OF the total debt of about $38 billion we perhaps owe a total of at least about $15 billion bilaterally shared among a number of rich countries led by perhaps Japan and followed by the US and Europe.

Most of this amount, we have wasted on demonstrative consumption and wasteful projects. And the rest was siphoned off by the ruling elite, especially the unscrupulous among the civil and military bureaucracy. The nation has been paying a heavy price for this criminal irresponsibility in the shape of ever-increasing debt servicing burden and the shrinking ability of the economy to self sustain.

There is, however, another side to this tragic story. Most of these loans had come attached. Based on the priorities fixed in its five-year development plans, Pakistan would prepare annually a list of projects needing foreign assistance and circulate this list among the bilateral donors. More often than not the donors would pick only those projects which would fit their own national economic priorities and ensured that most of the loaned money would go back to the source in the shape of cost of equipment, hardware, commodities and fees for the donor country consultants etc. Not only this. More often than not the terms of loan would be so fixed in fine print of the agreement that what would appear almost like a grant on the face of it would turn into a debt carrying punishing terms at the time of repayment. For example, the loan would be made available in a weak currency while the terms of loan would demand repayment in harder currency. This not very helpful attitude of the donors has also added its own horrendous dimension to Pakistan’s debt tragedy.

Most of these donors need Pakistan very badly today to wage successfully the first phase of their war against international terrorism which is being fought at the door steps of this country. By the way things are developing, this phase seems to have the potential of lasting for a long time and with the passage of time it is going to became ever more ugly making Pakistan ever more important for the international Coalition. This importance of Pakistan for the international Coalition is rooted in this country’s geography which cannot be changed come what may and also in the fact that a Coalition fighting a war against a Muslim country would need a Muslim Pakistan ever more badly to counter the growing impression that it is in fact a war against Islam itself. Many in Pakistan have started asking: Could we, using the extraordinary clout that the first phase of war against international terrorism has placed in our hands declare unilateral debt moratorium of at least 50 years, if not a complete write -off and for justification use the harsh repayment terms of these loans and the fact that at least about 80 cents out of every dollar loaned went back into the donor’s pocket while of course, at the same time expressing the profoundest gratitude for the 20 cents which came to us but which we could do nothing with but waste? This question is becoming ever more strident and frequent as the donors continue to do nothing other than talk about a third round of debt relief which was already on the cards even before September 11 and about their help in obtaining still an undisclosed amount of loan ( perhaps not more than 500-700 million dollars) from the Poverty Reduction and Growth Facility (PRGF) of the IMF and the World Bank which too was on the cards even before the tragic attack in New York and Washington . And the nature of loans euphemistically called aid which are being discussed in the capitals of major donors like Tokyo, Washington and Brussels appear to be no different than the ones which even though highly generous made no difference to Pakistan’s economy and neither did they save it from degenerating into its current mess. No one except the Europeans is even talking about greater market access to Pakistani goods. And what the Europeans have offered is nothing dramatic or actually related to the War. Pakistan has been trying to negotiate this level of access to European markets for the last one year and for legitimate reasons. Still, Pakistan is immensely thankful to EU for having seen the logic of this demand and hopes that US and Japan would also see this logic. In fact Washington and Tokyo should have seen this logic much readily because these two countries have seen this model of economic development working with stunning success in the case of Japan itself and then in the case of other East Asian countries. The US and the Western countries had come into the war ravaged Japan with capital and know how, used the cheap labour there and produced high quality goods for the markets of rich countries at highly economic cost thus helping themselves as well as Japan. And after having attained a level of economic development, Japan in turn helped its neighbours using the same economic model thus the Asian tigers were created which could face off even the worst ever economic upheaval that visited the region in late 1990s. Even China is growing from economic strength to strength following the same model.

Past aid, economic as well as military, has only helped in turning Pakistan into a corrupt country given to frequent military take-overs. If the same economic model is used once again to help Pakistan out of its economic crisis in return for its help in fighting a Muslim country in the name of war against international terrorism, the result would be no different than what was seen happen in this country over the last 50 years. The military will continue to enjoy supreme political pre-eminence in the country which would only push economy, education and health to the back stage and wars in the forefront which is the surest recipe for corruption to become all pervasive. So, those in Pakistan negotiating at the official level with the donors despite being representatives of a military government should press the donors for greater market access, more investment in export oriented sectors and more re-location of low-tech manufacturing facilities from the rich countries to Pakistan. The lifting of sanctions against operations of the Exim Bank and the OPIC should help the US investors greatly in this direction. In case the donors drag their feet on these matters, the official negotiators could always use the threat of declaring unilateral debt moratorium for at least 50 years to start with. The donors would know that such a move would be very popular among the people of Pakistan and would even serve to mitigate to an extent the pain and hurt they are experiencing for being on the side of America and waging a war against the poorest of the poor Muslim countries. The risk for Pakistan in this would be next to nothing because the Coalition would not dare abandon Islamabad mid-way through its war against international terrorism.