The policy advisory loans given by international creditors are pushing Pakistan further deep into the debt burden, which the government can avoid by relying on its researchers, says a former official of the International Monetary Fund (IMF).
Government-owned Pakistan Institute of Development Economics (PIDE) Vice Chancellor Dr Nadeemul Haque said that the advice given by foreign lenders often lacked a base, resulting in faulty decision-making. PIDE, under its Research for Social Transformation and Advancement (RASTA) programme, kicked off its first RASTA conference to discuss the research papers written by local researchers. “The government is accumulating debt to do work that Pakistani researchers can do,” said Haque, also a former IMF official.
The statement came days after the Asian Development Bank (ADB) approved a second tranche of $300 million loan for capital market reforms. The World Bank and the ADB have been pegging their loans with policy advisory to bring so-called reforms to the areas of energy, revenue mobilisation, debt management, fiscal prudence and capital market reforms. But despite getting billions of dollars, the country’s performance in these sectors has remained dismal.
A few post-programme evaluation reports of independent wings of the World Bank and the ADB also admit that the loans failed to bring reforms in the targeted areas. The Pakistan Tehreek-e-Insaf (PTI) government has taken more than $53 billion in gross foreign loans after coming to power and around three-fourths of these were either policy loans or short-term commercial loans.
READ Foreign loans swell to $14.5 billion
However, the Ministry of Finance is keen to get the money pegged with the advice aimed at increasing the foreign exchange reserves that are largely the product of such loans. Haque is the second senior government official who has publicly criticised the growing dependency on foreign policy loans, which hardly achieved their intended objectives. Earlier, Federal Board of Revenue (FBR) Chairman Mohammad Ashfaq said that the FBR was better off without a $400 million World Bank loan meant for increasing revenues.
The loan had been signed by the PTI government despite public opposition. The donors are dumping their research in Pakistan with money on the table that Pakistan eventually has to return, said Haque. The government made a policy to provide 10 million homes, apparently on the basis of advice from the World Bank that claimed a shortage of 10 million homes in Pakistan, said PIDE Pro-Vice-Chancellor Durr-e-Nayab.
She said that on research it was found that the World Bank based its claim on the State Bank of Pakistan (SBP)’s research and the SBP was referring to the World Bank in its papers. A whole policy was made on a figure that did not have a verified base, said Nayab. Given an average household size of well over six persons, this means that nearly one-third of the population is without a house. “Do we see such a huge number of people living on pavements, at roadsides, under bridges, or in any open area? Thankfully, No,” she said.
PIDE after digging out the reality concludes that there is certainly not a “deficit of 10 million housing units” in Pakistan. There may be “inadequate housing” in the country, but not “housing shortage”, she added. Despite the billions of dollars pumped into the energy sector by the foreign lenders, the sector sustained losses of Rs8 trillion in the past 10 years, said Haque. Without having any check and care for the output, the government has given Rs2 billion to the UNDP, which is more than the money given to any university in Pakistan for conducting research, said Nayab.
The circular debt of power, petroleum and LNG (liquefied natural gas) sectors has jumped to over Rs3.9 trillion, said Dr Naveed Arshad, a researcher from LUMS (Lahore University of Management Sciences), who has done research on the reduction of cost of electricity generation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ