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The truth about PDF's poverty concerns
M. Ziauddin
The three-day long sitting in Islamabad last week of the Pakistan Development Forum (PDF), a substitute for the Aid-to-Pakistan Consortium, looked at poverty in Pakistan from almost every angle and thousands of words were used describing and dissecting its causes and prescribing all kinds of panaceas for eliminating it.
However, not a single soul participating in the discussions ever mentioned the fact that during the period (the 1990s) when poverty in Pakistan was supposed to have deepened and widened Pakistan was perhaps the most sanctioned country in the whole world after Iraq.
Sanctions were slapped on Pakistan by the US in 1990 under Pressler amendment because Pakistan's military had, without informing the then elected government, crossed the red-nuclear line. And this was the time when former Soviet satellites in Eastern Europe, with their economies shattered were coming back into the fold of the so-called free world and needed extra help from the multilateral donors who had already started talking of, perhaps taking Pressler sanctions as the signal from the big boss, Pakistan-specific 'donor fatigue'.
As Pakistan was trying to cope with the situation where the concessional assistance from most of the bilateral and multilateral donors was drying up through the mid-1990s, its military dealt another blow to the country in 1998 when it forced the then elected government to test our nuclear devices in response to the Indian n-tests which resulted in further sanctions against Pakistan, this time from the entire world including Japan which was the only bilateral donor that had been giving Pakistan concessional assistance worth about $500 million annually throughout this dark period.
The military dealt the third blow in 1999 when it went on the Kargil adventure. This resulted in some more sanctions and finally in 1999 when the military finally took over the country for the third time in its 56 year of existence , more sanctions were slapped on Pakistan.
Interestingly, during this sanctioned period which the present official economic managers would love to call the 'lost decade', simply to humour the military leadership which needs justification for continuity, the country saw the rate of population growth coming down from 3 per cent in the decade of 1970s and 1980s to 2.5 per cent and the rate of literacy going up from 35 per cent in the two previous decades to 47 per cent. If the then elected governments were looting the country and the politicians plundering and raping the economy how did it happen that despite low growths of 1990s and low inflows of concessional assistance, these politicians were able to achieve successes on the social fronts.
More interestingly, in both the periods of elected governments, the 1970s and the 1990s, despite low growth there was an attempt on the parts of these governments at equitable distribution and policies were made to take the fruits of even the depressed progress to the poorest of the poor. On the other hand during both the high growth periods in the so called golden era of Ayub Khan and that of Ziaul Haq, poverty actually increased manifolds. It was during these periods that disparities between rich and poor, urban and rural and among the regions grew rapidly.
And here is the progress report on the economy during the latest military rule in Pakistan as outlined by Dr. Hafiz Pasha, UN Assistant Secretary General and Director RBAP: "The Human Development Index of the UNDP places Pakistan at the 138th position among 173 countries, and this ranking has been slipping somewhat in recent years.
While there has been a modicum of economic recovery, the growth rate is still among the lowest in South Asia and the savings and investment rates will have to rise perceptibly if a path of self-sustaining high growth is to be achieved which can significantly
improve the quality of life of the people and contribute to substantial poverty alleviation. The government has revealed that the incidence of poverty continues to rise in Pakistan, now almost one-third of the population , in the face of rising unemployment and only modest growth in per capita incomes."
Both the multilateral as well as the bilateral donors had imposed sanctions on Pakistan in the decade of 1990s not because the then elected governments were mismanaging the economy or were indulging in bad governance. But because of nuclear tests, Kargil war and military take-over.
And then suddenly we see the donors changing their policies towards Pakistan in June 2000. Our application for a bail-out was with the IMF then. If the US representative had sat on the board while it considered the application he would have had to vote against automatically without going into the merits or demerits of the application because he was not supposed to vote in favour of any country which was being punished with sanctions under the Pressler law. So, the US representative along with his UK colleague abstained from the board meeting to let the application through because the two countries had taken a pledge from Pakistan that in return the country would stop cross-LoC firing ( unannounced).
While the IMF was putting together a very tough SBA, the Pakistan sponsored Hizb had announced unilateral ceasefire in the IHK ( seemingly without any apparent rhyme or reason causing many eye brows to be raised). This was followed by Indian unilateral ceasefire announced in November that year ( though by that time the Hizb had withdrawn its ceasefire). Then soon after we signed the SBA with the IMF Pakistan itself announced ( in mid -December , 2000) partial withdrawal of troops from LoC. One can clearly see a link between the SBA finalization and the troops withdrawal. This had actually provided the backdrop for the Agra talks.
When the talks failed, Pakistan had still not come out of the woods and needed another bail-out from the IMF. The PRGF was being discussed at that time and the Fund had indicated that it would not be able to provide more than 500-600 million dollars under this programme to Pakistan. This time the bail-out was being considered not because the economic management had improved but because if they had let Pakistan default, it would have impacted on many other poor countries in the region and taken all of them along down.
Then 9/11 happened and immediately everything started looking honky dory. And the money that started flowing into the country since and the financial space that Pakistan has been able to create as a result ( without any significant contribution from its own official economic managers except the idea of buying dollars which had its own limits and would have run out of its steam if 9/11 had not happened) makes it all look very shinning except the rate of poverty whose ratio the
President has been told by his economic managers has dropped by 0.8 per cent this year and it can be reduced further, up to 20 per cent in about five years time with the continuity of the ongoing policies.
So, the President wants continuity which can be assured only with him being in the saddle. Even the multilateral donors have bought this notion of continuity seemingly in their own interest. They are very happy with Pakistan these days because the country is doing exactly what they want it to do-achieve macroeconomic stability at the cost of everything.
All the representatives of multilateral donors who spoke during the three-day PDF forum spoke long on poverty but they were very short on how to reduce it. In fact under what appeared to be their overwhelming concern for poverty reduction, they all wanted Pakistan to reduce subsidies, increase utility charges and food prices, reduce the size of the public sector as well as the government. All in the name of continuity of reforms. But this the surest way to more poverty , rather elevation of poverty.
The most interesting of the addresses during the PDF forum was that of the World Bank Vice President for South Asia Region, Ms Mieko Nishimizu. In her enthusiasm to promote continuity of President General Pervez Musharraf she even went to the extent of paraphrasing
Winston Churchill.
After admitting that Winston Churchill was right for most circumstances within which nation states find themselves when he said " Democracy is the worst form of government, except all those
forms that have been tried from time to time", she said "but I dare say he overlooked the role of leadership."
Then she went on to give the details of her own World Bank brand of democracy saying: "Democracy, more than any other forms of political system is, a ' dance' between the people and their leaders. To be sure , leaders can in the end be only as ' good' as the people permit them to be. But, the reverse is just as powerfully true: the people are only as good as their leaders enable them to be.
Good leaders inspire and raise the sights of the people above their lowest common denominator. They help their people see beyond the immediate personal gains or losses to greater good and opportunities for all. Democracy without leaders is ' worst form of government' indeed."
She left her listeners breathless with her fantastic ideas on democracy. But then, what role did Pakistan's military leadership play in increasing the remittances from one billion dollars to over four billion dollars and the exports from over 8 billion dollars to about 10 billion dollars she did not elaborate. Had 9/11 not happened, overseas Pakistanis savers would not have become concerned about the safety of their savings in foreign banks which were taking a very close look at deposits under Muslim names and those which would not stand deeper scrutiny.
On the export front too it was not the leadership which did the job but it was accomplished by the enhancement last year in the access to European markets and partly by stoppage of the practice of over- and under-invoicing which Pakistani traders had indulged in to keep part of their local earnings in foreign banks. They have now stopped it because of the fear of being deprived of their loot on the suspicion of having Al-Qaeda links. More over all this is just one shot items which would start tapering off after the end of this year.
Meanwhile, the unearned income of the State Bank of Pakistan in foreign exchange is putting a lot of pressure on it and it is barely managing to keep the money supply from going out of hand and pushing up domestic inflation at a time when domestic production and investment is at its lowest ebb. As a result the SBP is suffering massive losses.
The massive fiscal space that has been created in recent months has got nothing to do with the domestic policies but is directly linked to the attitude of the donors , most of whom take their orders from the US and the US does not certify a country for dole on the basis of how good its official economic managers are managing its economy but on the basis of that country's utility for the US national interest at that particular time in history.
As of today we are serving that interest and perhaps it is in the interest of the US as well at the moment to remove the chances of war in the nuclearized South Asia. And as long as we toe this line, the donors are likely to keep their coffers open for us no matter how good or how badly we manage our economy. Once the US achieves its objective which perhaps it hopes to by the end of this year, it would wash its hands off the region.
This is not to say that it has any interest in resolving the Kashmir issue. It only wants us to start normal relations with India, do trade with it and keep the borders , especially the LoC, rather soft.
So, we have very little time to make the most of what we are getting by way of money and financial space. If we continue to follow the prescription of the multilateral aid agencies and deny our people the fruits of these unencumbered flows and keep pressing ahead on the macroeconomic stability theme and hoping that Pakistan's private sector would start taking up the slack in a year or two, we would soon go the way Argentina went. It was lovingly helped by the IMF and the World bank to its current economic mess.
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Pakissan.com;
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