Situationer: Climate change ‘Catch-22’ backs the dollar – Newspaper
The catastrophic floods that have affected more than a third of the country have only exacerbated Pakistan’s economic difficulties.
Inflation breaks all records and sets new ones, raising the cost of construction and slowing growth; the projected rate is expected to decline from 6% in FY22 to 2.3% in FY23.
The flood-affected agricultural sector estimates losses at around $13 billion. The closure of textile units means that exports from this sector will decrease by at least 20%. Reports also suggest the auto industry is working at half strength.
Meanwhile, the dollar is making new highs – on Thursday it appreciated further to close around Rs 236 in the interbank market. Although this is still below the record high of Rs239.5, reached at the end of trading on July 28, most experts did not expect such highs after the long-awaited injection from the International Monetary Fund ( IMF).
The currency market is inextricably linked to the country’s financial health, and experts say a holistic view is needed to understand why and how the economy – and the rupee’s competitiveness against the dollar – is spiraling descending.
Although Pakistan has been advised to seek climate-related reparations, experts say there is no mechanism to do so at the moment
Although the Fund has been successful, insufficient inflows from other sources of credit have yet to materialize. This includes support from “friendly countries” which Miftah Ismail often refers to.
Simply put, the country needs $32 billion to $34 billion in the current fiscal year to meet its external payments, mainly debt service and liabilities. The trade deficit has started to widen again, following the lifting of the ban on imports of luxury items under pressure from lenders resistant to such protectionist measures.
Then, of course, there’s the current account deficit, which was estimated to remain below last year’s $17.3 billion. But the drop in exports is pushing it back up. This is a catch-22: exports depend on imported components, and the instability of dollar rates prevents most exporters from executing their transactions with any degree of confidence.
“More than the IMF, Pakistan currently needs assistance from the World Bank and its International Bank for Reconstruction and Development (IBRD). It was this institution that initially helped Pakistan build dams and dams,” says Rashid Masood Alam, a senior banker associated with a World Bank affiliate in Karachi.
He says infrastructure projects like building highways, roads, dams and bridges would require billions of dollars. These projects are essential to restore the severed connections needed to keep Pakistan’s economic wheels turning, but at present the country has no way to fund such megaprojects.
“The European Central Bank, IBRD and World Bank should investigate and help Pakistan buy machinery and expertise to plan better to avoid a crisis-like situation,” he added.
Carbon emissions and repairs
Immediately after the floods, there was talk of a climate-induced disaster and how Pakistan, while being one of the lowest carbon emitters, was coping with the consequences of the actions of big polluters such as the United States. States, China and Europe.
In a recent and oft-quoted interview with BBC News, the academic Maira Hayat of the University of Notre-Dame had raised the question of reparations. “There are certain issues that the citizens of [the] the northern hemisphere must ask its states. For example, what is the Global North’s responsibility for the kind of devastation we see in Pakistan today?
“In the language of climate policy, this is called loss and damage. The reason loss and damage has never been formally incorporated into climate policy and climate policy is because of the resistance of the wealthiest and…guiltiest nations, like the US and the EU” , she said.
This point of view is shared by Mr. Alam. “Pakistan is surrounded by two major carbon emitters, namely China and India. Its more than 7,000 glaciers have already begun to melt at an alarming rate and if this phenomenon is not stopped, it could wreak havoc on the region and cause sea levels to rise, which could lead to the immersion of coastal towns,” he said.
If global warming trends are not halted, he warns, a country with a global carbon footprint of 0.7% would be deprived of agriculture, livestock and human resources at an unprecedented level.
According to the United Nations Environment Programme, the world’s richest 1% emit more than double the emissions of the poorest half combined.
It was in view of this sobering statistic that developed countries were supposed to set up a fund to help developing countries adapt to climate change, he said, but nothing came of it.
So even though Pakistan’s cause is now championed by none other than UN Secretary General Antonio Guterres, there is simply no provision for Pakistan to seek compensation from the countries producing the greatest amount of greenhouse gases, says climatologist Ali Touqeer Sheikh. “The Kyoto Protocol nor the Paris Convention contain any provision or agreement to pay for the losses suffered by countries affected by climate change.”
He also insists on the need to look within. “It has been known since the early 1990s that climate change has increased recurrent flooding and will be more aggressive in years to come, but our governments have never paid attention to this serious problem. Instead, they tried to blame climate change entirely for these massive losses. »
He suggested that the government should not allow the reconstruction of houses built in the path of perennial streams and rivers, which were washed away by torrential rains.
All in all, the situation calls for a solid plan to be drawn up to ask the developed world to recoup our nearly $30 billion in losses, and the UN’s flash appeal for $160 million is like peanuts compared to the quantum of damage.
These losses will ultimately create unemployment, increase inflation, reduce economic growth, reduce exports and keep the dollar dominant against the rupee, sealing the fate of the country which could see default if the overall economic decline continues.
Posted in Dawn, September 17, 2022