If anyone thinks that Pakistan’s economic turnaround can be achieved with the loans and policies of the World Bank, the IMF plus its current team of managers incharge of Pakistan’s economy, then probably, he was not aware of the fact these agencies and people have only one solution in their minds, which consists of three components:
~ Obtaining more and more loans from every possible avenue
~ Increasing number of taxes and their rates
~ Launching amnesty Schemes
As a common sense, giving fresh loans to repay the old loans, is no favour to Pakistan (which was already badly traumatised in every way by continuously fighting War on Terror since the year 2001) from any lending agency.
To further add to the economic problems of the country, the economy management team of Pakistan, kept on increasing the inflation, by enhancing tax/utilities rates and imposing new taxes with every conceivable scheme in their minds.
These merciless tzars, further devised money whitening schemes to make the rich criminals, who built their fortunes by evading taxes, look innocent in the eyes of the law.
Now, our economic malaise has reached such a stage that business as usual, is going to jeopardise our statehood, not in years, but in months.
The degree of the sovereignty of a country, is directly proportional to the state of the economy of that nation. Actually, in constant growth & development lies our salvation.
Moreover, we Pakistanis must know, that without any doubt, the easiest and surest way of moving ahead, is to stand on our own feet.
Foreign expensive loans may keep us afloat, but will never allow us to swim and reach the shores of the economic stability. To seek fresh loans, to repay the old loans, is a sure recipe of disaster for any economy.
According to a research [published by the Guardian dated 14 January, 2017] ( https://www.theguardian.com/global-development-professionals-network/2017/jan/14/aid-in-reverse-how-poor-countries-develop-rich-countries?CMP=share_btn_fb ) of the US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics for every $1 of aid that developing countries receive, they lose $24 in net outflows. Now, one can easily imagine that if, aid can rip apart the economy of the developing countries in such a rampant manner, how cruelly the loans must be looting and destroying the economy of the loans recipient nations.
Similarly, the above research also exposed the economic crimes of the multinational companies, wherein, they indulged in novel ways of loot and plunder of the developing nations, quoted as below:
Quote.”Multinational companies also steal money from developing countries through “same-invoice faking”, shifting profits illegally between their own subsidiaries by mutually faking trade invoice prices on both sides. For example, a subsidiary in Nigeria might dodge local taxes by shifting money to a related subsidiary in the British Virgin Islands, where the tax rate is effectively zero and where stolen funds can’t be traced.
The above research also states the solution of the economic exploitation of the developing nations quoted as below:
”Poor countries don’t need charity. They need justice. And justice is not difficult to deliver. We could write off the excess debts of poor countries, freeing them up to spend their money on development instead of interest payments on old loans; we could close down the secrecy jurisdictions, and slap penalties on bankers and accountants who facilitate illicit outflows; and we could impose a global minimum tax on corporate income to eliminate the incentive for corporations to secretly shift their money around the world.”
For the policy makers of Pakistan who are convinced that we can not survive without loans from the World Bank and IMF etc., the following extract from Cato Institute Policy Analysis No. 92: The World Bank vs. the World’s Poor
Must be an eye opener which clearly states that $1 from the World Bank brings in $4 from the rest of the world.
“Has the World Bank helped the Third World? Some countries have benefited, but most of the long-term aid recipients have only ended up with heavy debt loads, swollen public sectors, and overvalued exchange rates. Instead of spurring reform, most aid programs have simply allowed governments to perpetuate their mistakes. As one IMF official described the impact of foreign aid on Zambia, “It is fair to say that what we have done is to allow Zambia to maintain a standard of living for its civil servants [whose payroll amounts to 20 percent of the country’s gross domestic product] which is totally out of sync with the rest of the economy.”
After scores of structural and sector adjustment loans, and after thousands of “reform covenants” in bank project loans, most LDCs still have policies that would qualify them for an economic insane asylum. If the bank has been unable to straighten out Third World economic policies after disbursing over one hundred billion dollars in loans and handouts, what chance is there that increased bank lending will correct these problems in the future?
The World Bank’s activities have been especially harmful because of its indiscriminate use of its “seal of approval.” Barber Conable recently bragged, “Look at the foreign aid program: the World Bank is one of the most cost-effective elements, largely because $1 from the World Bank brings in $4 from the rest of the world.” Conable judged the bank’s cost-effectiveness solely by the amount of resources transferred to Third World governments, with no concern for how those resources are used and abused. The bank routinely exhorts Western banks to continue lending to LDCs even after those countries have effectively defaulted on previous loans.
The World Bank has had a destabilizing influence on the international financial system; it has encouraged huge expansions of doubtful loans, failed to encourage reductions in lending when its research departments should have spotted warning signs, and dogmatically viewed all transfers of resources as inherently beneficial. But the ultimate question is, Are more bad loans good for the world economy?
World Bank loans either go directly to the recipient government or must be guaranteed by the government. Thus, World Bank aid inevitably increases the politicization of Third World economies–even while bank economists lecture on the need for politicians to stop throttling the marketplace. The costs of politicizing aid are far greater than the cost of interest payments on private credit.
The bank claims that it needs to provide more aid to Third World economies to help them grow. But the bank itself is based on an outdated theory of development economics, which assumes that all Third World economies need for growth is to be provided with capital handouts and modern technology. Now that economists are beginning to realize that domestic economic policies are more important for growth than international welfare is, the World Bank no longer has a clear rationale for existing.
Critics assert that adjustment requires austerity and that the developed nations must give LDC governments extra aid to help them adjust. But in most cases what is needed is not belt tightening but simply that governments loosen the noose that is strangling their own economies. It is not belt tightening to allow farmers to receive market value for their crops, thus greatly increasing harvests. It is not belt tightening to stop arbitrarily seizing the assets of private businesses. It is not belt tightening to privatize the operations of state-owned companies that are sinking the government’s budget. It is not belt tightening to reduce tax rates that are so high as to choke off income-generating activity. And it is not belt tightening to remove the pervasive restrictions on foreign investment that characterize almost all the Third World’s troubled debtors.
The case is often made that loans to LDCs should be increased because capital can be used better in the Third World. This advice may be well received in freshman economics classes, but it is unconvincing to anyone who has visited Tanzania. As Harvard demographer Nicholas Eberstadt observed, “The rights to private property, personal liberty, due processes and even to life itself are routinely ignored or violated by the overwhelming majority of sub-Saharan states.” If a government is not trustworthy, how can it expect to be judged creditworthy?
For much of Latin America, the debt crisis would be largely “solved” if the citizens decided that the government could be trusted and called home tens of billions of dollars in “flight capital” that they had placed overseas to avoid expropriation. If a country’s own citizens don’t trust their government, why should the World Bank squander Western tax dollars subsidizing it?
Five World Bank borrowers–Peru, Nicaragua, Syria, Guyana, and Liberia–have effectively defaulted on their bank loans. Yet the bank wants to expand its lending in order to keep a net positive flow of assets to its debtors– to continue giving them $5 so they can repay $3. This may be in the bank’s interest but it benefits no one else.
The bank was created because commercial banks were leery of lending to sovereign governments. In the past 20 years, private lending to sovereign governments has exploded. If the private credit market for sovereign borrowers has any fault, it is that it is too generous to doubtful governments. In almost every case, World Bank loans now go either to countries that squander the money or to countries that could obtain private loans.
What the bank can do that private lenders cannot or will not do is provide money on easy terms to uncreditworthy borrowers. But every bank handout increases a recipient government’s ability to act irresponsibly and sabotage its own economy and reduces its need to rely on private credit markets. As the bank’s report on exchange rates has shown, bank aid boosts a country’s real exchange rate, thus making it less likely that the country will become self-sufficient.
Who benefits now from the World Bank, aside from inept Third World rulers and the bank’s own employees?
A few years ago the bank was considering establishing a commercial affiliate that would borrow in world capital markets and lend to LDCs at a profit. This is a good idea for the bank as a whole. If the bank never gets another dollar from the U.S., West German, or Japanese treasuries, it will still be able to lend over $13 billion a year because of its huge reserves and repayments of previous loans.
The bank should be required to support itself by selling bonds and existing on its own creditworthiness. Once Western governments stopped handing out money to the bank, its obsession with its loan levels would cease, and it could begin to make sound economic judgments. It would no longer have an incentive to back unproductive projects and incorrigible kleptocracies.
Giving countries money that will be badly used is worse than not giving them any money at all. Empowering corrupt and inept politicians to rule over their people has nothing to do with real development.
Perpetual structural adjustment loans for politicians who perpetually maul their economies and impoverish their subjects are an exercise in futility. If real policy reforms are made, people will have genuine incentives to invest or to lend these governments money. And if no real reforms are made, giving them money will only continue to squander capital and postpone the day of reckoning.
The less money the bank has, the more likely it is that its net effect on development will be positive. As long as the bank suffers from its current “have money, must lend” syndrome, it will continue pouring billions into floundering socialist regimes, inefficient government corporations, and harebrained mass migration schemes. A poorer bank would be a wiser bank and a better friend to the Third World.” Unquote.
Since the World Bank and IMF knew very well that their fresh loans to repay old loans will further sink Pakistan economically, but still they wanted to expand their lending in order to keep a net positive flow of assets — they continued giving us $10 so we can repay them $6. This may be in the bank’s interest, but it was deadly poison for Pakistan .
Since, these loans were given to us with deliberate ill intentions, Pakistan must stop repayment of these loans, on the very strong plea of being ODIOUS loans.
Now, the time has come to separate the growth, development, education, eradication of poverty & security of Pakistan, from the politics, forever.
It has been a standard political tactics in the past, to put the blame on previous rulers, by all and sundry, to divert the attention of the masses, from own failures and governance incompetencies.
However, now we must put a full stop to this non-sense, which has wasted the entire past lifetime of Pakistan.
In this connection, Mr. Steve Maraboli has very appropriately said that “Make a pact with yourself today to not be defined by your past. Sometimes the greatest thing to come out of all your hard work isn’t what you get for it, but what you become for it. Shake things up today! Be You… Be Free… Share.”
Nothing can match the benefits of the collective wisdom. Let us build a new economically strong and politically stable Pakistan, by our collective decisions; knowing very well that no political party, group or institution is so strong, to run this country, single handedly, for a sustainable period, without the help and cooperation of each other.
We must also realise that our personal safety and better future lies in accommodating and cooperating with each other, with the sole aim of building a STRONG Pakistan, under the slogan “Re-born Pakistan”.
In this regard, it is suggested that, we should AIM to bring Pakistan by the year 2035, to the level at which Singapore was in the year 2010 (where country was developed first and politics allowed subsequently, not like Pakistan, where we have put the cart before the horse; and indulging in politics first and development of the country and society is the last priority).
All politics & other considerations should be made subservient to this TARGET for 2035, even if we have to abolish weekly holidays for the next 20 years & reduce our daily sleeping time to 6 hours.
All the stake holders, particularly, from the deprived sections of the society in Pakistan, must immediately come forward, for deciding about the direction of the future of the nation.
Biggest factor in any victory is self-confidence. Anti-thesis of terrorism is education, coupled with economic emancipation.
As such, the nation must embark upon the following agenda, to resurrect our economy without any further loss of time.
1. Request to all foreign donors for a 10 years moratorium, on all debt repayments by Pakistan, which is a frontline state of the world’s war on terror (WOT). Here, don’t forget that the world powers have totally written off loans of many countries, for much less cooperation than Pakistan, which is practically fighting their war, for more than a decade and a half.
2. 20% per annum reduction in all non-developmental government expenditures, plus total freeze in all perks paid from the national exchequer, involving foreign currency.
3. All government servants starting from the President, PM, Judges, military and civil personnel using official cars must use their vehicles for 10 years, before replacing it with new model.
4. Maximum tax rate on each and every type of income in Pakistan should be fixed at 10%. This will not only bring huge revenues to the government, but will also discourage the tax evasion tendencies.
The size of our undocumented economy is almost equal to the yearly budget of Pakistan.
The best way to minimise black money is not the launching of amnesty schemes, because the black money keeps flourishing after taking advantage of such facilities. If we really want to deal with the menace of undocumented economy on a permanent basis, the best way is to either eliminate taxes or reduce the rates of taxes to a minimum level i.e., not more than 10%. This low level of tax rate will not only spur an economic boom, but will also automatically encourage people towards paying the taxes; rather than giving bribes to the government officials, to save them from bigger payments of taxes.
5. Impart training of various modern skills to the country’s huge unskilled manpower for increasing the industrial and agricultural productivity, competitiveness, value addition & exports.
6. Special support and incentives for developing world class facilities for enhancing income from tourism sector, which should encompass religious, medical, educational, hunting, entertainment and traditional tourism, specially keeping in view how rapidly Dubai has become a world tourist destination by juxtaposing technology with innovative ideas.
7. Set a target for 20% per annum increase in foreign remittances, by offering innovative incentives to expatriate Pakistanis, which should even attract foreigners to park their money in Pakistan.
8. Outsource FBR functions (which will alone increase income by Rs.1000 billion) & IMPOSE FLAT 10% tax on ALL & EVERY TYPE OF INCOME (as already mentioned at 4. above), without any exemption (except for the security forces personnel, whose salaries may be doubled with expected receipt of un-precedented increase in revenues). This will not only reduce income tax burden on salaried class (with max. tax rate of 10%. Here don’t forget consultants are already paying 10% tax), but will also result in so much increase in revenues, to the extent that government will not require any tax fresh imposition, in the budget. Plus, the government will be able to give tax free salaries to all the armed forces, rangers, police and other security agencies personnel, who are shedding their blood, in fighting the menace of terrorism, for our and our children’s safe TOMORROW.
10. Initiate steps (by imposing economic emergency specifically for austerity at every level) to bring each and every economic activity under document.
11. To attract huge world wide foreign exchange deposits from expatriate Pakistanis and foreigners, allow profit rate of 3% PA to be paid on half yearly basis, on Dollar and other specified foreign currency bank accounts in Pakistan. We should not forget that recently Pakistan borrowed at 3% from the IMF and sold Eurobonds at 8.25%.
Moreover, all ELIGIBLE NON-FILERS must not be penalized with any amount of taxation as they are LEGALLY not allowed to file returns as per law.
In this regard, very surprisingly our finance ministry has declared virtually the entire population of the nation as criminals in the eyes of taxation law, because, only just 1.12 million people in Pakistan are tax return filers and over 200 million or 20 crore residents are non filers and subjected to different, unjust and higher rates of taxation at almost every step of daily life, needs immediate reconsideration by the concerned in the government, wherein; crores of ladies, widows and men (above 20 crores to be precise) are wrongly and unlawfully declared as Non-Filers and subjected to unjust taxation.
Firstly, law of the land, allows all those retired persons who after retirement, have submitted three consecutive NIL tax statements, NOT to file any more tax statements. Then how come these persons are considered non-filers.
Secondly, all such type of persons, who are NOT required to lawfully submit Tax returns (like above 60% of the population which hardly earns $2 per day); are considered as illegal NON FILERS; and subjected to cruel and higher taxation rates, applicable to the non filers.
Just imagine, if a writ petition is filed in the public interest, how finance ministry will defend this tax coercion, from almost the 100% population of the country, because only about 11 lac people file tax returns.
Obviously, 100% of the country’s subjects can’t be termed as committing the crime of non-filing of tax returns. Hence, this is a discriminatory and bad law, which needs drastic and immediate review.
Our government can impose tax on its 100% population, but not in an unlawful and discriminatory manner, favouring handful of just 11 lac persons out of above 20 crore people of Pakistan.
The article was originally published here.