Asia Times: Who are you calling 'austere'?



	August 05, 1999	atimes.com

India/Pakistan

Who are you calling 'austere'?
By Nadeem Iqbal

ISLAMABAD - By the next fiscal year, the debt servicing burden on Pakistan's annual budget will be larger than the budget for defense, development and the running of the government, say economists.

This eventuality is being predicted by Pakistan's financial managers in the face of a stream of flopped austerity and debt retirement schemes launched by the Nawaz Sharif government. Not only have they failed to rescue Pakistan from the debt trap, but they have failed to rein in the upward trend of the government's domestic and foreign borrowing.

According to data from the federal Ministry of Finance, since February 1997 when Prime Minister Nawaz Sharif took over, the debt burden on Pakistan's economy has increased by a whopping 15 percent. In fiscal year 1996-97 Pakistan owed a total of $43 billion (2.15 trillion rupees) in domestic and foreign debt. In December of last year the figure had climbed to $50 billion (2.5 trillion rupees).

A critic at The Nation, a conservative English daily, said: ''The government can plead that the increase roughly corresponds to inflation in this period, and debt has shrunk as a proportion of the GDP. Or that the debt had to be incurred because of the stagnant revenues, in turn the result of a prolonged recession. Or that the foreign debt remains the same when denominated in dollars, but devaluation has increased the rupee burden. However these are all excuses ex post facto, rather than factors previously included in government projections.''

The newspaper added: ''The Nawaz government's record on debt deserves more severe criticism because it has committed itself publicly to reining in government expenditures, raising revenues and reducing the debt burden. The much touted Debt Retirement and National Self Reliance Funds yielded partial results, while all the government's announcements about reducing non-development expenditures, downsizing government departments, austerity programs and privatization have proved ineffective.''

Sharif won the 1997 elections riding the slogan of ''Self Reliance'', which in the aftermath of the nuclear tests last May gave way to the Debt Retirement Fund.

Finance Minister Ishaq Dar announced to Pakistan's parliament that the total donations received by the government to the Fund through March of this year were $56.10 million. Of this, $34 million were utilized to retire the most expensive debts. The amount is quite meager given the fact that, as stated by the State Bank of Pakistan, by June 26, 1999, the government had spent $118 million in debt retirement.

During the 1990s Pakistan's debt servicing liability rose, from $1.3 billion in 1990-91 to $2.5 billion in 1998-99 - an average increase of 8.8 percent per annum. The amount swelled by 9.5 percent over the previous year in 1998-99.

Independent economic analysts regard Pakistan as a highly indebted developing country that has failed to follow through its austerity measures.

According to the Finance Ministry, the expenses of the prime minister's office in the previous financial year exceeded the actual budgetary allocation by over half. During 1998-99, the prime minister's office spent $2.98 million, about 52 percent more than the original allocation of $1.96 million. This despite Sharif's declaration last year that he would set a precedent for austerity.

Instead, an amount of $3.24 million has been allocated for the prime minister's office in the coming year's budget, presented two months ago in June.

The brunt of this lavish spending has been born by the ministries concerned with social and human development, whose budgets have been slashed. For instance, the budgetary allocation for the Education Ministry was cut by $301,600 from $2.45 million.

The Health Ministry was equally affected. Last year it was provided $338,500 less than the original allocation of $95.5 million. This year the budgetary allocations for medical services and public health were trimmed by $1.97 million and $485,000 million respectively.

Giving his candid view, a source in the Finance Ministry said that every government-sponsored austerity drive is doomed as long as nothing is done to curb the population increase and improve the rate of literacy so as to enable more people to become resource-generating units. He said Pakistan's increasing dependence on lenders - called ''donors'' in government parlance - is directly related to the country's inability to produce its own food to feed the galloping population.

M. Ziauddin, bureau chief of the prominent English-language Dawn newspaper and a top financial analyst, said: ''The economic policies being pursued by the government and the three budgets presented . . . have not done one iota for alleviating this ever-growing menace of debt servicing.''

Recently the London Club (composed of the International Monetary Fund, World Bank, Islamic Development Bank and Asian Development Bank) and the Paris Club (made up of industrialized nations) have rescheduled loans of $800 million and $3.3 billion respectively. An alarmed Ziauddin observed, ''In fact, if the three-year rescheduling by Paris Club and London Club had not been achieved, Pakistan would have touched this year the spot which it would be reaching in 2000-2001.''

(Inter Press Service)

asian sex gazette