Economy
 
Soaring loans ring alarm bell for the rulers
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December 16, 2011
Government loans have reached alarming proportion with the increase over 100 percent during the first five months of ongoing fiscal year 2011-12 owing to extravagant spending of rulers.

As per statistics of State Bank of Pakistan, government acquired loan of .7777 trillion rupees from central bank and other commercial banks during the first five months of ongoing financial year.

Volume of government loans has increased 130 percent from July, 1 to November, 18. and government obtained loan to the tune of Rs 707 billion from banking system to meet its budget deficit. Volume of loan acquired from central bank stands at Rs 61. 62 billion while loans of a sum of 646.15 billion rupees were acquired from commercial banks. Banks extended loans amounting to Rs 6.57 billion to private sector during the period under review which was 84.7 percent higher as compared to loans provided during the corresponding period of last year.

If we name India then it will come to light that India which had more population than Pakistan has got loan of Rs 158.49 billion from the bank while state governments have obtained loan to the tune of Rs 13.22 billion.

According to experts an exceptional surge in budgetary loans is being witnessed due to exceptional rise in ongoing expenses of government under subsidy head besides law and order situation. However increase in pace of securing loans from banking system by the government gives clear indication that existing pace of revenue recoveries don’t meet the requirements of the government.

Government of Pakistan on one hand features atop the list of borrowers from commercial banks and on the other hand it has also broken the record of taking foreign loans.

Asian Development Bank (ADB) has made disclosure in the annual report released with reference to Asian prices that foreign loans have increased by 20 billion dollars during the recent five years and this way burden on national exchequer rose in terms of payment of interest. Unemployment level has also risen.

Pakistan was facing difficulties in meeting challenge development goals in perspective of poverty and enrolment at primary school level.

ADP said in its annual report foreign debt volume had reached the level of 53.71 billion dollars while they were pegged at the level of 33.26 billion dollars in 2005.

Report revealed that foreign debt proportion rose from 27.8 percent to 31.3 percent during the last four years. The burden of payment of interest for Pakistan is growing fast besides ever increasing burden of loans. The amount under this head had risen from 2.42 billion dollars to 3.43 billion dollars annually during the last five years.

Report reflected that Pakistan had set the target of revenue recoveries with 26 percent increase for 2011. But this pace remained restricted to 10.9 percent during the seven months from January to July in the current year due to devastating floods and exempting the affected areas from tax by the government. In this backdrop, tax to GDP rate also declined. 50 percent enhancement in salaries of government employees also kept national kitty under pressure. Government failure in allocation of substantial amount against subsidy in the budget in order to bridge power tariff gap also worsened the situation.

PPP led government had to face corruption charges besides negative external remittances from international monetary agencies during the first three months of the current fiscal years. Overall external remittances were recorded 31.6 billion rupees while Rs 35.9 billion were paid back under the head of loans. This was difference on account of negative remittances remained 4.3 billion.

The official statistics revealed Pakistan received total project aid to the tune of Rs 25 billion and it obtained loan program of Rs 2 billion from different lending agencies while IMF did not introduce any funding program for Pakistan. IMF funding program was linked to World Bank and Asian Bank loans therefore, it is still suspended. Marked decrease in foreign loans has forced government of Pakistan to secure loans amounting to Rs 261 billion form commercial banks during the 3 months from July to September in current fiscal year of 2011-12 to bridge 1.2 percent GDP deficit gap.

Sources told government obtained loans of Rs 119.5 billion form banking sources and Rs 142 billion from non banking sector during the first three months of the current fiscal year. A sum of Rs 177 billion and Rs 107 billion were spent on payment of interest and defence needs respectively. On the other side development expenses shrank to Rs 50 billions under Public Sector Development Program.

Federal government secured Rs 533 billion including Rs 389 billion on account of tax recovery by FBR.

Revenue collection of provincial governments reached level of Rs 19 billion, non tax revenue Rs 128 billion and expenses touched the mark of Rs 790 billion. Government got Rs 15.6 billion under petroleum levy.

Domestic loans were repaid to the tune of Rs 164 billion and external loans Rs 12.4 billion during first three months of the ongoing financial year. Punjab share in Divisible Pool stood at Rs 94.286 billion, of Sindh Rs 55 billion, of Khyber Pakhtoonkhawa Rs 33 billion and of Balochistan Rs 27 billion during the first quarter of the current fiscal year. Provinces failed miserably in collecting revenue adequately. Punjab collected Rs 9 billion, Sindh, 8.9 billion, Khyber Pakhtoonkhawa Rs 898 million and Balochistan Rs 196 million.

The volume of debts being obtained by the government is swelling rather than registering any decrease. Government on the other hand is taking loans from central and commercial banks without any limit to meet its extravagant expenses.

Chief Justice of Pakistan Iftikhar Muhammad Chaudhry remarked during hearing of loans written off case the home of a poor person is put to auction and public wealth goes to the pocket of those who get write off loans of billion of loans. The homes of common men are auctioned due to non payment of loans while the big wigs get their loans waived and they run their factories out of this amount.

Finance Minister Abdul Hafiz Sheikh told National Assembly Secretariat in his written reply that 31 banks and financial institutions wrote off loans of their account holders amounting to Rs 17.24 billion during the period from 2009 to 2010. 17 out of 31 banks provided information in this regard and the remaining 14 banks furnished information only for one year. UBL was at the top of list of banks which waived loans.

UBL waived loans of Rs 2.90 billion, HBL, Rs 2.18 billion, ABL Rs 2.2 billion. Standard Chartered Bank remained fourth at the index of loan waiving banks while Faisal Bank stood at 5th position.

HBL wrote off loans of Rs 1233. 245 million in 2009, Rs 953.374 million in 2010. Allied Bank wrote off loans amounting to Rs 1857.806 million in 2009 and Rs 169.660 million in 2010. Faisal Bank waived loans amounting to Rs 18.645 million in 2009 and Rs 1426.586 million in 2010, Askari Bank Rs 1009.372 million in 2009, Rs 711.383 million in 2010.

National Bank remained at fifth position in the line of waiving of loans. It wrote off loans of Rs 638.461 million in 2009 and Rs 503.967 million in 2010.

Industrial Development Bank waived loans amounting to Rs 194.297 million during two years, Saudi Pak Industrial and Agricultural Investment Rs 60.158 million, Pak-Libya Holding Rs 6.115 million, Pak Kuwait Investment Company Rs 85.848 million, Equity Participate Fund Rs 1.707 million, My Bank Rs 83.481 million. NIB however did not provide the information about 2010.

Atlas Bank wrote off loans of Rs 56.6 million but it did not provide information in respect of 2010. Bank of Khyber waived loans of Rs 25.893 million in 2009. City Bank wrote of loans of Rs 405.350 million in 2009 but no information was furnished by the bank for the year 2010.

Bank Al-Habib waived loans of Rs 3.190 million during 2009 and it produced no report regarding 2010. Habib Metro Politan Bank wrote off loans of Rs 85.566 million during the two years. Bank of Punjab waived loans of Rs 77.449 million in the two years, HSBC Rs 367.212 million, MCB 937.837 million.

SME bank wrote off loans of Rs 52.3386 million in 2010, Silk Bank Rs 233. 584 million during two years. UBL waived loans amounting to Rs 2.90 billion in 2010, Standard Chartered Bank Rs 1802.079 million, Summit Bank Rs 9.096 million, Agricultural Development Bank Rs 184.976 million JS Bank Rs 49.023 and First Women Bank Rs 0.708 million. Suneri Bank did not provide information.

The question arises who are these people who have got waived loans running into billion of rupees. Are they common men. A common man can not meet his daily expenses and no one is ready to give loan of even of a single penny.

Finance Minister Abdul Hafiz Sheikh had also made disclosure during National Assembly question hour that loans over Rs 1 billion were written off during the last one year. On the other hand no limit is set for government to obtain foreign loans.

Former governor State Bank Shahid Kardar resigned from his office for this reason that they repeatedly asked the government to obtain less loan from central bank and not to rely on central bank in terms of loans. This led to create tense situation between the government and governor state bank. Eventually he had to tender resignation. But the government diverted its direction for securing loans from state bank to commercial banks and it started securing loans more from commercial banks and less from state bank.

Government in its economic survey report for the year 2010-11 has admitted that condition of national economy remained worse. Inflation and loans surged and several budget targets of the current fiscal year could not be achieved. No serious attitude was shown in this regard.

This is the need of hour that government should control its luxurious expenses and obtain loan in less quantity as currency notes were got printed by the government to meet its expenses. This led to accelerate the rate of inflation.

Economic managers of the country should demonstrate responsibility and advise the government to play the role of responsible government. They should observe austerity otherwise they will have to meet the fate of rulers of other Muslim countries rulers wherein the wave of change swept away the corrupt rulers.

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