Pakistan is suffering from the floods of the century, leaving many children displaced and in dire need of assistance.

(Associated Press)

[Financial Channel/Comprehensive Report] China's die-hard brother-Pakistan owes China about 30 billion US dollars (about 948 billion Taiwan dollars) due to its participation in the Belt and Road Initiative. It is Pakistan's largest creditor. The country is in crisis due to the floods of the century.

The United Nations Development Programme has suggested that Pakistani creditors should forgive their debts, or even give up their claims, in exchange for Pakistan's agreement to prioritize building infrastructure to curb the crisis caused by climate change.

The risk of Pakistan's debt default continues to rise. Its total external debt has reached 100 billion US dollars. China accounts for 30% of Pakistan's total external debt and is the largest creditor. Other creditors include Japan and France, the World Bank and commercial bondholders.

Pakistan has been ravaged by floods recently, with more than 30 million people affected, causing losses of about 30 billion US dollars, and the economy has continued to deteriorate.

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In order to prevent Pakistan from defaulting, the United Nations resorted to new tactics.

A UNDP policy memo recommends that Pakistan negotiate debt relief with creditors to stem the climate change-induced crisis, according to documents seen by the Financial Times.

The memo also called on Pakistan's creditors to consider debt relief, allowing Islamabad to prioritize funding for its century of floods rather than repaying borrowings.

The memo said that Pakistan may suspend loan payments first to free up fiscal space to use funds for disaster relief, post-disaster recovery and more.

The memorandum also proposes some restructuring or debt swaps, and even asks creditors to waive their claims in exchange for Pakistan agreeing to prioritize increased investment in infrastructure and increased resilience to climate change.

The United Nations Development Program believes that Islamabad and its creditors should find a long-term solution, including reducing Pakistan's debt to sustainable levels, so that the Pakistani government can prioritize the needs of its people.

Regarding the UN's proposal, Sakib Sherani, head of the Islamabad think tank Macro Economic Insights, bluntly said that if China does not participate, no agreement can be reached, and that it is in China's interest to help Pakistan, especially when the debtor cannot meet the debt, give a little space, which is also beneficial to creditors.

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