ISLAMABAD - Despite the International Monetary
Fund's optimistic report, released last week on
Pakistan's economy, for ordinary citizens the facts on
the ground are dismal. The IMF report outlines a 5.1
percent gross domestic product growth and a 1.8 percent
inflation decline, high inward remittances, strong
exports, rupee stability against the United States
dollar and sizeable external support.
However,
whatever the macroeconomic picture painted by the
government and donor agencies, the real situation is
frightening. Economic conditions are assessed from the
condition of the common man, and Pakistan's common man
gives a bitter perspective.
Efforts by
international lending and reform institutions to reform
Pakistan's perennially ruinous economy have been
strenuous indeed. The IMF and the World Bank for three
years have been pushing intensively the Washington
Consensus - economic reform by creating opportunities in
agriculture, small and medium scale industries,
information technology and the oil and gas sectors.
In a country riven by factionalism, poverty and
religious tension, the international lending
institutions are seeking reforms to strengthen
macroeconomic stability and government effectiveness,
providing a favorable environment for business growth,
and seeking to improve the equity of the poor. And they
have been at it for a long time, without noticeable
effect. In the 51 years since 1952, the International
Bank for Reconstruction and Development and the
International Development Agency, both World Bank
agencies, have approved 84 loans and 119 credits for
Pakistan amounting to US$6.97 billion and $7.71 billion
respectively. The World Bank has funded another $1.23
billion in 15 main projects, of which $416 million
remains to be disbursed.
Pakistan is undergoing
a dramatically painful transition from a quasi-command
economy to a market one. Despite the lending
institutions' prescriptions, more than 34 percent of the
country's population live below the poverty level, most
of them in rural Sindh, Southern Punjab and most of
Balochistan.
Unemployment and underemployment
are the most crucial problems faced by Pakistani youth.
Education is the primary tool for reasonable employment
and to contribute to socio-economic development of
families. So far, the state has been unable to provide
educational facilities fast enough, creating a vacuum
that is being filled by fundamentalist madrassas
(religious schools).
Previously, government jobs
were considered more secure and individuals from
ordinary educational backgrounds could find jobs in the
public sector. World Bank and IMF policies, especially
during the past decade, have downsized government
departments, wiping out hundreds of job opportunities
and making hundreds of government employees redundant.
The present wave of privatization has also
heightened unemployment. The Poverty Reduction and
Growth Facility (PGRF) arrangements cited by the IMF to
bring in foreign investment to reduce poverty are
proving difficult to put into practice. The majority of
those educated in government-run schools does not have
access to the quality education required by
multinational corporations and domestic private
companies and are so far unable to benefit from any
multinational investment.
A second factor that
is suicidal for economic growth is Pakistan's unequal
distribution of wealth. Like many other developing
countries where corruption and lawlessness rule, much of
the country’s wealth is concentrated within a limited
group of individuals. This lack of access to wealth is
one way or the other linked with the discriminatory
access to quality education. Those from lower financial
backgrounds have limited admittance to higher
educational institutions and are therefore unable to get
high-income jobs.
The decreasing middle class
has pushed more people into absolute poverty. The elite
on the other hand, are multiplying their wealth. The
monthly and annual earnings of a common government
servant and a member of the middle classes exhibit
startling differences. Take for example one individual
we will call Fida Mohammad, 37, who has worked as an
office boy for the last 14 years at a federal government
office in the capital city Islamabad, earning Rs3006
(US$55) per month, including allowances.
Fida
supports six children and a wife. All six are in school,
which consumes his entire income. For him, the all-time
high inward worker remittances of $4.2 billion listed in
the IMF country report, or the record export earnings of
$11.1 billion are of no benefit. Fida feels poorer than
he did a decade ago.
Conversely,
recently-declared assets by members of the Pakistani
parliament are staggering. Statistics issued by the
Election Commission of Pakistan and published by the
national dailies reveal that about 100 members in the
Upper House of Parliament are rupee billionaires. At the
top of the list is the NWFP senator, Azam Khan Swati,
with assets of Rs3.37 billion. Others include Nisar
Memon at over Rs30 million, Finance Minister Shaukat
Aziz at Rs400 million, Sardar Lateef Khosa, Rs150.4
million, S M Zafar, Rs50.8 million, Khalid Ranjha Rs60
million, Babar Ghauri, Rs30 million, Abdullah Riar,
Rs260 million. Many more have assets of more than Rs10
million.
The above list contains only a few
senators, whereas the assets of members of the Lower
House are yet to be made public. In a country where per
capita annual income is only $410, the gap between the
incomes of upper and lower class is drastic. Ironically
the middle class is on decline.
The main reason
is obvious as described by the Transparency
International in its annual report on corruption,
ranking Pakistan 11th among the world’s 102 most corrupt
countries.
TI's chairman, Peter Eigen says,
"Political elites and their cronies continue to take
kickbacks at every opportunity. Corruption is perceived
to be dangerously high in poor parts of the world, but
also in many countries whose firms invest in developing
nations." He further adds, "Corrupt political elites in
the developing world, working hand-in-hand with greedy
business people and unscrupulous investors, are putting
private gain before the welfare of citizens and the
economic development of their countries."
Eigen's comments ring especially true in
Pakistan, where bank loan defaults are considerable.
Economic reforms dictated by either the IMF or
introduced by the present and previous governments have
been focused on strengthening the financial position of
the "haves" and further deteriorating that of the
"have-nots". The federal minister of housing and works,
Syed Safwanullah, a former banker, commented that the
existing structure of loan servicing by commercial banks
and DFIs is designed to extend money to those who
already have enough of it.
Safwanullah added
that industrial loans worth millions are drawn but
hardly a few industries become actually operational
because of the huge misappropriations by creditors. The
process of banks for extending loans is complex and
difficult and often discouraging for people who need it
most. The mismanaged credit facilities offered by
Pakistani banks are yet another factor that adds to the
negative economic growth in the country.
While
the report says Pakistan has introduced banking reforms
including new laws covering increased loan recoveries,
privatization of banks and improved management, in
practice the new laws have provided safety to the banks
against the loan facilities they extend to creditors.
The new and improved system of public finance,
especially for vehicles and housing, has not reached the
common man, who really needs it.
Bank
privatization may have improved management quality and
increased earnings for bankers and high-level
management, but in practice it has increased
underemployment. Banks are now hiring new personnel with
fewer qualifications on contract and minimum salaries
against the previous remuneration, adding to the
miseries of the middle and lower socioeconomic classes.
PGRF arrangements in the power sector are aimed
at tariff adjustments and reduced fiscal burdens on the
sector. However, the reforms have increased tariffs and
the burden on the common citizen's pocketbook. Last
week, the government granted reasonable relief on
telephone rates but the elected prime minister, Mir
Zafarullah Jamali, rejected electricity tariff relief,
which obviously indicates the dictates of the
international monetary agencies and which has not been
passed down to rate-payers.
The World Bank
report cites support for the Pakistan government in
education, health care, family planning, HIV/AIDS
prevention and polio eradication. Other programs include
water supply and sanitation programs, especially in
rural areas. On paper, all of these reforms and projects
seem encouraging. The reality is not. Even in
cosmopolitan cities like Karachi, the federal capital
Islamabad and nearby Rawalpindi, water supply and
sanitation problems are acute.
In Karachi, the
situation is troublesome mainly because of the poor
planning, high population density and mismanagement of
existing resources. Even in the posh areas of
metropolitan Karachi, clean water and sanitation are
problematical. In the capital, Hepatitis-B broke out in
1994-1995. Investigations by the district administration
revealed that contaminated water was the primary cause.
There is considerable antipathy at all social
levels towards the policies of the IMF and other donor
agencies. However, many people in Pakistan believe that
revolutionary practices are necessary to tackle a
government economic crisis that never seems to improve.
Others demand proper handling and utilization of
available local resources and foreign assistance. Both
can do well, said a government official who prefers not
to be named, provided government and governed adopt
cooperative attitudes.
The Pakistan political
leadership is divided on the roles of the IMF and other
donor agencies. Opposition members always criticize
their policies, the government playing a defensive role.
When the government changes, attitudes change, with the
top seat favoring the IMF no matter which political
faction. Not a single person could be held accountable
for the implementation of the oft-criticized policies of
the donor agencies. The trap in which the nation is held
is set by no one but their own leadership.
Senator Sanaullah Baloch of the Balochistan
National Party (BNP), asked about development schemes in
his own province, said that Balochistan is Pakistan’s
poorest area, about 6.5 million people and with more
than 60 percent of the population living in poverty. The
literacy rate is about 12 percent, only 2 percent of
them women. From 1999 to 2001, Baloch said, more than
3,000 died of in a long-running drought.
However, Baloch said, poverty-reduction programs
are strategic in nature and don’t appear to favor the
individual poor. The federal government, Baloch
complained, devotes the biggest part of its budget to
law and order although the province is largely peaceful.
If the amount devoted to Balochistan were to be divided
by total provincial population, each individual would
get about 2 US cents annually.
Infant mortality,
Baloch said, is 120 per 1000 births. Similarly, he
continued, the situation in education and lack of
educational facilities has resulted in the mushrooming
growth of madrassas that are producing religious
fundamentalists and Jihadis and supplementing
sectarianism.
Baloch described privatization as
illegal and unconstitutional. National assets that are
being privatized, he complained, were joint property of
all of Pakistan’s four federated units, but were sold
off without the approval of the provinces, which were
given no share of the proceeds.
Baloch says that
no significant foreign direct investment has appeared in
his province over the last six years, and that the small
amount that has come has not affected the poor. The
Gawadar Mega Project, a new mega port project that was
signed on May 12, 2001 with the Chinese government, was
also done without consultation with the Balochistan
government, he said, nor was the government a party or
witness to the agreement.
Baloch said the
memorandum of understanding signed by the two countries
regarding the project has also not yet been made public.
The project is designed to promote the interest of few
and the people of Balochistan are not given any
employment in the project, Baloch charged, saying that
even the labor force is coming from outside the
province.
The IMF report is thus complex,
complicated and conditioned in jargon. All loans are
extended on extremely complex terms and conditions that
are acceptable to policymakers in theory but are not
feasible for the practical victims who are the majority
of Pakistan's poverty-stricken.
Loans are given
by the consortium in mixed currencies but are taken back
in US dollars only. To alleviate poverty, the IMF has
told the government to impose more taxes, impractical at
best as these taxes pose an increased burden on the
economy of an already deprived majority. Poverty cannot
be alleviated at the cost of further increasing debts at
compound interest/mark-up.
In sum, it appears
there is a need to establish a proactive approach
towards communication arrangements for the donor
agencies’ programs and their projects. Their plans also
need to be devised in view of the existing realities.
The IMF's report doesn’t seem to reflect that reality.
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Nov 12, 2003
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