Daily Times

The common Pakistani is full of either angst or despair. PML-N created their power base by giving them ample panem et circenses (bread and circus) in Lahore and northern Punjab. Punjab got preferential treatment in resource allocation and opportunities. However, there was little for the common man beyond populist measures. Unsurprisingly, on May 9, 2023, it was the Corps Commander’s residence, also known as Jinnah House in Lahore, that was burnt by the city’s residents. This was the angst and frustration felt by the common man of urban Punjab. The young man who stole the peacock at Jinnah House is seen in a video circulating on social media saying that he is taking the peacock because the military has taken it from him.

The military is hated and scapegoated for economic woes, which it neither created nor exacerbated. An oft-repeated phrase in public discourse is that the military takes up half of the budget and leaves nothing for the social services sector and all else, hence the common man suffers. This statement is completely false and very incendiary as it stokes the flames of hatred against the military.

In this column, I will attempt to destroy this pernicious myth and make the facts clear and easy to understand.

I am quoting official figures from the 2023-24 budget as quoted on the Ministry of Finance’s website. The total budgeted expenditure is PKR 13.3 trillion out of which only PKR 1.8 trillion has been allocated for defence spending. This means that only 13.5 per cent of the budget was allocated to the military. Given existential threats to the sovereignty of the state such as the TTP in the northwest and India on the eastern border, this budget is lower than what it should be. The lion’s share of the budget has been allocated to mark-up payments on local and foreign loans undertaken by the government. The exact figure is PKR 7.3 trillion out of the total budget of PKR 13.3 trillion, which translates into a whopping 55 per cent. Interest payments of debt undertaken by our various heads of state are where the state wealth is spent – at the cost of Pakistani citizens.

The military is hated and scapegoated for economic woes, which it neither created nor exacerbated.

As per the CEIC website data, in March 2023, Pakistan’s total external debt stood at USD 125 billion. Pakistan’s debt-to-GDP ratio is 78 per cent. In only 22 years, since 2000, the nation’s gross public debt has increased by over 1500 per cent. Our various civilian heads of state have run the country by borrowing money instead of generating revenue.

The story of Pakistan’s external debt is one that each Pakistani needs to know. It is not the military dictators who pile on external debt, which needs to be repaid in precious foreign exchange reserves. Our debt burden is the misdeeds of the civilian leadership. When democracy returned to Pakistan after General Zia, it was Benazir Bhutto who as the Prime Minister signed on to the Structural Adjustment Program (SAP) of the IMF in 1988, immediately after assuming power. This signing set Pakistan on a course of destruction. Benazir took loans of almost USD 600 million in December 1988. After her ouster, Nawaz took loans and donations from Saudi Arabia and other friendly countries and did not approach the IMF.

During the democratic decade from 1988 to 1999 in the successive terms of Nawaz and Benazir, external debt almost doubled from $ 20.5 billion in 1990 to $38.9 billion by the end of June 1999. After General Musharraf’s 1999 coup d’etat, he kick-started the economy and generated revenue to run the country. Pakistan’s debt stood at a record low of USD 37.2 billion in June 2006, after seven years of General Musharraf’s military rule. After the return to civilian rule in 2008, Yusuf Raza Gillani and Asif Ali Zardari wrote a letter to the IMF, shamelessly claiming full credit for Musharraf’s economic accomplishments from 1999-2008. On the basis of the economy’s stellar performance during the Musharraf era, Yusuf Raza Gillani undertook an unprecedented loan in excess of USD 7 billion in 2008. There would have been no need for this loan, had they continued the policies of Musharraf. However, they aimed to borrow money to fill their own pockets.

From 2013 onwards, PM Nawaz Sharif’s government continued the trend of taking huge loans. In 2017 under the Nawaz government, external debt stood at USD 86 billion.

Imran Khan assumed power in 2018. He had promised to enrich the country by bringing back stolen state wealth. However, external debt reached an all-time high of USD 130.6 billion in Dec 2021 during his rule. Imran Khan even appointed an IMF man as the governor of the State Bank of Pakistan, achieving a new low in compromising our sovereignty. Debt causes distress and is something known to every responsible adult. A majority of our foreign debt is short-term foreign commercial loans and cash deposits from Saudi Arabia, China and the United Arab Emirates (UAE). While these are pressing obligations, they are not as worrisome as IMF loans.

There is a phenomenon known as the Washington Consensus, underpinning loans taken from the World Bank and the IMF. Pakistan lacks academics turned public intellectuals, hence the public is unaware of this very grave phenomenon. The Washington Consensus is a set of ten economic policy prescriptions considered to constitute the standard reform package promoted for crisis-wrecked developing countries by Washington D.C based institutions such as the World Bank, the IMF and the US Treasury.

The Washington Consensus is officially termed as the IMF’s Structural Adjustment Programs (SAPs) which Benazir Bhutto signed in 1988. SAPs have debilitating consequences for the economy. SAPs lead to increased poverty and inequality, which damages debtor nations.

SAPs require debtor nations to implement stringent austerity measures, including reducing government spending, cutting social programs, and increasing taxes. This means that the poor get reduced access to healthcare, education, and other essential services. SAPs also advocate trade liberalization, which forces local manufacturers to compete with cheaper imported goods. This affects the manufacturing sector, leading to unemployment. To boost trade, SAP advocates currency devaluation, which raises fuel importation costs and makes it more expensive to pay interest in foreign currencies. High fuel cost causes increased inflation, reducing the purchasing power of individuals and further exacerbating poverty.

SAPs advocate for privatizing state-owned enterprises and deregulating industries to attract foreign investment. However, the privatization of essential services, such as water, electricity, and healthcare, makes it inaccessible for the poor. SAPs hence cause tremendous human suffering, especially of the poor and the shrink of the middle class, pushing it into poverty. This is what we are experiencing now. Dr Qaisar Bengali’s research on Pakistan’s trajectory of debt has shown that the share of development expenditure as of the percentage of GDP, has been reduced from an average of 8 per cent to 3 per cent. This means that even the foreign aid given has not been used for the development sector. Such aid has instead been unwisely used to support the balance of payments and debt serving of expensive loans, defence and public administration, and subsidies in public services. In public finance, hardly any money from the tax revenue has been spent on health, housing, education, transport or the development of agricultural and physical infrastructure. In the past eight years. The Economic Affairs Ministry debt reports show that now Pakistan takes about 85 per cent of its total foreign loans under “non-project” loans only to pay back past loans through new loans.

Pakistan has become a rentier economy, as Pakistan’s financial elite secure subsidies, which the country finances by borrowing more.

The running of the state takes up most of the money left over after paying interest payments. PML-N and the PPP have always used government subsidies, contracts and jobs as bribes to enlist the loyalty of their supporters. This has defeated merit and created a mammoth state structure which is a huge financial burden on the state’s meagre resources. It is hence the political leadership and the bureaucracy which usurps and squanders Pakistan’s state wealth. This is what has caused the Pakistani nation to become impoverished and hopeless. Musharraf assumed power with a bankrupt economy but he turned things around in a very short time. His policies accelerated economic growth, helped create 13 million new jobs, and cut poverty in half without increasing the country’s external debt burden. Musharraf’s government attracted significant investment and focussed on education and health care. Pakistan’s human development score rose by 18.9 per cent during the Musharraf years and increased by just 3.4 per cent under elected leadership since 2008. It is Musharraf’s initiatives that developed our freelancers and the tech export industry today. Knowledge is power. Pakistanis ought to know the truth, so that they can make demands of their elected civilian leadership to reproduce the same results that a military general achieved not too long ago.

The political leadership scapegoats the military to fool the people. The media works hand in glove with the political leadership to maintain the status quo. The media acts as the politicians’ accomplices since the former is the greatest beneficiary of this scapegoating. The incessant tirade against the military dominates airtime. TV anchors keep the general public embroiled in political dramas so that they do not have to work hard to produce quality content like the WION channel of India or the Al Jazeera television of Qatar. Our TV channels’ anti-military propaganda’s success as a business model is proven by the fact that our TV anchors have deep pockets and even own private aircrafts. The hoopla they generate fattens their bank accounts. The Pakistani nation must not allow itself to be fooled anymore. Pakistanis must stop blaming the military for the damage caused by political leaders. The military is the guarantee of our sovereignty and hence deserves our respect. Dr Bengali played his part as an economist and a public intellectual when he conducted and published his research. It is now the moral responsibility of citizens, journalists, Youtubers and social media activists and influencers to spread the truth. Pakistanis must put the blame where it rightfully belongs.

The writer is an independent researcher, author and columnist. She can be reached at aliya1924@gmail.com