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June 30, 2019

A non-starter

Opinion

June 30, 2019

The PM has announced a debt commission to investigate debt taken by the PPP and PML-N governments during the period 2008-2018. Long before coming into power, Imran Khan repeatedly mentioned the significant increase in loans when the PPP and PML-N ruled the country during 2008-2018.

The prime minister believed then, and continues to believe even now, that our economy has suffered greatly as a result of massive loans taken by the two opposition parties. He has often quoted the figure of Rs30,000 billion as the amount of borrowings at the end of the PML-N tenure in June 2018. The other figure that he has repeatedly mentioned is Rs6000 billion which according to him was the amount of debt when the PPP took over in 2008.

Not even once has he mentioned the details of the loan portfolio during the time of Gen Musharraf. Post-9/11, how much loan was written off or rescheduled and how many grants did Pakistan get as a result of providing services to the US on the war on terror? This is not of much concern to the prime minister.

The reality, however, is quite different in terms of the actual numbers. Miftah Ismail, former finance minister, in his article in these pages (‘The midnight tirade’, June 19) has given the actual figures and quoted no other source but the present government’s own economic survey. The first thing the prime minister needs to do is to brush up on his numbers. Important national decisions are being taken without an understanding of various economic definitions and without knowing the exact numbers. This can lead to serious consequences, as it has in last several months.

The government also needs to know the difference between public debt, and debt and liabilities. At the end of the PML-N’s tenure, public debt was Rs24,900 billion while the debt & liabilities figure was over Rs30,000 billion. As such – and this can be verified from the SBP and finance ministry figures – the PML-N during its five years increased public debt by Rs10,600 billion and not Rs16,000 billion as the PM claims.

The PML-N has made it clear that they have no issue with a commission set up to investigate the amount of loans taken during their five-year tenure. The PPP has also indicated its willingness for such a commission. However, in its present format, this is simply a non-starter for the following reasons:

First, why is the period of the probe restricted to 2008-2018? If the PM considers that the amounts borrowed were significant, then why has the current fiscal year been excluded? This fiscal year the borrowing has been more than in any year in our history. Just for reference, the PTI government’s borrowing in its first year in office will be around Rs5000 billion. Compare this with the Rs10,600 borrowed by the PML-N in its five years and one would start to wonder whether the PM even knows what’s happening in his government. Therefore, it would only be fair to expect the PM to include 2019 in its probe and let the commission determine the reasons for accumulating record debt in the current government’s first year.

Second, this probe is about financial matters and requires not only top-level understanding of economics and finance but also strong professional experience in this field. Matters of taxation, revenue generation, fiscal deficit, annual development plans, debt repayments, exchange rate dynamics, provincial share under NFC etc will be under probe. Most, if not all, members of the commission neither have the right educational qualifications nor strong professional backgrounds to undertake such a gigantic task. The same exercise, if at all required, could be undertaken by an international audit firm of repute. This is also important to showcase the neutrality of this probe.

Third, initially the government announced that this probe would be about the loans taken during the last 10 years. However, when the terms of reference were announced, the objective seems to be completely different. The commission is not just supposed to inquire about the borrowings but to investigate any contract awarded during the 10 years under review. There must be hundreds of contracts awarded by the federal government as well as the provincial governments in the last 10 years. The commission is supposed to review the justification of undertaking any contract and also ensure its complete transparency in all respects. So now the functions of NAB and other investigating agencies will be the business of this commission.

The commission is also supposed to investigate whether the Fiscal Responsibility & Debt Limitation Act 2005 was busted during this period. Another reason why the current fiscal year must be included in this probe: the debt-to-GDP ratio has gone up in this fiscal year.

In addition to the above, there are other considerations that should have been taken into account before announcing the probe commission. According to the PM, the PPP’s tenure between 2008 and 2013 will also be examined for extraordinary debt accumulated in those five years. The ruling party has maintained this position for several years now. With this background, why did they appoint Hafeez Shaikh as finance adviser in the first place? Will the finance adviser be probed by the commission? The centre of gravity of this probe commission, in terms of documentation and information, will be the Ministry of Finance. Will this not lead to issues of ‘conflict of interest’?

One wonders whether all these issues were discussed with the finance adviser and the negative consequences for the government, country’s economy and our international image were considered.

The government must reconsider this decision. From our standpoint, it’s a non-starter in its present form.

The writer is former governor Sindh and former minister for privatisation.