The issue of bonds

FINANCE Minister Shaukat Aziz has noted with a degree of satisfaction that several investors have shown a keen interest in the bonds that Pakistan proposes to issue in the near future to borrow about $250-500 million from the international capital market. He has, however, advisedly decided not to rush to the market with the offer but to wait for the right moment when he would be able to get the best bargain for Pakistan. Our past experience with this mode of borrowing has not been very pleasant. It was only with great difficulty that we could meet our obligations for the last issue of such bonds.

There is, admittedly, a world of difference between the state of the economy in the late 1990s, when a financially down-and-out Pakistan issued Eurobonds, and the one obtaining currently when we have record foreign exchange reserves of $11 billion. Still, it is always wise to look deep and long before taking such a major step. Resources borrowed from multilateral donors carry a lot of highly restrictive strings. These donors — the IMF, the World Bank and the Asian Development Bank — have their own agendas designed to fit the interests of their rich board members. It is these agendas and not the specific national interests of the poor recipient states that set the rules for lending. The conditionalities have consistently robbed the domestic economy of its dynamism and retarded its growth. And that has perhaps been the main reason why Pakistan has so far not been able to stand on its own feet despite having received generous concessional assistance from these donors over the last many decades. Now it seems that the developments since 9/11 have created enough room in the economy to enable Pakistan to enter the international capital market.

There are two benefits accruing from this form of borrowing: you become much more choosy and relatively more responsible while borrowing from the capital market than when you are borrowing from the multilateral donors who do their own choosing for us most of the time; secondly, the spread of profit and loss which determines the place of your bonds in the market also determines the ranking of your national economy in the international market. This perhaps is the most important criteria foreign private investors keep in view when making their international investment decisions. For domestic needs, too, instead of burdening the budget, the government could allow its public sector entities to float bonds, as WAPDA does from time to time to mobilize resources for taking in hand specific development projects. It would be prudent if for the time being we continue to borrow from the multilateral donors, persuading them, with the current strength of our economy, to keep their conditionalities to the minimum. At the same time, we should keep testing from time to time our economic strength in the international capital market by floating appropriately packaged bonds. It is only after we have ensured beyond all doubt that the all-round growth witnessed during 2002-03 is sustainable over the medium term and that we will not face the default situation that we did in 1971 and 1999 that we should think of graduating from a multilateral donor-dependent country to a borrower from the international capital market.

Karachi rain trauma

TRADITIONALLY allergic to rain, Karachi seems to be having a full dose of it this year, with Monday’s downpour leading to ten deaths besides paralyzing city life. At least eight “goths” have been washed away, there have been widespread power outages, and streets have been flooded, causing traffic jams considered unprecedented in the city’s history. Karachi is never able to cope with rains. The lack of significant rains over the last one and a half decades had added to the city’s administration sloth. Then suddenly this week it rained with an intensity beyond anybody’s expectations, and everybody was caught napping. The ones to blame especially are those who manage — or mismanage — the drainage system, besides, of course, the notoriously incompetent power company that goes by the name of the Karachi Electric Supply Corporation.

In analyzing the reason for the mess that Karachi is, one notes with regret that no party or government ever considered it its duty to take on Karachi’s mega problems as a challenge. The emphasis has invariably been on politics. To that one must add the federal government’s failure to realize that Karachi’s problems are beyond the capacity of local or provincial governments to solve. They are of such magnitude and need so much money that no local agency can manage them. To this must be added the Karachi and provincial governments’ failure to put a nucleus of relief outfit in place. In developed countries there is always a permanent staff on hand to deal with emergencies. The Karachi City District Government, too, should think in terms of setting up a permanent pool of relief workers who should be able to spring into action whenever there is a crisis-like situation. The Sindh government, which declared a rain emergency on Sunday, seemed conspicuous by its absence on Monday evening when the rain hit Karachi. It is time all those charged with managing this mega city came up to the expectations of the tax payers and citizens of the nation’s largest city.

BBC vs Blair

THE widely-respected BBC finds itself in the midst of a political storm in Britain, thanks in large part to the unfortunate death of ministry of defence consultant David Kelly. Mr Kelly was the source for its May 29 radio report alleging that the British government had deliberately overplayed intelligence to “sex up” its dossier on Iraq’s weapons of mass destruction. This report seriously embarrassed the Tony Blair government because it gave the impression that he and his government had deliberately lied to the world in order to justify the decision to attack Iraq and to convince a highly sceptical domestic public. Mr Blair’s powerful communications director, Alastair Campbell, was accused of ordering certain changes to the dossier, which also contained portions lifted from a graduate student’s thesis. A parliamentary enquiry later exonerated him but the BBC resolutely stood its ground saying that its source was very reliable.

Then, Mr Kelly’s alleged suicide happened and all hell broke loose, with the Labour government experiencing its worst crisis. A judicial enquiry has been ordered and it is likely to explore the role the media might have played in the consultant’s death. Meanwhile, the BBC’s chairman, Gavyn Davies, has come out with a blistering attack on the British government, accusing it of planning fundamental changes to curtail the BBC’s editorial independence. In an article in the Sunday Telegraph, which the newspaper described as “unprecedented”, the head of Britain’s public broadcaster said that Mr Blair’s government wanted to replace the BBC’s fiercely independent board of governors with an external regulation to bring the broadcaster “to heel”.

The British government should realize that the reason that much of the world listens to and believes the BBC — as opposed to, say, Fox, which is sometimes ridiculed — is because the broadcaster has an independent editorial policy. In fact, historically it has generally been pro-Labour. So for the party to now turn against it on the WMDs issue just because it carried reports deemed damaging to the Blair cause would suggest that Labour desperately needs a healthy dose of tolerance of dissent. Surely, Mr Blair does not want to be remembered as a prime minister with imperious or dictatorial leanings.