THE current economic crisis has forced Pakistan to traverse the territory on which it has never travelled before. The country has dealt with many deep economic crises in its 61-year history.

On most occasions the economy ran into difficulties because of state profligacy: the government spent much more than it earned through taxation and other forms of revenues. Fiscal deficits increased which by the simple laws of economics produced large and unsustainable current account imbalances.

When governments spend beyond their means and finance the difference by printing money, it increases demand for goods and services, including demand for imports. When the crisis develops these contours, the situation is a relatively simple one. The governments in trouble — and that has included Pakistan on several occasions — turn to the International Monetary Fund for a cash infusion.

The IMF support does not come free; it arrives with many conditions. The standard Fund recipe is to push the government towards narrowing the fiscal gap by cutting expenditures, sometimes severely. This, in the Fund’s language, is called ‘adjustment’. In this context the period of adjustment becomes an issue between the government and the IMF. The Fund usually wants to compress the period of adjustment; the governments usually want a broader timeframe within which to bring about the needed changes.

The Fund also likes to reduce aggregate demand by asking the central bank — in Pakistan’s case the State Bank of Pakistan — to raise interest rates. That reduces the demand for credit which, in turn, reduces the rate of growth of GDP. And the Fund usually suggests currency devaluation, another way of reducing demand.

However, with different exchange rate mechanisms in place in most parts of the world, the Fund has advised governments to let the market forces determine the price of the domestic currency. Even Pakistan does not determine the value of the rupee; it leaves it mostly to the market. In Pakistan’s case, the rupee has lost 44 per cent of its value in the past 10 months. This means massive devaluation even when we factor in the sharp rise in domestic prices.

Pakistan is now negotiating with the Fund to obtain a significant amount of cash infusion. This will happen since the IMF has large amounts of resources currently available to it. Pakistan will receive the Fund’s support under a facility called the ‘Stand-By Arrangement’.

The amount of money available is based on a multiple of the share a country has in the IMF’s capital. For Pakistan three times its share — called the ‘quota’ — would ordinarily be available. This would amount to $6bn. A larger multiple is possible if Pakistan is able to develop a robust programme and persuades the Fund of the urgency of the situation it faces.

However, not all of this will be given out at once; it will arrive in tranches after the Fund’s review of Pakistan’s compliance with the various aspects of the programme agreed to. One-third of the total amount would be given in the first tranche. The full disbursement will take a couple of years with the timing of tranche releases determined by the country’s performance with reference to the targets agreed with the Fund.

The SBA is an expensive facility; it carries a large interest rate and it needs to be paid back quickly. In other words, its aim is to provide immediate relief, not to help with the long-term development of the economy.

At this point, Pakistan does not have much leverage with the Fund. The country is depleting its reserves rapidly. The loss of confidence on the part of the business community in the country’s economic viability has resulted in capital flight which has further strained the balance of payments situation. Thus weakened, Pakistan will be subjected to fairly rigorous Fund conditionality. Some of this may be politically embarrassing. Some of it may inhibit long-term growth. It is important that the approach to the Fund is made with some strengthening in the country’s external accounts situation.

Leverage with the Fund could be increased if a somewhat different approach were to be followed. To demonstrate what I mean by this I should perhaps explain how I managed this kind of a problem 12 years ago. In 1996-97, I took a leave of absence from the World Bank to take charge of the Pakistani economy as a member of the caretaker administration headed by the late prime minister Meraj Khalid.

I was in fact the finance minister in the Khalid government. The crisis I had to deal with had some of the attributes of the one that the Zardari government is currently handling. However, at that time reserves had been depleted to even lower levels.

President Farooq Leghari and I decided to appeal to the countries where we had good contacts. These were China and the UAE. Because of my tenure as director of China operations at the World Bank from 1987 to 1994, I had good relations with some of that country’s leaders. One of them — Zu Rongji — was known to me when he was the mayor of Shanghai. During his tenure as mayor I had negotiated a programme of assistance to develop Shanghai. When I joined the caretaker administration he had become China’s prime minister.

Following a call to Beijing from Islamabad, I was invited to meet the prime minister. Subsequently $500m was deposited by the Chinese in Pakistan’s account at the Federal Reserve Bank in New York. Leghari used his contacts with the senior leaders of the UAE who provided us with another $350m. With our reserves now at a less dangerous level, we had increased our leverage with the Fund. The deal we then negotiated suited us better than would have been the case if he had gone to Washington with a weak reserve situation.

My suggestion, therefore, is that the approach to the Fund should take place in a much broader context. While the quick-disbursing money the Fund can provide has become critical to meet our worsening situation, the Fund’s programme should be placed in a broader context.

I am in favour of going to a selected group of donors with a comprehensive programme covering stabilisation of the economy as well as setting the economy on a long-term trajectory of sustainable ‘inclusive’ growth. The emphasis on inclusive means that the rewards of growth would be more widely disbursed among different segments of the society and among different regions of the country.

WHERE is the state in Pakistan to protect life, property, liberty and honour of citizens? Where is the state to dispense justice to all its citizens?

Where is the polity which all Baloch, Sindhis, Pathans, Punjabis and other nations, nationalities and linguistic groups can take pride in calling their own?

Men and women, rich and poor, landowners and tillers, villages and cities, factories and workshops, banks and business houses, schools and hospitals, and mosques and churches are in a state of insecurity. The security of the police and the army, the ultimate guardians of security of the people and the state, is also endangered, necessitating extraordinary measures.

The rule of law is the foundation for a just state. However, when our police is obliged to keep people in illegal custody for investigation, when it has to kill people in ‘police encounters’ as it does not expect a fair trial in our court rooms, when our security forces have to kidnap citizens for investigation, when the enforcers of law turn into law breakers to maintain law and order, whither the rule of law?

The prevalence of corruption and inordinate delays in dispensing justice in the courts; the recovery of kidnapped citizens on payment of a ransom; the settlement of civil disputes on payment of a fee by private ‘courts’ held by goondas and strongmen make a mockery of our system of justice. Above all, when a state blatantly ignoring constitutional provisions and violating the basic axioms of human values and morality, legislates pardons for criminals under investigation in the name of ‘national reconciliation’, the state loses all legitimacy to be ruling in the name of law.

Acute energy shortage, rising prices, paucity of jobs, shortage of essential commodities, unbearable governmental levies and taxes, precipitous decline in the value of the rupee, endangered bank deposits and flight of capital are definitive indications of complete failure of the economic management and regulation by the state. Endemic poverty, illiteracy, malnutrition, disease, absence of health care and sanitation are direct manifestation of the absence of the state of Pakistan for an overwhelming majority of its citizens.

Without the state, Pakistan is left with the apparatuses of a state — groups of self-regulating, self-perpetuating and self-serving officers — operating independently under the laws of the land made to further imperial interests. The sovereignty of the people is all but lost in the extrajudicial, illegitimate, uncoordinated authority exercised by the services. Pakistan has been turned into a non-state: a state merely in name.

Time is opportune to rebuild our state. In a new social contract there must come into being a new state in which the people exercise power over themselves and for themselves. The provinces decide what powers and authority they would like to bestow on the federal government. In order to be truly sovereign Pakistan must be transformed into a state of all the peoples for all the peoples.

Big government should give way to small government. What the people collectively can decide and implement at a smaller level of population should not be decided and implemented by the body of an area of a larger population.

There should be three levels of government — citizens’, provincial and federal — of councils elected by the people at each of these levels to exercise political, social and economic power as prescribed in the constitution.

The citizens’ government at the level of the village or cluster of villages or tribes should have the jurisdiction and authority for the protection of persons and property, the management of local policing and the setting up of citizen courts for enforcing criminal law.

The citizens’ government at the level of tehsils and talukas will have its own administration to maintain land records and will adjudicate on questions such as those presently dealt with by the revenue officials of tehsils and talukas. It will also have its own civil courts. The citizens’ governments at the district and city level shall perform both legislative and executive functions as prescribed in the constitution.

The expenditure of the citizens’ governments should be met from the revenues collected by the provincial tax-collecting apparatus and directly credited to the account of each district, tehsil, taluka, village and cluster of villages. The revenues of the poorest councils may receive a subsidy from the provincial government.

The provinces should exercise power over all matters not specified in the jurisdiction of the citizens’ and federal governments. The government of the province should conduct inter-provincial relations and relations with the federal government.

The guarantee for the emergence of a sovereign Pakistan also lies in erasing the perception of being a client state of foreign powers and in establishing healthy relations with the countries of South and South-West Asia. There exists a massive commonality in the economic and strategic interests of Pakistan and the countries of the region including Turkey which can form the basis of very close cooperation.

It is time that the people of Pakistan, especially the young and educated, conscientious and committed form groups in every province, agree on what needs to be done and come forward to mobilise the people of each province, then of the entire country, to change the shape of things.

MY last article on the Higher Education Commission was published in Dawn on Jan 4, 2004. Since then I have not written on the HEC because I admired the spirit in which Dr Attaur Rahman was reforming the universities of Pakistan. Moreover, as a beneficiary of some of these reforms, I did not feel it appropriate to praise Dr Attaur Rahman’s contribution to academia. However, now that he is not in office I think the time has come when I should give my honest opinion about the HEC’s achievements under him.

This is all the more necessary considering that there has been a spate of criticism against the HEC in general and Dr Attaur Rahman in particular in the last few weeks. I am not talking about such balanced articles as Dr Pervez Hoodbhoy’s (Dawn Oct 21, 2008) but about letters in newspapers and statements by Dr Qadeer Khan among others.

In Dr Hoodbhoy’s case we all know that he has always had the moral courage to voice his opinion according to the dictates of his conscience. I am not technically qualified to give any judgment on most of his criticism — barring a minor factual error which I will mention later — but I do know that he has both integrity and sincerity, so, even if some of his facts were wrong, his motive for criticism is above board. Moreover, his criticism of HEC first came to light when Dr Attaur Rahman was in power. The criticism of the recent critics comes at a time when he is no longer in office. That is my objection to it — it is a case of bashing someone who has gone down.

First, the HEC should not be identified with one personality. The HEC has a large bureaucracy which takes decisions as all such bodies do. They appoint committees and the decisions are implemented by people who bring their own ideas into the picture. As such, there were many policies which were conceived in the spirit of reform but got bogged down later.

Let me point to one such policy — that of approving PhD supervisors by the HEC and then paying them for each student they supervise. The idea was to prevent unqualified people from supervising doctorates and to provide incentives for research. In reality academics were subjected to the ignominy of chasing HEC officials to get their names approved. Later, some supervisors took large numbers of students whom they could not adequately supervise.

The end result is that the prestige of university professors is lowered and, what is worse, we produce too many substandard PhDs. I pointed this out often and Dr Attaur Rahman agreed with me. However, once a payment is made it is difficult to withdraw it. As a mark of my own disagreement with this scheme I chose to resign from the position of an ‘approved supervisor’ in early 2007.

Initially I did not approve of hiring foreign academics at high salaries at all. Later I was convinced that in some fields they were required. I voiced this criticism in front of Dr Attaur Rahman and he convinced me of the soundness of the idea to reverse the brain drain by bringing back competent expatriate academics and others who had done good work. I am sure the process is not as perfect it should be; at the very least the selection process could be streamlined.

As Dr Hoodbhoy has pointed out the mistakes of the HEC, let me dwell more upon the good that it has done. First, in my opinion, is the provision of the digital library. Now we have a huge number of research articles and e-books at our fingertips. Back in 1985 when I was writing my first book, I remember importing articles at the cost of Rs12 per page at my own expense. Now, in 2008, I have imported eight research articles and an e-book through the HEC completely free of cost.

Another good idea of the HEC is to give scholarships to young people to go abroad for their doctoral studies. Even if half of the students sent abroad come back and join our universities, we will have better faculties than we do at present.

I remember having campaigned — much like Don Quixote — in the press for raising the salaries of academics and indexing them to research output for about twenty years but the first person who ever did anything to bring the universities out of the ghetto was Dr Attaur Rahman. Thanks to him all members of faculties are at least one grade higher in salary than college lecturers and junior bureaucrats.

Moreover, the Tenure Track System (TTS) salaries compete with the private sector so we are no longer in danger of losing our best academics to the private sector. TTS salaries range between Rs80,000 to Rs312,000 per month (not Rs350,000 as Dr Hoodbhoy claimed). The highest salary tenured professors at Quaid-i-Azam University are drawing at the moment is Rs215,000 and it takes them years to reach the ceiling. I know several people who would have gone to the private sector if it hadn’t been for such salaries. All these are achievements which should be praised.

Probably the biggest fault of the HEC is that it curbed the autonomy of the universities by using the stick-and-carrot method. However, the fact is that some of the universities used this autonomy to protect plagiarists and give high salaries without indexing performance with emoluments. Courses with high-sounding names were offered but the people who taught them could not even pronounce their names. As there is no external evaluation and students get inflated grades we are producing ignoramuses in the name of autonomy.

Personally I feel that autonomy is the right of the best research universities but not a mere college or degree-manufacturing factory which arrogates to itself the title of a university. So, where the HEC went wrong was that it gave the title of ‘university’ to far too many institutions. To what extent Dr Attaur Rahman is personally responsible for this proliferation of universities is not known to me.

Dr Attaur Rahman’s most striking trait was his unfailing courtesy. I also found him receptive to criticism, which he accepted with grace. Thus he remained unfailingly courteous and affable towards Dr Hoodbhoy (whose talent and sincerity he admired) at least on the occasions I observed personally. Dr Attaur Rahman’s contribution to higher education in Pakistan will always be remembered with respect.