Pakistan’s allies will only do so much to rebuild the country after devastating floods so the government must raise tens of billions of dollars for reconstruction itself, US Special Representative for Afghanistan and Pakistan Richard Holbrooke said on Thursday.
The floods, triggered by heavy monsoon rain in late July, killed more than 1,750 people, forced at least 10 million people from their homes and caused up to $43 billion in damage.
“The international community is not going to be able to raise tens of billions of dollars,” Holbrooke told a meeting of newspaper editors in Karachi.
“You have to figure out a way to raise the money,” he said.
A massive cascade of waters swept through the country, washing away homes, roads, bridges, crops and livestock, sending the vital US ally in the campaign against militancy reeling in one of the worst natural disasters in recorded history.
Pakistan’s economy was already fragile and the cost of rehabilitation will likely push the 2010/11 fiscal deficit to between six and seven per cent of gross domestic product (GPD) against an original target of four per cent.
The floods are “going to put your government to the test”, Holbrooke said.
Pakistan’s tax to GDP ratio is about 10 per cent, one of the lowest in the world, and while the government has called for greater revenue collection, it has done little to broaden a very narrow tax base.
The International Monetary Fund (IMF) on Wednesday approved as expected $451 million in emergency funding to help the country rebuild. That amount is separate from an $11 billion IMF-backed economic programme agreed in 2008.
The IMF programme includes energy sector reforms and measures to boost revenue.
If Pakistan does not increase its tax revenue and eliminate energy subsidies to cut expenditure, future IMF funds could be in danger.
For now, the focus is on getting help to flood victims, 10 million of whom are in urgent need of food and shelter. Aid agencies warn that water-borne diseases and hunger could kill many more.
“I’ve never seen anything on the scale of this,” Holbrooke, who also visited flood-hit areas, said at a meeting with the American Business Council, including representatives of major US companies such as IBM and Procter & Gamble.
“This is what we need to convey to the international community. It’s the reconstruction stage that I’m most worried about.”
The United Nations says it has received $307 million, or about 67 per cent, of $460 million it appealed for in emergency aid last month, and plans to a launch a new appeal this week in New York.
The United States has taken the lead in providing emergency aid, contributing $261 million for relief and security.
The United States wants to make sure the floods do not create political turmoil in Pakistan, which faces a Taliban insurgency at home and is under US pressure to tackle militants who cross the border to attack US-led Nato troops in Afghanistan.