Foreign debt: ‘Accountability needed in public loan utilisation’

Speakers say taxes, not foreign debt, should be used to deal with fiscal deficit.

LAHORE:

A parliamentary audit commission must be formed to ensure accountability in the utilisation of foreign loans, speakers at a discussion on Thursday said.

The conference titled: Public debt - Impact on State and Society was organised by the Institute for Social and Economic Justice, Islamic Relief and Unlocking Chains of Debt.

The speakers agreed that tax collection should be increased to meet fiscal deficit instead of relying on foreign debt.



Human Rights Commission of Pakistan general secretary IA Rehman said that the problem of debt arose when rulers increased their expenditures without considering their resources.

“Foreign debt affects citizens’ basic human rights. Around 40 per cent of the annual budget goes to debt servicing and a similar amount is allocated for defence. In such a situation, the budgetary allocations for health, education and social security suffer. A reasonable amount of debt is necessary to ensure the balance of payments. The main issue is how it is spent. In Pakistan, the government should take steps to control its extravagant expenses. The total amount of foreign debt and the terms and conditions on which the loans were obtained must be made public,” he said. Prof Akbar Zadi contested the claim by several speakers that more debt was obtained during dictatorships than during democratic rule.

“More loans were obtained during the Pakistan Peoples Party (PPP) government than during the Musharraf era. Taking loans is not a bad thing either. Most countries, institutions, businessmen, even housewives and farmers obtain loans. The real question is how the amount is utilised. The International Monetary Fund (IMF), or other monetary institutions, never compel a country to borrow from them. When a country fails to generate adequate funds from its own resources, it has to rely on foreign debt to meet the deficit,” he said.

“Pakistan is the only country that borrows without any reason. The main issue is how the amount is paid back. Our governments pay back the interest on the foreign debt by taking more loans,” he said.

He said that the biggest problem in revenue generation was the non-recovery of taxes. “If enough taxes are collected, we can get rid of foreign debt. The civil society should raise awareness among people about the importance of paying their taxes. A parliamentary commission should be set up to ensure the audit of foreign debt taken by governments,” he said.

Hafiz Rashid Mahmood, the Punjab Urban Resource Center director, said that Pakistan had obtained a major portion of the debt for spending on health, education, sanitation and other basic development projects. “If an individual completes some work, it costs him Rs1. If the same work is done by the local government, it will cost Rs3. If the same work is done through the provincial government it costs Rs7. The cost is Rs28 if it is carried out through foreign funding,” he said.

He said foreign institutions themselves approached developing countries to sell their loans. “They do not provide loans for resolving problems which a country identifies itself. For example, no one will give you money for building a dam. There is no accountability in Pakistan regarding debt expenditure,” he said.

Qais Aslam said that loans spent on development should be returned.

Former Lahore High Court Bar Association secretary Rabiyya Bajwa gave out souvenirs and bouquets to the panellists.

Published in The Express Tribune, May 29^th, 2015.