January 29, 2007
Foreign debt impinges on national sovereignty
Foreign debt has always been a sensitive national issue because heavy external borrowings not used productively become a burden on the national exchequer and retard economic development. Heavy indebtedness also provides diplomatic leverage to the ââ¬Ådonorââ¬Â and tends to impinge on the exercise of national sovereignty by a nationââ¬â¢s people.
But over the past sixty years, debts have been piled up by successive governments seeking foreign assistance for an ever-widening range of economic activities, even in areas , where indigenous resources could be more profitably employed or in sectors in which there has been no justification for any investment, local or foreign.
The author estimates that Pakistan has contracted loans worth $80 billion, repaid $70 billion and has yet to repay $35 billion; addiction to aid has also serious implications for the economy. Unable to service its debts, Pakistan has frequently been seeking debt rescheduling and relief after adopting an ostrich-like approach unaware of the magnitude of the worsening debt burden.
In 2002 Mr Shuakat Aziz, the then finance minister reportedly told the Paris Club that he would be unable to go back to Pakistan, if he did not get debt relief The Musharraf government has repaid $27 billion ($20.5 billion principal and $6.5 billion interest) and has reduced the debt by $1 billion. It indicates the borrowings by the military-led government. . The author blames the ââ¬Â financial bureaucratsââ¬Â for colluding with international financial institutions for mortgaging the national economy and ââ¬Âloss of Pakistanââ¬â¢s sovereignty.ââ¬Â During 1988-99, loan packages were concluded with IMF by caretaker governments and later signed by prime ministers Benazir and Nawaz Sharif governments. In 1989-90, debt became the highest claimant of the federal budget outlay..
The changing pattern of assistance has also come under criticism because a major shift from grants to interest bearing loans and from ââ¬Åproductive ââ¬Å project financing to funding of social sectors. Besides, projects are often designed by lenders based on their own priorities rather than on projects and programmes based on prioritised needs of the national economy. The country has been living beyond its means and the trend is continuing. Now the provinces, public sector corporations and private sector can borrow, with or without federal government guarantees though the burden would ultimately be borne by either by the government or the national economy. The international financial institutions are also toying with the idea of starting lending to district governments directly.
Foreign assistance is a double- edged weapon. If productively used , it can blaze the path to national self-reliance, otherwise it can make a country subservient to outside powers and lending agencies by creating perpetual dependence on them. . The problem is on the expenditure side. It is not the quantum of money but how effectively and efficiently the borrowed money is used. Here the various governments seem to have failed.
The book is based on some original source material, interviews of eminent businessmen and eminent economists. It includes an exclusive interview with the Prime Minister Shaukat Aziz who advised the author to tell the story how economic sovereignty has been regained after Pakistanââ¬â¢s exit from the IMF programme .Perhaps, the title of the book, ââ¬ÅPakistan: Sovereignty Lostââ¬Â does not take into account the economic muscle that the country has acquired and ignores the exercise of national sovereignty that earned Pakistan in the 1990s the label of ââ¬Åone tranche countryââ¬Â or led to multi-layers economic sanctions by the West. Sovereignty may be diluted by external influences on specific issues; it is not lost in absolute terms unless a country is under foreign occupation. .
Book Review : (Ali Iqbal)
Pakistan: Sovereignty Lost
By Shahid ur Rehman
Mr. Books, Super Market,
Islamabad
252 pp. Rs395
http://www.dawn.com/2007/01/29/ebr11.htm
Foreign debt impinges on national sovereignty
Foreign debt has always been a sensitive national issue because heavy external borrowings not used productively become a burden on the national exchequer and retard economic development. Heavy indebtedness also provides diplomatic leverage to the ââ¬Ådonorââ¬Â and tends to impinge on the exercise of national sovereignty by a nationââ¬â¢s people.
But over the past sixty years, debts have been piled up by successive governments seeking foreign assistance for an ever-widening range of economic activities, even in areas , where indigenous resources could be more profitably employed or in sectors in which there has been no justification for any investment, local or foreign.
The author estimates that Pakistan has contracted loans worth $80 billion, repaid $70 billion and has yet to repay $35 billion; addiction to aid has also serious implications for the economy. Unable to service its debts, Pakistan has frequently been seeking debt rescheduling and relief after adopting an ostrich-like approach unaware of the magnitude of the worsening debt burden.
In 2002 Mr Shuakat Aziz, the then finance minister reportedly told the Paris Club that he would be unable to go back to Pakistan, if he did not get debt relief The Musharraf government has repaid $27 billion ($20.5 billion principal and $6.5 billion interest) and has reduced the debt by $1 billion. It indicates the borrowings by the military-led government. . The author blames the ââ¬Â financial bureaucratsââ¬Â for colluding with international financial institutions for mortgaging the national economy and ââ¬Âloss of Pakistanââ¬â¢s sovereignty.ââ¬Â During 1988-99, loan packages were concluded with IMF by caretaker governments and later signed by prime ministers Benazir and Nawaz Sharif governments. In 1989-90, debt became the highest claimant of the federal budget outlay..
The changing pattern of assistance has also come under criticism because a major shift from grants to interest bearing loans and from ââ¬Åproductive ââ¬Å project financing to funding of social sectors. Besides, projects are often designed by lenders based on their own priorities rather than on projects and programmes based on prioritised needs of the national economy. The country has been living beyond its means and the trend is continuing. Now the provinces, public sector corporations and private sector can borrow, with or without federal government guarantees though the burden would ultimately be borne by either by the government or the national economy. The international financial institutions are also toying with the idea of starting lending to district governments directly.
Foreign assistance is a double- edged weapon. If productively used , it can blaze the path to national self-reliance, otherwise it can make a country subservient to outside powers and lending agencies by creating perpetual dependence on them. . The problem is on the expenditure side. It is not the quantum of money but how effectively and efficiently the borrowed money is used. Here the various governments seem to have failed.
The book is based on some original source material, interviews of eminent businessmen and eminent economists. It includes an exclusive interview with the Prime Minister Shaukat Aziz who advised the author to tell the story how economic sovereignty has been regained after Pakistanââ¬â¢s exit from the IMF programme .Perhaps, the title of the book, ââ¬ÅPakistan: Sovereignty Lostââ¬Â does not take into account the economic muscle that the country has acquired and ignores the exercise of national sovereignty that earned Pakistan in the 1990s the label of ââ¬Åone tranche countryââ¬Â or led to multi-layers economic sanctions by the West. Sovereignty may be diluted by external influences on specific issues; it is not lost in absolute terms unless a country is under foreign occupation. .
Book Review : (Ali Iqbal)
Pakistan: Sovereignty Lost
By Shahid ur Rehman
Mr. Books, Super Market,
Islamabad
252 pp. Rs395
http://www.dawn.com/2007/01/29/ebr11.htm
