$40 billion 'window of opportunity'



Dr Farrukh Saleem

America sent our way a paltry $91million in 2001. Then came September 11. In 2002, we got a wholesome $1,151 million. In 2003, Bush announced a five-year $3 billion aid package. In 2004 and 2005 we received $411 million and $726 million, respectively. Thanks to Bush, the World Bank -- where America has 265,219 votes -- committed a three-year $4.5 billion loan. Thanks to Bush, the Asian Development Bank -- where America has 565,919 votes -- committed $1 billion a year for the next three years. Japan resumed her yen loans, the equivalent of $500 million a year, and the UK promised an additional $150 million a year. Additionally, expatriate Pakistanis keep sending back an average of $350 million a month.

To top it all, the US Department of Defence has been depositing a cool $100 million a month into our treasury for the last four years. The US forgave $3 billion worth of bilateral debt, and then convinced the Paris Club lender nations to reschedule a large portion of our $38 billion bilateral debt on easy terms. Add it all up -- and thank Osama -- for the total bonanza is going to be a colossal $40 billion.

Yes, our large scale manufacturing (LSM) is growing like it has never done before. Yes, construction activity is at its best since 1987. The stock market is booming and corporate Pakistan is richer than ever.

To be certain, the $40 billion 'window of opportunity' that opened up right after 9/11 shall eventually close. We ran a budgetary deficit as well as a trade deficit before the window opened up. We were, in effect, a twin-deficit economy.

Count the years and the 'window of opportunity' has now been open for more than four years. Here is what we have managed to achieve: From July 2005 to December 2005, we imported goods and services worth $13.6 billion and our exports stood at $8 billion; a six-month trade deficit of $5.6 billion. Our annual budget now shows total resources of Rs698 billion and expenditures of Rs986 billion; a deficit of Rs288 billion. Somehow, we continue to be a twin-deficit economy.

On December 25, 1979, another 'window of opportunity' had opened up when Leonid Brezhnev sent in troops to invade Afghanistan. On January 21, 1980, President James E Carter, in his state of the union address, identified Pakistan as a 'front-line state' in America's global 'war against communism'. During that 'window of opportunity' the CIA pumped in some $5 billion to $8 billion. Prince Turki al-Faisal, the then head of Istakhbarat, Saudi Arabia's secret service, matched the CIA dollar-for-dollar. Pakistani expatriates sent in an additional $3 to $4 billion a year. The total bonanza from our previous 'window of opportunity' had added up to some $30 billion.

On February15, 1989, the last Soviet soldier walked out of Afghanistan, and soon afterwards our 'window of opportunity' was no more. Alas, we had nothing to show for the $30 billion bonanza.

Our macro economy is now doing better than ever before but what about our micro economy? Yes, our gross domestic product is growing like never before but who is minding our gross domestic problems? Parts of Pakistan are shining like never before but how many Pakistani lives has 'shining Pakistan' really touched? How many additional Pakistanis now have access to basic necessities? Is justice being dispensed? Are we using this 'window of opportunity' to build either a political or an economic infrastructure to keep us going when the window is no more?

The News

What these people do not understand that Pakistan can not even come close to developed countries only in few years. It will take pakisan about a little less then decade with the GDP growth of more then %6 and constant export growth of more then %13.

the last paragraph made some really good point

for example, cutting corruption in our banks has brought all pakistani banks into profit, as the prime minister pointed out

but we should also follow china's example where they audited their military, we should do the same, as it is a big part of our nation (politically)

afterwards, it will have the confidence of being corruption free, and the military government/semi-democarcy can lead, by example, to ending corruption acroos the country, and dispensing justice fairly

they should also resolve issues quickly, and fairly (negiociations with the baluchistan government, on how much royalities they should get from sui will have to be done, but we should by bypass the non-governmental elements that are harmful; if they want power they should run for positions in government)
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also we spend 33% of the budget ($17 Billion last year) on paying of the debt (38 Billion total debt)

so for last year, we paided off $5.7 Billion of debt to bring it to $38 Billion
we should really pay off this debt, while laying the ground work for when the debt is paid off

at around 6 Billion a year paying off, and assuming growth in debt paying off equals interest on the debt, pakistan could be debt free in 7 years

and then we would have around 6 Billion to pay for that import imbalance as well as domestic imbalance, through reducing inflation, and developing internal equipement, so foriegn stuff would not have to be bought, or at least not a whole lot more than is exported
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at present we need to use this "window of oppurtunity" to set up a diverse economy based on various industries

1. dams will create a stable water supply, and support the agricultural industry
2. lowering electricity pricing will help industrial development, and we could even build more than we need to sell to our developing neighbors to the north and west (china, afghanistan, and CAS)
3. inviting IT companies will create a modern "brain industry" and from that many R&D companies
4. also the tranist economy, centered arouns moving things from gwadar to overseas, and overland to CAS and china
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with our debt paided off, and th einfstruture to untilize the newly freeded up money, we can invest the money in our economy, and grow

we can use this window of oppurtunity and not squader it

dr. farukkh saleem is just one of those people who will criticize and criticize for the sake of criticizing. he's taken everything out of context. quite possibly the stupidest article i've read all week.

the government is developing the economy, he is just trying to pointing places where it could focus on (a suggestion to the governemnt)

although with criticism, should be suggestions
(he should give suggestions, but i don't think that would sell newspapers )

but we should also follow china's example where they audited their military, we should do the same, as it is a big part of our nation (politically)

The govt. did audit the KRL .. I think the first thing to audit fast would "Kaumi Bachat centre" and get it Moody's creditation ! I had heard that actions were going ahead regarding auditing "Kaumi bachat centre".

and in the last couple of years Audit General Pakistan is starting to become vocal ! Good signs !

Hi,

Just wanted to point out one thing. I do not think that our debt is still 38 billion. We have to remember that after the earthquake 4 out of the 6 billion pledged were in loans. Soft term loans, though they maybe they are still debt. Also is Pakistan not taking on more debt? For things such as infrastructure and we will need to for the gas pipeline from Iran.

Just my observation.

Ehsan

also the government is investing $6 billion to modernize the transportation network (rails, roads) so a trip between islamabad and karachi should not be more than 36 hours for any kind of cargo

ehsan20:

Pakistan's debt is hovering around $36-38 bn mark for quite some time. We are paying off the expensive (high interest rate) loans and replacing them with cheaper ones. That reduces the amount of interest payments we need to pay on the loan drastically. There is a debt management office in SBP doing this.

As for quake relief, there were quite a number of loan we got from abroad that were on very cheap rates. Pakistan seeing this window of opportunity would replace these loans with the comparatively more expensive ones and be able to carry out the relief efforts at the same time.