EDITORIAL: Writing off convention - Wednesday, November 17, 2010

Source : http://www.dailytimes.com.pk/default.asp?page=2010\11\17\story_17-11-2010_pg3_1

Despite the embarrassing lack of consensus between two federal ministers ? Interior Minister Rehman Malik and Finance Minister Hafeez Sheikh ? some home truths need to be reinforced to enable the finance minister to see beyond the rut he is stuck in. On Sunday Mr Malik categorically voiced, for the first time on a global forum, how critical it is that war-ravaged Pakistan, as an ally in the war against terror, be given a write-off on the $ 55 billion in debt that it is currently bogged down in. There could have been no better platform than the Pakistan Development Forum to raise this issue, where the delegations of some 30 countries had come together to discuss the challenges faced by Pakistan. The donors can see for themselves the massive crisis facing Pakistan if timely intervention does not occur. For the finance minister to dismiss demands for a debt waiver is tantamount to his being blind to the debilitating circumstances in which Pakistan is functioning. Mr Sheikh is heavily steeped in the culture of international financial institutions (IFIs) such as the International Monetary Fund and World Bank. Whilst this seems to have become the necessary qualification for the head of our financial ministry in recent years, these are testing times for Pakistan and we need to think out of the box instead of resolving our problems on the backs of the masses, backs that are already broken. Raising taxes and slashing development programmes are all too common measures for expedient crisis management, but they may no longer be feasible in the long run.

Pakistan is in a ‘state of necessity’ where it has been impacted by some of the worst calamities that can hit a country. We have suffered many losses in lives, property, assets and writ of the state in the war on terror. Government mismanagement of the economy and rapid inflation are bringing the people to their knees and the recent floods have washed away any remaining rationale for sticking to tried and tested economic formulae. There could not be a better time than this to seek a long-term goal like a debt write-off. It must be remembered that a waiver will not happen overnight; there is a whole process of negotiations involved. Till then Mr Sheikh’s short-term reforms and taxation may be able to hold the tide. However, as things stand, there is no guarantee that these reforms will even go through. The Reformed General Sales Tax (RGST) Bill still has to be passed by parliament and there are many roadblocks in its way with the opposition protesting and trade and industry up in arms.

Mr Sheikh’s concern over losing ratings in international capital markets if we press for a debt write-off is a bit premature considering that Pakistan’s credibility for all international investment is close to nil. The likelihood of Pakistan being able to approach the international financial market without incurring unaffordable costs in the near term seems slim. Therefore there is weight in the argument for approaching the international financial institutions to at least reschedule the $ 34-35 billion debt we owe them, while asking the bilateral and multilateral lenders to write off, if not all the remaining $ 20 billion, then at least the high cost short term debt of about $12-13 billion, whose servicing contributes the bulk of the $3 billion a year required for this purpose. As for Pakistan becoming a “pariah” country, one need only give the example of Argentina where the government refused to pay outstanding debts because of a similar debt trap situation. Argentina is no outcast today, but rather one of the most prosperous countries in Latin America, having reformed and restructured its economy on healthy lines. *

SECOND EDITORIAL: Fixing Pakistan Railways

Daily Times on Tuesday revealed that millions were spent on the renovation of two Pakistan Railways (PR) officers’ luxurious bungalows located at the Railway Officers’ Colony in Mayo Gardens Lahore at a time when PR is facing huge financial constraints.

Abuse of power by individuals in power is nothing new in Pakistan. Our history is littered with such examples. Pakistan Railways earlier this year in March was hit by the ‘scrap scandal’, in which PR had announced sale of its scrap. The tenders were the biggest in the organisation’s history, worth 39,000 tonnes of scrap or Rs 1.118 billion. The state-owned enterprise has been facing a shortfall in operational locomotive engines. According to Railways Minister Ghulam Ahmad Bilour, PR only has six freight trains in operational condition from Karachi to other parts of the country and 35 trains are out of service due to the locomotive shortfall. He has said Rs 4 billion is urgently needed for the restructuring and rehabilitation of PR. The entire Pakistan Railways system is running on 220 engines whereas 400 more engines are needed to put PR on a healthy footing. It is pertinent to mention here that freight via rail is the most cost effective and efficient manner of transportation. Trains also serve to connect remote communities that would otherwise be inaccessible. As an example of PR’s dysfunctionality, the organisation’s failure to pay salaries of class-III and class-IV employees before Eid resulted in employee protests in Peshawar, which led to a three-hour delay of the Awami Express and Quetta Express.

This was not always the case. In the glory days of PR, the company had state-of-the-art technical facilities in Lahore and the Pakistan Locomotive Factory in Risalpur. The misuse of funds and mismanagement seems to have brought the organisation grinding to a halt. It is convenient for the present government to blame its predecessors but its own record over the past two and a half years is nothing to write home about. Serious action needs to be taken against the individuals responsible for the latest ‘extravagance’. The problems at Pakistan Railways need to be addressed immediately, since it is rightly called the ‘lifeline of the country’. *

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