Debt or DEATH trap..?

Mian Muhammad Nawaz Sharif must read this editorial titled “IMF’s debt trap” published today, by the daily “The Frontier Post”.

However, I would have titled it “IMF’s economic DEATH trap”.

Moreover, Pakistan needs immediate appointment of a VISIONARY finance minister, who can take us out of the death trap of the ultra high foreign and local debts.

Pakistan call ill afford the running of its economy, just with loans and every now and then increasing tax and utility rates, ONLY for those honest citizens, who pay very timely, all the taxes and the utility bills. This is the most CALLOUS way of dealing with the economic woes of a country, that too by a DEMOCRATIC government.

The previous 5 years PPP rule and the last one years PMLN rule, has ruined the economic foundations of Pakistan; by running the finances of the country with huge domestic and foreign loans, without any considerations of the future repercussions, on the national economy and ultimately on the the sovereignty of the country.

Now, we have reached a stage where in the current fiscal year (2014-15), out of the total Budget of about 4 trillion PKR, we have kept an amount of 1.3 trillion PKR (about 1/3rd of the total budget of 4 trillion PKR) for the debt servicing ALONE, which is almost double the amount of our defence spendings, budgeted for the current fiscal year.

A R T I C L E

IMF’s debt trap

Posted on 2014-07-01 04:32:09

Dr. Murtaza Mughal, President of the Pakistan Economy Watch (PEW) has said that policy makers are focused on reducing deficit and privatization of prime assets as dictated by the IMF. By doing so they have pushed the country virtually in IMF’s trap. Transferring ownership of our national assets may result in growing poverty; in unemployment because of retrenchment by the new owners, and eroded exchange rates as foreign investors would transfer profits overseas. In addition, international financial institutions want to impose global economic order, a plan hidden behind attractive words like privatization, deregulation and downsizing etc.

Federal Finance Minister Ishaq Dar boasts about foreign investors’ confidence in the government, and claims to have commitment of $32 billion Chinese investment, which is in fact a loan; $11 billion loan has been approved by the World Bank, $6.64 billion by the IMF and $2 billion has been acquired through the launch of Eurobonds.

IMF touts that it helps recover the economies that are in dire straits, but in fact it has the record of multiplying the problems of debtor countries. Its conditions of withdrawing subsidies, devaluation of currency and privatization of prime national assets adversely impact the people and the state.

Pakistan is already in the grip of debt to the extent of $65 billion, and despite the rescheduling of the debt or taking new loans to pay back the old loans, one day these loans have to be paid. If this trend continues, Pakistan would find itself in the vicious circle; and would continue to take more loans to pay back the old loans; and also loans for mega projects like Dassu Project, which means phenomenal increase in debt servicing and as a result increase in fiscal deficit.

To avert the economic disaster, the government must show zero-tolerance to corruption, tax evasion, wastages and mismanagement in public sector enterprises. It should learn to live within its means and reduce the non-development expenditure by curtailing perks and privileges of cabinet members and parliamentarians.

If axe falls on development expenditure, Pakistan would not be able to build infrastructure for further development and industrialization to generate employment opportunities.

On their part, the trade and industry should resort to aggressive and innovative marketing policies; look for non-traditional markets; and try to increase the exports of value-added products to reduce the trade deficit.

Unfortunately, the IMF does not give suggestions or advices that really matter.

For example, there seems to be no pressure to immediately bring agriculture sector into the tax loop perhaps because majority of the parliamentarians belong to landed aristocracy.

Some industrialists have also gone into agricultural sector to take advantage of exemption on agricultural income, and use it to convert black money into white money.

It means that the IMF would not like to annoy the ruling elite. It has to be mentioned that agriculture contributes about 23 per cent to the GDP, but does not contribute to the exchequer in the form of taxes even to the extent of 5 per cent.

As regards trade deficit i.e. excess of imports over exports, our industrialists and exporters are handicapped because of higher input costs like electricity and gas charges.

It is better for the government to rely on homegrown policies instead of following IMF policies.

PML-N government has been claiming that it has competent, experienced and honest managers they why it does not put them as heads of the public sector enterprises to turn into profitable entities.

In many countries, the utilities are being run successfully by the state; why it cannot be done in Pakistan.

Tags: My Views