Press Conference - Independent debt audit commission be formed for inquiry into Pakistanís loan contracts made with IFIs
Publishing Date: October 21st 2008
Independent debt audit commission be formed for inquiry into Pakistan’s loan contracts made with IFIs.
Judicial inquiry be initiated into bank loans of Rs.60 billion, written off during Musharraf period
LAHORE. Debt is no longer a private affair because it has a political dimension also, which concerns all nations and societies. The indebtedness of most countries of the South is becoming all the more unbearable because the repayments and interest payments demanded by creditors are beyond the means of poor countries and prevent all forms of development. These views were expressed at a press conference organized by CADTM-Pakistan in connection with week of global action against debt, at Lahore Press Club, here on Monday (13 October 08)
CADTM-Pakistan focal person Abdul Khaliq addressing the press conference said the external debt crisis of the third world has been talked about for over 20 years and the rich creditor countries claims that it wants to provide a solution. Official solutions have come and gone but the debt of developing countries continued to swell; from about $ US 70 billion in 1970, it grew to $US 540 billion in 1980 and reached $US 2,800billion in 2006, having increased 40 times in 35 years.
He said it is now agreed that debt crisis is structural, where as it had been initially presented as a crisis of insolvency. Of course the indigenous factors, such as the decisions taken by national leaders, corruption etc. have played an important role in the development of this crisis. But it is above all exogenous factors, such as terms of trade, the trans-national companies, and increase of interest rates, among others, which are responsible for triggering it.
Basically the debt serves as pretext for bleeding third world populations dry by reducing social budgets, for exploiting their natural resources and for imposing on these economies measures, favorable to the creditors, reducing their sovereignty to practically nothing. Thus debt has become an instrument of re-colonization and it is not mere an economic issue rather a pure political issue and should be dealt accordingly.
Talking about Pakistan he said the official external debt has never gone down since 1999 when the military regime of General Musharraf took over, although after 9/11, Pakistan received a record aid. 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. The successive governments claimed that new loans would have to be taken for building the five large dams and rebuilding the infrastructure for industrial and commercial development particularly from the World Bank and the Asian Development Bank. But the building of mega dams has been opposed by the three of Pakistan’s four federating units.
He told the media that the 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.
The debt servicing cost is also going up. It rose to Rs.301 billion in year 2006 from Rs.247.7 billion the year before. The interest payments on domestic debt amounted to Rs.190 billion. Most of the internal debt has gone to buy the luxury items and majority of it has ended up in the contractors, civil and military bureaucrats and corrupt politicians. The Musharraf regime also availed the highest foreign exchange inflow in history of the country with over $ 25 billion coming through remittances of overseas Pakistanis and $ 10 billion in assistance from the US. It shows the elitist economic policies of the regime had least concern about the rising debt.
In Pakistan, he said 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. This status quo strongly favors spending in sectors and areas, which create few, if any at all, benefits for the people at large. An analysis of the priorities in public spending shows that only 0.7 per cent and 2 per cent of the GDP are spent on health and education, respectively. The major share of the GDP is spent on military expenditures and debt-service. Composition of our current expenditure reflects that half of it is consumed by defense expenses and interest payments, 7.9 per cent of it is spent on current subsidies, 14 per cent on general administrative expenses and the rest on development.
In fact, a major chunk of our economic gains are spent on the two Ds; defense and debt-repayment. Indeed we can safely say that in Pakistan, colonial rule has only been replaced by clique rule. And as a functional democracy is missing, decisions are taken by a handful of persons who in the process are bound to marginalize the masses.
The government is reducing taxes on multi national companies; imposing new taxes on ordinary people including a 16 per cent general sales tax imposed on most of the every day use items. There is an open rule of the so-called free market polices which has resulted a maximizing of monopolization of economy and creating a new layer of super rich. One of the main pillars of this neo-liberal agenda is repayment of the debts. Even before Musharraf military regime, the four civilian governments of Pakistan Peoples Party and Muslim League has also gone on the same path of repayments. This is done in a country where most basic facilities like clean water, sanitation, health and education is a historic low in comparison to other countries.
Dilating upon the current economic situation he said the capability of Pakistan to pay off the foreign liabilities is decreasing day after day as foreign exchange reserves are declining and imports are sharply rising, together with the external debt. According to state Bank of Pakistan the foreign exchange reserves are depleting rapidly in the range of $250 to $330 million weekly. Since the taking over by new government Pak rupee has lost some 23 per cent.
The World Bank (WB) and the Asian Development Bank (ADB) are among the key multilateral donors providing loans and grants to Pakistan. Ever since the country joined the WB in July 1950, the institution has approved more than 17.27 billion dollars in loans and credit. It is interesting to know that World Bank’s highest borrowers are also the most corrupt according to Transparency International Index. Pakistan in fact, is a favorite debtor country of the World Bank (among the top 12). The current fiscal year’s ongoing portfolio consists of 18 projects under implementation with a net commitment of 1.1 billion dollars. Pakistan has received about 15.39 billion dollars in total assistance from the ADB since 1996 excluding recently committed a credit of $ 500 million. By the end of 2005 it had disbursed 10.31 billion dollars of that assistance. But this has not changes the basic socio economic structure that remains feudal and military dominated in all sphere of life.
There is no way out for Pakistan on the present economic priorities. Repayments of debt that are not spent on the people but have gone to pockets of ruling elite have no moral ground either. If properly investigated the whole story of debts will be found littered with irregularities and corruption on the part of ruling elite. The daily Dawn (13 April 08) quoting Auditor General of Pakistan’s report says the accounts of the Earthquake Reconstruction and Rehabilitation Authority’s (Erra) show financial irregularities of more than Rs.655 million. According to another report of daily Dawn (09 June 08) bank loans amounting to Rs.60 billion were written off between 1999 and 2008 during Musharraf period. This is only tip of the iceberg of corruption. Pakistan’s ever increasing debt burden and the cost of servicing this debt is perhaps the single most important economic issue in the country today. Economic policies of the governments have failed completely to fill the gap in the trade balance, balance of payments, budget deficit, or resource gap over the many decades. Tracing Pakistan’s borrowing history, 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.
In nutshell, Pakistan could not benefit from international lending. The purpose of funding never ever fulfilled. As a result the country today, with regard to social indicators, is ranking at bottom among south Asian neighbors. In this backdrop the ever-increasing national debt and poor economic policies debt has become a perfect recipe of disaster for the country’s future, which seems unsustainable under the circumstances.
We call for institution of independent debt audit commission for inquiry into all the loan contracts made since 1947 with multi-lateral donors and International Financial Institutions.
A judicial inquiry should be initiated into bank loans of Rs.60 billion, which were written off between 1999 and 2008 during Musharraf period.
During the last 15 years Government of Pakistan sold out 160 state owned enterprises under its privatization policy. An amount of Rs. 395.241 was earned as privatization proceeds. The Public Accounts Committee as well as apex court of the country identified irregularities in the process. There should be a through investigation in the entire privatization process in Pakistan.
We call for introduction of a program to decrease military expenditure and convert the same into social and expenditure. Measures such as these would liberate several hundred billion dollars for a social development.
We also call for the return of state assets plundered by powerful elites of Pakistan and siphoned off: the peoples of the Pakistan have been despoiled by the vilest of dictatorships. The despoliation continues in the guise of "good governance". Ever since the removal of controls on capital flows under the pressure of the international financial institutions there has been a massive delocalization of capital, and the laundering of criminal gains has become easier. The property misappropriated must now be returned to the deprived populations of Pakistan.
CATDM Pakistan demands full foreign debt cancellation for Pakistan. Without this, it would be impossible to be on the path of progress. We call for a radical struggle against anti-poor economic policies of the governments to help create atmosphere for building public support against IFIs through popularizing the demand to abolish Pakistan external debt and level social and political grounds to refuse external debt.
Like other nations of subcontinent people of are also victims of the pillage by the British colonial power; we the people of Pakistan are therefore entitled to reparation. Over the course of history the colonial British contracted a historical and ecological debt towards people. For 200 years they constantly exploited, depleted and degraded our natural resources. It is now time to transform what is termed official development assistance (ODA) into grants in reparation. In the light of the commitment made by the industrialized countries at the 1992 Rio conference.
Furthermore, we should dare to raise and popularize the call of debt repudiation. The issue of illegitimacy makes debt repudiation not only imperative for our survival but development. The repudiation of illegitimate debts should be upheld as the right of people and an obligation of the government.
We understand that the call for debt cancellation is not a matter of charity towards the poor people of Pakistan. It clearly shows that debt cancellation is not about whether Pakistan can or cannot afford to pay the debts. Debt cancellation is an urgent issue of survival yes, but it is also fundamentally a matter of justice, and it is justice for all countries of the South.
Besides Abdul khaliq (Focal person CADTM-Pakistan), Rabbiya Bajwa, Nisar Shah and Bushra khaliq were also present the press conference.