That opposition leaders and conspiracy journalists continue threaten to deny the funding offered by the Americans in the Kerry-Lugar bill shows that they have a fundamental misunderstanding of basic economics. While they mistakenly proclaim that the bill is a threat to Pakistan’s sovereignty, a real threat to Pakistan looms: economic collapse. The best option for Pakistani people is to accept the investment offered in Kerry-Lugar. Here’s why.
According to Finance Minister Shaukat Tareen, if Kerry-Lugar is not approved then Pakistan will face a budget deficit of $800 million.
Finance minister said: “The bill is under discussion in senate and if it is not passed by the senate then we would have to choice but no seek IMF’s help to fight war against terrorism and for the social development.” This was said in accordance with the weakening dollar which has compelled the government to take immediate steps with the help of State Bank of Pakistan (SBP), to convert foreign reserves in two or three different currencies. Tareen said that this is utterly shameful for us and we do not want to beg money from others, but it is now inevitable that this process would continue from IMF. “Pakistan will receive an amount of $521 million by November 15 from IMF”, he added. He said that value added tax is being introduced from July 1, 2010 suggestions and steps are being taken in this regard.
He stated that we would not launch any of the schemes for whitening of money so that the common people could be saved from paying direct taxes, adding that everyone in the country would be included in the tax net. He said that if there is any conflict between Planning Commission of Pakistan and Economic Advisory Council, the Planning Commission should end and the Economic Advisory Council should be maintained and remain intact.
The fact is that Pakistan requires some assistance from other nations at this time. We are in the midst of both a global economic recession and fighting a battle against extremist militants that threaten not only our own independence, but the peace of democracies around the world. For this reason, our friends in the US are not giving us alms, they are aiding their partner, Pakistan.
Opponents of Kerry-Lugar make arguments about national pride, but when it comes time to support the nation economically, they are nowhere to be found.
The “Ghairat” lobby, always eager to mobilize street protests of the “Go America Go” variety, never runs a campaign to get the nation to pay taxes. Ditto for the industrialists and traders that support the various factions of the Pakistan Muslim League and the landowners that are incharge of the Pakistan People”s Party. Few Pakistanis know we have a tax-to-GDP ratio of 8%, even below Ghana, which collects 15% of its GDP as revenue.
It is fashionable to say we will break the proverbial begging bowl (kashkol) and tighten our belts. This is a good populist slogan much beloved of some Urdu columnists. As prime minister, Mian Nawaz Sharif championed this view and became rather popular among middle class urban Pakistanis. He started the National Debt Relief Program with the explicit purpose of raising donations from overseas and rich Pakistanis. Only $178.3 million were collected against the then outstanding national debt of $35 billion. Of this only $28 million was in donations, $1.6 million in Qarz-e-Hasana, and $148 million was in profit bearing deposits. So much for “Ghairat” and hyper nationalism trumping economic realities.
As we have proven in a previous post, the non-military investments that are made in Kerry-Lugar will help build Pakistan’s economy. The economics are not in doubt. If a free and democratic Pakistan is to survive, we will require some assistance. This is not a question of national pride, nor is it a question of sovereignity. It is a simple case of economics.