KARACHI, March 26: Pakistan is expected to re-negotiate with IMF a fresh budgetary target for bank borrowings to retire expensive foreign debt. Or alternatively, the Fund’s approval could be sought to exclude these borrowings from the fiscal deficit.

Sources here said the government will require rupee equivalent to retire expensive World Bank loans. However, the pre-mature repayments of costlier IMF loans would not have any monetary impact.

The policy for pre-mature repayments of multilateral debts, now being evolved, will be discussed with the donors as soon as it is finalized.

As the IMF loans are provided to the State Bank for balance of payments support and are not transferred to the government, the pre-mature repayment has no monetary implications with assets being offset by the liabilities.

The expensive IMF loans have, therefore, been first targeted for retirement. The pre-mature debt repayments have been made possible by the soaring foreign exchange reserves, that now exceed $10 billion.

To quote the second quarterly report 2003 of the State Bank, about one-third of the total IMF debt of $2 billion at end-December 2002 was high-priced SBA (Stand By Arrangement) credit. This can be retired expeditiously as it does not require government borrowings.

The central bank officials feel that early repayment of IMF credit could give a strong and clear signal of improvement in fundamentals of the economy.

Similarly, says the report, the pre-payment of expensive IBRD credit could create substantial fiscal savings.

Official figures show that interest on costly IBRD credit accounts for about 27 per cent of the total interest paid on expensive foreign debts during fiscal 2003. The share is expected to rise to 44 per cent by fiscal 2005. For retiring these World Bank debts, the government will require increased rupee borrowings to purchase foreign exchange from the State Bank.

Dwelling on the implication of the pre-mature debt repayments, the SBP has spelt out the following: the government will need to re-negotiate the IMF mandated limits for budgetary borrowings from banking sector. Alternatively, the rupee borrowings could be excluded from the fiscal deficit.

According to indications here, both the IMF and the World Bank have agreed in principle to the move to retire expensive multilateral debts and the Finance Ministry is working on detailed proposals. The government may have to pay some premium to the lenders to compensate for extinguishing these debts in an environment of falling interest rate.

In fact, the government will be substituting expensive external debt with relatively cheaper rupee borrowings. If the government raises short-term rupee debt through T-Bills for repayment of long-term debt, the net interest savings would be reversed if the rupee costs rise sharply in future years. However, given the low rupee funding costs expected in the foreseeable future, the NPV (net present value) will remain positive. The fiscal space, gained by substituting expensive debts by cheaper borrowings, will depend on the source and not therefore the cost of the rupee borrowings.

“Such repayments of external debt could help relieve upward pressure on exchange rate and simultaneously help reduce the reserve money”, says the SBP report.

Recently, the State Bank has also allowed pre-payment of foreign private loans on case-by-case basis to borrowing firms.

Only a few firms have applied for pre-payment of loans totalling $16 million. Of these, the State Bank has allowed pre-payment of $13 million by end February 2003 and the remaining applications are being processed.

By end-December 2002, the stock of private loans and credits was $2.1 billion with maturities ranging between 5-15 years. Of these about $1.1bn comprises fixed rate loans with a weighted-average cost of eight per cent per annum. The private firms have been provided the opportunity to swap these high interest rate loans by cheaper domestic loans. The balance $0.9 billion constitutes floating rate loans, priced as high as LIBOR+4 per cent.

However, the initial response of the private firms has not been very encouraging because of two reasons. All the private borrowers do not have rupee counterpart fund available with them nor they have the capacity to generate resources on their own.

Second, the pre-payment of expensive external debt, according to market reports, is proving costlier. Unlike the IMF and World Bank whose mandate is to quicken the pace of development, commercial banks have a different approach. They are reluctant to extinguish expensive debts in the face of falling interest rates and if they agree to do so, they demand exorbitant premium rates. The problem is further complicated by borrowers like Hubco, who have an array of lenders and negotiating with all of them involves a big hassle and substantial expenses on lawyers, documentation and payment of premium.

PRIME Minister Mir Zafarullah Jamali’s address to the nation earlier this month scrupulously evaded such burning issues of the day as the position of the government on the Legal Framework Order and on the Iraq crisis.

And yet he was very forthcoming and specific on one thing: the government was not going to carry out land reforms. This in a country which is in the grip of an acute agrarian crisis characterized by low productivity and increasing poverty and unemployment.

This declaration marked a U-turn from the cherished goal of banishing feudalism and bringing hope to the rural multitudes. It was a message promising big landlords the continuation of official patronage and conveying his government’s resolve to perpetuate feudalism.

Ayub Khan’s land reforms left the large landed estates nearly intact. Their undoubted merit lay in affirming the principle that government could take over land from bigger owners against compensation and distribute it to the actual tillers. Zulfikar Ali Bhutto’s first land reform limited ownership to 150 acres of irrigated land or 300 acres of barani area. His second reform in 1977 limited ownership to 100 acres of irrigated or 200 acres of barani land. But Gen Ziaul Haq was dead set against the implementation of Bhutto’s reforms. He had them reversed with the help of the Shariat courts.

It was widely believed that if the land reforms enacted by ZAB had not been reversed by Gen Ziaul Haq, the size of the maximum land holdings would have automatically come down further owing to the operation of the inheritance laws.

Asked to comment on the no land reforms decision , Mr Taj Haider, the Pakistan People’s Party’s central information secretary says that it is intended to “facilitate the growth of corporate agriculture in the country”. This he maintained would bring about a shift in land ownership in favour of the feudals, army officers and multinational corporations.

There is apprehension that if these programmes are implemented they will cause massive unemployment in the rural areas with armies of the landless moving towards the cities in search of jobs. This process is already underway because of wholesale mechanization.

According to the World Bank’s annual report 2002, there are indications that poverty in Pakistan might have been on the rise over the past decade. According to another World Bank document entitled Pakistan Poverty Assessment, “unequal land ownership may lead to entrenched rural poverty”.

Gender inequality in Pakistan’s rural areas is another aspect of the pattern of land ownership. According to the Pakistan Rural Household Survey 2001, as cited in the WB report, “women in Pakistan have the legal right to inherit land. Indeed, community level data indicates that in 67pc of villages sampled women do inherit land, and in 57pc of villages, women enjoy ownership of land.

“However, household land ownership estimates tell a very different story. In the PRHS sample, only 2.8 per cent of the plots were reported to be owned by women. The evidence therefore suggests that there are gaping inequities in ownership of land across gender, and that the law on inheritance of land by women has failed at the implementation level in Pakistan,” the report says.

There are direct effects of land inequality on productivity resulting from frictions in the land purchase and leasing markets. Because of these problems, inequality in household land ownership translates (though far less than acre-for-acre) into inequality in operated area per household, experts quoted in the WB document said. They have also found that large landowners “often engage in wasteful rent-seeking behaviour, using their influence with irrigation officials to manipulate the water distribution in their favour”.

Land inequality can also lower incentives to invest in land. The skewed distribution of land leads to tenancy, mostly on share basis, which provides lower incentives for investment in soil fertility than under owner-cultivation. Soil degradation, due to water logging and salinity, is quite significant in rural Pakistan, particularly in Sindh province and in southern Punjab. As a consequence of pervasive land tenancy, available medium and longer-term measures to combat soil salinity are rarely undertaken, resulting in loss of cultivated area and low yields.

In view of these findings, one would expect the prime minister and the ruling party to review a decision which is going to exert a very negative effect on rural poverty and productivity per unit of cultivation. Industrial development will also be adversely affected since it is obvious that the growth of manufacturing depends crucially on a high rate of growth of agricultural incomes. Pakistan’s political parties which profess faith in democracy and social justice must rise to the occasion and take an unambiguous stand in favour of drastic agrarian reforms.

FOR the first time in the national history, NIBGE introduced a short-term course on “Modern techniques in biotechnology” for providing training to scientists and research scholars to cope with the problems of enhancing the utilization of biotechnology.

At present, the entire world is realizing the importance of biotechnology in handling the complicated problems of hi-tech industrial and environmental degradation, health hazards, crop yield and protection and mineral purification.

Dr Kausar Abdullah Malik, member, Bioscience of the Pakistan Atomic Energy Commission, inaugurating the training course, said concerns about biotechnology, as a new science and cutting edge knowledge, would be removed by arranging workshop for NGOs and journalists at NIBGE in the near future to let them see what biotechnology in its essence is.

He said as a science of the new millennium, there were a lot of expectations about biotechnology and the modern world was looking towards this science. But at the same time, there were certain controversies which were needed to be debated. Apprehensions about genetically modified crops and environmental degradation particularly were the sensitive areas where NGOs and journalists saw that technology with queer eyes.

NIBGE director Dr Ahmad M Khalid dedicated the course to Watson’s discovery of double helix DNA, exactly 50 years ago, which ushered in an era of biotechnology in the world. He said biotechnology had a significant role to play in agriculture to provide insect-resistant crops.

According to him, biotechnology was trying to produce food for hungry, diagnostic services for the sick, in defence and so on. In Pakistan, biotechnology industry had a significant role to play in uplifting the economic conditions. Buying and selling of DNA had been the industry of new millennium.

Dr Khalid claimed that for the first time in Pakistan, a short-term course on modern techniques in biotechnology was being introduced to provide training to scientists and researchers to cope with the problems and to enhance the chances of its utilization.

In developing countries like Pakistan the scope and value of biotechnology was even greater. But acute shortage of trained personnel hindered the possible benefits of this technology. He expressed the hope that the activity would become an annual feature in future.

Dr Khalid said the developed world believed that progress was related to biotechnological approach. But, due to the low allocation of resources for the field, Pakistan currently was offering that course to professional researchers and scientists. Now it had been decided by NIBGE to train permanent employees of research centres and departments working in biotechnology or planning to initiate work in this area.

He said the course would encompass concepts of biotechnology, methods in molecular biology, transformation technology, analysis of gene expression, DNA fingerprints, methods in protein chemistry and bioinformatics.

The biofertilizer division of NIBGE chief and course organizer, Dr Fauzia Yousuf Hafeez, Dr Sohail Hameed, head of bioprocess technology division of NIBGE M Afzal Ghauri, and others read out their research papers claiming that the biotechnology revolution could put the country on path to progress and bring a revolutionary change in the socio-economic setup. Twenty young scientists out of 150 applicants had been selected, one from Tanzania, to impart training about this sophisticated technology.

The course was organized with the assistance of Pakistan Atomic Energy Commission, OIC standing committee on scientific and technological cooperation, Pakistan Biotechnology Commission and Pakistan Science Foundation.