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Friday, June 7, 2024

Pakistan caught in a serious debt trap

The Islamic Republic of Pakistan faces dual existential calamities of debt and floods which cannot be contained through the regular approach. Out-of-box solutions are required to come out of this mess created by dictators, usurpers and their heirs.

The Islamic Republic of Pakistan is trapped in odious or illegitimate debt. The trap was laid in October 1958 by the first usurper Ayub Khan who abrogated the 1956 constitution. He ruled the country with the help of the royal colonial establishment. The framework for economic development was put in place by the founding fathers on the guidelines left by the father of the nation Muhammad Ali Jinnah. While imports into the country were regulated through licenses, targeted exports earned the much-needed foreign exchange.

A department under the Ministry of Commerce was created headed by the Chief Controller of Imports and Exports (CCIE). As my father’s family were leading importers of watches, I had the opportunity to visit the office of CCIE with my old man as I remember it was located on Davis Road across from the infamous ‘Muslim League House’. Import Licenses (IL) were issued to credible parties after strict scrutiny and regulation. Industrialization was to be carried out by the private sector with a few public sector enterprises in areas of defense and transportation.

Read more: Pakistan economy in long term ICU – Editorial

Remembering Khan Bahadar Hamid

The Pakistan Ordinance Factory (POF) and the Karachi Shipyard and Engineering Works (KSEW) were notable additions in this period. The Mughal Pura Workshop of Pakistan Railways was the only technical facility available in the new land. Khan Bahadar Hamid Ghani, a foreign qualified Mechanical Engineer headed this organization. As a Project Manager, he played a key role in establishing these facilities. The entire batch of the graduating class of Maclagan College of Engineering and Technology (UET now) was hired and sent to the United Kingdom for training and higher education thus establishing a base of qualified manpower in the country. Though Ghani Sahib was the son of Lahore, he decided to live in Karachi after retirement and is buried there as an unsung hero of technology. In the words of Allama Iqbal for such selfless contributors “Na Mal-e-Ghani mat Na Kishwar Kushai” (Neither bounty of war nor praise for performance).

As a child growing up in the Mall very close to the main seat of power called the Town Hall, I saw huge posters on the historic building on October 27 every year in which Ayub Khan the dictator was projected as the ‘Saviour of Pakistan’ while Allama Iqbal was presented as the ‘Founder of Pakistan’ with no mention of Jinnah. This ‘Anti Jinnah’ mindset was created as Madre Millat Fatima Jinnah valiantly opposed the policies of the usurper till her mysterious death in 1967. Also, it has been reported that the Father of the Nation had seen through the political ambitions of the General during his visit to East Pakistan and personally super seeded him for any further promotion.

With a very mediocre career, it remains a mystery how Ayub Khan (PA 10) managed to first get promoted as the Sipah-e-Salar and then became the President of Pakistan. Perhaps Prime Minister (PM) Liaquat Ali Khan was pressurized in promoting him after the fateful air crash of Maj. General Iftikhar Khan the first choice came from a family of Generals. His elder brother was Maj. General Akbar Khan (PA 1) the senior officer of that time and five other siblings all served the Armed Forces.

Read more: Did Pakistan economy really progress under PM Khan?

Coming from a family of honest and upright businessmen who believed in honest hard work, and against debt and interest-based economy, the danger bells started to ring in our household the moment Ayub Khan approached the International Monetary Fund (IMF). My father’s uncle, Dr. Anwar Iqbal Qureshi, after retiring from IMF in the early sixties, was invited by the dictator to join as his Economic Adviser. Dr. Qureshi traveled by train from Karachi and stayed overnight at our place.

Understanding the debt-based fast-track economic model 

He explained the debt-based fast-track economic model of IMF. My old man warned him against such a faulty approach. According to him, repayment would be a big issue, and easy money would generate corruption. Loans were doled out to the favorites as if there was no return. Massive right-offs took place and individual/project debt turned into the national debt. Next year we have to pay back close to $ 22 billion which we do not have.

With an imminent default hanging over our heads, there has to be an effective game plan. The ‘Debt Conspiracy’ that was let loose on the new nation by the dictator has to be countered by legal-financial experts. As I understand there are ‘International Laws’ against ‘Odious or Illegitimate Loans’ that were forced on third world economies through subservient dictatorial regimes not representative of the people.

Read more: Food security in danger: Pakistan Economy Watch

Currently, the country is facing serious flooding which has destroyed the infrastructure and needs to be rebuilt. The Islamic Republic of Pakistan faces dual existential calamities of debt and floods which cannot be contained through the regular approach. Out-of-box solutions are required to come out of this mess created by dictators, usurpers and their heirs. Jinnah rightly said “No force can undo Pakistan” but debt has proven to be a detrimental ailment and in toxification that has rocked the nation, it’s time to wake up before it’s too late.


The writer is Ex-Chairman Pakistan Science Foundation. He can be reached at fmaliks@hotmail.com. The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.