After the long winter of recession

THE International Monetary Fund has praised the way the economy has been managed in Pakistan in the last three years. Top IMF officials who visited Pakistan on a review mission last week have also expressed their satisfaction with the new democratic government’s commitment to continue with the on-going reforms. In the opinion of Mr George T. Abed, the IMF’s director for Middle East, North Africa and Pakistan, by keeping the reforms on course, Islamabad could improve the growth rate from the current year’s projected 4.5 per cent to six per cent in 2003-05 and reduce the budgetary deficit from the projected 4.6 per cent of GDP during 2002-03 to less than four per cent. Addressing a joint press conference along with Mr Shaukat Aziz, adviser to the prime minister on finance and economic affairs, in Islamabad the other day, Mr Abed expressed his pleasant surprise at Pakistan’s remarkable achievements on the economic front at a time when the entire world was in the grip of a serious round of recession. Mr Shaukat Aziz added his own bit of sunshine by claiming that the government had overperformed in some areas as in building-up reserves and stimulating the flow of remittances. He asserted that it was possible for Islamabad now to repay some of the expensive multilateral loans ahead of schedule. He also claimed that the on-going Poverty Reduction and Growth Facility (PRGF) would be the last IMF facility and the country would not need any more special financing from the Fund.

Mr Abed, however, very rightly introduced a note of caution in this highly optimistic reading of Pakistan’s economy by stating that power tariffs and the high incidence of poverty were recognized by the Fund as major challenges to Pakistan. He urged the authorities to make more serious efforts for the privatization of Wapda and the KESC at the earliest. He said these last two entities were running huge line losses and both were in the red, needing financial support to remain afloat. He did not explain why even after so many years of focused reforms, these two public utilities have remained as afflicted as they have always been: highly corrupt and inefficient. Mr Abed supported higher spending, within the agreed fiscal limits, on pro-poor social sector projects, including education and health, and endorsed the prime minister’s “falahi (welfare) scheme” of five billion rupees for the poorest and most vulnerable segments of society.

Like the official managers of the economy, IMF officials too seem to believe that the turnaround that is being witnessed in the economy has come about as a result of implementing the Fund-prescribed policy of keeping a tight lid on budgetary deficits over the last three years and not because of the financial space created for Pakistan by the positive fallout of 9/11. And both seem to believe that the only way one can reduce poverty is by continuing to strictly adhere to this policy. They disagree with the notion that by over-doing the macroeconomic stabilization act, they are only adding to the proportion of the poor in the country. Even the prime minister’s “falahi programme”, which the Fund has endorsed, does not seem to have the capacity or potential to make any difference to this expanding sea of poverty. It targets only 15 million individuals or 2.5 million families, each of whom would be provided cash assistance of Rs. 2,500 annually and that too in equal monthly instalments. The very size and the reach of the gesture suggest that the step has been undertaken more for its political appeal than for its potential to make any substantial difference to the poverty level as such.

In addition to this, the package offers the pensioners concessional profits of 11 per cent on special savings schemes. This rate will not be reduced for a period of 10 years. This two per cent additional profit on savings schemes is also being considered for widows, orphans and the disabled. This too is too little to make any difference to the economic plight of pensioners, who today are making do with incomes bordering on subsistence. Finally, one hopes that those who have been entrusted with the task of identifying the 2.5 million needy families for cash assistance will do their job with a sense of service and in full honesty because in a country where 35 per cent of the population is known to be living below the poverty line, it will be extremely difficult not to be tempted by considerations other than the right ones while selecting those most in need of financial assistance.

The T-word

THE anti-terror steamroller chugs along, targeting people all over the world and now set on a course that could lead to the flattening of Iraq. Within the United States itself and in many other countries, the threat of terrorism is also being exploited to curtail civil liberties and attack human rights. Concerns on this score have brought forth a blunt warning from United Nations Secretary-General Kofi Annan. Addressing a Security Council meeting on Monday convened to assess the anti-terror campaign worldwide, he referred to the increasing use of terrorism, which he called the T-word, to “demonize political opponents, to throttle freedom of speech and the press, and to delegitimize legitimate political grievances”. He went on to say that “any sacrifice of freedom or the rule of law within states — or any generation of new disputes between states in the name of anti-terrorism — is to hand the terrorists a victory that no act of theirs could possibly bring.” A few days ago, the New York-based Human Rights Watch organization had similarly underscored the danger of the on-going campaign leading to a curtailment of individual rights.

The state of human rights in many countries is in any case deplorable, with flagrant violations of constitutional and legal proprieties, arbitrary arrests and detentions, imprisonment without trial and manipulation of the judiciary being the order of the day. The war on terror has now provided autocratic rulers with a new handle to justify their transgressions. This is largely because the agenda has been set by the United States, and it is an agenda that relies on force and intimidation and ignores economic, social and political factors that drive people to take to violence. Instead of addressing these causative factors, one government after another appears to look for newer forms of suppression and turn to ever more draconian legislation. The doctrine of preemption, as enunciated by the Bush administration, takes us dangerously further towards what Mr Annan has called the generation of new disputes between states. Allegations of terrorism can now be put forward by hegemonistic regimes as a casus belli to start a war or crush liberation movements. This is precisely what Israel has been doing in Palestine by presenting the Palestinian liberation struggle as a terrorist campaign to justify its policy of brutal suppression. The world is moving into perilously deep water. Mr Annan is caught between his responsibility to oversee international peace and security and the US pressure to sanction war against Iraq. His instincts are still on the side of rationality, and his words should be heard with care.