George W. Bush the 43rd President of the United States of America has made history in his first address to the American Congress on the 39th day of his assuming office. He has asked for 2 trillion dollars cut for debt reduction and $ 1.6 trillion in tax cut. According to President Bush, the people of America has been over charged by the previous governments and he is the leader of American people there now to ask for a refund. This is going to happen for the first time in the history of the world, no government has ever made a refund of taxes levied and charged earlier. Will this speech of the American President be taken as a guideline by the other nations who solicit the so-called benefits of IMF and World Bank? The two major moneylenders to the third world.
Unrestrained government spending which has been the hallmark of Pakistan’s economy is the most dangerous road to deficit and it is a pity that no government has taken any step towards restraint on spending rather they have been over spending to retain their seat of musical chair obtained through corruption in the name of democracy. Political parties are still following the same corrupt route to power. The choice is therefore to live within our own means. Pakistan is full of resources in men and material and the crisis has only been in honest leadership, so much so, that the debt liability from IMF and World Bank amounting to $2.2 Billion in 1977 has soared to $ 37 Billion or so. The peculiar phenomena of these debts are that it is only the masses that bear the brunt of it and meet the liability, while they have got no hand in incurring this liability. This liability should also be shared by International Financial Institutions, The multi-national banks, the governments of the Industrialized countries and the Government of Pakistan. It is therefore important that the cost of debt servicing is shared between these three major players. In Pakistan the situation is entirely different, none of these players who enjoy the benefits of debt liability are a partner in servicing the debt, it is only the innocent people of Pakistan who are finally the sufferer in the deal. It is horrifying to note that $ 100 Billion have been transferred back to foreign banks and Pakistan is a debtor of $ 37 Billion. What a fallacy of figures and facts?
One of the problems with Pakistan is the recessionary adjustments instead of expansionary adjustment, the result of this policy has been that Pakistan is forced to borrow to service the foreign debt liability in order to remain in the economic and political stream. The requirement therefore is that people of Pakistan spend their own money to meet their own needs, to fund their own priorities and pay down their own debts. It is no denying the fact that Pakistan has paid back much more than the principal sum borrowed and is still under a liability of $37 Billion. It is like the proverbial Indian Baniya who does not bothers about the principal sum but is only interested in collecting the interest. That is why Islam prohibits usury.
Ten years ago our neighboring country launched their economic reforms agenda based on expansionary adjustment program under the IMF and World Bank patronage, whereas Pakistan had to follow the recessionary adjustment program. The successive governments for the last one-decade have had been the hand made of the donors and use to fall at their behest. Pakistan if it has to survive on the map of the world has to first come out of this situation.
Will this move of the American President as enunciated in the Congress on the 39th day of his presidency be a pointer to American donors to make a refund to their borrowers where they have charged exorbitantly higher then the principal sum. The policy of beggar thy neighbor must change, if the developing nations have to come in line with the developed nations. Fifty years is a very long period for Pakistan to remain an under developed country for no fault of the people of Pakistan who suffer and groan under the heal of their unwanted rulers and that too in the name of democracy, the coveted system of government promulgated by the Western political thinkers to make economic hostage of people living in Asia and Africa.
Odious debt is a debt, which is imposed upon a nation by force, which includes creating circumstances where the nation is forced to borrow, hence odious debt has to be considered as an invalid debt. Karen Lissaka, the United States representative to the IMF remarks that ” If the principal of odious debt is applied, most of the third world countries would simply disappear from the records of the donors.”
The difference between debt rescheduling and unilateral moratorium is that while in the case of former the time of refund is extended at higher rate of interest creating further burden for the borrowers while in the case of latter it is done unilaterally without even consulting the donor agencies and the country then formulates its own policy and debt remains static at the existing liability level.
It would therefore be imperative to bring in the net of debt liability, the three beneficiaries, International Financial Institutions, the multi-national banks and the governments of the industrialized countries to play their due role and reduce the burden on the common man in the developing world.
Pakistan is suffering from not only the honest leadership crisis but also many other crises, which emanates therefrom and includes debt management crisis, development crisis, economic growth crisis, socio-economic distributions crisis and finally the political crisis. If number one crisis é the leadership crisis is solved, the solution of other crisis will follow.
Mr. Ali Ashraf Khan is a Pakistani Businessman and Ex-Politician who bid good bye to politics in order to concentrate on more useful service benefit of the political intrigues prevalent in the National Political life of Pakistan. He frequently writes for English and Urdu newspapers in Pakistan.