THE foreign debt burden of the country is currently estimated at $38 billion or so. A few economic writers have been blaming the military regimes for contracting the huge foreign debts which is one of the reasons for the country’s current economic malaise.

They have also been blaming the military dictators for diverting the economic aid received from abroad for the purchase of military hardware. They have almost been absolving the civilian rulers of their responsibilities in this context.

The country remained under democratic/autocratic eras as per the undermentioned details:

1947-48 to 1957-58 (11 years): democratic era consisting of about seven regimes;

1958-59 to 1968-69 (11 years): autocratic era of General Muhammad Ayub Khan, although he had given partial democracy through the 1962 Constitution;

1969-70 to 1971-72 (2 years): autocratic era of General Yahya Khan;

1971-72 to 1976-77 (6 years): democratic era of Zulfikar Ali Bhutto;

1977-78 to 1987-88 (11 years): — autocratic era of General Ziaul Haq.

1988-89 to 1998-99 (11 years): democratic eras of Muhammad Khan Junejo, Benazir Bhutto and Nawaz Sharif.

1999-2000 to date (2-1/4 years): autocratic era of General Pervez Musharraf.

The economic writers have more specifically been blaming the era under the rule of General Ziaul Haq era for creating so much extraordinary foreign currency debt burden for the country that the latter democratic regimes remained busy in repaying the debts burdens built up by him and such repayments were made not only from the country’s current foreign exchange earnings but also by contracting additional foreign exchange loans not only from bilateral/multilateral lenders but also from commercial sources carrying “punishing” interest. Resultantly, the 1988-89-1998-99 regimes did not find the adequate resources for development purposes. No plausible analysis of such an assertion, however, appeared in their articles. Some writers were also of the view that during the 1979-89 period when Pakistan was fighting proxy war for the USA in Afghanistan, there have been huge dollar inflows in the country and the aggregate of such inflows is put by some at $50 billion or more. The assertion about such large inflows is also hitherto remains to be satisfactorily explained.

An effort is, therefore, being made here to analyse in some detail the foreign currency debt. Pakistan had commenced borrowings in foreign exchange in early 1960s. At the end of the fiscal year 1960-61, the country’s borrowings stood at $ 171 million. The following chart gives details of accumulation of the foreign debt: Table:

It will be seen from the above chart that Zulfikar Ali Bhutto had inherited the foreign debt of $3.425 billion and when he left, the foreign debt burden had almost doubled to $ 6.341 billion even though he had to repay only a small amount of $756 million in respect of the debt created by his predecessor military dictators which constitutes only 20 per cent of the fresh debts contracted by him. The question is where this democratic regime spent 80 per cent of the foreign currency borrowing viz 80 per cent of $ 3.672 billion i.e. $ 2.9376 billion particularly when no mega project was undertaken during this democratic era except the Pakistan Steel Mill which was partly built during this regime. As compared to this Ayubian dictatorial era-which contracted foreign loans of the order of $ 3.425 billion - had large projects to its credit - a few to be named are Tarbela Dam, Mangla Dam, Indus Basin canal and the Wapda’s large electricity projects throughout the country.

When General Ziaul Haq usurped power in July 1977 he inherited the debt burden of $6.341 billion from Mr. Bhutto. At the time, the democracy was restored in early 1988-89, the foreign debt burden had reached $ 12.913 billion. Thus during General Zia’s dictatorial regime, there has been a net addition of $ 6.572 billion in the country’s foreign debt burden. But during the same period, repayments of foreign debts were made to the extent of $ 4.770 billion which constitutes over 72 per cent of the fresh credits contracted as against the previous democratic regime which utilized only 20 per cent of the fresh loans for debt repayment.

The democratic regimes which ruled the country in the aftermath of 1988, five in number, inherited the foreign debt amounting to $ 12.913 billion from General Zia’s autocracy and left the debt burden of $ 29.252 billion in 1998-99. This depicts a net addition of $16.339 billion in the foreign debt burden while during the same period, repayments effected totalled $4 26.086 billion which is more than double the debt burden of $ 12.913 billion left by General Ziaul Haque.

How could the quantum of debt repayments during the post-Zia democratic regimes be more than double of the legacy left by the General? This obviously indicates that the repayments made by the democratic regimes ruling the country during 1988-1999 did not solely relate to the debts left by General Zia but they (democratic regimes) themselves resorted to borrowings out of proportion without constructing any mega economic or social project except motor ways/convention centre, prime minister’s house/prime minister’s secretariat etc. on which a lot of nation’s resources were wasted.

All these were not justified on the economic grounds for the poor country like ours. The income from motorways is only partly covering its maintenance expenses not to speak of the relative debt servicing/debt repayment. It appears that since the debts contracted during this democratic rule were rather short term, repayment burden was very heavy. The democratic regimes, besides resorting to the hefty borrowings, also tapped yet another source of foreign exchange accruals.

The first Nawaz Sharif regime, under the garb of “exchange and payments reforms” liberalized the foreign currency accounts (FCAs) Scheme in early 1992 permitting the resident Pakistanis to maintain the FCAs and feed them with the foreign currency notes. To facilitate the feeding of the FCAs with foreign currency notes, sale/purchase of foreign currency notes/coins was made completely free through the medium of the authorised money changers (AMCs) which were licensed by the State Bank of Pakistan (SBP).

The number of AMCs is now around 400. This measure brought a very large chunk of foreign exchange. The balances held in the FCAs before the introduction of the exchange and payments reforms (30th June, 1991) aggregated about $2.5 billion which grew to over $11 billion in 7-year period i.e. in May, 1998 when a ban was clamped on withdrawals in foreign currencies from the FCA.s (I would not call it freezing because freeze is tantamount to complete ban on withdrawals from the accounts while under May, 1998 decisions, withdrawals from FCAs in Pakistan rupees was permissible without any limit). Since the balances held in the FCAs constitute quasi debts, it can safely be deduced that the 1988-1998 democratic regimes, in addition to the net foreign debt of $16.339 billion, added a further sum of $8.5 billion to external burden under the FCA scheme. Thus the post-Zia democratic era added $24.839 billion (i.e. $ 16.339 billion + $ 8.5 billion = $ 24.839 billion) in the external burden. The irony is that the ruling juntas could not put these huge resources received under FCAs Scheme to any productive use.

The greater irony is that the Nawaz Sharif’s last regime took in hand such projects like Lahore Airport in the aftermath of nuclear detonation in May-June, 1998 and dished out millions of dollars on account of down payment at a point of time when the country was starving for every single dollar.

The estimates envisaging inflow of $50 billion from abroad during the dictatorial regime of General Zia seems to be rather exaggerated. The USA was the largest lender/donor during the Zia regime. One remembers that two 5-year agreements were concluded with USA each for approximately $3.5 billion. And if one correctly remembers, these agreements covered both economic and the military assistance. Some cash inflows may have generated from friendly Arab countries including Saudi Arabia but still the figure of $ 50 billion would be exaggerated.

As for military hardware purchases, democratic regimes never kept themselves behind their dictator counterparts. Here, it would suffice if 3-4 mega deals are quoted; (a) purchase of tanks from Ukraine which were termed in the press of not being of high quality - this deal was finalized during Nawaz Sharif rule, (b) purchase of 40 Mirage III planes from France and their refurbishment. This was done during the Benazir regime even though these planes were discarded by the French air force and Mirage V planes with sophistication and latest technology were in use in the world at that time and India had also embarked upon purchase of Mirage V planes, (c) purchase of 2 or 3 submarines from France. This was finalized during the Benazir regime, (d) purchase of 60 F-16s for which Benazir used to boast that she has purchased these planes from the country’s own resources. This deal could not be completed and the USA returned to us only a part of the advance payments aggregating $ 600 million made by us.

What could be concluded from the above analysis is that each regime— whether democratic or dictatorial created external debt burden for the country; each regime repaid, partly or fully, debts created by its predecessor regime, and each regime resorted to military hardware purchases. It can also be safely concluded that both the dictatorial and democratic regimes were equally involved in corruption. To substantiate this, one can quote the case of the retired naval chief whose involvement in the corruption of over Rs5 billion has been proved but he is being let off on payment of Rs450 million only. Likewise, in the matter of the overseas accounts of Benazir/Asif Zardari and their involvement in the Cotena case and Rockwood House over-whelming evidence is there but there is no sign of rapid court proceedings. What the street wisdom thought during the democratic rule was that each ruling party instead of taking action for corruption was safeguarding the interest of the other party. There has not been any difference for the big fish during the present military rule too.

And the final conclusion is that all the rulers - whether democratic or dictatorial - are basically alike, corruption will continue to nurture and the poor economic writers should not blame one and absolve the other because both are almost equally responsible for the present malaise where the country has reached.