A temporary relief
By AMANULLAH BASHAR
Dec 13 - 19, 1999
Although the rescheduling agreements accorded with foreign creditors
under the title of Paris Club and London Club have given a sigh of relief to Pakistan, yet
it is a temporary phase as the agreement will expire in 2001.
Since the foreign debt which according to an estimate has reached to
the level of $32 billion is too big to serve from its own resources for the economy,
Pakistan needs to seek a second loan rescheduling arrangement with its donors as there is
no way to cope with foreign currency needs after 2001, observed by leading economist at a
seminar organized by a local newspaper last week.
The rescheduling of the loans for second time however may add to the
problems as once countries go for second time rescheduling, IMF sets harsh conditions to
choke growth. Let us see how the new government in Pakistan cope with the situation.
Pakistan will be signing its loan rescheduling agreement with the
London Club of Commercial creditors on Dec 12. The London Club had rescheduled $512
million commercial loan of Pakistan and representative of eight banks are reaching
Pakistan on Sunday to sign the agreement.
This was stated by the finance minister Shaukat Aziz, while delivering
the key note address at the seminar. Pakistan would be back in the international market
after the first half of next year.
The government is meeting its debt liabilities and more funds will be
raised on short term and long term basis by the mid of next year to meet the financial
commitments, Aziz said.
The government was already working on a plan to reduce the multiplicity
of taxes and reduce the direct contact between the taxpayers and the tax collectors.
Regarding government campaign for recovery of defaulted loan, he said
that the total stuck up amount was Rs211 billion out of which around 10 per cent has been
recovered in cash.
Shaukat described it as the smartest recovery in the entire region
which has risen hopes that the economy would be put on the right track soon. The
government is trying to develop a culture so that people will realize that borrowed money
has to be returned voluntarily. Despite all odds and evens, errors, challenges or
disappointments, the new team is determined to succeed. Shaukat said with confidence
" we will succeed, as failure is not an option".
Speaking on the occasion, Dr. Hafeez Pasha, former federal advisor on
finance said that situation demands that government should adopt a survival strategy
instead of going for revival strategy to save the economy from total collapse.
It was imperative that corrective measures were taken on permanent
footings to face the challenge instead of keeping on postponding the crisis. He was of the
view that the prices of different commodities were held down artificially just to paint a
better picture and maintained that the prices should be adjusted on realistic grounds.
The current account deficit is a big problem during 1999-2000 whereas
trade deficit could rise from about $1.8 billion in 1998-1999 to $2.2 billion in
The economic plan to be announced on Dec.15 will give a guideline to
arrest the declining trend in the economy and evolve ways for the growth and revival of
Entering the new millennium on a new economic path was the title of the
Setting aside the fears that a mini budget may be announced on Dec.15,
the finance minister Shaukat Aziz said that it will be an effort to take the masses into
confidence on different measures which will be taken for their well-being. The economy is
in a debt trap with a life of a year or so, with our credibility with international and
domestic investors standing at zero.
To counter all this the government has decided to come up with a plan
to first boost the confidence of domestic investors who are the engine of growth for
Foreign investors are important but it is the local investors who drive
the economy up of any country. Shaukat Aziz said that negotiations with Paris Club and
London Club etc. were going well and there was no immediate threat of default. He
reiterated that the major target before the government is to revive and stabilize the
economy for which it was working overtime.
Pakistan is passing through a transitional phase and will gradually
move towards a market economy. We are changing the orientation and believe that the
private sector will become an engine of growth.
The present stage was a unique opportunity to define the national
economy while entering the new millennium. It is the time when we should stop doing wrong
and work towards the betterment of the people.
Aziz said that credibility of the government could be gauged from the
fact that 90 per cent holders of Pakistan's three exchangeable bonds had accepted the
government's offer to exchange the bonds with a new one, to be launched on Dec.13. We are
negotiating with the rest of the 10.l per cent bond holders.