Pakistan caught in a widening debt trap

A country where a father and mother kill themselves so that their children might live has no right to call itself an Islamic Republic. In fact, it cannot even claim to be civilised. This came home to me with a vengeance last week when I visited five children, a girl and four boys, in Faisalabad whose parents had committed suicide. Asghar Siddiqui, 18, is the oldest son. Four years ago their 38-year old father was struck with paralysis. He lost his job and there was no social security system to help him, as there is in the 'Godless' West where actually everything is Islamic except profession of the Islamic faith and public morality.

Asghar and his younger brother left school and started working, Asghar as a tailor and the other one as a tea boy. Depending on the amount of work available both brought home between Rs2,000 and 2,500 every month. The entire family subsisted within this amount, one of over 100 million souls that live (if you can dignify such existence with the word 'living') on less than $2 a day, less than the price of a Big Mac. Over the past two-and-a-half years the family's monthly utility bills, gas, electricity and water, skyrocketed from around Rs500 to Rs1,500.

I insisted on seeing the bills because according to our well-meaning, truthful and 'Islamic' government people at the lowest income levels are unaffected by the rise in utility prices. As their utility bills rose the family could barely feed itself. Finally the parents decided that they were too much of a burden. If there were two less mouths to feed their children might just scrape by. They hanged themselves.

Who is responsible for this crime? This is induced suicide and induced suicide is murder. The murderers are those who have forced a situation in which two helpless parents had no option but to remove themselves from the scene to enable their children to get by. I'm afraid the accusing finger points directly at two entities: the IMF and its inhuman conditions and our weak governments that accept IMF conditions vacillating because they are devoid of faith and direction. This in a country for Muslims who bear the tradition of Hazrat Omar who held himself responsible if a dog died of hunger in his realm.

God alone knows how many families in Pakistan are facing such dilemmas in their struggle for existence. In the last few years every finance minister invariably announces regular increases in utility prices and equally invariably assures the nation that the poor will not be affected.

All of them faithfully act as IMF Collectors and obediently implement its inhuman policies, just as their predecessors, the revenue collectors of the British did, just so that they can get more loans to service the ever rising debts. The hapless people of this country were never consulted when our rulers took these loans and have no idea where they were spent. But they have to pay for them through regressive indirect taxation that has caused a three-fold rise in poverty since 1988. Today, according to the ADB, there are almost 70 million Pakistanis below the poverty line. There are millions more living in 'normal' poverty.

human conditions

The IMF is least bothered that the fundamental human rights of the masses in Pakistan are violated in servicing its debts or by its inhuman conditions. A month back the IMF told a UN committee that human rights were not part of the IMF Charter. The IMF's loyalty is to protect the interests of its shareholders who are the ultimate creditors. Yet it imposes its conditions on countries like us that are caught in the debt trap – making out that it knows what is best for us instead of admitting that it is making us do what is best for its shareholders and creditors. It acts as the plaintiff, judge and the jury and puts all the blame and burden on the masses of the country.

Yet no one, least of all our 'sovereign' governments whose charter it definitely is to protect the human rights of Pakistanis, dares question the IMF either about its miscalculation in giving bad loans to corrupt governments or its policies that could have actually made our economic plight much worse. The IMF imposed condition to cut deficit has deepened the recession, lowered the growth rate and shrunk the economy. Unemployment is rising, causing immense hardships to the people.

Rather than making our government raise utility prices would it not be better for the IMF to take the harder option of cleaning corruption and inefficiency in the government corporations like Wapda? The people are being crushed by cost-push inflation at a time when their level of tolerance is extremely low and has reached breaking point. This cost-push inflation is increased by the IMF condition of creeping devaluation. Last year the rupee devalued 15 per cent. This flawed policy has made things worse for the country. As real incomes fall, the poor, the salaried class and the perennially neglected pensioners have found it difficult to survive. Corruption amongst government servants has been rising; the honest are finding it impossible to make ends meet. This leads to a further deterioration in governance, which in turn deters investment.

Perhaps the greatest fallout of devaluation, rise in indirect taxes and utility prices is the collapse of the state-run education system. Quality teachers unable to live on government salaries are going into the private sector by either opening their own schools or joining private ones at higher salaries. This means that the quality of students coming out of government schools is deteriorating at an alarming rate. Meanwhile civil servants are forced to be corrupt in order to send their children to expensive private schools with their exorbitant fees. No one has analysed the amount of corruption that can be reduced if state schools imparted good education.

Professional migration

With devaluation has come increasing dollarisation, with everyone with any surplus cash buying dollars. Keeping money in dollars gives far better returns than investing the money in a country where there is so much red tape and corruption. As the rupee falls it becomes far more lucrative for professionals to seek employment abroad.

In the last few years there has been a major exodus of professionals. At SKMT we lost 87 nurses to the Middle East in the last year. The worst aspect of devaluation is that since 1998 the foreign debt has gone up by Rs700 billion. This has to be paid by the people of Pakistan through indirect taxes that will raise poverty and increase the misery of the masses. The deficit will have to be made up by more loans, entrapping us further in debt.

The present government tells us that there might be a turnaround in the next 4 to 5 years. That the situation will ease if we can get cheaper loans to swap with the more expensive ones.

Unfortunately for the government the people have got cynical and no one in Pakistan believes that we can pay our loans. People feel hopeless about their predicament, which is why there is not likely to be any investment and nor are we going to keep our capital or our brains in the country. At the same time the poor are going to be crushed further until there is an eruption.

Geo-strategic agenda

The Pakistan government, like most third world governments, is petrified of taking on th