The Supreme Court, while hearing a suo motu case on September 27, 2010, questioned the authority and jurisdiction of State Bank of Pakistan (SBP) to waive off Rs 256 billion bank loans during the period from 1971 to 2009 under Banking Companies Ordinance. The apex court directed the SBP counsel to submit details of at least ten cases from each year which met two conditions set in Section 33B of Banking Companies Ordinance, 1962 and which were pre-requisites for writing off loans. In the wake of February 2008 elections, the people of Pakistan thought that the rulers would respect their mandate by ending rent-seeking and make journey towards a true democratic polity. The ruling elite however as usual and expected resisted any such change.
The powerful ruling elite having the support of traders and clergy is bound to resist any move aimed at recovering the wealth amassed by them -- this money is their main source of power. The privileged classes, despite all their differences, are united as far as financial corruption, tax evasion, plundering of national wealth are concerned.
They feel threatened whenever a public debate takes place in media about their tax declarations and figures of loan write-offs.
Tragically, the apex court did not decide the issue of loan-write-offs though suo moto action was taken in 1996 and 2008. In 2008, according to press reports, the Supreme Court took serious notice of the fact as to how banks wrote off a staggering amount of Rs 125 billion as "bad debts" during 2000-2006, against Rs 30 billion written off during 1985-1999. According to reports, larger numbers of loans were written off under Circular No 29/2002, issued by the State Bank of Pakistan (SBP), of which major beneficiaries had been politicians and industrialists.
During the self-proclaimed "transparent era" of Musharraf-Shaukat, the loans write-offs in just seven years (2000-2006) crossed the figure of Rs125 billion, whereas in the much-publicised "corrupt eras" of elected governments (1985-1999) it was just Rs 30 billion. This comparison speaks for itself and does not require any further comment. The country's banks and other financial institutions wrote off an amount of over Rs 30 billion during the governments of Muhammad Khan Junejo, Benazir Bhutto and Nawaz Sharif. During the two tenures of Nawaz Sharif (1990-93 and 1997-99) total loans of Rs 22.35 billion were written off -- in his first tenure, a total of Rs 2.39 billion were written off and during his second, the amount went up to Rs 19.96 billion. The written off loans during the two tenures of Nawaz Sharif constituted approximately 74.5 per cent of the total of Rs 30.18 billion, written off between 1986 and 1999. During the two tenures of late Benazir Bhutto, a total of Rs 7.23 billion loans were written off, constituting 24.2 per cent of the total written off loans -- Rs 494.97 million in her first tenure and Rs 6.74 billion in the second term.
During the Musharraf-Shaukat era, an unholy alliance of bankers, businessmen-cum-politicians and bureaucrats managed to plunder the public money through an amnesty scheme from SBP, whereas banks had liquid securities to recover the loans. The SBP in the suo moto case submitted before the apex court that amongst the beneficiaries of Circular No 29/2002 were two sitting chief ministers of PML-Q regime.
The ruling elite skillfully engineered the amnesty scheme to get the benefit of write-offs and a consequential concession in tax law for no-taxation of benefits derived, whereas their personal wealth kept on increasing. All these beneficiaries of loan write-offs still possess assets worth billion of rupees. The criminal culpability of successive governments in this matter has tarnished the image of Pakistan in the eyes of the global community as a haven for the corrupt, plunderers and tax evaders.
The Supreme Court of Pakistan in 1996 (Reference: Dawn dated October 16, 1996), took suo moto cognisance under Article 189 of the Constitution of Pakistan, took up this issue and the expressed intention of studying all the laws governing loan write offs. The apex court vowed to make authoritative pronouncement that "would eliminate the chances of misusing the laws for siphoning of public money." There is no record of what happened to that public-interest litigation case, it appears from the recent proceedings that the case is still pending after a lapse of 14 years.
The public interest litigation originated from a reference filed by then President, late Ghulam Ishaq Khan against a PPP MNA Rao Rasheed Ahmad, who as a member of loan write-off committee blatantly ordered the write off of a loan to his wife. There have been many such examples where the rich managed to plunder the savings of small depositors in a shameless manner. An unholy alliance of bankers, businessmen-cum-politicians and bureaucrats has destroyed the entire banking/financial system.
The politics of writing-off of loans in this country requires proper investigation and study as it will unveil may "big names" that are responsible for corruption and failure of the democratic process in the country. The country lost billions of rupees in the form of public revenues because of bad debts written off by the banks on the directions of the SBP. The Government of Pakistan, SBP and Federal Board of Revenue (FBR) never considered the report of the Auditor General of Pakistan in this regard, showing a loss to the public exchequer of Rs 120 billion as far back as 1992. It is a matter of record that the
Board of Revenue in the presence of this audit report from the auditor general of Pakistan, issued another circular-instructions on February 4, 1993 vide its letter No 13(26)/IT-1/79 giving further concessions to the banks. The cases relating to plundering of public money to the tune of billions and blatant abuse of powers by rulers and their henchmen pose a serious threat to democratic culture.
The unscrupulous landed aristocrats and businessmen (some of whom are now politicians and elected members), state functionaries and corrupt bankers joined hands to deprive this nation of billions of rupees and colossal public revenues. The managers of the State Bank and FBR should be taken to task to explain who had asked them to issue "administrative instructions" in gross violation of law for loan write offs and giving tax benefits to the beneficiaries. The inquiry into loan write offs will reveal the modus operandi under which public money was siphoned as well who were the real beneficiaries. If we want to establish true democracy in Pakistan, the public money looted by these criminals should be recovered and all those who facilitated them should be punished.
The writers are tax lawyers, authors and teach at LUMS.
Emails: huzaima@huzaimaikram.com and ikram@huzaimaikram.com
The powerful ruling elite having the support of traders and clergy is bound to resist any move aimed at recovering the wealth amassed by them -- this money is their main source of power. The privileged classes, despite all their differences, are united as far as financial corruption, tax evasion, plundering of national wealth are concerned.
They feel threatened whenever a public debate takes place in media about their tax declarations and figures of loan write-offs.
Tragically, the apex court did not decide the issue of loan-write-offs though suo moto action was taken in 1996 and 2008. In 2008, according to press reports, the Supreme Court took serious notice of the fact as to how banks wrote off a staggering amount of Rs 125 billion as "bad debts" during 2000-2006, against Rs 30 billion written off during 1985-1999. According to reports, larger numbers of loans were written off under Circular No 29/2002, issued by the State Bank of Pakistan (SBP), of which major beneficiaries had been politicians and industrialists.
During the self-proclaimed "transparent era" of Musharraf-Shaukat, the loans write-offs in just seven years (2000-2006) crossed the figure of Rs125 billion, whereas in the much-publicised "corrupt eras" of elected governments (1985-1999) it was just Rs 30 billion. This comparison speaks for itself and does not require any further comment. The country's banks and other financial institutions wrote off an amount of over Rs 30 billion during the governments of Muhammad Khan Junejo, Benazir Bhutto and Nawaz Sharif. During the two tenures of Nawaz Sharif (1990-93 and 1997-99) total loans of Rs 22.35 billion were written off -- in his first tenure, a total of Rs 2.39 billion were written off and during his second, the amount went up to Rs 19.96 billion. The written off loans during the two tenures of Nawaz Sharif constituted approximately 74.5 per cent of the total of Rs 30.18 billion, written off between 1986 and 1999. During the two tenures of late Benazir Bhutto, a total of Rs 7.23 billion loans were written off, constituting 24.2 per cent of the total written off loans -- Rs 494.97 million in her first tenure and Rs 6.74 billion in the second term.
During the Musharraf-Shaukat era, an unholy alliance of bankers, businessmen-cum-politicians and bureaucrats managed to plunder the public money through an amnesty scheme from SBP, whereas banks had liquid securities to recover the loans. The SBP in the suo moto case submitted before the apex court that amongst the beneficiaries of Circular No 29/2002 were two sitting chief ministers of PML-Q regime.
The ruling elite skillfully engineered the amnesty scheme to get the benefit of write-offs and a consequential concession in tax law for no-taxation of benefits derived, whereas their personal wealth kept on increasing. All these beneficiaries of loan write-offs still possess assets worth billion of rupees. The criminal culpability of successive governments in this matter has tarnished the image of Pakistan in the eyes of the global community as a haven for the corrupt, plunderers and tax evaders.
The Supreme Court of Pakistan in 1996 (Reference: Dawn dated October 16, 1996), took suo moto cognisance under Article 189 of the Constitution of Pakistan, took up this issue and the expressed intention of studying all the laws governing loan write offs. The apex court vowed to make authoritative pronouncement that "would eliminate the chances of misusing the laws for siphoning of public money." There is no record of what happened to that public-interest litigation case, it appears from the recent proceedings that the case is still pending after a lapse of 14 years.
The public interest litigation originated from a reference filed by then President, late Ghulam Ishaq Khan against a PPP MNA Rao Rasheed Ahmad, who as a member of loan write-off committee blatantly ordered the write off of a loan to his wife. There have been many such examples where the rich managed to plunder the savings of small depositors in a shameless manner. An unholy alliance of bankers, businessmen-cum-politicians and bureaucrats has destroyed the entire banking/financial system.
The politics of writing-off of loans in this country requires proper investigation and study as it will unveil may "big names" that are responsible for corruption and failure of the democratic process in the country. The country lost billions of rupees in the form of public revenues because of bad debts written off by the banks on the directions of the SBP. The Government of Pakistan, SBP and Federal Board of Revenue (FBR) never considered the report of the Auditor General of Pakistan in this regard, showing a loss to the public exchequer of Rs 120 billion as far back as 1992. It is a matter of record that the
Board of Revenue in the presence of this audit report from the auditor general of Pakistan, issued another circular-instructions on February 4, 1993 vide its letter No 13(26)/IT-1/79 giving further concessions to the banks. The cases relating to plundering of public money to the tune of billions and blatant abuse of powers by rulers and their henchmen pose a serious threat to democratic culture.
The unscrupulous landed aristocrats and businessmen (some of whom are now politicians and elected members), state functionaries and corrupt bankers joined hands to deprive this nation of billions of rupees and colossal public revenues. The managers of the State Bank and FBR should be taken to task to explain who had asked them to issue "administrative instructions" in gross violation of law for loan write offs and giving tax benefits to the beneficiaries. The inquiry into loan write offs will reveal the modus operandi under which public money was siphoned as well who were the real beneficiaries. If we want to establish true democracy in Pakistan, the public money looted by these criminals should be recovered and all those who facilitated them should be punished.
The writers are tax lawyers, authors and teach at LUMS.
Emails: huzaima@huzaimaikram.com and ikram@huzaimaikram.com
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