With every passing day indications are getting stronger that
the proposed IMF package of 3 years 3 billion dollars under the poverty
alleviation and growth facility (pagF) may not be available during the current
year putting Pakistan in a precarious position as the present rescheduling of
foreign loans will be expiring by Dec, 2000 and Pakistan needed nearly 4.5
billion dollars to meet its debt servicing liability during the year 2001.
Another 1.5 billion is needed to meet the likely trade deficit.
Latest indications from IMF sources are that $ 3 billion deal
may be delayed by another year and instead a bail out emergency package may be
offered to save Pakistan from immediate default as about the same amount will be
needed to meet the liabilities of the first quarter of the next year. Some
relief in the form of rescheduling of some loans may also be provided to keep
the country alive in the oxygen tent.
This short emergency bail out package is most likely to be
designed on the lines of Fund's Standby arrangements. Most of the board members
who belong to the highly Influential G8 states are said to have come to the
conclusion that in case they waited until Pakistan signed CTBT, delivered on
terrorism, resumed talks with India and restored democracy, its economy will
collapse causing immense damage to the whole region. They also do not seem to
feel comfortable with the thought of a nuclear country becoming an international
defaulter. With this emergency treatment, pressure will be mounted for signing
of CTBT and fulfilment of other conditions of the agenda. Any long term
arrangement with IMF will depend on how faithfully and effectively Pakistan
meets these conditions.
The seminar was organized by the Society For Citizens Rights,
Islamabad and was addressed, among others, by two prominent financial managers
of the country under two former political governments, Sartaj Aziz and Dr.
Hafeez Pasha, two economic journalists, and a political figure-cum-lawyer, Abid
Hasan Minto. The seminar was presided over by Air Marshal (Retd) Asghar Khan.
Dr. Hafeez Pasha, former adviser on finance to the Pakistan
government, pointed out that there has been rapid erosion of foreign reserves in
the recent past and now the foreign exchange reserves stand at $ 700 million
while the dollar-rupee equity is sharply in favour of the greenback. Strangely
enough, the government has not so far shown any concern about the sharp decline
in the liquid foreign reserves nor it has come out with some contingency plan to
meet the difficult foreign exchange situation. He pointed out that Pakistan
would not be in a position to meet its obligations of repayment in January 2001
unless something special happens. However, there are certain options available
to Pakistan to meet the situation. One is to go back to the IMF and other
international and financial agencies and accept their conditionalities, however
harsh they may be. The other option is to offer economic and political
concessions including the change of stance on Kashmir, eradication of terrorism
and signing of CTBT and return to democracy etc. He however said that return to
democracy would not prove to be a strong lever for easing the debt burden. As an
honourable nation we should not offer any political concessions. Pasha said that
he was convinced of self-reliance and the only way out for Pakistan, and if the
country practiced the policy of self-reliance for three years, it could be able
to come out of the difficult situation being faced at the moment.
Sartaj Aziz, while narrating the history of incurring of
foreign debts, said that the solution lies in adoption of a policy of
self-reliance. He said there is no doubt that the situation is very serious and
suggested that Pakistan with the co-operation of the poor countries and some of
the developing countries which have been hit hard by the increasing foreign
debts, make concerted efforts for debts, relief while impressing upon the G.8
countries not to restrict the debt relief to 41 countries and add the adversely
affected developing countries to their list with the condition that the relief
provided would be partially used for poverty alleviation.
Asghar Khan demanded that Pakistan, along with the other poor
countries, should be provided debt relief while the country should live within
its own means. He said that poor countries should make concerted effort to get
their debts written off. Pakistan along with SAARC countries and the poor
African countries should make all-out efforts to get debt relief without any
further loss of time.
Unilateral moratorium is another option being suggested by
some economists. Donor may be asked to postpone the recovery of loans for 5
years. The difference between debt rescheduling and a unilateral moratorium is
that since the former is done with the consent of the international agencies,
the latter plays an important role in the formulation of economic policies.
Since the latter is done unilaterally by the country concerned, it then
formulates its own policies. The pros of this strategy are, first, the amount of
debt is maintained at the present level and does not keep escalating as in the
debt rescheduling case. Second, unilateral moratorium allows the adoption of
alternative policies, as these are determined by the country itself.