Category Archives: Pakistan

ANP MPs show ballot before casting their vote

In order to further bewilder the bourgeois and petty bourgeois (as NFP likes to call all those who oppose Zardari), we now have footage of Presidential Elections in NWFP.

MPs can be clearly seen showing their ballot to powers that be, presumable so that they can take ‘corrective action’ against those obstinate MPs who want to use their own head and conscience in choosing the next president.

Worldwide, balloting is done in secret for a reason – so that they remain impartial and there is no peer\party pressure.

Meanwhile

The Awami National Party (ANP) has accused the electronic media of carrying out camera trick to make news out of a non-issue and to make the “highly transparent” presidential election controversial by showing footages of the NWFP MPAs violating sanctity of the ballot. [..]

Leaders and parliamentarians of the ANP said showing the marked ballot papers during the presidential election was not meant to doubt the loyalty of their colleagues and ruling partners, but a sign of sincerity towards a joint candidate of the ruling alliance and most of the parliamentarians did this for ‘fun’.

Show of stamped ballots was just for fun: ANP

Tsk tsk tsk. Shame on the media for highlighting such issues and on bourgeois and petty bourgeois for carrying out ‘unfair and untrue’ character assassination of Zardari by highlighting his hard-earned assets and self-less, people-serving, democracy-loving need for power.

Suckers these enlightened elitists, they dont let us have fun!

See original article at ByZENtine

The road to hell is paved with good intentions…

A few days back I was re-reading a piece I had written last year – Democracy: Dead on Arrival.

I had written it while I was still at LUMS and still had the streak of activism…So much water has passed under the bridge… The political scenario has changed extensively. On the personal front, my priorities have changed. Nothing is quite the same.

And the history has repeated itself umpteenth time.

After a heist of 9 years, Musharraf has resigned, marking an end of an era. Another dictator, allegedly a good-intentioned one has left us in the lurch after making an incredible mess.

Here are some of the commonly heard views:

Mush- fans

See what he did for the economy…. And look at the state right now! Plus, what wonders he has done for the Media. He’s God’s gift to Pakistan and should stay forever more.

The apologetics

Okay, so he may have done a few things wrong. But he’s still a lesser evil.

The politicaly inclined

A dicator, albeit one without a uniform is never good for the country. Whether its Nawaz camp or PPP, (besides the PML Q which has quietly distanced itself Musharraf) everyone is happy to see Musharraf go. It’s a victory for democracy!

The Pro-constitution, pro-judiciary

The pre-Nov 2nd judiciary must be restored and Mush leaving is a victory.

The Vindicitive

(May overlap with the politically inclined and the pro constitution)

He’s a traitor since he has violated the constitution and must be punished accordingly.

After what he did to Mian sahab, forcing him into exile, Mush must be taught a lesson. If we go easy on him this time, it would mean more dictators in the future.

The skeptic (also called doomsdayers, naysayers, pessimistic)

The dollar is 67. Inflation is double figures. Terrorist attacks are rampant in our towns. All the policies are made in Washinton. No one has a spine to standup. Or grey cells to comeup with their own policies.

The analyst

The question is, did Musharraf resign for the better interest of the country or in fear of impeachment.

The indifferent

The question is, who cares?!!

Sneak Preview: EVDO High-speed wireless broadband by PTCL

Last week, two gentlemen from PTCL approached my company with partnership offer for selling EVDO with our laptops and desktops.

EVDO – a 3G Wireless broadband service by PTCL is currently in the pre-launch stage with plans for a formal launch in a couple of months. The gentlemen left two EVDO packs for us to test and since the last couple of days I have been testing it 24/7.

All I had to do was take the card out of the box and put it into the PCMCIA slot, install the CD and I was all set to go. So far, I’ve tested it in the car, in the city center and suburbs of the city. The connection seamlessly toggles between CDMA and EDGE depending on the availability. The voice connectivity has been disconnected in the demo packs, however, there is a slot for WLL SIM which can be put into the card to get voice over IP.

The proposed package:

  • No initial cost
  • Monthly flat rate charges (at a premium over conventional broadband\DSL connection)
  • Commitment for one year.

Convenience:

No doubt, seamless connectivity esp for executives on the go, is a great selling proposition. For the growing number of laptop users, this would rave well. Jet-setting executives would love to use EVDO at airports, all of which are connected btw. For desktops maybe not. Also, with broadband and DSL, users have to wait eons to get the connection. EVDO is as simple as purchasing a mobile connection.

However, there may be barriers to entry. Most executives use shared office connections at work and perhngaps a dial-up or broadband\DSL at home. Paying for a dedicated connection for one laptop/desktop may reduce the size of market by making it financially infeasible for most upwardly mobile urbanites.

I for one am not hacppy with the premium pricing mechanism. For a high adoption rate, which would in effect dilute the overheads; PTCL should not be charging a premium. Furthermore, if convenience is the objective then commitment for a year is counterintuitive. I think, PTCL should let the users see the value for themselves. I think its a great sell provided we can get pricing package right.

The problem is, PTCL has too many conflicting objectives. It wants to go with EVDO but not cannabalize its broadband ( the service level for which, btw, sucks). It wants to maintain it telephony monopoly and prevent VOIP.

According to classical economic wisdom, increased competition is supposed to improve the quality of service. We have yet to see that happen at least in mobile telephony and internet connectivity.

With Wateen, LinkdotNET (who came sup with this y2kish name, anyway?) and whatnot cropping up, internet connectivity service level ought to improve. EVDO (Evolution Data Only) promises that, but at a premium. All I can say is that Quality of Service is the battlefield, not creative advertising.

A perilous course – US policy and Assistance to Pakistan

CSIS Report on “Post Conflict Reconstruction Project” goes into my repository as a must-read which Im afraid Ill never get around to reading.. A perilous course – US Assistance to Pakistan (June 2007)

One doesnt need such a fancy analysis to understand the issue.

Unfortunately for us, US supported Musharraf and continues to back him.  The man has sacked the judiciary and silenced the media. Now civilians can also be court marshaled on lame pretexts. He is planning to hold ‘free and fair’ elections without these two ingredients that are considered integral for democracy by the civilized world.

One can imagine how free and fair would these elections be.

And then defying all laws of parenting, US Foreign Relations Chairman and the next contender for President,  Senator Biden advocates “large, unconditional financial support for non-security projects such as schools, roads, clinics, etc; conditioning of security aid on performance; support for judicial, political, and good government reforms; and finally and increase in public diplomacy and high impact support.”

That’s what they call rewarding bad behavior. They cant stop the Coalition Support Fund as it would be the second time the US would be ditching Pakistan unceremoniously as they just cant afford to repeat the post-Soviet war scenario.

And they think they can promote democracy and good governance by setting up schools and dishing out dollars. And all this while there is no word from the US regarding reinstatement of judiciary, removal of ban on the media, and restoration of the constitution and civil rights. When your premise is not true how can your conclusion be sound? And then they sit and wonder where they went wrong.

In setting up their dream team of moderates, they have created a monster.

As Imran Khan said in an interview to Dawn
“The most awful thing about all this is that the Bush administration is prepared to sacrifice 160 million Pakistanis to back one man who is willing to turn his own army against civilians for the so-called ‘war on terror’. It is plain callousness on the Bush administration’s part to play with the lives of Pakistanis to accomplish a convoluted ideology. But the saddest part of it all is that Musharraf and Benazir are assisting it in ruining the future of this country.”

Bananaistan

Emergency Martial Law declared in

Pakistan Bananaistan.

Banana

COAS Musharraf declared an Emergency then President Musharraf addresses the nation citing security concerns in Waziristan as the reason. Dubbed as Emergency Plus as it only applies to the Media and the Judiciary.

Truth was the first casulty as GEO, ARY and other news channels were taken off air. Chief Justice was taken into custody by the army.

Engaging coverage on Pakistan Politics

Goodbye civil rights!

Went to visit a relative at Agha Khan Hospital, only to be greeted by men in uniform deployed at the front entrance of the hospital, informing the public in a high-handed manner that they can only go in one by one and that they are doing us a favor by allowing us to go in at all. Amazing!

Update: LUMS Faculty members among those arrested

Ali Cheema

This afternoon, a group of 50 or 60 peaceful protestors – including some
prominent journalists, lawyers, academics and human rights activists –
gathered outside the HRCP building to protest against Musharraf and his
emergency declaration. The protestors were surrounded by the police and
arrested. Mr. Bilal Minto (adjunct faculty, Law & Policy) and Professor Ali Cheema (Economics) are also amongst the arrested individual.

LUMS Press Release – Arrest of Faculty Members

Further update: 10:45 pm 5th Nov 2007

From Alumni email

All the people who were arrested by the police day before yesterday from the HRCP building – including Dr. Ali Cheema and Mr. Bilal Minto – and detained for 2 1/2 days, have finally been released on bail a little while ago. However, the criminal charges
brought against them have not been dropped.

Dr. Parvez Hassan – a senior member of the LUMS Management Committee – who was arrested during yesterday’s protest, was also released on bail early this morning.

PTCL and the art of annoyance

Important bit of info by Tee Em on Karachi Met Blog 

PTCL has quietly activated answering service on its phone lines. I called various places in Karachi today for official purposes and ended up at listening to the answering service prompt.

If your home or office phone number gets a bill of Rs 1,400 per month or more, your line has been crowned with this unsolicited ‘facility’. Of course it is not necessary for PTCL to tell you how to retrieve the messages that your dear callers have deposited in your mailbox by paying Rs 2.01 each time your phone number was engaged and they were presented with an prompt in English language!

Democracy – Dead on Arrival

BuzhkashiWhen General Pervaiz Musharraf ousted the Nawaz Sharif Government and took over Pakistan in 1999, most of those in born towards the end of the Zia-ul-haq era and having only seen the game of musical chairs of power between Nawaz Sharif and Benazir Bhutto since gaining consciousness, were relieved, if not joyous, to see the notoriously corrupt politicians go into exile and pave way for a more disciplined military regime.

Seven years on we are wiser and weary.

Musharraf has over-stayed his welcome. We never had any faith in the politicians in the first place, now by becoming disillusioned with the military regime we join the old and the wise in their cynicism of all forms of top-down power. Most have resigned to the fact that in politics faces change yet the ground realities remain the same.

As a student in Karachi, in the 1990s, we had lived through the time when there was not a single week of the month that went without a strike in the city. Those were the days when extra-judicial killings were being carried out against young activist of MQM (or its dissident factions) by the law enforcement agencies. The academic cycle was disrupted by low attendance due to frequent strikes and violent protests that paralyzed major parts of the city. Since the state television, PTV, remained in denial about the law and order situation, we often had to rely on word-of-mouth news or call up the school administration and then place our bets whether it was safe enough to venture outside. Instead of fire drills, we had teachers advise us to duck under the tables and stay low whenever we heard gunshots.

Those older than us who were in universities at the time, particularly public-sector educational institutes, were at the center-fold of student politics – wantingly or unwantingly. The student bodies were highly politicized, as the unions demanded some sort of affiliations in exchange for privileges and protection. The destructive and disruptive student unions often clashed amongst themselves and deliberately delayed examinations so much so that entire batches did not graduate on time. It was not surprisingly to hear of a simple four-year degree getting prolonged to five or six years.

Through the 1990s almost everyone we knew someone or the other who lost family members in clashes between different political activists or in extra-judicial killings by law enforcement agencies in fake encounters. Some people simply went missing in such encounters. Some families put in all their resources and efforts to send their kids abroad or out of the city, gripped with the fear that they would become involved in student or street politics if they stayed in Karachi. Those who could afford private education and lived in a non-political locality were somewhat sheltered; for the rest there was little escape.

Consequently, most of my generation grew up abhorring any sort of activism. The old and the wise regard student-politics as a way to corrupt impressionable young minds and destroy their careers. Not surprisingly, even social activism or community service somehow never gained popular momentum here.

Thus, when Musharaf took control of the country in 1999, there was a bit of noise from some quarters of the press and the intelligentsia over the murder of democracy. Most, however, held their breath in cautious optimism. The argument that un-constitutional removal of an elected prime minister fell under the category of high treason was meaningless to us. After all, we figured, the constitution is not kosher. It’s a man-made document written nine years after independence, changed thrice during our six-decade history, and held in abeyance numerous times.

Naively, we hailed Musharraf. We reasoned, at least Musharraf is more presentable than the industrialist Sharif or the prodigal feudal Ms. Bhutto, and has no-nonesense attitude as opposed to their histrionics. The least the Chief of army Staff would be able to do is maintain peace in the country. Hopefully sanity will prevail. The politicians and their corrupt plundering, blame-storming ways were the only version of democracy we knew. Only the military can save us from ourselves, we opined. There is no alternative. After all, anything done out of an act of necessity is beyond good or evil. So, we wondered…what’s the brouhaha over the murder of democracy, when the effective choice is nil?

And almost like clockwork, as if to appease his critics Musharraf’s rule apparently brought a time of economic prosperity for the country. The GDP growth is 8% according to official figures. The Foreign Direct Investment is increasing. Luckily for him, since 9/11 happened and a lot more remittance has started pouring in. Currently, the average remittance for the last 3-4 years is $4 billion a year, as compared to $1.5 billion in the 1990s1. When Nawaz Sahrif left office Pakistan’s external debt was 53 per cent of the GDP. It is now 28 per cent of the GDP2. Foreign exchange reserves increased from $0.5 billion in 1999 to $13 billion3. The Karachi Stock Exchange was dubbed the fastest growing in the world.

How much of this was sheer luck? How much of this prosperity is the benevolence of Big Brother? How much of this actually trickled down? And for all the talk of sustainable development how long before our fortunes reverse?

Interestingly, after coming into power President Pervez Musharraf emphasized that students should not get involved in politics and political parties should stay away from educational institutions4. The message from Musharraf was clear – students have no business in politics. Well, now that we think about it Mr. President, neither does the military.

The question is who does have a role? Forget about the power vacuum now, what will become of the country in the years to come?

65% of our population of 168 billion is below the age of 25 and apathetic. It is neither moderate nor enlightened – it is indifferent and apathetic. The youth has its pre-occupations ranging from substance abuse, sports, music, dance parties, online social networking, computer games, text messaging and fashion to religion. Activism of any color, size or shape is not one of them. We certainly don’t have any succession plans or institutions, or any sort of a platform for those will take an active role in public sphere. The chances of current education system producing good citizens groomed for participating in public sphere is very low.

The entire education system at the primary and secondary levels is based on rote learning. The textbook version of history being taught at the primary and secondary levels is completely purged of any political intonations. Those who do manage to make it out of the education system with their creativity and critical thinking intact; are lured by greener pastures. 9/11 did dampen and reverse brain drain to an extent. Nevertheless, even those who explicitly express their intent to ‘stay and serve the country’ often get disillusioned with the state of affairs and fly away when opportunity beckons.

The lower stratum of the society is pre-occupied with making the ends meet, whichever way it can. In the middle to upper strata we mass-manufacture engineers, computer scientist, doctors and management hacks, as these are the only acceptable, employable professions. A few first, second or third generation entrepreneurs crop up here and there. Disciplines like social sciences are avoided. Public policy is unheard of. Philosophers, thinkers, writers, journalists and social scientists are considered superfluous. With the recent boom in media, pseudo-intellectuals and television celebrities are aplenty.

For a young person from a non-political family, aspiring a career in politics, breaking-in is difficult. The political parties are leader-centric rather than ideology or principle-centric. Often the young entrants have to align themselves with one party or other – the very people who they want to replace. There is no dearth of young and faithful sycophantic chamcha-cum-sidekicks with no independent thought. Mostly the power is passed on to sons and daughters of politicians – their competence is a separate issue altogether. New working class blood rarely makes it to the decision-making arena and if they do it’s a typical case of power high. The politicians are predictable, but when someone from the working class comes with the explicit intent of doing ‘good’, we shudder. But even those with altruistic intentions and immunity against power, are too remotely located or disconnected to fathom the problems plaguing the country on an aggregate level. They don’t realize the priorities and the intensity of these problems. Take for example the problem of allocation of resources to the provinces. Sindh wants it to be based on revenues, Punjab on population, Baluchistan on size and NWFP, well…the level of poverty. The issue is framed as a zero sum game so that the politicians who are so deeply entrenched in their own constituencies are forced to pick sides.

There is no lesson learned from history, inequity and its repercussions are conveniently forgotten. And if there is someone doing pro bono work, challenging the status quo, over-stepping the social order, he or she is discouraged by emphasizing on magnitude of work required and the futility of it all. ‘You are not a bat, hanging upside down, holding the weight of the world on your head,’ they are told. Since such intrinsically motivated people are rare and such moments infrequent for our consciousness, they remain fragmented across time and space. There is no platform for such like-minded people to converge and keep the motivation going.

For majority of the youth it makes no substantive difference who takes power. We go scurrying about our lives. In the lower to middle stratum when something does enrage the people the only course of action known is street protests. And when a mob gathers, the mob mentality takes over. Burning of tires and destruction of public property is simply collateral damage. Peaceful protests don’t get a lot of coverage anyways. The only way to be heard or just vent out is street protests. And for a distant observer, one can never dismiss the possibility of vested political interests sponsoring such protests. There is no real way to gauge popular dissent or approval of the masses.

So we remain a quasi-democracy where the rich and the powerful are more than equal. The poor lack the education and the cultural capital required to succeed in this quagmire of politics. The educated have the cultural capital but lack the will. The politicians, et al have all of the above but lack ethics and operate without a moral compass.

Any efforts for a better future would be useless if it fails to take the silent majority in the fold. And before we go on to ‘higher ideals’ such as democracy; physiological needs of the masses have to be met first. Before we go towards a participative democracy we need to create an environment conducive for participation. We need to go beyond boycott of goods or burning tires. We need to build collective consciousness rather than collective amnesia. We need to make the people understand that they will be heard. That they are not simply cogs in the larger scheme of things, but citizens whose rights will be safeguarded.

We need to ask ourselves, is it something inherent in our cultural dimensions that need to be fine-tuned before we move towards participative democracy? Will the theory-X mentality, that everyone else is lazy, cheat and incompetent; ever let us believe in a truly participative democracy? Will we ever be able to do away with subservient, colonial mentality? Do we need to change our tolerance for large power distance before we start believing in participative democracy? If there has to be a change, does it have to be violent? Can a few good men and women make a difference? Can we go from being activist-driven to being problem driven in our approach? What price are we willing to pay for a better system?

Could it be that there are no alternatives to the current options – the modern pseudo authoritarian regime or the down-right dirty politics endowed from generation to generation?

Editorial for LUMS Business Review (LBR)

Editorial

00-cover.jpg

This year at LBR, the themes of globalization, entrepreneurship, privatization, corporate governance and social and infrastructural development surfaced quite recurrently in the articles reflecting the mood prevalent in the rest of the country, as the government’s policy towards private enterprise, competition and liberalization of the economy continues full throttle.

Indeed, the effects of globalization are becoming more and more profound. The government’s pro-privatization policy and consolidation of banks continues. Improvements in the regulatory framework are on the cards. Foreign investment continues to pour in, mostly in the oil, gas, telecommunications, and banking sectors. Reforms in the taxation system are underway. Media proliferation continues. And The Ministry of Tourism endeavors to brand Pakistan as the destination in 2007; albeit with a mild response.

Here at LUMS, 900 young, and purportedly politically-aware, socially active and environmentally-conscious leaders of tomorrow, from schools and universities across Pakistan, as well as India, Afghanistan, Portugal, Germany and Austria tried their hand at role-playing at LUMS Model UN. Seminars and workshops on entrepreneurship, business ideas, running of small and medium-sized enterprises, succession planning in ‘Seth’ run organizations, are also a rage.

Inside Suleman Dawood School of Business, we have a record number of foreign students in the graduating batch of 2007 from all across Central Asia, Nepal and Bangladesh. Thus there is greater emphasis on non-academic and cross-cultural learning. Student Exchange Programs have been established with Business Schools in India and Copenhagen. Informal exchange of delegations also took place – all in the spirit of giving the students international exposure and global perspective.

On the downside, the inflation stands at 8.8%, and a major energy crisis and acute water shortage looms ahead. We remain at the low end of the textile sector. Bio-tech cotton fails to do much. Most of our staggering population of 160 million goes with next to negligible education. Information Technology remains stalemate. The concept of strategic human resource management evades us for most part. And we as a nation remain risk-averse, indifferent to power distance and resistant to change.

These are all signs of the times as the gurus predict the death of distance and we trot on to the brave new world.

 

-ZQ

LUMS Business Review (LBR), Summer 2007

External debt: a false sense of achievement

By Yousuf Nazar
PAKISTAN’s official external debt has not gone down since 1999 although it has received record aid, investments, and remittances flows. It has gone up to $36.9 billion from $33.6 billion in 1999 despite receiving at least $10 billion in economic, military and development aid from the United States, over $6 billion in privatisation proceeds, and a relief of $1.6 billion in loan write-offs by foreign governments during the last seven years.

The rescheduling of Paris Club debts provided an additional relief of $ 1.2 to $1.5 billion annually in terms of debt service payments. Is the government’s debt management policy as sound and successful as it claims or a historic opportunity to restructure country’s high debt levels has fallen victim to political expediency or a false sense of achievement?

Even after having received such generous assistance, Pakistan external debt to GDP ratio is 28 per cent – slightly worse than Africa’s 26.2 per cent, which also happens to be the average for all the developing countries. The average external debt to GDP ratio of all emerging markets declined from 42.1 in 1999 to 26.2 per cent in 2006, underpinned by strong growth in the global economy and record investment flows into the developing countries.

It is argued that the former Prime Minister Nawaz Sahrif left a heavy external debt burden at 53 per cent of the GDP and the current levels represent a substantial improvement. The net debt flows (disbursements minus repayments) into Pakistan during 1990-1999 aggregated $5.4 billion compared to $1.1 billion during 2000-2006.

Hence, the growth in the debt slowed down during the last seven years. However, post-9/11, Pakistan received generous foreign aid as well as much higher levels of foreign direct investment. Remittances averaged around $4 billion a year during 2003-2006 compared to an average of $1.5 billion in the 1990s.

Nevertheless, Pakistan’s liquid foreign exchange reserves, after jumping to $10 billion-level in 2002-03, have more or less stayed around that level on average. The foreign exchange reserves of even Sub-Saharan countries (excluding South Africa and Nigeria) doubled to $50 billion during the same period. Brazil and Argentina repaid all of their $25 billion debt – by utilising their foreign exchange reserves – to the IMF in early 2006 to rid their countries of its influence.

In contrast, Pakistan has not able to reduce the external debt burden in absolute terms or build up its foreign exchange reserves. In fact, it has become the fourth largest borrower of the World Bank and the fifth-largest recipient of American aid to foreign nations. This shows its continued reliance on foreign governments and multilateral institutions – despite declarations of economic sovereignty – and a failure to mobilise domestic resources to pay for the development expenditure. Leaving aside all the technicalities and vague statements, there has been no convincing explanation for not having used the privatisation proceeds to reduce the external debt in a completely transparent manner.

Some policy makers argue that it is acceptable to borrow if the borrowing is for productive purposes. That is theoretically correct. However, if the borrowing record is littered with corruption and wasteful spending, and major sectors of the economy (large agriculturists, stock brokers, property barons, etc.) do not pay any tax at all, the proposition becomes quite debateable and the motives questionable.

This is a critical issue for Pakistan’s political economy because the subject of external debt has been a highly political one for most of Pakistan’s history since it has relied heavily on the US and institutions under the US influence for its external financing needs. So have many other developing countries – though not necessarily to Pakistan’s extent – in the past but most no longer do. This type of aid has been associated with corruption, waste and increasing debt burdens. It has even been viewed as a payoff to the third world dictatorships for their support and aid in helping the US in achieving its foreign policy objectives that have often clashed with the national interests of the borrower countries.

For example, the recently proposed US law, aimed at punishing oil companies that deal with Iran, will make it even more difficult to construct the Iran-Pakistan-India gas pipeline. Pakistan must import natural gas from Iran to meet an imminent shortage during the next few years. On the other hand, recent moves in the US congress threaten to cut military aid to Pakistan if it fails to “do more” and stop the Taliban insurgency from its tribal areas.

The government claims that it no longer borrows from the IMF and does not carry around a begging bowl. This is quite misleading because it has been borrowing more and more from other multilateral institutions like the World Bank (WB) and the Asian Development Bank (ADB). The borrowing from multilaterals has outpaced the borrowing from the Paris Club since 1999-2000. Its share in total public and publicly guaranteed debt has increased from 37.5 to 50.2 per cent in 2006.

Consequently, whilst the government has made progress in raising money from the international capital markets – a welcome and positive development – official sources still account for 90 per cent of Pakistan’s external debt, including the WB/ADB [48 per cent] and foreign governments [38 per cent]. IMF’s loans rarely exceeded 5-6 per cent of total external debt as it normally provided the balance of payments support and not long-term loans that constitute the bulk of our external debt.

The present government has criticised the previous governments for the accumulation of almost $18 billion debt in the 1990s and increasing Pakistan’s debt burden. While it is true that the debt accumulation in the 1990s was large, critics of the civilian governments conveniently overlook a key statistic: 77.2 per cent of the gross disbursements during 1990-1999 were utilised to repay the old debts. The debt-service to gross disbursement ratio jumped to 82.8 per cent during 2005-2006. The continuing increase in this key ratio throughout the 1990s and even during 2000-2006 indicates that more and more of new loan disbursements were used to repay the past debts; a significant percentage relating to the borrowings during the previous military regime of General Zia-ul-Haq.

Pakistan’s total external debt that stood at $8.7 billion in 1978, reached about $22 billion (50 per cent of the GDP) by the end of the 1980s. That Pakistan had to borrow more later in the 1990s just to service some of the old debts indicates that the loans were not properly utilised as they did not contribute to the development and therefore to the debt servicing capacity. This raises serious questions about the whole wisdom of politically motivated borrowings from the foreign governments and the institutions under their control.

It is therefore fair to ask whether any cut in aid from the foreign governments would be of real significance from a development perspective and particularly in a global economic environment when the private capital flows (through foreign direct investments and international capital markets) have become the dominant source of financing to the developing countries. As a group, they reduced their total external debt to the foreign governments and multilateral institutions (WB, IMF, ADB, etc.) through net repayments of $48 billion in 2006 whilst attracting a staggering $502 billion in net private capital flows.

Pakistan’s vicious cycle of borrowings from foreign governments and multilateral institutions, graft, waste, and accumulation of more debt to repay the old debts leads one to believe that the rulers have been putting excessive burden on the people and mortgaging their future by borrowing more and more while indulging in wasteful and unproductive spending while the ‘big fish’ get away with not only benefiting from the “development projects” financed by external borrowings but also with paying no taxes.

Pakistan’s foreign (or hard currency) debt to total debt (that is, including domestic debt) ratio of 47 per cent is high compared to an average of 28 per cent for emerging economies. Given our long-term track record of using foreign debt to indulge in wasteful expenditure, it would be in the best national interest to set up a special fund (in a hard currency, be it dollar or euro) to accumulate all the privatisation proceeds and use that for the early retirement of our external debt. Some countries, like Russia, have set up hard currency stabilization funds to provide for the rainy days.

However, this would be just one among a series of measures needed to reduce dependence on foreign debt. We must cut imports and reduce the rapidly deteriorating current account deficit that has prevented a build-up of foreign exchange reserves since 2003. We must also strive to increase the tax- to- GDP ratio from 10 per cent (one of the lowest) to 17 per cent within the next five years instead of making far-fetched 10-year plans.

The world today is experiencing unprecedented economic growth with huge pools of liquidity seeking investment opportunities. If Pakistan can reduce its macro imbalances by reducing foreign debt and mobilising domestic resources, it can attract a much greater level of foreign direct investment and achieve greater economic freedom. Shall we rise to the challenge or we will once again squander away a historic opportunity?

The writer is a former head of Emerging Markets Equity Investments, Citigroup.

Dawn