Why not grants instead of loans?
Did Pakistan have the option to seek relief from donors in debt servicing instead of asking for condition-loaded ‘soft’ loans and grants? This is a question which many in Pakistan raised after the government claimed credit for securing $1.9 billion grants and over $4bn soft loans from a conference of international donors.
Critics say that it was not a donors’ conference but a “lenders” gathering who were out to create business opportunities for their companies from the earthquake disaster. Pakistan secured debt relief on $11 billion repayment after the 9/11 incident plus trade concessions from the US and the EU. It was a price demanded by the military rulers of Pakistan for becoming a partner of the US and developed countries in their war against international terrorism.
While many governments, agencies and NGOs and local social outfits moved swiftly in the earthquake devastated areas and did whatever was possible to provide relief, there was no dearth of organizations and agencies that were out to capitalize on human misery and make a quick buck. The media reported supply of expired medicines, substandard goods and tents that could not withstand the first rains and snow.
Pakistan is seeking trade concessions from the US and the EU after the October 8 earthquake as given to Sri Lanka and Indonesia after the tsunami struck them a year ago. But why didn’t Pakistan seek debt relief?
Top government functionaries rule out the possibility of debt relief. “Debt relief was obtained from the Paris Club multilateral loan arrangements,” a top government functionary said, and pointed out that in case of reconstruction and rehabilitation of the earthquake areas, “we are asking for bilateral assistance”.
Ahsan Iqbal of the PML-N believes that Pakistan should have sought debt relief to create some fiscal space in the budget rather than add to the debt burden that would strain the budget in the years to come. Pakistan’s debt burden has increased to $36 billion plus in face of the debt management programme taken up by the government in the last five years. After securing four billion dollars plus for reconstruction and rehabilitation of the earthquake affected areas, the debt will touch the $40 billion figure.
“Even if we assume these are interest-free loans, the burden of debt servicing is bound to increase,” Mr Iqbal asserted. He was associated with the Planning Commission during the Nawaz Sharif government and was involved in negotiating loans and assistance for various projects. “And mind it, these loans are not creating any income generating assets in Pakistan but are being utilized for the construction of houses, hospitals and similar buildings.
Belonging to the middle income group of countries, Pakistan, he said, qualified for low interest loans from the open market and there was no need to convene a special donors’ conference for reconstruction and rehabilitation.
Former finance and foreign minister Sartaj Aziz has suggested that only those grants and loans should be utilized that are not tied and do not carry any terms and conditions. Grants are mostly tied with the purchase of goods and services from donors. Prices for goods and services are much higher than the market, and the bulk of the grants go back into the country which has donated it.
Mr Aziz has attributed the delay in relief to the victims and assessment of losses of life and property to the collapse of the district administration after the introduction of devolution. “Deputy commissioners and tehsildars have generations of experience with them to tackle emergencies,” he said and added that nazims and union council members were neither experienced nor well-equipped to cope with such situations.
Professor Khurshid of the Jamaat-i-Islami believes relief and reconstruction “are best done by the people who are affected by such calamities if there are leaders to mobilize and motivate them.”
He is convinced that loans, grants and the sort of people who are responsible to carry out reconstruction and rehabilitation are just not capable of doing their jobs. Officials are keen to set up plush offices and purchase automobiles for themselves rather than judiciously utilize the available funds.
Reports that a team of National Assembly members and senators and relatives of senior officers of armed services are touring the US and Europe on taxpayers’ money to mobilize donations and purchase equipment has made people more sceptical of the government efforts.
What was the quality of the goods purchased was evident from a statement given by a senior army officer involved in the relief work. He said 90 per cent of the tents given to the earthquake victims crumbled under the weight of the first rain and snow.
No official figures were available, but a businessman said that 240,000 tents worth around $1 billion were purchased.
Amjad Rashid, a global food trader, is unhappy over the approach for procurement of winterized tents. “It was mismanaged,” he informed the government in a communication while pointing out that all the organizations of federal and provincial governments and NGOs rushed to purchase tents, which raised local prices from $125 to $225. “Tents are not the right solution of the problem,” he had warned the government early in November.
Mr Rashid, who has been involved in relief and rehabilitation in war-stricken Iraq and Afghanistan and also helped Muslims affected by the tsunami in Sri Lanka, said the government should provide equipment and machinery for the manufacture of plastic goods that were used in the same locality.
The inordinate delay with which the government issued tax refund notification for the supply of goods and services on international tenders to the earthquake affected areas has made businessmen unhappy. They complain of losing more than $65 to $70 million business which was won by Dubai-based companies. For example, there was a tender to supply a small kit of towels, soaps, medicines and other essential items. Dubai-based businessmen get all these items duty-free and hence did good business.
Notwithstanding all these problems and limitations, there is a general belief that the Musharraf government is all set to make reconstruction and rehabilitation a great success because the year 2007 is an election year. Even if he is in uniform and will remain so, his interest is to see his Q.League politicians occupying the largest number of seats in the NA and the Senate and in the provinces.
Source: DAWN
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