The briefing was jointly organised by the Institute for Social and Economic Justice (ISEJ), the Campaign for Abolition of Third World Debt (CADTM Pakistan) and the Tax Justice Roundtable at the Lahore Press Club.
ISEJ Director Abdul Khaliq said that Pakistan needed a financial system that allowed its people to hold their governments and international financial institutions (IFI) accountable for their policies and actions. “The people of Pakistan are less and less willing to bear the injustice at the hands of governments and lenders. Poor people are being forced to pay back the loans, never spent on their welfare,” he said.
“Pakistan has been ruled, most of the time, by IFI-backed military dictators who directly governed the country for 32 years.
These rulers undermined the democratic institutions in the country and incurred heavy debts, with almost 80 per cent owed to the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB),” Khaliq said.
“The political leadership did not make any meaningful effort to get out of the clutches of IFIs, pushing Pakistan gradually in a vicious debt circle. Instead, they misused loans and the misappropriated money was siphoned off,” he said.
“There is need to set up a debt audit commission to dig out illegitimate loans and corruption. It will give the government and public the necessary evidence and arguments to cancel/repudiate the part of the debt found illegitimate.
However, this will not be enough to get Pakistan out of the crisis. It has to be complemented with significant measures to generate revenue; such as progressive taxation,” he said.
Economist Dr Qais Aslam said that poor taxation was at the heart of economic woes facing the country. “The country has the lowest tax-to-GDP ratio in the world and a taxation system that is believed to be unjust and discriminatory.
With 0.9 per cent of the people of Pakistan paying direct taxes, it comes as little surprise that it is unable to generate enough revenue to end debt dependency and break the shackles of the IMF and creditors,” he said.
“Not a single offender has been prosecuted in the past 25 years for tax evasion. This shed light on the government apathy towards tax evasion. The affluent classes and business centres continue to evade taxes while the economy suffers. The government is still not serious in introducing progressive taxation to bring the rich into the tax net. The consequences of the crisis have thus been made much worse by the alleged remedies,” he said.
Bushra Khaliq, the Women in Struggle for Empowerment executive director, said a significant part of the public debt in Pakistan was illegitimate. “The debt is a result of the deliberate policies of governments who decided to systematically favour the moneyed classes to the detriment of other marginalised sections of society. The public debt was increased to compensate for the drop in government revenues,” she said.
Published in The Express Tribune, October 16th, 2014.
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the basics of Pakistan's economy are too weak to compete in current competitive globalised world............... if we want to usher in a new era of economic growth, then we must come out of the quagmire we are currently caught in.
the feudalistic mindset with which the nation has been ruled should must come to an end. land reforms are must for a naya Pakistan and they are long over due. Crony-capitalism & feudalism had wrecked havoc and ruined the country's economy......... transparency in govt. with effective control on curruption and creating a competitive buisness environment are key to a better and prosperous future of Pakistan. Stability in country and peace in the region are necessary for economic growth.........
@Waseem: You have ignored two fundamental changes since the departure of dictator Musharraf: 1. Unprecedented spike in interest rates (LIBOR) alongwith the financial crisis of 2007-08. This led to exorbitant increase in interest payments not only in Pakistan but in many other countries of the world. 2. Unprecedented rise in international oil prices. The flawed policies of Musharraf led to over-reliance on imported fuels since no mega dam or power sector project was commenced during this period. The Rental Power Policy of 2006 led to commencement of RPPs reliant on imported fuel. The oil import bill has risen to US$18 Billion per annum. Another important factor, though less important, was signing of NRO in October 2007 to waive corruption cases of US$ 200 Billion. Out of over 8000 beneficiaries of NRO, only 300 were politicians while rest of the 7,700+ included bureaucrats (both civil & military). The above reasons have led to compounding of external debt and increasing the burden on average Joe.
@Nida Alvi :-
in my view,first becoming self-sufficent in arms & ammunitions without developing the economy & human resources is just a pipe-dream.........
Instead it should happen the other way round which means first,developing our economy & human resouces. Then coming out of the debt-trap & circular debt crisis. Then creating a robust defence industrial base to become self-reliant in manufacturing arms & ammunitions ,even becoming an exporter............
@Nida Alvi: When Musharaf was sent packing Pakistan's foreign debt was 40 billion dollars which increased from 38 billion dollars in his eight years of rule while the DEMOCRATICALLY elected governments after that have taken almost 25 billion dollars of foreign debt which is almost 50 % of the total before them in less than 7 years. And you still blame the dictators.
Pakistan is caught into the uncertain situation of Debt Trap. Most of the fresh loans are obtained in order to repay the previous loans & their interest. "Friendly" countries like USA & UK continued to give "aid" to their friendly Dictatorships in Pakistan which added up as compounding debt. The loans were mostly used on purchasing weapons from the west. US government kept the money for many years but didn't release the F-16s. Lets hope that Pakistan becomes self-reliant in arms & ammunitions and the debt is spent judiciously to enable Pakistan come out of the Debt Trap.