December 03, 2007	Monday	Ziqa’ad 22, 1428

FORMER prime minister Shaukat Aziz claimed that his government had broken the begging bowl and taken the nation out of the IMF clutches. The international rating agencies have also upgraded the country’s credit rating.

The former regime also blamed the previous governments for emptying the national coffer and burdening the nation with heavy debt. Let us examine these claims.

The debt burden as a percentage of GDP, has decreased after the October,1999]s takeover (external debt 26.8 per cent and domestic debt 29.8 per cent: total 56.6 per cent of GDP as at the close of fiscal 2006-07).

There may be numerous factors behind it inter-alia, including high rate of GDP growth during the last three fiscal years or so and extra-ordinary accruals from overseas on various accounts in the aftermath of 9/11. But this is one way of gauging the matter.

The other is to dilate on the numerical accumulation of the debt. The outgoing regime has always been using the GDP ratio in the matter of debt as suited its interest while in the matter of tax revenues, it used numerical data as GDP ratio technique indicated decline in the performance.

The table shows the position of outstanding national — external” as well as domestic — debt during the last eight years.

It will be seen from the table that the external debt accumulation was of the order of $7.415 billion during the eight-year period (1999—2006/07) which gives annual average of $926 million. The average annual external debt accumulation in the previous eras was as under:

(i) 1958/59—1970/71-(13 years’ Ayub/Yahya era); $263 million,

(ii) 1971/72-1976/77 (six-years Z.A.Bhutto era), $486 million,

(iii) 1977/78—1987/88 (11 years’ Ziaul-Haque era) $597 million,

(iv) 1988-89 to 1998-99 (11 years) $1670 million and

(v) 1999-007/8 years’ present era $926 million.

The accumulation of external debt during 1988/89-1998/99 was heaviest but it has to be seen in the background of the multi-layer sanctions imposed on Pakistan following the nuclear blasts in May, 1998.

The former regime maintained an average annual accumulation of external debt at $926 million. But when we look at the last fiscal FY-07, the situation seems alarming as during that fiscal, external debt accumulation is at the highest ( $3.044 billion) in the country’s history.

If one takes into account heavy inflows from overseas since 1999, one feels that there was hardly any need of external borrowings by the outgoing regime; a few specifics of the inflows are jotted down here: (a) workers’ remittance $25.6 billion, (b) purchases from open market $5.2 billion, (c) receipts from USA on account of logistic services $10 billion, (d) privatisation proceeds exceeding $2.5 billion. This totals over $43 billion. There may be other receipts too which are not known publicly.

The domestic debt increased from Rs1375.9 billion in 1999-00 to Rs 2597 billion in FY-07- annual average Rs152.6 billion. But the domestic borrowing during FY-07 is Rs275.3 billion.

The overall [external+domestic] accumulation of national debt averages to Rs208.63 billion per annum (equivalent)during 1999-00 to FY-07 but during the last fiscal [FY-07], it is Rs459.19 billion.

As for breaking up of the begging bowl, the outgoing regime’s claims are unfounded. No doubt, we have come out of the IMF’s stringent programmes, the borrowing has not halted.

The economic managers merely changed the source of borrowing from IMF/ bilateral lenders [Paris Club] to the multilaterals [World Bank/IDA and Asian Development Bank etc] as is evident from the Table.

As per the reports, the per capita external debt in India is $140. Our external debt of $38.7 billion spread over the population of 160 million gives the per capita figure of $242. Our overall national debt [external+ domestic] amounting to Rs4934.87 billion gives per capita debt of Rs30,842.

The tax revenue collection target for the current fiscal 2007-08 [FY-08] was fixed at over Rs1 trillion.

The data for the first quarter of the fiscal indicates a shortfall of Rs13 billion in the collection vis-a-vis the target for that quarter.

The emergency [ read martial law] imposed on the November 3, 2007 is believed to affect the economy, Mr Shahid Javed Burki has recently said that GDP growth during the current fiscal may lag 1-2 per cent behind the target [ seven per cent].

The economy is likely to become sluggish during the ensuing 3-4 months on account of agitation against the martial law, curbs against the media and the electioneering / its aftermath.

In that event, the tax collection may be substantially lower than the target- say by Rs100 billion- while the governmental expenditure will be on the rise.

Where from will the deficit be financed? Obviously from the external and domestic borrowings.

So, one presumes that during FY-08, governmental borrowing [ external and domestic ] may reach Rs550 billion; because the rulers’ are not expected to curtail their expenditure.

The poor nation is spending about Rs1 million daily on each of the president/prime minister’s kitchen and household.