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November 16: Countdown for loan defaulters

  1. Dollar trade suspended
  2. November 16 — Countdown for loan defaulters
  3. IIPPs threaten legal action
  4. SLIC yet to release its 1998 accounts

Recovery of Rs 200 billion loans has been estimated by the deadline

From Shamim Ahmed Rizvi, Islamabad
Oct 25 - 31, 1999

Perhaps the day of reckoning for the powerful loan defaulters who were violating the law of the land since long, has arrived. While the details and modalities of running the state under the new set up headed by General Pervez Musharraf are still being worked out, hunt for bank defaulters has already started. All of them have been put on Exit Control List, their bank account have been frozen while some of them have already been arrested.

The new Chief Executive of the country Gen. Pervez Musharraf, in his address to the nation made it clear that recovery of the defaulted loans is on the top of his agenda. He asked the loan defaulters to voluntarily return all the borrowed money within 4 weeks otherwise the law of land would deal with them with iron hand and recover every penny with heavy penalty. It is being estimated that a minimum of 50 per cent of over Rs. 200 billion will be recovered within this grace period of 4 weeks. For the rest, the General will have to take the extreme actions.

Many deadline in the past were given by previous governments to the bank defaulters but of no use as defaulters were fully aware that these threats were only for a political purpose. "Most of the rulers were themselves defaulters and unless they paid their share there was nothing to worry, the defaulters used to have an argument.

But, this time the situation is entirely different. There is no ruling class and there is no defaulter in the administrative setup. So the message is loud and clear that there is no political gimmick this time and the General means business. More optimistic analysts believe that amount of voluntary deposits during the 4 weeks may exceed the cautious estimate of Rs100 billion. This achievement can solve the economic problems of the country for at least the current financial year giving enough time to the new administration to implement its programme of economic revival on a long term basis.

The ousted government of Nawaz Sharif which won the 1997 election with the solid commitment to the nation that "every penny of the looted national wealth would be recovered" slowly backtracked. Nothing was heard about his much publicized loan recovery drive during the current calendar year.

One of the charges on which Benazir Bhutto government was dismissed in October 1996 was that she had failed to recover the bank loans of Rs. 140 billion (which have since risen to Rs 224 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 "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 defaulters 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 Finance Minister cleared himself by reading out a letter from the State Bank of Pakistan which said that the names of defaulters could not be disclosed because the honour and privilege" of the loan defaulter could not be breached. The former finance minister preferred to remain silent and did not answer any of the following questions asked by some angry Senators. Is Mr. Dar really so concerned about the so-called honour and privilege of the loan takers or he is trying to protect other skeletons in the government's cupboard?

Since when the State Bank 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?

The problem of stuck-up loans has eluded a satisfactory solution for about a decade when the amount of defaulted loans had been on the increase for one reason or the other. The major cause of sanction of quite a number of loans by banks and DFIs was the political pressure. The influential persons in industry and business were seemingly strong enough to avoid the payment of their loans due to protection enjoyed by them from the ruling class during different periods of political regimes over the last several years. Moreover, the weakness in law for the recovery of bank loans in addition to extremely inadequate number of banking tribunals, has been further adding to the acuteness of this problem. This in turn has been infecting not only the banking system but also the financial sector as a whole with distortions on a wide range.

During all this period the amount of defaulted loans instead of showing any decrease, has literally multiplied. When Benazir government was dismissed, the defaulted loan stood at Rs140 billion which rose to Rs224 billion on 30-6-99 showing an increase of over Rs84 billion during Nawaz Sharif government who won 1997 election on the slogan of recovering the looted money.