A welcome move

IN a welcome move the government has decided to repay over a billion dollar of the debt which we owe to the World Bank (WB) and the Asian Development Bank (ADB) much before it was due. Relevant notices in this connection have already been sent to these two multilateral donors. The amount comprises 18 different loans that Pakistan owes — 11 to the WB and the rest to the ADB. All these loans carry very high interest rates ranging from 4.6 per cent to 11 per cent. It is assumed that the resources being obtained to repay this amount carry highly concessional terms or are made up mostly of grants. It is also assumed, in the absence of details of these loans, that the prepayment of over a billion dollars of debt would save the country at least about five billion dollars in service charges over their repayment periods which normally run into 25 to 30 years. And the amount thus saved would hopefully be used for economic and social development. Though the government has not given a complete list of the loans which it wants to prepay, it is safe to assume that most of these loans refer to the period of the 1980s because one can recall at least four such loans signed in the early years of that decade which carry interest rates of nearly 11 per cent and whose repayment periods extend up to 35-40 years. Take, for instance, the loan of $57.5 million obtained from ADB at the rate of 11 per cent in December 1983 for the Guddu Combined Cycle project or the $19 million obtained from the same source in 1983 for a gas purification project at an interest rate of 10.5 per cent.

Similarly, in 1982 Pakistan secured $29 million for a telecom project and another for the Tarbela extension in 1984 with the first one carrying an interest rate of 11 per cent and the second, 10.25 per cent. Indeed, at the end of the decade, donors started putting the screws on Pakistan, saying that the country’s debt burden had become unsustainable and needed to be brought down to save it from default. It was again on this plea that the multilateral donors reduced their aid to Pakistan to a trickle, forcing it to go for even costlier commercial loans to keep itself from going under, thus creating a more precarious debt situation. The donors then forced Pakistan to divert resources badly needed for development to debt servicing, and advised it to induce the private sector to play a bigger role in development. But for a number of reasons, the private sector continued to behave like a callous rent seeker.

In the absence of any significant private sector investment activity, it is the responsibility of the public sector to take in hand as many socio-economic development projects as possible so that the country achieves a respectable annual growth rate and, at the same time, contains the spiralling problem of unemployment. However, continuing resource constraints, mostly because of the escalating burden of amortization of old loans, has made it impossible for the public sector to expand its activity to any significant extent. In fact, over the last two decades as the debt servicing burden went up steeply, the public expenditure on socio-economic development activity went down in the same proportion. Therefore, it makes good economic sense to replace costly loans with cheaper ones and then to use the savings to fund those projects which would yield significant economic and social profits.

Pesticide price hike

THE sharp rise in pesticide prices in Punjab at a time when the cotton crop in parts of the province is under pest attack needs to be looked into urgently by the government. The price hike is being attributed to the higher than expected demand following the pest attack and the fact that some dealers have resorted to hoarding the product in a bid to earn some extra money. This shortage of pesticides and its sale at rates three times the original price puts the farmer in a tight corner. On the one hand, the standing cotton crop is under attack and, on the other, the cost to combat this has tripled. This is a highly unsatisfactory situation.

For the government, what is at stake is the size of this year’s cotton crop. It is feared that the target of 10.55 million bales of cotton set for this year (2003-04) may not be met as a large portion of this is produced in Punjab. The Kissan Board has indicated that owing to the shortage of pesticides, one million bales may be affected in the year. At this stage, however, these are all estimates. The reality is that vast areas of Punjab’s cotton growing areas have been severely affected by a pest attack. This is bad news for the Pakistan economy as the bulk of the country’s exports come from cotton or cotton-based products. While Pakistan has been consistently producing a good cotton crop over the past few years and has a vision to boost production to 15 million bales by 2010, the government has to take serious note of the complaints by cotton growers of problems which are affecting their production figures. There has been a call to evolve a policy so that there is some direction in the import, production, sale and usage of pesticides and other agricultural inputs. This will rid us of the ad-hoc system that is in place now, which is abused by some at the cost of the national exchequer.

Death of a student

THE death of a student at the Quaid-i-Azam University in Islamabad is symptomatic of a disturbing trend in society where disputes, even among seemingly educated people, are being increasingly resolved by resort to violence. A dispute reportedly between members of the Punjabi and Pakhtoon ‘student councils’ at the university escalated into a free-for-all with both sides using semi-automatic weapons as a result of which one student suffered fatal injuries. It would be fair to say that had genuine student unions been in place at the university the dispute would not have spiralled to the point where guns would have come into play. Organizations like the ones responsible for Monday’s violence cannot be called genuine student bodies because student unions do not allow their members to possess or use automatic weapons.

It would be most unfortunate if the federal government were to use this particular incident as a pretext to further clamp down on student unions. What happened at the QAU was not caused by genuine student unions but by de-facto militias which have university students as members. It is important that the government distinguish between the two. Policymakers, especially in the education ministry, need to consider the view that the continued ban on student unions is proving counter-productive in that students too are becoming polarized on ethnic and other narrow lines. The long-term effects of such a ban must not be underestimated because of the fact that unions are meant to provide a constructive channel for the energy and extra-curricular interests of the student community. In the absence of these bodies students inevitably fall into the conflicting political and ideological traps of outside forces. This is apparent from the shootout on the QAU campus and similar other incidents of violence at other colleges and universities.