Lessons to learn from Greek saga

KARACHI: The European Union and the International Monetary Fund finally agreed to provide $237 billion to Greece to help Athens cope with its debt problem and avert a possible default.

Greece’s debt has mounted to 400 billion euros in the face of unbridled spending and corruption by the government and state institutions. The government turned a blind eye to all this and things went out of control. Now it has put in place an austerity programme which includes wage freezes, pension cuts and tax rises.

Has this episode left a lesson for Pakistan to learn from? Our debts and liabilities have been increasing steadily and we allocate a large part of our budgetary expenditure to debt servicing. External debt and liabilities have surged to $54.23 billion.

What concrete measures the previous or the present governments taken to keep Pakistan’s debt under control in order to avoid a situation similar to that of Greece. The government announced austerity measures a few months ago to curtail expenditures. Under the plan, it has to reduce the size of the cabinet and stop several development projects.

However, the cabinet size has still not been cut and extravagant spending by parliamentarians and other government officials has not been curtailed.

In order to cut expenditures to cope with cash crunch, the government slaps duties and taxes on imports to discourage the trade. However, the rule is relaxed whenever a government high-up or someone connected with him want to bring in some product from abroad.

The latest example of extravagant government spending is the state permitting Punjab‘s governor to import a Rs25 million bullet-proof Mercedes Benz. This is when the Punjab governments is facing fiscal crisis.

The federal government has already reduced the size of the Public Sector Development Programme to Rs250 billion from the original Rs446 billion set at the start of the fiscal year in July 2009. The Punjab government has put a halt to unnecessary expenditures after its coffers went dry in the wake of the Sasti Roti programme.

In another incident, Rs1.8 million has been spent on the maintenance of a 2008 model car of a senior official of the Pakistan State Oil. This is higher than the price of the car.

To meet the budget we approach international lending institutions – the International Monetary Fund (IMF), the World Bank and the Asian Development Bank.

In late 2008, Pakistan’s foreign exchange reserves dropped sharply and the country had to seek emergency loans from the IMF. The IMF provided $11.6 billion, to help the country avert balance of payments crisis and shore up reserves.

The disaster has not been averted just because the loan has been received.

Eventually, the loan has to be repaid and with high interest, which will mount pressure on the country in coming months.

International experts say that the cause of the Greek crisis is extravagant and unchecked spending and corruption in state institutions on a large scale. Is that not the same as our case? It is time to rise to the occasion and put our house in order.