually impossible. On the contrary, global donors can be better assured of government checks and balances on climate investment should such a path be taken. In the process of such people-centric climate investments, good governance will also benefit in Pakistan.
For now, there is a dual challenge at play for Pakistan: rebuilding lost healthcare infrastructure in the country’s South, and also accommodating millions of displaced populations in quick time. That creates an added incentive for Pakistan to sensitize top emitters to the gravity of its funding constraints, making it critical to tailor future climate assistance to either short-term or long-term rebuilding goals. Committing to one of the two should serve as a strong point in Pakistan’s climate financing narrative. This can be accomplished by extending recent activism with global climate partners, as witnessed during Islamabad’s chairmanship of the Group of 77 developing economies in Egypt.
Taken together, a delicate balance between climate financing and governance mandates can translate into a recipe for good governance. The alternative is an undesirable one for Pakistan: it risks raising the stakes to improve livelihoods, puts pressure on dwindling foreign reserves, and threatens to put more distance between Islamabad and its progress on the UN Sustainable Development Agenda.