Injustice of Donors against Pakistani Nation

Foreign aid has become a burden, rather than a blessing.
Pakistan is the most heavily debt country is the world with $52 billion external debts and $50 billion internal debts, total debts $102$ billion
The United States’ and Donors failure to produce aid, loan efficacy in Pakistan has put its credibility at stake

Corruption is a cancer in the body politic, a tax on the poor”. Quoting Mr. James Wolfensohn. Decades ago, Albert Hirschman likened development to the break-up of traffic jammed in a tunnel.A major chunk of our economic gains are spent on the two Ds; defense and debt-repayment. Debt is no longer a private affair because it has a political dimension also, which concerns all Pakistani nation and society. The indebtedness of Pakistan is becoming all the more unbearable because the repayments and interest payments demanded by creditors are beyond the means of poor people of Pakistan and prevent all Forms of development. This is well brought out by Alice Amsden in her latest book, Escape from Empire

In comparison, in 60-plus years here, the 167 million shareholders have been doled out a saga of broken promises, palace intrigues, brute force, denial of rights, bartering of sovereignty, abject surrenders, bogus referendums, brazen rigging, sham accountability, scandalous NROs, promiscuous cronyism, disgraceful judgments, wanton corruption, food poverty, increasing rich-poor and urban-rural divides, rampaging inflation and enveloping gloom. "It is a poor country replete with tycoons."

The former Prime Minister Chaudhry Mohammad Ali in his article, "Foreign Loans: Far Reaching Consequences," had warned the nation in clear terms: Weekly Asia, 19th Nov. 1962

The temporary impression of economic prosperity that has been created under these loans, is in fact very much like extravagant zamindar who makes merry with the loan amount spending beyond his means and when the amount of one loan is spent, he goes begging for another till he absolutely falls into the grip of the money-lender.

Even if Pakistan does not take further loans after 1969-70 the repayment of outstanding loans shall continue up to twenty first century and we shall be compelled to get fresh loans to settle earlier loans and their compound interest shall destabilize our national economy stated by Ex PM C.M.Ali

During the 1960’s, about 19 million people were counted as poverty afflicted in Pakistan 1980, the number of these poverty stricken people had risen to 34 million By 1990 it was reduced to 24 million but again it started rising and went up to 42 million in 1995 — an addition of 18 million within half a decade. Nearly one-quarter of the population is classified poor as of October 2006.

24 Jan.2009 Advisor Corporate Affairs Pakistan Poverty Alleviation Fund (PPAF), Dr Junaid Ahmed has said that 50 percent of our population is living below poverty line and their average daily income is below 2 dollars 44 percent have no access to clean water and 42 percent without proper sanitation. Infant child mortality is 77 per 1000 persons and 44 percent children do not attend primary schools.ty to aids and loan from donors countries for keeping us poor and begging Nation on the planet.

Majority of decisions are taken at the whim or fancy of either an individual or a group of individuals who may have a vested interest in maintaining the status quo. The rulers here are capable of spending a billion dollars a day but not of earning it.

According to Allen McGrath, author of the Destruction of Pakistan's Democracy, when CJ Munir denied the existence of the Assembly's sovereignty, he destroyed Pakistan's existing constitutional basis. He did further harm when he did not indicate where sovereignty resided The political power of the armed forces of Pakistan is greater than the power of the elected representatives of the people as well as of the judiciary. Time and again the former have provoked their supremacy.

The World Bank highest borrowers are also the most corrupt according to Transparency International Index. Pakistan is a favorite debtor country of the World Bank (among the top 12). Between 1950 and 1999, the international donor community contributed nearly 58 billion dollars to Pakistan ten billion dollars of aid from the United States since September 11, 2001.
Contraceptive prevalence rate has remained at the same level, below 30 percent. And infant child mortality has been stagnant for the last 10 years or so.” Currently, Pakistan ranks 136 out of 177 on the United Nations Development Programme Human Development Index.

The Pakistani rupee has shrunk about 25 percent this year 2008-2009
1960, Dollar was 4.76 Pakistani Rupees. 1980, dollars 9.97 Pakistani Rupees 1985, dollars was 16.28 Pakistani Rupees, 1990, dollars was 21.41 Pakistani Rupees, 1995,dollar was 30.62 Pakistani Rupees and Inflation 2000,dollars was 51.64 Pakistani Rupees,2005,dollars was 60.40 Pakistani Rupees,2009,dollars was 76.5 Rupees,

The World Bank publication "Global Development Finance 2000"*, that the maturity period of external debt decreased from 31.6 years in 1970 to 19.7 years in 1998, while the grace period declined from 11.9 years to 5.6 years. The interest rate increased from 2.8 per cent to 6.0 per cent, while the extent of grant element decreased from 59.2 per cent to 29.7 per cent during the same period

In the wake of stock market meltdown and falling value of the rupee, Pakistan’s economic managers are hoping for some external help to bail the economy out of trouble in 2009 .At the end we got $7.5 billion from IMF through Citi Bank Economic Manager Shukat Tareen new advisor on Finance to PM from USA.

The foreign debt and liabilities have increased in rupee value by more than Rs705 billon in less than six months 2008-2009,simply due to the more than 25 per cent or Rs15 per dollar decline in currency value. The country’s overall external debt stock has increased by almost $7 billion to $47 billion since June 2007.

The country’s total debt stock now hovers around Rs7 trillion, up by about Rs1.4 trillion from Rs5.6 trillion in March 2008.This includes about Rs3.4 trillion domestic loans and Rs3.6 trillion in foreign loans and liabilities

Low levels of spending in the social services and high population growth have contributed to persistent poverty and unequal income distribution

These CIA covert operation, including the organisation of military coups, are often synchronized with the imposition of IMF-World Bank macro-economic reforms

Most of this money has been embezzled by those who were in subsequent governments in Pakistan, floundered through bank debt default and spent on non-development expenditures like defense and debt servicing and the lifestyles of the policymakers and politations. All powers, authority and resources, have been usurped by an organized group of power elite.

It is clear that during the first 25 years of Pakistan's existence, Government of Pakistan had to borrow money domestically to meet its fiscal deficits From 24 million dollars at the end of the Pre-Plan period in 1954-55, it rose sharply to six times at the end of the First Plan in 1959-60, seven times over the Second Plan, about three times over the Third Plan and about two and a half times by the end of Non-Plan period in 1977-78.

The growth began to taper off during the subsequent Plans, but was still substantial: 30 percent over the Fifth Plan 1978-83, 37 percent over the Sixth Plan 1983-88, 47 percent over the Seventh Plan 1988-93. It is only in the Eighth Plan 1993-98 that the burden rose less sharply by 20 percent. But the cumulative burden had now become a hefty 22.8 billion dollar. In 2008-2009 internal debt is $50 billion

In a nut-shell, the position of Pakistan's total public debt stock (internal and external) as of 31st March, 1972 was as follows:
Internal Debt: Rs.7.62 billion
External Debt: Rs.39.85 billion
Total: Rs.47.47 billion

The present economic crisis has been largely perpetuated by a bloated defense budget that the army would find politically and internationally impossible to allocate to itself if it was ruling the country.

The generals need a civilian face to any government, if for no other reason than to ensure that the defense budget is not too seriously questioned inside and outside the country.

If we look into the list of debt defaulters and government functionaries (officials as well as politicians) who have embezzled public money and have defaulted on their bank loans, we get a glimpse of the extent to which the people of Pakistan have been robbed of their share of the nation’s wealth.

Political power and authority was snatched away by the bureaucrats and generals after the assassination of Liaquat Ali Khan. The powerful bureaucrats both in Mufti and in Khaki, joined hands to seize political power

The common man bears the burden of 100 different taxes prevalent in the country but the super-rich are provided escape routes of exemptions and tax holidays, 180 of them in the payment of income tax alone

President Ayub's "Decade of Development" (1958-1968) proved a masterly piece of deception. It made the rich richer, and the poor received plenty of promises. With the breakaway of East Pakistan, Yahya Khan and his coterie of Generals were swept from power.

After the rule of two military dictators viz, Ayub and Yahya, Zulfikar Ali Bhutto became a civil dictator. A champion of the poor and downtrodden
A report of the Income Tax Department in respect of income tax paid by MNAs, Senators and MPAs from 1985 to 1993 showed that 70 per cent MNAs paid no tax at all, and only 32 paid less than Rs. 5,000 and at least 13 ministers did not pay any tax

"Borrowers, mostly from the country’s elite, are estimated to have defaulted on about 3000 billion rupees or US$ 40,220 million loans rescheduled / written Another news item states, "Loans worth of Rs 800 billion (US$ 8000 million) have been rescheduled, and many among the big defaulters have either got their loans rescheduled / written off or escaped from 1947 to 2009.

The assembly approved a law to write off loans worth billions of rupees owed by the politicians to the nationalized banks in 1985 1985 Amir Ul- Momenien-Zia and Mr Clean Junejo era

During Benazir Bhutto’s two terms in power, a total of Rs 7.23 billion loans had been written off, constituting 24.2 per cent of the loans written off — Rs 494.97 million in her first tenure and Rs 6.74 billion in the second

According to the figures compiled by the Credit Information Bureau, it was during the two tenures of Nawaz Sharif — 1990-93 and 1997-99 — that major chunks of these loans had been written off.

Two-thirds of the total loans — Rs 22.35 billion — had been written off during the two stints of Nawaz Sharif. In his first tenure, a total of Rs 2.39 billion had been written off and during his second, the amount had gone up to a staggering Rs 19.96 billion.

The loans written off during the two tenures of Nawaz Sharif constituted approximately 74.5 per cent of the total of Rs 30.018 billion written off between 1986 and 1999.

A total of Rs 59,945.17 million loans have been written off during accounting years 1999-2007, Federal Minster for Finance Syed Naveed Qamar told The National Assembly. Total of Rs 104850 millions loans were written off during 1999 year while Rs 309,190 million was written off during 2000. According detail, a total of Rs 1,004,855, Rs 627,593, Rs 627,593, Rs 1,177,139, Rs 2,348,811, Rs 1,199,808, Rs 2,004795, and Rs 2,192,121 millions loans were written off during 2001-2,3,4,5,6,7 years respectively

Those 8000 persons who are defaulters of banks for an amount Rs. 140 billion. They are the persons who evade taxes and deprive the exchequer of an annual income of Rs. 700 billion and still stay above accountability. They operate the black economy which is not accounted for and is estimated at the lowest to be Rs. 1700 billion

An economic system survives where the government has indefinitely depended on foreign loans, particularly short-term loans, to finance a part of its current expenditure. There is nothing in the (present) government’s programme that would reduce Pakistan’s dependence on increasingly expensive and scarce foreign funds.

The responsibility of the donor nations is as much as of the government of Pakistan, because they also knew of the plunder and misuse of the funds. Even still the donors close their eyes to the plunder and kept on financing all subsequent regimes and politations of the country. The people who gave these loans knew that the money wasn’t being used wisely. Perhaps they even took their cut. Yet the ordinary people have to pay back these loans.

This is the injustice of it all. The burden of our debt is immoral". The donors are as liable for these faults as much as the ruling elite of Pakistan. .Poverty-stricken people who should not be made doubly responsible for the mistakes and misconduct of others. On the one hand, finances meant for their uplift and economic development were misused and misdirected away from the people to the foreign bank accounts of the rich and powerful (ironically in the very banks of the donor nations), and on the other hand, by paying back the principal as well as the interest on the debt that they did not spent.

Those who have misused the funds should be taken to task, in what ever nation they might reside for the time being in accordance to local and international laws, so that the plundered wealth of the country can be returned to their rightful owners – the people of Pakistan.

In the 1950’s and the 1960’s approximately 70 percent of the Pakistan’s foreign aid package was non-returnable grants and only approximately 30 percent were loans and credits. Of this, about 80 percent were spent on development expenditures and only 20 per cent were spent on non-development purposes.

Somewhere in the 1980’s and the 1990’s the situation had reversed. Approximately 80 per cent of the foreign aid package for Pakistan was being spent on defense and other non-development expenditures, almost all of the foreign resources for the country were in the form of loans, credits and direct investments at quite harsh conditionalities and heavy interest rates. In the 1990’s and the year 2000 all of the foreign assistance has been spent on debt servicing. In 2000-2009 all of Foreign assistance and loan has been spent on the two Ds; defense and debt-repayment.

The World Bank (2000), Global Development Finance, Country Tables (2000), Washington, D.C. meant that 85 per cent of the new debt acquired in 1990 was devoted to debt servicing, which implied a large and rising debt burden

The external debt has gone up to $ 45 billion in June 2008 from $ 33 billion in 1999. In fact, Pakistan is the fourth largest borrower of the World Bank and fifth-largest recipient of US aid to foreign nations but even then the country has not been able to reduce external debt. Its borrowing record is littered with corruption and wasteful spending.

Despite the fact that Pakistan is spending an estimated amount of $ 4 billion on debt-servicing every year, the volume of payable debt is going up and up. The foreign debt is not coming down substantially as new loans are taken when the old loans are repaid. In the fiscal year 2006, foreign debt of $3.1 billion was repaid, but new loans of $3.05 billion were taken.

Musharraf regime had borrowed a staggering amount of over $ 15 billion since 2003. During 2003-04, the total external debt was $ 33.352 billion. Had government stopped borrowing, the debt would have declined to $ 23.646 billion after payment of principal amount by end June 2007. Pakistan’s total foreign debt and liabilities have now crossed the $45 billion mark while domestic debt had soared to Rs.400 billion by the end of June 08.Now in Feb. 2009 the External debt is $ 52 billion mark, and internal debt crossed the 500 billion Rupees mark.

The external obligations of Pakistan in December 1999 were about US$ 37 billion, out of which US$ 32 billion were external public and publicly guaranteed debt. At the same time the internal debt of Pakistan was US$ 32.5 billion. External indebtedness and internal indebtedness together shows a total of US$ 69.5 billion (total debt) which is approximately 100 % of the country’s GDP. . In plain English, the country is indebted to an approximate equal amount of what Pakistan is producing in a year.

The only change was that the younger generation of landlords had taken over from their elders.

The social background of the new members of parliament can be judged from the following figures: Landowners 117 Tribal leaders 17 Religious leaders 6 urban professionals 8 Ex-army officers 7 Student leaders 2 Businessmen 42, in 1985 Election in Pakistan .Same figure is going in Feb.2008 election, now landowners cum Industrialists sitting in NA of Pakistan. Just faces change same kin and Keith of Elite Class of ****.

The feudal families which had been discarded by the electorate in 1970 have returned to the assemblies. The National Assembly, the Senate and the four provincial assemblies were dominated by landowners. Nearly 75 per cent of the 847 members of these bodies were big landlords.

Pakistan is in a situation of a classical debt trap, where new loans are being taken in order to service old loans. A simple Debt Burden Index (DBI) tells the story. By dividing external debt as a percentage of GDP, and the debt growth rate by the GDP growth rate, we can clearly assess how heavy the debt burden has become for the nation and its people.

The per capita external debt for in Pakistan 1999-2000 was US$ 231, which in rupee terms was Rs. 13500 – an amounts which is equivalent to a month’s pay for a grade 19 Gazetted Officer in the Government of Pakistan. Debt servicing alone for the year 2000-2001 will be US$ 5671 million (Rs. 329,000 million) which is per capita US$ 41.18 or in rupee terms equal to Rs. 2,400. The per capita external debt for in Pakistan $247, 31 December 2007 Rank 52 External debts (% of GDP 9.42%) now dollars is 76.50 Rupees which is in terms of Rupees is 18500.

According to Economic Survey of Pakistan 1999-2000, the share of financial institutions (IDA, IBRD, ADB, IFAD, etc.) in total external debt of Pakistan as of 30th June 2000 was 51.9 per cent, while the share of consortium countries (Japan, USA, Germany, France, Canada, Italy, UK, Sweden etc.) was 40.3 per cent. The share of non consortium countries (Korea, China, Russia, Australia, etc.) was 5.5 per cent, while the share of Islamic countries (Kuwait, Saudi Arabia, Islamic Bank, Turkey, etc.) was 2.2 per cent.

Pakistan’s External Debt 30-06-2005 Multilateral Creditors (ADB, IBRD, IDA, IMF,) 16,970 (US $ Million). Bilateral Creditors (PARIS CLUB-NON-PARIS CLUB) 13,819 (US $ Million) Others Public & Publicly Guaranteed Debt (A + B + C) II. Private Sector Debt 1,906 so total Total External Debt & Liabilities $35,834 US $Millions

In 2007-08, Pakistan has added $4.2 billion to its stock of external debt without borrowing a single penny only because of depreciation of dollar versus major currencies like euro and the Japanese yen

Pakistan debt growth over the 1990 was unprecedented, but a credible debt reduction strategy and faster economic growth reduced the public debt burden from 84 percent of the GDP in 2000 to 57 percent in 2006. Interesting account that reduction in debt to GDP ratio came by way of rescheduling, a debt swap for social spending, debt cancellation and pre-payment of GDP in 2005

Similarly William Easterly has questioned the effectiveness of foreign aid and loan in reducing poverty and promoting economic growth. The complex problems of poverty of low-income societies can be solved by the home-grown rise of political and economic institutions, rather than through influx of foreign loan and aid, advisors and planners.

When a nation treads the path of economic bankruptcy then the lending countries also try to deprive it of the freedom of thinking and action. Gradual infusion of foreign powers in national affairs can culminate into a situation leading to appointment and expulsion of men in power. It is possible that the common man remains unaware of the pressure of these powers but its devastating effect continues, especially when there arises need for new loans

"Police repression and low salary are forms of having social control. When the people ask for things in a blockade or in a march and there's a kid who breaks a window, we are violent. But I ask what's more violent, a youth dying of starvation, a kid being shot from behind, or if we break a window? A window is a material thing; you can fix it, life you can't ever get back."

Although economic development ultimately makes societies better off, in the short run it creates winners and losers. As Samuel Huntington has noted, social unrest flourishes not in countries mired in poverty, but in those that are developing and changing, either for good or for ill, raising or diminishing expectations. AID effectively discourages governments from learning from and correcting their mistakes

When our own politicians and economic experts were harping in tune with American and European experts, planners, bankers and money lenders in favor of foreign aid and international investments in the name of economic development of Pakistan, so as to get us into this net, some far-sighted leaders tried that the nation should not tread this suicidal path, but it proved in vain. Today we need again to ponder deeply over what they said that the new strategy is free from past mistakes.

At the end I will Ask who will solve, the misery of poor nation from wrong doing of Donors and Mufti, Khaki, and Corrupt politician .Can we get rid of Externals and Internal debt of Pakistan. Can we will pay back the loan or our Fate will be same like Somalia, Rawnda, Burundie, or new East India Company will take over Pakistan.

Usman Karim based in Lahore Pakistan lmno25@hotmail.com