Debt Pakistan

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Debt Pakistan

May 20, 2007

Buried in debt


Debt Pakistan
Debt Pakistan

National debt is a serious subject which must be discussed in a sober rather than sensational manner, writes Dr Muhammad Reza Kazimi

Pakistan is burdened with debt. This constricts its diplomatic and security options. There have been attempts by previous governments to liquidate the debt. Resumption of aid following Pakistan’s joining the ‘War Against Terror’ gave the impression that the debt burden had been greatly relieved. Shahid ur Rehman assures us that it has not. The Introduction of his book highlights his main contentions and it is here that he shifts the burden of guilt from economic to political decisions. It is an indictment of our country’s early leadership. Some of these observations are factual and correct but even here, the documentation is not adequate, which prevents his observations from acquiring context.

Shahid ur Rehman says that Pakistan first lost its sovereignty immediately after its independence, when the Quaid-i-Azam sought a $2 billion economic assistance from the United States (P.15). The background to this is that the US was the only country to send a delegation to attend the Independence celebrations of Pakistan, while the USSR was the only country not to congratulate Pakistan on its creation. The Indian government had withheld Pakistan’s share of its financial assets. The 17 per cent which was paid after Gandhi’s protests was barely sufficient to meet our initial expenditure.

In an investigative treatise, it is necessary to mention the primary cause of the events described. According to the author, Liaquat Ali Khan and Khwaja Nazim uddin renewed the request only two days after Liaquat’s assassination. It needed to be ascertained whether Liaquat’s signature was genuine, since this is an assertion which is at odds with other US documents. Liaquat’s meeting with the US envoy Avra Warren only four days before his assassination; had been contentious. Warren had asked for Pakistan to contribute towards Middle East defence. Liaquat made the contribution contingent on a Kashmir solution and not on $2 billion. In fact, Liaquat was broaching a joint defence with Iran and Egypt, against the western bloc.

Shahid ur Rehman tells us that in 1952, wheat imported from the US was transported on camel carts with “Thank you America” written on the signs hanging from the animals’ necks. This, by itself is correct, but here one is tempted to register a counter complaint:

“Not long ago, while one of the authors was in Pakistan, our economic mission delivered a shipment of American tractors. Within a few days, it was commonly accepted throughout the countryside that the tractors had been given by Russia” (A Factual Epilogue: The Ugly American, P.282)

Shahid ur Rehman in his Introduction blames Ayub Khan for the grant of the Badaber Base. Further on, he himself refers to the acrimonious correspondence between Ayub and Lyndon B. Johnson over its closure: “I give not a fig for Pakistan except as its interests are ours” (P.17). Earlier McConaughy wrote: “The fight to the finish would destroy Pakistan’s military capability, which is not in American interests” (British Papers, P.381). Every envoy is meant to consider the interest of his or her own country and not the country of accreditation. Clearly, McConaughy was answering the charge that he was being sympathetic to the country to which he was assigned.

The US was the only country to send a delegation to attend the Independence celebrations of Pakistan, while the USSR was the only country not to congratulate Pakistan on its creation. The Indian government had withheld Pakistan’s share of its financial assets. The 17 per cent which was paid after Gandhi’s protests was barely sufficient to meet our initial expenditure.

Under the heading ‘Mystery of Liaquat’s visit to the US’ (P.30), Shahid ur Rehman persists in the face of overwhelming documentary evidence to the contrary, that Liaquat used USSR’s invitation to cadge an invitation from the US. But it is another fact that the USSR, after having extended the invitation, never set the dates. Before embarking for USA; on American soil and on his return, Liaquat reiterated that he had accepted Stalin’s invitation but he could only go when the dates were set.

But before rendering judgments, one must keep in sight, that even now, the India-US Nuclear Treaty and Russia’s supply of five nuclear reactors to India are proceeding simultaneously. It is naïve to think that the same conditions that apply to India would also apply to Pakistan, which brings us back to the advantages accruing to India, and the disadvantages accruing to Pakistan at the time of its creation. To blame the founding fathers instead of recognising the predicament in which the new country found itself, is quite a distortion.

National debt is a serious subject which must be discussed in a sober rather than sensational manner. It was found necessary because, when the author comes to his subject, he is on firm ground. In a situation when the people of Pakistan are kept from knowing the extent of their debt, when the loan is staggering despite the respite granted to Pakistan for its cooperation in the ‘War Against Terror’, these facts need to be made public.

Shahid ur Rehman reveals that 1989-90 was the first financial year during which debt repayment came first in the federal budget, getting ahead of defence and development (P.74). During the same year, three packages were negotiated with the IMF — all negotiated by unelected governments but implemented by elected governments. Since 1990, Pakistan is paying $39 million every year to encash one National Highway Authority bond worth $22 million and “nobody knows when, how and why these bonds were issued” (P.84). It would take $780 million for bonds having a face value of $440 million by 2010, which is not too far away. Now the debt incurred for building highways is not the same as the debt incurred for keeping the economy afloat in the initial stages. We must differentiate between the loans contracted before and after the Korean War, when the element of compulsion had receded.

Apart from the amounts of the loans contracted, the other aspect is that since information is not shared, there is no accountability. For example, Dr A.R. Kemal suspects that the government was reporting commercial debts repayment, but not the commercial debt contracted. A table provided by the author reveals that Pakistan to date has contracted $79 billion and repaid $70 million. They are shocking figures.

In conclusion, we are constrained to remark that such an important book should not have been produced in such a slipshod manner. We learn that what Ziaul Haq had staged was not a coup but a “coupe”. Similarly the back cover says that the premier had promised to come to the premier of the book.


Pakistan joined the World Bank on July 11, 1950, and the Auditor-General Yaqub Shah was appointed the first Pakistani representative to The World Bank.

A team of World Bank officials visited Pakistan in 1951 and offered $60 million for irrigation purposes, the rehabilitation of railways, extension of telecommunication and hydro projects.

Pakistan contracted the first loan in its history — $27 million from the World Bank for Pakistan Railways on February 22, 1952. But it was the first loan from the United States signed in December 1952 that changed the economic, security and political landscape for all times to come.

In 1951, India, hit by a famine sought two million tons of wheat from the United States leading to the Indian Emergency Flood Act signed by President Truman on June 19, 1951. It envisaged that a nearly $5 million interest would be used to bring Indian students, professors and technicians to the United States and for free ocean transportation of relief supplies to India given by individuals and private organisations.

In 1952, Pakistan was also hit by a food shortage earning the ‘gourmet’ Prime Minister Khwaja Nazim uddin the nickname of Quaid-i-Qilat (leader of shortages).

The government approached the United States for assistance, and negotiations which led to an agreement for the import of one million tons of wheat under a $15 million commercial loan provided by USEXIM. The agreement was signed at a ceremony in the White House on September 7, 1952, witnessed by President Truman. Ambassador Muhammad Ali Bogra signed on behalf of Pakistan.

Subsequent developments revealed that the shortage was artificial and as soon as imported wheat started reaching Pakistan, the hoarded wheat resurfaced. When 600,000 tons of wheat had arrived, the government asked the US to stop further shipments.

Using the food shortage as a pretext, Ghulam Mohammad sacked Prime Minister Nazim uddin on April 17, 1953. According to various accounts, Nazim uddin was held incommunicado, his telephone lines severed to prevent him from appealing to the Queen in whose name the governor-general was ruling Pakistan.

Nazim uddin is reported to have remarked in helplessness that when he was governor-general, the power lied with the prime minister, now that he was the prime minister, the governor-general was wielding the real power.

Mohammad Ali Bogra was imported from Washington to become the prime minister. He was the first rolling stone of Pakistani politics to rise meteorically by switching over parties and loyalties. When Pakistan was born, he supported Hussein Shaheed Suharwardy in the election of the leader of the house in the East Pakistan Legislative Assembly against Khwaja Nazim uddin.

Nazim uddin won. Bogra changed his allegiance to Nazim uddin and managed to secure the ambassadorship to the United States. Mehmood Ali, a veteran of the Pakistan Movement, said the following about Mohammad Ali Bogra.

“In the power struggle in Pakistan after the assassination of Prime Minister Liaquat Ali Khan and the illegal and unconstitutional dismissal of Khwaja Nazim uddin, Mohammad Ali Bogra changed over to the Ghulam Mohammad-Iskandar Mirza-Ayub Khan axis backed by a foreign power and succeeded in stealing the office of the prime minister of Pakistan.”

As ambassador to the United States, Bogra had signed the cherished deal for one million tons of wheat and was inducted as prime minister before it started arriving in Pakistan. The US wheat was transported from the port on camel carts with “Thank you America” hanging from the camels necks and its arrival was celebrated at a glittering ceremony in Karachi on July 3, 1953. It was the biggest ceremony ever in the history of the metropolis chaired by Prime Minister Bogra. (By permission from Mr Books)

Pakistan: Sovereignty Lost By Shahid ur Rehman Mr Books Super Market, Islamabad Tel: 051-227 8843-45 ISBN 969-8500-01-4 252pp. Rs395

Shahid ur Rehman, a veteran journalist known for his economic and diplomatic reports, is correspondent for Kyodo News Agency of Japan. His other books include Who Owns Pakistan? and Long Road to Chagai.

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