Pakistan must raise billions after flood - Holbrooke

by reuters | Thomson Reuters Foundation
Thursday, 16 September 2010 16:22 GMT

* Tens of billions of dollars needed for Pakistan

* IMF programme at risk without tax reform

* Fear for outbreak of epidemics

(Adds Gilani comments)

By Michael Georgy

KARACHI, Sept 16 (Reuters) - Pakistan's allies can only do so much to rebuild the country after devastating floods so the government must raise tens of billions of dollars for reconstruction itself, a top U.S. official 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," U.S. Special Representative for Afghanistan and Pakistan Richard Holbrooke told a meeting of newspaper editors in the southern city of 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 U.S. ally in the campaign against militancy reeling in one of the worst natural disasters in recorded history. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

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Pakistan's economy was already fragile and the cost of rehabilitation will likely push the 2010/11 fiscal deficit to between 6 and 7 percent of gross domestic product (GPD) against an original target of 4 percent.

The floods are "going to put your government to the test", Holbrooke said.

RECONSTRUCTION WORRY

Pakistan's tax to GDP ratio is about 10 percent, 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.

Pakistani Foreign Minister Shah Mehmood Qureshi said the government was contemplating measures to generate revenue.

"We...intend to revisit our budgetary priorities to cap non-development expenditures, to reprioritise our development allocations and to see what we can do to mobilise national resources," he told reporters in the city of Multan along with Holbrooke and Australian Foreign Minister Kevin Rudd.

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 a $11 billion IMF-backed economic programme agreed in 2008.

About 10 million flood victims are in urgent need of food and shelter. Aid agencies warn that water-borne diseases and hunger could kill many more.

Pakistani Prime Minister Yusuf Raza Gilani appealed to donors to help Pakistan with the flood crisis because the country needs stability to fight terrorism.

"The world should be more concerned about Pakistan's stability because this situation can disturb stability in Pakistan," he told reporters.

The United States has taken the lead in providing emergency aid, contributing $261 million for relief and security.

Washington wants to make sure the floods do not create political turmoil in Pakistan, which faces a Taliban insurgency at home and is under U.S. pressure to tackle militants who cross the border to attack U.S.-led NATO troops in Afghanistan. (Additional reporting by Sahar Ahmed in Karachi and Augustine Anthony in Islamabad; Writing by Chris Allbritton; Editing by Elizabeth Fullerton) (For more Reuters coverage of Pakistan, see: http://www.reuters.com/places/pakistan)

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