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Loan recovery drive put off

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'Bank defaulters enjoy honour, reputation and no action can be taken against them'

From Shamim Ahmed Rizvi, Islamabad
August 9 - 15, 1999

The much talked about bank loan recovery drive of the present government which won the 1997 election with the solid commitment to the nation that "every penny of the looted national wealth would be recovered," has almost vanished. Nothing is being heard in this regard any more from official circles. There was no mention of this staggering amount of about Rs. 200 billion in the budget speech of the Finance Minister nor the Prime Minister on whose national agenda it was the 'No-1' issue, has ever spoken about it in the recent past. One of the charges on which Benazir government was dismissed in Oct 96 was that she had failed to recover the bank loans of Rs. 140 billion (which have since risen to 200 billion) from the politically influential defaulters.

The last time we heard about it from official circles was in the senate when the Finance Minister Ishaq Dar, while replying to a question raised by a Senator in April last said that the State Bank of Pakistan had opposed the publication of the list of loan defaulters on the ground that "it would damage reputation and honour of loan defaulters". Some senators had been insisting to know the names of the powerful defaulters who were not paying back public money. They wanted to know who were the defaulter and how much they owed to the state but the Finance Minister was avoiding any direct answer to the question on one or the other excuse. One day he said that a task force was being set up to expedite loan recovery and that will also consider the question of publishing the list of loan defaulters. Another day when persistently goaded, the Finance Minister cleared himself by reading out a letter from the State Bank of Pakistan which said that the names of the defaulters could not be disclosed because the honour and privilege" of the loan defaulter could not be breached.

For over a year after the PML came into power nothing more was heard of this stern promise made by the Prime Minister. Then after the nuclear test of May last year, when austerity and self-reliance were all the rage once again, the Prime Minister made another solemn vow that defaulted bank loans would be recovered. Even a deadline was given but it came and went without even a murmur of an apology from the government. What to talk of recovering bad loans, the finance minister is shy even of disclosing the names of the principal defaulters. Why is this so? Is Mr. Dar really so concerned about the so-called honour of privilege of the loan-takers or he is trying to protect other skeletons in the government's cupboard?

What the people would like to know is: Since when the State Bank — which failed in its duty as a trustee of the foreign currency accounts — has become the defender of honour and reputation? Since when the loan defaulters have started enjoying honour and reputation and needed legal protection? Since when has the law started working for the defaulters and against the people whose money has been plundered? And, what moral or economic justification do such laws have?

Whatever the banking laws and their intent are, once default occurs the contract between the lender and the borrower is breached. And when the funding bank goes to court for recovery, the entire transaction enters the public realm. It is a simple matter, then, to obtain copies of loan documents from the court and to "Tarnish" the exalted reputation of the defaulter, that is how such details trickle out into the independent press which, in fact, has published unofficially obtained lists of defaulters.

The only time when such a list was officially published was during the caretaker setup of Moeen Qureshi. The step, which was widely acclaimed by the public, remains a reference point and certainly did not shake or rattle the economy. It is mind-boggling that a democratically elected government should need a secretive task force to tell it that nothing would be more in the public interest than revealing the list.

During the past one-and-a-half-year the government gave various deadlines to defaulters to clear their dues or face liquidation and imprisonment but each was contemptuously ignored despite the fact that the government even offered to waive off upto 80 per cent of mark-up. The last deadline announced by Dr. Hafiz Pasha in Nov. last was upto 31.12.98. Twice in the past one year, similar warnings were issued first by the Governor State Bank who pleaded the defaulters to pay the principal amount and only 10 per cent of mark-up by Dec. 31, 1997 — and, second by the Prime Minister himself warning the defaulter to pay by June 30, 1998 or face imprisonment. To set an example, the Prime Minister had pledged to liquidate his personal loans by transferring the collateral assets to the creditor banks. There was some criticism that, instead of transferring overvalued assets to his creditors, the Prime Minister should have made straight payment. Still, it was seen as a long overdue stop in the right direction.

But, the deadline passed without any response from the defaulters. Thereafter, some start-stop measures were taken by the Federal Investigation Agency against a few selected defaulters, leading once again to charges of political victimization. As the recovery drive stopped, the government diluted the promise made by the Prime Minister, saying that coercive action will only be taken against "willful defaulters". By this rather fluid definition, a major chunk of "engineered" or "circumstantial" defaulters were excluded from the net. The drive ultimately fizzled out altogether.