The bonanza days are back again. Every one and his auntie is making a beeline for Pakistan with bags stuffed with dollars. The IMF has approved a PRGF programme of three years and agreed to lend $1.3 billion to finance the programme.

Repayment of this loan carrying an interest rate of 0.5 per cent within five -and-a-half years. The Paris Club has been magnanimous. Once again Afghanistan has come to Pakistan’s rescue.

During the ten years of Afghan war against the Soviet Union, Pakistan under the military rule of President General Ziaul Haq perhaps received as much as 50 billion unencumbered dollars( conservative estimate). But when the salad days came to an end with the death of the military dictator in 1988 there was nothing on the ground to show where these billions had gone. On the other hand the country found itself burdened with a debt of about $17.29 billion including $1.82 billion of short/medium term loans. The succeeding democratic government had to rush to the IMF for an emergency assistance from its Standby Arrangement (SBA) because nothing much was left in the kitty to meet the balance of payments position gap.

In the democratic decade of 1990s which the present official economic managers, for their own convenience, call the ‘Lost Decade’ the net addition to total debt outstanding was $15.45 billion while in the same ‘Lost Decade’ the total amount repaid as interest and principal was $36.61 billion! This would mean that in the democratic decade (1988 to 1999) Pakistan had been making average repayment of its loans taken in the decade of military dictatorship of the order of $3.66 billion dollars and yet its external liabilities doubled during this period.

Clearly much of these new liabilities acquired during the democratic decade were spent on amortizing the debt acquired by the decade of military dictatorship. There was very little left after this for the democratic governments to spend on development projects.

And even less to line their pockets as the present military regime would have the people inside and outside the country believe. This is not to say that the politicians were all saints but that the scale of corruption during the democratic regime was certainly not as high as it is being played up by the military regime and its civilian puppets heading the official economic and financial institutions.

In 1990-91, the short and medium-term loans were no more than ten per cent of the outstanding external debt to official creditors. This amount more than doubled in 1998-99 when it was 22.2 per cent, and since 1995-96 has been almost a fifth of the total debt. In contrast,long term debt had increased by only 5.7 per cent since 1994-95, while short and medium term debt had increased by 28 per cent over the same period. This clearly indicates that the multilateral and bilateral donors which are falling over each other today to give every kind of economic help to a military regime were not at all interested in helping the democratic governments of the 1990s ( except of course, Japan) to alleviate their debt burden most of which was actually acquired by Pakistan during the military regime of President General Ziaul Haq.

Interestingly, the debt rescheduling which was obtained by a democratic government in the beginning of 1999 actually came to the rescue of the present military regime in its first year of the rule. And since the lenders in their own selfish interest never let a borrower default, the military regime was provided another round of debt relief in the next year. And happily in the first two years of the present military government the total debt servicing fell substantially. In the financial year 1999-00, the total debt to be repaid had there been no Paris Club relief available would have been to the tune of 7.82 billion dollars, the highest ever. However, an amount of 4.08 billion dollars were rescheduled and Pakistan had to repay only $3.74 billion. The fact that the government could show to its ‘friends’ in the donor community a semblance of improvement in the official economic management in the two years, despite the slowdown in the growth, fall in the revenue collection,deepening recession and diminishing jobs, could be attributed directly to the economic space provided to the military government by these two rounds of rescheduling of the debt.

All this has been recalled here in order to put the whole thing in the right perspective before Pakistan’s fourth military regime intoxicated by the new bonanza chooses to follow in the footsteps of its three predecessors. Ayub Khan used the American free lunches of the 1950s and 60s to purchase weapon systems which turned into junk within a period of a decade and half and then exhausted most of it within 17 days in an unwanted war. His successor, Gen. Yahya Khan used the left-overs to fight another short but losing war. The third military dictator used the free lunches to create an informal economy of massive proportion based on wholesale corruption whose size makes it almost impossible for any reform to take effect.

If so far no significant corruption has come to light in the tenure of the present regime, it is not because corruption has been eradicated (this is no reflection on all those honest officers who are engaged in managing the country’s affairs for the last several years) but because there was hardly anything left in the kitty to siphon off. With so many sanctions working all at the same time, default staring in the eyes and the donors keeping the country on the life-line of debt rescheduling, there was nothing to pilfer.

This situation has now undergone a drastic change. The dollars would be pouring in now. There would be temptation. This is the time one needs to watch those who would be handling this bonanza. And this is the time to see how much of the aid is used for purchasing weapon systems which carry a lot of kickbacks and commissions and which become obsolete in a matter of two to three years. Very early in the day when the country became the front line state for the second time in two decades, those who knew better had pressed for less aid and more trade because they knew in the season of free lunches, corruption rather than economy thrives.

However, the bilateral donors seem to have chosen to ignore the request. Only a few feeble attempts were made to improve Pakistan’s market access in the rich countries and that was that. The bilateral donors perhaps feel more comfortable with giving seemingly unencumbered dollars because this helps their own trade to flourish and if some of these dollars are pilfered then they too come back home for safe-keeping.