Debt will choke Pakistan

Islamabad diary

We have taken on debt and continue to take on more so recklessly that it is now getting to be beyond our power to service. The old legend used to be that we spent most of our money on defence. We still spend a whopping amount on that – more than we can afford – but debt payments as a portion of our annual budget now far exceed expenditure on defence.

This is what comes from living beyond our means. But far from restraining their horses the brilliant team managing our money is all set to pile on more and more debt. Let me not go into the figures. They’ll only put you to sleep.

We’ve now come to the point where we are floating some of the most expensive bonds on the planet not for new expenditure but for retiring older bonds. We just heard the good news that for paying back a bond taken out during the Musharraf years by that other carpetbagger, Shaukat Aziz – the newest carpetbaggers being those now in the finance ministry – a new bond is being floated.

To know where such an approach will inevitably lead we have to look no further than Greece. Greece took on more debt than it could manage. Its fat-cats are not paying the price of this extravagance. Fat-cats never do. They always land on their feet. It is the people of Greece, ordinary people, wage-earners and pensioners and the like, who are learning the true meaning of European Union-inspired austerity.

If with our foreign loans we were building up our industrial capacity and improving our export prospects that would be a different story. In that case we would be taking on debt to improve our payback capacity, which would be brilliant economics. But that’s not what is happening here. Our industrial capacity is going down; exports are falling. And we are taking more loans, both domestic from our own banks and external from foreign creditors, and floating expensive bonds. And Ishaq Dar, our apology for John Maynard Keynes, calls it progress.

Our financial and economic elites have played a nice trick on the nation. From any future shocks or downturn they are themselves insulated because, sharp as they are, most of them have their wealth secreted abroad. They are only part-timers in the Islamic Republic. Their major interests now – property holdings, bank accounts, and other financial wherewithal – are abroad, in happier climes: Dubai, London, New York, and other favoured destinations.

So much so that Islamabad is now only the nominal capital of the Islamic Republic. Dubai is closer to being the real capital. That’s where a whole lot of Pakistani money is parked. Even IMF meetings related to Pakistan are now held in Dubai. Our great and good ones are beholden to it and Pakistan, unsurprisingly, finds it hard to press for the money owed to it on a privatisation deal.

You can wonder where all the Pak money stashed abroad has come from. It certainly hasn’t come from scientific or technological innovation. Have the Sharifs or Zardaris invented anything? Have they displayed sharp entrepreneurial skills, added to the sum of human knowledge? Most of the Pak money abroad is ill-gotten money, fruits of power and political connections. Whether Pakistan goes boom or bust, it does not matter in the least to this class of joy-riders. They are concerned about their London and Dubai properties, not Pakistan’s debt crisis. Yet they are the ones in the driving seat and taking the decisions. It is the nation and its children yet to come who will the price of their acumen and wizardry.

This is ultimately a political question. It’s the nation’s future which has been mortgaged. But the nation is putting up with this state of affairs, its political parties largely quiescent and unconcerned. There is no revolt party anywhere, no urge to take to the barricades. The PTI takes itself as a party of protest but many of its leading elements are part of the same Dubai and London-coloured status quo.

The poor, the deprived, the resourceless had never any role in decision-making. Now for all practical purposes they find themselves driven out of politics altogether. Their only role now is to attend political rallies at which their betters speak down to them and promise them the moon and the stars and sell them impossible dreams. Their other role is to cast their votes at election time for variants of the status quo.

Who will take up the challenge of recasting Pakistani politics? Not those who benefit from the existing order and who can have no conceivable reason for upsetting it. It serves them fine. Why should they shake the pillars of the temple? After all, it is their temple. The masses in this sense are disenfranchised. The parliamentary game goes on in their name but is alien to their interests.

If Pakistan’s economic existence was not precarious, if the country was not saddled with debts it could not pay, this charade would not matter. Make-believe and circuses, after all, are a part of the political process, even in advanced democracies. But the stakes with us are high. To tackle the problems pressing down on it, Pakistan needs not just elected leaders – which it has in plenty – but honest leaders whose heart is in Pakistan and not in some offshore haven.

That’s the Pakistani predicament…stuffed lions and pompous, chest-beating heroes aplenty but no real leadership. The one hope is that the pressure coming from the Panama Leaks keeps being applied so that by the time of the next elections something cracks and new forces come to the fore. Otherwise our present course, spending way beyond our means, will lead the country to disaster.

Hitler, himself defeated, did not break the British Empire. Britain was exhausted financially. Indebted to the United States, it could no longer afford the expense of empire which is why India was abandoned – virtually abandoned – sooner than most people, including Mr Jinnah, had thought possible. (In that limited sense our freedom struggle owes a debt to Hitler.)

Money trumps everything. If you are extravagant but have the money to pay for your extravagances there is nothing like it. Then by all means build the flyovers and tunnels you want – even though that urge should be tempered by considerations of taste and aesthetics. But if you are living from hand-to-mouth, as Pakistan is, then going for huge projects you can’t afford is downright madness. That’s the current approach, the country’s future mortgaged for the narrow self-interest of the ruling classes.

They’ll have their Dubai and London flats to go to and their external fortunes on which to live, in the style to which they have become accustomed. But what kind of a raw deal are they leaving the Islamic Republic’s hapless masses?

Email: bhagwal63@gmail.com