Economic Wilderness
In keeping with the financial mismanagement of the 50 years plus of this nation’s existence, the economic numbers simply do not add up. To be fair to the military regime, the massive siphoning off of public sector funds into private sinecures has been contained at the macro-level while the quantum of leakage at the micro-level seems to go on unabated has even increased because of the “risks” of being “nabbed”. Pakistan is in a Catch-22 situation of obtaining more and more loans to make repayments, without having the means to avoid further slide into an ominous debt trap. The quicksand is of our own making, with no or little help from the obdurate policies of world financial institutions and the lack of a spine among our financial negotiators. Our Finance Ministry has been grovelling before the IMF both in public and private for measly amounts which the IMF dangles before us but does not disburse. The flight of capital has assumed alarming proportions, a mass migration of talent and expertise going to Canada, if this is not reversed no entrepreneurial potential will be left in the country. Thankfully, our Finance Minister is still smiling in the face of eminent financial apocalypse, maybe he knows something we don’t.
Federal Budgets are mostly a routine assemblage of statistics and limited initiatives dictated primarily by IMF parameters. Not one single Finance Minister has shown any inclination of resorting to the drastic measures necessary to break the shackles that holds Pakistan’s economy in a vise, emasculating the freedom the economy needs to flourish. The Finance Minister and his confidants must have had a lot of fun laughing off (as they usually do) the criticism of the last Federal Budget. The revenue projections were unrealistic in the face of the projected tax collections, despite lofty (and arrogant) claims of not resorting to mini-Budgets, the basic premise remained is always, to fool both the IMF and the public. Barely three months into Budget 2000-2001 this pack of lies has unravelled. Hiking prices of essentials mid-strain is a time-tested bureaucratic method of making up shortages in revenue projections and increased expenditures, unfortunately at an unusually high cost. Mini-budgets not only dampen economic fervour, they put severe financial strain on everyone but a handful of the very rich. The Finance Minister’s special expertise in banking was in acquiring new accounts, basically a specialist financial PR job. The ultimate service to the Bank he even now serves was in arranging a massive injection of liquidity from a Saudi entrepreneur when Citibank’s very existence was threatened. We should use his special expertise to shore up Pakistan’s foreign exchange reserves. As Foreign Minister, he could do this job even better, aided by the extensive first name-basis contacts carefully cultivated at the uppermost hierarchical levels of foreign governments and international institutions. Given that a Finance Minister is akin to being a PM in the present circumstances, individual ambitions need to be correctly slotted to fully exploit his (or her) potential for the country.
That Finance Ministry initiatives are at cross-purposes is no surprise. They want to deaden the bite of accountability so that entrepreneurs do not take flight, on the other hand they are conducting a ham-handed exercise of tax documentation through CBR that forces businessmen to seek greener NAB-less pastures. On the basis of incontrovertible evidence, accountability can take place in major cases, not by embarking on fishing expeditions all over the country. The abolition of wealth tax was one such initiative to sop up black money without scaring it away, next would be to encourage real-estate and commensurate schemes that give confidence to investors without their freedom being threatened. To revive the economy, let us create a supply-sided situation i.e. move about half of Lahore and Sialkot garrisons closer to their battle locations e.g. Kasur and Pasrur, etc. Real estate in both Lahore and Sialkot cantonments being expensive, the revenues generated would be able to finance the cost of purchase of land and construction of not only the two new cantonments but construct more modern ones at Lahore and Sialkot. This would require millions of tons of cement, sand, steel, bricks, wood, electrical equipment, etc besides creating white and blue collar jobs in a varying range of disciplines. This formula is not anything new, Senator (previously Governor) Huey Long of Louisiana used it in the 1920s, copied later by US President Franklin D. Roosevelt for his “New Deal” in the 30s, and subsequently by Adolf Hitler in reviving Germany economically.
The second initiative requires standing up to the IMF, in no position to repay our debts we should earmark 10% of the foreign exchange earned annually as debt repayment or freeze all payments till such time that we are able to pay. All interest payments must also be frozen, such measures have been accepted for Latin and South American countries repeatedly in the past 3-4 decades. The recent rescheduling of debts for Pakistan means the principle of debt moratorium has already been accepted. Our policy-makers have to let go of self-interest, possible future international financial careers should not circumscribe their initiatives for the country. The country’s vital interests must supersede their personal ambitions.
Out of a total of US$ 10 billion sent by 3.5 million Pakistani expatriates, only US$ 1 billion approximately comes through official home remittance channels. On a pro-rata basis that comes to slightly less than US$ 300 per year per individual as opposed to Bangladesh US$ 450 per individual, India US$ 600, Sri Lanka US$ 900 and the Philippines US$ 2100 (all approximate figures). Instead of looking to borrow “peanuts” from various international agencies why not concentrate on giving our expatriates an incentive-oriented, efficient system that will not require them to send money through “Hundis”. A survey of Pakistani missions and banks in the Gulf shows that almost 100% of their personnel were sending money through “Hundis”, the very people meant to motivate Pakistani expatriates to use official channels were in fact acting as commission agents. With billions at stake, Hundi operators spread largesse around in plenty, both at home and abroad, to ensure that no official scheme can ever be successful. We need to concentrate our attention on the Gulf States to channel expatriate earnings through official means. The equation is simple, should we beg US$ 650 million from the IMF or get Pakistani expatriates to officially route what they send in unofficially (US$ 9 billion annually)? This scam of “Hundi” could not take place without local foreign exchange dealers, their activities should be banned immediately, only scheduled banks being allowed that privilege.
Documenting of the economy needs to be done but not in the present manner. In comparison to other departments (that can function without any Brigadiers being thrown at them), CBR is vital ground and needs an Army Task Force in priority to every other civilian department. All the information is available, what it needs is collation and verification in a sophisticated manner within the four walls of computer rooms. Once the full data is available, physical cross checks can be made. The emancipation of Pakistan’s economy lies in one factor alone in supersession of all other issues, that CBR should do its job.
Nobody is asking that we thumb our collective noses at the IMF, only make them understand that this country could well be on the road to virtual anarchy (on the Somalia pattern). Certainly the world does not want nuclear capability on the loose. Purposeful initiatives can only be taken by people with imagination and national spirit, those without a tendency to slot outright crooks into suitably lucrative slots. Allied Bank almost got as President someone who should have been one of first people to be arrested and questioned by NAB about private bank accounts abroad. For PIA Chairman the name of a highway robber was floated who had virtually committed daylight dacoity of PAF’s Shaheen Foundation. The NDFC has a Chairman who has sacked the company auditors for exposing the truth, no wonder he cannot darken the doorsteps of Dubai. The question one may well ask, why were such people being recommended and who was canvassing for them? Without the right people in control over economic matters, we will go deeper into financial wilderness, what to talk of light there may not even be a candle at the end of the tunnel we are in. The military regime needs to shake itself from the opium of rhetoric they are being fed to lull their defences, they must get their act (and instincts) together. This country needs financial guides who are not only outstanding but hold the country’s interests supreme. Can we afford to experiment any further with this country’s future? Cheap popularity and rhetoric will only carry you so far, it will not be enough to guide us out of the economic wilderness we are in.
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