Debts Write off, Not Rescheduling, May Revive Economy

Mr. Aziz said that the September 11 incidents in America and post-11 September developments all around the world have implications for global economy. These developments have grave implications for Pakistan in economic terms. He said that the present government is already having a loss of $1.4 billion in the country's exports. Moreover, tourism, insurance, and PIA have also been adversely affected.

He added that since the government of Pakistan has decided to join the global efforts to combat terrorism, a number of countries have lifted sanctions from Pakistan, announced aid for it, and rescheduled the outstanding debts. But he advised the government to ask for writing off the loans instead of rescheduling them. So far Pakistan has a total debt of 35.6 billion US $. Out of this, 12 b is bilateral debt, 15 b is multi-lateral, and the rest is private. Out of these debts, only bilateral debts can be written off, which Pakistan mostly owes to the US and Japan. While citing the case of Egypt, he said that its $7 billion debt was written off. He said that merely rescheduling the debts would not help revive the country's economy.

While presenting a brief overview of the loan rescheduling and aid granted to Pakistan, Ms. Tanvir Anjum of CRCP said that after September 11, many countries have rescheduled their debts to Pakistan, and announced aid for it. However, so far only around $4b debt has been rescheduled whereas Pakistan is required to pay 21 b in next 4 years. So far aid of 165 million US $ have been announced for Pakistan. Out of this amount, 75 m have been allocated for patrolling along the Pak-Afghan border. In addition, 50 m emergency aid has been given by the US and 40 m by Japan, which amounts to 90 m. The Government of Pakistan has the discretion to use this 90 m aid where it thinks appropriate, but this money is most likely to be used for emergency arrangements like preparing hospitals to deal with any emergency situation, and maintenance of law and order, etc. But the apprehension is that this aid may not help revive economy and generate economic activity.

The Sept. 11 incidents have adversely affected Pakistan's economy. For instance, export orders have been cancelled, which are likely to cause a loss of $4b, insurance rates and freight tariffs have been increased. According to an informal survey, tour operators have incurred a loss of 150 m rupees due to cancellation of reservations. So far the direct and positive impact of the lifting of sanctions on Pakistan's economy is invisible. It is feared that the aid granted to Pakistan and rescheduling of its debts are not likely to revive economy, though the fiscal deficit may be reduced. And if economic activity is not generated and economy is not revived, he consumers and citizens are most likely to suffer.