SBP’s timely warning

THE second quarterly report of the State Bank of Pakistan has identified a number of economic concerns needing urgent policy responses from the government. These concerns include the high rate of inflation, the rising current account deficit, the ballooning budgetary borrowing, deceleration in the growth of the commodity sector and a static tax base. On its part the SBP has ruled out any relaxation in its monetary policy which it has been tightening over the last six months mainly to keep the rate of inflation in check. Indeed, despite tighter monetary policy, the overall growth rate continues to remain robust at over six per cent while the rate of inflation is still likely to hover around seven to eight per cent during the year. So, there is still some room for the SBP to manoeuvre with its tighter monetary policy to bring down the rate of inflation without adversely affecting the growth rate. However, if the government continues with its budgetary borrowing spree without any thought to its longer-term effect on inflationary trends, even relatively higher interest rates can hardly help curb the rate of inflation.

In fact, such a fiscal policy would only compound the inflationary crisis. In such a situation, with no safety nets to protect the poor, their condition has gone from bad to worse. Couldn’t we have in place an inexpensive scheme like the Indians have introduced (Antyodaya Anna Yojana scheme) to prevent starvation among the poorest of the poor by providing foodgrains at subsidised rates? Ggas and electricity charges, house rent, transport charges and education expenditure, which make for almost the entire budget of a middle class family, have gone up by more than five times in recent years while the income of salaried classes has remained almost static, making it impossible for them to make ends meet. This has pushed many in the middle classes into the less privileged group. Couldn’t the government regulate and rationalise the prices of all such items that affect the budget of the middle classes instead of letting them be determined by market forces alone?

The SBP says that it would like to bridge the trade gap through containment of inflation and lowering of transport costs, instead of any large or abrupt exchange rate adjustments. But attempts in the past to artificially keep the exchange rate high only led to subsidising imports and eliminating the competitive edge of our exports. The deceleration witnessed in the commodity sectors, especially large-scale manufacturing, is attributed more to capacity constraints than any fall in demand either in the domestic or export markets. The country needs investment — related imports to expand these capacities. This seemingly is not happening. Therefore, there is no reason why consumer imports should not be curbed through the use of the exchange rate. This could also serve as an incentive for the exporters of such goods to set up their fabricating units inside Pakistan. The one major reason why it seems that the government does not want to use the instrument of exchange rate to overcome the increasing trade deficit is its growing dependence on the income from import duty for meeting its budgetary needs. The SBP has, therefore, very rightly advised the government to widen its tax base and bring into the net agriculture, the services and the equity sectors so that the country can achieve sustainability in its economic growth and activities.

Kishanganga issue

THE Indian willingness to modify the Kishanganga hydroelectric project on the Neelum makes good news. While, on the one hand, this vindicates Pakistan’s stand on the project in the light of the Indus Basin Water Treaty, the Indian decision, on the other, shows a welcome willingness on New Delhi’s part to abide by the international treaty on sharing the waters. The Foreign Office on Wednesday welcomed the change in the Indian position on the issue with guarded optimism and hoped the revised blueprint would be given to Islamabad at the earliest so that it could be examined by Pakistan experts. As Islamabad has indicated, it will not hesitate to accept the modified version of the project if it does not interfere with the flow of Neelum waters into Pakistan as guaranteed by the treaty. Unfortunately, this is not the only controversial project India is building in occupied Kashmir; the Baglihar dam also violates the treaty because it seeks to divert the waters of the Chenab. Pakistan thus had no choice but go to the World Bank for arbitration as provided for in the Indus waters treaty. Let us hope the Kishanganga issue will be mutually settled without recourse to World Bank arbitration.

There are reports that the Indian prime minister will bring with him to Islamabad proposals for a solution of the Siachen and Sir Creek disputes, because Dr Manmohan Singh does not want his visit to Pakistan to be a non-event. Of the two issues, Siachen needs priority for a solution, because —besides being a drain on the two countries’ economies — harsh climate has inflicted more casualties on the two armies than battles. In fact, Rajiv Gandhi seemed poised for a major initiative on the issue and resolve it, but evidently his generals did not agree with him. Any solution now will obviously require, besides demilitarisation, agreements on such finer points as mutual withdrawals to positions previously held and accepted by both sides, authentication of maps, no-go areas, and bans on mountaineering expeditions. These details can be worked out by experts provided the political leadership on both sides shows a determination to clinch a deal. A breakthrough on Siachen will certainly strengthen the on-going normalisation process.

Why that many power failures?

KARACHI is again in the grip of prolonged power outages and unannounced loadshedding. According to reports, residents in all parts of the city are experiencing long power breakdowns, which in many cases happen more than once a day. It seems that last summer’s story is about to be repeated this year as well, with residents being made to suffer long hours of power outages. The only ray of hope in this is the fact that the KESC is now under a new management, following its privatisation. A German company, well-known for its standing in the electronics field, is one of the investors in the new management and it is hoped that its expertise in the field will be put to good use in the running of the power system.

By this is meant an efficient operation of the utility, a reduction in its excessive transmission and line losses and elimination of illegal or ‘kunda’ connections. It has to be said that the previous army-led management could not make any progress on any of these fronts. There are other important issues as well that the new management will have to look into. One relates to the revamping of the utility’s infrastructure, especially its distribution network, so that the frequency of power breakdowns can be reduced. The other is of generation capability given that every summer the utility experiences gap between demand and supply, which is the primary cause of loadshedding. It is not known what progress, if any, has been made on this front. Has the KESC’s generation capability been enhanced or are there plans to buy power directly from independent power producers in case of a shortfall? With the month of June still six weeks away, one hopes that the new management will try to improve the system’s working in every vital aspect.

For a democratic future

MICHAEL SCHUEUR, former head of the CIA’s Al Qaeda Unit, warned in an opinion piece in the Washington Times that if the US keeps pushing Gen Musharraf to “do US’s dirty work against his country’s national interest”, he could be toppled and the US would lose an important ally in the region. The two areas, according to him, where Musharraf has gone against Pakistan’s national interest to please the US, are:

* Helping the US to destroy the pro-Pakistan Taliban regime and replacing it with the Pro-India Karzai one which immediately allowed an enormous Indian presence in Afghanistan.

* By sending the Pakistan army into the tribal area bordering Afghanistan. Musharraf has created a “heaven-sent environment for Pakistan’s enemies to fuel the Pashtun fire against the Pakistan army. In time the country could become ungovernable which would be “a boon for India”.

According to him, “the US officials believed that they could add untold pressures to Musharraf’s burden and still find him willing to do America’s most important dirty work of killing Osama bin Laden”.

When Pakistan sent its forces to Waziristan two years ago on American orders, the most shocking aspect was that a political solution was about to be struck between the tribal jirga and the government, whereby the tribes would have taken the responsibility of not allowing any attacks on Afghanistan from Pakistani territory. The second shocking aspect was that the Pakistan army went in Waziristan with a total disregard of the history of the tribal area left behind by the British. Had they paid any attention to the vast amount of material left behind by them, they would never have made this monumental blunder.

In their 200-year Raj in India the British suffered the highest amount of casualties in Waziristan. In 1935 half of the British Indian army was camped outside Waziristan and British officials and soldiers kept dying there till 1947. The British had very early on in their interaction with the tribals come to the conclusion that the nature of the people and the hostile terrain made military action unfeasible both in terms of men and material.

Thus, the superpower of the time preferred political negotiations and offered financial incentives to maintain peace and achieve its objectives. Military action was always the last resort. Yet here is a country that after paying for its debts and defence has to borrow and scrape and still cannot provide basic necessities to its people. The big question is: what happens if the US achieves its objectives in the region and walks away as it did after the Soviets were defeated in Afghanistan and stops paying the Pakistan army $70 million a month to do “its dirty work”? How will the country cope with the mess that is being created?

But much more shocking is the moral dimension of sending the army in Waziristan on the US administration’s orders. While researching on a travel book on the tribal area, I came across British Intelligence weekly accounts of unrest in the tribal areas in reaction to the massacres of Muslims in Kashmir and East Punjab in November 1947. On their own the tribes gathered volunteers and pooled their resources to send lashkars into Kashmir. Today Azad Kashmir is part of Pakistan because of the sacrifices, especially, of the people of Waziristan.

In both 1965 and 1971 volunteers from the tribal areas came to assist the Pakistan army. The country has never had to spend anything to protect its 1,500 kilometre border with Afghanistan because of the tribes’ fierce loyalty to Pakistan. One of the reasons why the Pakhtoonistan movement failed was because the tribal area acted as a buffer and remained loyal to Pakistan. It was because of this loyalty that the Soviets failed in the ‘80s to stir up trouble in the tribal areas for the Pakistan government.

Today Pakistan army is treating them no differently from how the Americans are treating the Iraqis or the Israelis the Palestinians. Even the terminology used by our government is the same — ‘miscreants’, ‘terrorists’, ‘foreign militants’, ‘Islamic extremists’, etc. For two years we have been hearing that there were a handful of foreign terrorists whose back was broken and everything was under control. Yet despite the strict press censorships and a complete ban on any independent enquiries, it has emerged that now the Pakistan army is pitted against its own citizens and the foreign element is insignificant.

The awful fact is that the tribesmen have risen up against our army. The more “extra-judicial killing” our army does the more the ranks of the tribesmen fighting our army grows, revenge being an integral part of the tribal culture. Even those not involved in fighting have complete sympathies with those who have taken up arms against the army — as was abundantly clear from the demands of 8,000-strong tribal jirga at Miranshah a few days back. Today no one in Waziristan dares talk to the Pakistan army for fear of being killed.

So far, according to Independent observers at least five times more Pakistani troops have died in Waziristan than US troops in Afghanistan. Like in Iraq no one has any idea about the number of civilians killed. There are tens of thousands of refugees in Bannu, Tank and D.I. Khan. And yet the war is being lost. Not only is the hatred and resistance to the Pakistan army growing, but also the once intensely loyal part of the country is now a fertile ground for Pakistan’s enemies to operate from.

Meanwhile, the senseless army action in Balochistan is producing a similar situation in the province. Another swamp created for foreign mosquitos to breed. No lessons learnt from the East Pakistan debacle. Rather than settling the province’s sense of deprivation politically and economically, opting for military action has further exacerbated the problem.

Pitting our army against our own citizens at the behest of George Bush’s neocons (war on terror is perceived by the vast majority of our population as a war against Islam) by a general to secure US support for his dictatorship, has raised many questions about the role of the Pakistan army. The people of this country have taken a lot of pride in their army and have sustained it at a great cost. One of the main reasons why we have not achieved our potential as a nation is because our resources have been diverted from developing our human capital to defence. We have watched countries in South East Asia overtake us in the ‘70s and ‘80s. Now all other South Asian countries are higher up the ladder in the human development index than us.

Even a bigger question being asked is who owns Pakistan — the tiny ruling elite or the people of this country. While the rulers have been bowing and boot-licking foreign powers, they have shown utter contempt and disdain for their own people.

When those Pakistani youth who were fighting with the Taliban against the Northern Alliance in Afghanistan and were captured and butchered, our government never spoke out against this violation of the Geneva convention. This job was left to the western human rights organisations.

Similarly, it has remained silent about those Pakistanis lying in Guantanamo or other detention centres who have not been given their basic human right to prove their innocence in a court of law when Gen Musharraf triumphantly declared on CNN that he had handed over 700 Al Qaeda suspects to the US. In trying to please his foreign patrons he had shown contempt for the law of the land.

When our own government has shown such lack of respect for its citizens why would any other country respect us? Hence the problems faced by the Pakistanis in the US, the murder of six Pakistanis in Macedonia under the pretext of them being of Al Qaeda terrorists and most recently the imprisonment and torture of Pakistanis in Greece. The amazing thing about the last incident is that rather than help them in getting compensation for being put through such pain and humiliation, the Pakistan embassy tried to buy their silence.

Even within the country the contempt of the rulers for their people is so blatant. The way during the VIP movement the people are herded behind barriers for hours when our rulers travel within the country and sometimes attending frivolous social functions.

There have been reports of patients on their way to hospitals, stuck in traffic jams, and dying. Equally jarring is the ostentatious lifestyle of the rulers on taxpayers money — the luxurious PM, presidential and governor palaces; the purposeless and extravagant foreign tours the private jets and crores of rupees worth bullet-proof cars, the army of ministers, etc. All this while the majority of the population falls below or around the poverty line.

The time has come for all patriotic forces to join hands and put Pakistan first. The longer Gen. Musharraf stays in power the worse. The only way out is for us to demand genuine democracy which can only come through holding free and fair elections under a caretaker government, with an independent election commission and judiciary.

Only a genuine democratic government with a sovereign parliament which derives its power from the people (rather than from Washington) will stand up and promote our national interests. Only a strong and independent judiciary will be able to protect the rights of our citizens of the federating provinces as well as state institutions and only an empowered public can ensure that the fruits of economic growth are equally distributed. The public will throw out such a government that enriches the rich and impoverishes the poor. After all, the BJP government which boasted of an over eight per cent growth rate and Shining India was rejected by the rural masses who felt they had been excluded from the benefits of economic growth.

The writer is a member of the National Assembly.