Dawood Ibrahim
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Loans, funds, bonds and bills are the ‘creative’ financial engineering strategies being adopted by the government to foot its ever-inflating accounts payable. After declaring an economic victory by saying that the country is now ending its loan cycle from the IMF, the government has resorted to another expensive source of borrowing in the form of the Sukuk bonds. Not only are these bonds very expensive but are also being mortgaged by a national asset — the motorway.
The reason being cited is the constant pressure on foreign exchange reserves due to a persistent fall in exports. Finance Minister Ishaq Dar-led Economic Co-ordination Committee (ECC) of the cabinet approved the issuance of the Sukuk bonds to raise foreign inflows from international debt market against the Islamabad-Lahore Motorway (M-2). This was the second meeting of the ECC in four days that gave blanket approval to the finance minister for taking decisions about size, maturity and pricing of bonds. The ECC on a proposal moved by the Finance Division also approved exemption of duties and taxes on the proposed bonds for making transactions attractive in the international market.
This is a government that has broken all records of borrowing by any government; this is a government that has floated bonds at the highest cost in the market; this is a government that has borrowed more from domestic banks than the whole of private sector put together; and of course this is a government that had come to power on the promise that it would break the begging bowl and make the country self-reliant.
What sort of a model of development is based on more and more borrowing? What has made the country rely on price hikes despite oil prices crashing all over the world. Why are the expenses constantly increasing? Are we spending more on education, health and environment? Is the spending increasing on capital investment and technology transfer projects? On the other hand, non-development expenditure is rising especially on discretionary funds, foreign trips and expensive projects. These are all expenses that the taxpayer has to pay immediately in the form of high taxes or electricity tariffs, which haunt the public from generation to generation.
Take the expenses of the prime minister’s (PM) office. The PM went for his heart surgery and stayed in the UK for over six weeks. After the surgery, he converted his UK house into a camp office, as he was supposedly running the government from there. Most of his Pakistani staff was called to the UK, and travelling and boarding in the UK were all on government expense. The prime minister returned with his office on a special plane that was converted into a bedroom; 27 members of his family and staff travelled, again on the taxpayer’s money. This is the norm on all trips.
Personal trips are converted into official accounts, and political trips are clubbed with family outings. The United Nations General Assembly (UNGA) visit was also half a billion-rupee expense. The 79-member entourage comprised amongst many officials and journalists the prime minister’s granddaughter as well. The embarrassing part was to see him not only taking her on an official trip but also being seated with him on the delegate’s seat in the highly professional and restricted UNGA hall. If Michelle Obama was seated in the gallery, why was the PM’s granddaughter sitting in the UN seats and, more importantly, why on the taxpayer’s money?
Another norm is that the prime minister, on every foreign trip, makes a before and after stopover in the UK for personal reasons. Why should the people of Pakistan bear personal expenses of the Prime minister, his children and now his grandchildren?
The fact that many of the personal properties of the prime minister and the Punjab chief minister have been conveniently turned into camp offices and paid for from taxpayers’ money is shrugged away by the government as being a routine matter. The amount spent on the security of the Sharif family is more than that spent for the security of the taxpayer. At Jati Umra a new security wall, 4.4 kilometres long and 12-feet high, was built with 700 million rupees of taxpayers.
While 2,752 policemen guard 40 people of the Sharif family — almost 70 policemen for each family member — for the people who pay for this security in Lahore there is one policeman per 555 people. In the last eight years 8.5 billion rupees have been spent on the Sharif family’s security, and that too from a secret discretionary fund. This is being spent on one family’s security, while 70 percent of drinking water in Lahore, Islamabad and Multan is contaminated, and nearly every segment of society — be it farmers, teachers or doctors — is on the road clamouring for their basic rights.
As tax collection misses targets, exports fall and investment recedes, to pay for government expenditures the ‘Double Shah’ formula is adopted by our wizard economic managers. Double Shah was the conman who would use money of one borrower by promising to double his return to pay off other borrowers. Ishaq Dar and his team are doing the same. They are borrowing from domestic sources to pay off external liabilities, and they are borrowing from external sources to pay off their internal mega expenses. Eurobonds were floated at an all-time high rate of 8.25 percent, and now the Sukuk bonds by leveraging the Motorway.
All that has made this government break all records of debt. According to the latest data released by the State Bank of Pakistan, total debts/liabilities, as on June 30, 2016, reached Rs 22.459 trillion as against Rs 19.846 trillion on June 30, 2015, showing a monstrous increase of Rs 2.61 trillion, pushing debt-to-GDP ratio to 75.9 percent. It confirms beyond any doubt that the country is gradually being pushed into a deeper and deeper debt trap.
Who is going to pay for this shopping spree of rulers in which assets of Pakistan are mortgaged to borrow money having failed to provide electricity, water, gas, education and healthcare to the people of Pakistan? While the farmers are being sent to jail for protesting against the government, and the agriculture sector has crashed to a historic 19 percent, where has the Rs 341 billion, massively advertised, Kissan Package gone? In which projects was it utilised? Whose hands has it warmed? Which pockets has it filled?
Without constantly demanding answers to these questions the future generations of Pakistan will pay off debts that were used to guard, secure, feed, and entertain those who live behind barbed-wire walls, bulletproof cars and law-proof lifestyles.
The writer is a columnist and analyst and can be reached at andleeb.abbas1@gmail.com
http://dailytimes.com.pk/opinion/02-Oct-16/mortgaging-the-country
The reason being cited is the constant pressure on foreign exchange reserves due to a persistent fall in exports. Finance Minister Ishaq Dar-led Economic Co-ordination Committee (ECC) of the cabinet approved the issuance of the Sukuk bonds to raise foreign inflows from international debt market against the Islamabad-Lahore Motorway (M-2). This was the second meeting of the ECC in four days that gave blanket approval to the finance minister for taking decisions about size, maturity and pricing of bonds. The ECC on a proposal moved by the Finance Division also approved exemption of duties and taxes on the proposed bonds for making transactions attractive in the international market.
This is a government that has broken all records of borrowing by any government; this is a government that has floated bonds at the highest cost in the market; this is a government that has borrowed more from domestic banks than the whole of private sector put together; and of course this is a government that had come to power on the promise that it would break the begging bowl and make the country self-reliant.
What sort of a model of development is based on more and more borrowing? What has made the country rely on price hikes despite oil prices crashing all over the world. Why are the expenses constantly increasing? Are we spending more on education, health and environment? Is the spending increasing on capital investment and technology transfer projects? On the other hand, non-development expenditure is rising especially on discretionary funds, foreign trips and expensive projects. These are all expenses that the taxpayer has to pay immediately in the form of high taxes or electricity tariffs, which haunt the public from generation to generation.
Take the expenses of the prime minister’s (PM) office. The PM went for his heart surgery and stayed in the UK for over six weeks. After the surgery, he converted his UK house into a camp office, as he was supposedly running the government from there. Most of his Pakistani staff was called to the UK, and travelling and boarding in the UK were all on government expense. The prime minister returned with his office on a special plane that was converted into a bedroom; 27 members of his family and staff travelled, again on the taxpayer’s money. This is the norm on all trips.
Personal trips are converted into official accounts, and political trips are clubbed with family outings. The United Nations General Assembly (UNGA) visit was also half a billion-rupee expense. The 79-member entourage comprised amongst many officials and journalists the prime minister’s granddaughter as well. The embarrassing part was to see him not only taking her on an official trip but also being seated with him on the delegate’s seat in the highly professional and restricted UNGA hall. If Michelle Obama was seated in the gallery, why was the PM’s granddaughter sitting in the UN seats and, more importantly, why on the taxpayer’s money?
Another norm is that the prime minister, on every foreign trip, makes a before and after stopover in the UK for personal reasons. Why should the people of Pakistan bear personal expenses of the Prime minister, his children and now his grandchildren?
The fact that many of the personal properties of the prime minister and the Punjab chief minister have been conveniently turned into camp offices and paid for from taxpayers’ money is shrugged away by the government as being a routine matter. The amount spent on the security of the Sharif family is more than that spent for the security of the taxpayer. At Jati Umra a new security wall, 4.4 kilometres long and 12-feet high, was built with 700 million rupees of taxpayers.
While 2,752 policemen guard 40 people of the Sharif family — almost 70 policemen for each family member — for the people who pay for this security in Lahore there is one policeman per 555 people. In the last eight years 8.5 billion rupees have been spent on the Sharif family’s security, and that too from a secret discretionary fund. This is being spent on one family’s security, while 70 percent of drinking water in Lahore, Islamabad and Multan is contaminated, and nearly every segment of society — be it farmers, teachers or doctors — is on the road clamouring for their basic rights.
As tax collection misses targets, exports fall and investment recedes, to pay for government expenditures the ‘Double Shah’ formula is adopted by our wizard economic managers. Double Shah was the conman who would use money of one borrower by promising to double his return to pay off other borrowers. Ishaq Dar and his team are doing the same. They are borrowing from domestic sources to pay off external liabilities, and they are borrowing from external sources to pay off their internal mega expenses. Eurobonds were floated at an all-time high rate of 8.25 percent, and now the Sukuk bonds by leveraging the Motorway.
All that has made this government break all records of debt. According to the latest data released by the State Bank of Pakistan, total debts/liabilities, as on June 30, 2016, reached Rs 22.459 trillion as against Rs 19.846 trillion on June 30, 2015, showing a monstrous increase of Rs 2.61 trillion, pushing debt-to-GDP ratio to 75.9 percent. It confirms beyond any doubt that the country is gradually being pushed into a deeper and deeper debt trap.
Who is going to pay for this shopping spree of rulers in which assets of Pakistan are mortgaged to borrow money having failed to provide electricity, water, gas, education and healthcare to the people of Pakistan? While the farmers are being sent to jail for protesting against the government, and the agriculture sector has crashed to a historic 19 percent, where has the Rs 341 billion, massively advertised, Kissan Package gone? In which projects was it utilised? Whose hands has it warmed? Which pockets has it filled?
Without constantly demanding answers to these questions the future generations of Pakistan will pay off debts that were used to guard, secure, feed, and entertain those who live behind barbed-wire walls, bulletproof cars and law-proof lifestyles.
The writer is a columnist and analyst and can be reached at andleeb.abbas1@gmail.com
http://dailytimes.com.pk/opinion/02-Oct-16/mortgaging-the-country
