‘Faulty’ donor-driven advice piling up debt, says PIDE head

Published March 29, 2022
This image shows Pakistan Institute of Development Economics Vice Chancellor Nadeemul Haque. — Photo courtesy: PIDE website
This image shows Pakistan Institute of Development Economics Vice Chancellor Nadeemul Haque. — Photo courtesy: PIDE website

BHURBAN: The government-owned Pakistan Institute of Development Economics (PIDE) has criticised the government for blindly following donor-driven agenda unnecessarily burdening the country with debt without desired outcomes.

The continuously rising power sector problems including circular debt rising by Rs1 billion a day despite repeated loans and the recent housing subsidy scheme involving billions of rupees of taxpayers’ money on false estimates were quoted as glaring examples of hundreds of policy loans from international lenders.

The policy advisory loans by international creditors are pushing Pakistan further under the debt burden, which the government can avoid by relying on its researchers, says a former official of the International Monetary Fund Dr Nadeemul Haque — currently vice-chancellor of PIDE.

He said the advice by the foreign lenders also often lacked a base, resulting in faulty decision-making. “The government is piling the debt to do work that Pakistani researchers can do better,” he said.

Researcher says Pakistan faces inadequate housing, not a shortage

The statement came days after the ADB approved a second tranche of a $300 million loan for capital market reforms. The World Bank and the Asian Development Bank have been pegging their loans with policy advisory to bring so-called reforms in areas of energy, revenue mobilisation, debt management, fiscal prudence and capital market reforms. But despite pumping in billions of dollars, the country’s performance in these sectors has remained dismal.

Few post-programme evaluations reports by independent wings of the WB and the ADB also admit that these loans have failed to bring reforms in the targeted areas. The Pakistan Tehreek-e-Insaf government has obtained over $53bon gross foreign loans after coming into power and around three-fourths of these were either policy loans or short-term commercial loans.

Dr Haq is the second senior government official who has publicly criticised the growing dependency on foreign policy loans. Earlier, Federal Board of Revenue chairman Mohammad Ashfaq said that the FBR was better off without a $400m WB loan meant for increasing revenues. The loan had been signed by the PTI government despite public opposition to it.

The donors are dumping their research in Pakistan with money on the table that Pakistan also has to return, said Dr Haq who is also a former deputy chairman of the Planning Commission.

Despite billions of dollars that the foreign lenders pumped into the energy sector, the sector sustained Rs8 trillion losses in the past 10 years, said Dr Haq.

Without having any check and care for the output, the government has given Rs2bn to the UNDP, which is more than the money given to any university in Pakistan for conducting research, said the PIDE VC.

The circular debt of power, petroleum and LNG sectors has jumped to over Rs3.9tr, said Dr Naveed Arshad — a researcher from Lahore University of Management Sciences who has researched on reduction of the cost of electricity generation. His findings showed that the country can reduce the cost of generation by shifting demand from peak to off-peak hours. He estimated Rs6.5bn savings by shifting only 5pc peak period demand.

However, despite billions of rupees of foreign loans for the energy sector, the cost of generation and end-consumer prices have been constantly on the rise. Pakistani researchers can do much better than a white man who does not have local experience but gives advice on Pakistan through policy loans, said Dr Haq. “We still have not been able to free ourselves from the colonial clutches,” he said while inaugurating the conference.

He said the onus was is on Pakistani researchers and asked why they are being silent spectators? Why don’t they question things around us?

He said PIDE’s RASTA was one such platform where it has provided the space for our local researchers to come up with innovative ideas and local solutions. Through RASTA, we have also proved that we can do better than those who steer local research from outside.

The government made a policy to provide 10 million homes, apparently on the advice from the WB that claimed a shortage of 10 million homes in Pakistan, said Durr-e-Nayab, Director Research and Pro-Vice-Chancellor of PIDE.

Presenting her study titled ‘The Assumed Shortage of Housing in Pakistan’, she said the WB based its claim on SBP research and the SBP was referring to the WB in its papers. “A whole policy was made on a figure that didn’t have a verified base,” said Dr Nayab.

“We are short of 10 million housing units” has been a buzzword in politics, media, and donor-driven research for the last 10 years, she stated. Given an average household size of well over six persons, this means that nearly one-third of the population is without housing. Do we see such a huge number of people living on footpaths, on the sides of roads, under bridges, or in any open area? Thankfully, NO.

It is not clear from where did this number come from, she added. Worryingly, the government also uses this estimate without ever questioning its validity. Sadly we have based policy on this assumption and initiated a large public housing effort at considerable cost. Not to mention the negative spillover effects on the other sector in the context of tight fiscal space. So, PIDE after digging out the reality concludes that there is certainly not a “deficit of 10 million housing units” in Pakistan. There may be “inadequate housing” in the country, but not a “housing shortage”. The deficit is in the quality of life in the houses, not the absence of housing units.

Published in Dawn, March 29th, 2022

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