Economic Disparity in Pakistan: An Analysis

Recently, an analyst of The Economist, London, commenting on Pakistan's economic disparity said, "It is a poor country replete with tycoons."

With fertile land rich in natural and human resources, it is distressing that Pakistan today stands debtor to the tune of Rs. 2,500 billion. The nation has all the paraphernalia to emerge as an effective regional power, but after the lapse of 50 years in August 1997, it owes to the world $33 billion. To pay interest on these debts it has to resort to short-term borrowing from banks and financial markets with high interest rates. This year it needs more than $4 billion for these payments (the amount was $2 billion two years ago). If one wishes to have an idea of the burden of interest on the budget of the country, then suffice to say that for the current financial year the government of Pakistan has fixed Rs. 334 billion as revenue collection target. Of this, 248 billion would be required to meet debt-servicing. Defence budget (Rs. 134 billion) is only 60 per cent of the amount to be paid as interest and debt repayments. After debt-servicing the nation will be left with only Rs. 76 billion, which will not meet even the defence spending. Further borrowings would thus be needed to meet demands like administrative expenses, education, health and social services besides resources that are needed for national development projects.

With such an economic condition, those who came with a mandate to break the begging bowl, making loud promises of ushering in a new era and raising slogans like "Qarz utaro Mulk sunwaro" (pay off the debt and adorn the country), have miserably failed. During the last 9 months, they added Rs. 150 — 200 billion on the already overburdened shoulders of the nation. Besides IMF, World Bank and the Asian Development Bank, short-term borrowings are being made from the market at very high rates of interest after mortgaging future exports, sale of the shares of telecommunications and expected overseas remittances so as to save the country from defaulting. Short-term loans which were 13 per cent of the total external borrowings in 1992-93 have in 1997-98 risen to 20 per cent and the amount of interest and repayments of the short-term borrowings runs to $2.7 billion. The external and internal debts are 48 and 41 per cent, respectively. Summing up, thus the total debt is now about 90 per cent of our GDP. The annual repayments for external debts are consuming 61 per cent of our export income. The demand is rising with every passing day.

The greatest burden on country’s economy is its debts. The curse of interest, misbelieved as bastion for development by the secular leadership of the country, has ultimately ruined the economy. Most lamentably, the present leadership has agreed to bargain its economic and political independence and authority for policy making. As a result, the country is now in deep mire and there exist no visible signs for its deliverance.

People’s Plight

Now let us have an idea of the plight of the people and their sufferings. During the 1960’s, about 19 million people were counted as poverty afflicted in Pakistan as they were unable to meet their mere basic needs and led a sub-human life. Within 20 years of the so called development era, up to 1980, the number of these poverty stricken people had risen to 34 million. Fortunately, the overseas remittances then helped to mitigate this scourge. By 1990 it was reduced to 24 million but again it started rising and went up to 42 million in 1995 — an addition of 18 million within half a decade! This is the reason why 1/3rd of our population is poverty stricken, 70 per cent are illiterate and only 37 per cent of the initial school-going age children can reach schools. About 67 million persons do not have access to clean drinking water and 89 million persons do not have primary hygienic facilities. Every fourth new-born baby is under weight and bereft of the basic nourishment facilities. Every newly-born baby carries a burden of debt amounting to Rs. 18,000.

Affluent’s Pride

We have seen two facets. Let us see yet another. It concerns the upstart affluent, influential capitalists, the jagirdars, Vaderas and the ruling elite. On the surface, there has been an annual increase of 5 to 6 per cent in the GDP. In ’60s this increase was 8 per cent, in ’70s it was 4.8 per cent, in ’80s it was 8.5 per cent and during the 7 years of 1990, it stood at 4.7 per cent, as a result of which, according to statistics, there was an increase of 221 per cent in per capita income during the last 20 years. If the figures provided by the Household Surveys are analysed, the average household income during 1968-69 was Rs. 303 in urban areas and Rs. 197 in rural areas which would now be Rs. 4976 and 3070, respectively. But the real difficulty in regard to "average" is that it conceals the difference at the individual level. The bare fact is that the poor is getting poorer and the rich is becoming richer. These surveys have revealed that for the 20 per cent people with the least income level whose share in total GDP in 1971-72 was 8.4 per cent, it was reduced to 6.2 per cent by 1992-93 whereas for the richest 20 per cent whose share in 1971-72 was 41.5 per cent, it increased to 48.2 per cent (Economic Survey 1996-97, Govt. of Pakistan, pp. 6). Unequal distribution of wealth can be gauged from the fact that in December 1996 there were 1,024,462 bank accounts in all the scheduled banks of the country and the deposits amounted to Rs. 4,62,415 million. Of these only 6656 account holders were those whose balances were Rs. 10 million or more and their total holding was Rs. 269004.7 million, i.e. more than 55 per cent of the total deposits. The accounts with amount ranging from 1 million to 10 million are continuously swelling. As compared to 1995, in 1996 there has been an increase of 22.2 per cent and 27.2 per cent in these two types of accounts. In the accounts with deposits of Rs. 1 million or more, the total money is 89.3 per cent of the total bank holding. The number of such persons is 49817 which means that 90 per cent of wealth is with around 50,000 persons in a country with a population of 140 million.

When we look at the agriculture sector, we find that 40 per cent of the total agricultural land is with 6000 big land owners. It can be guessed how much share of the total agricultural income which comes to Rs. 600 billion goes to these 6000 persons and how much falls to the rest 72 per cent population that lives in rural areas and toils hard to get a living from the land. Elite comprising these few thousand people are mastering the politics and economy of the country. And they include those 8000 persons who are defaulters of banks for an amount Rs. 140 billion. They are the persons who evade taxes and deprive the exchequer of an annual income of Rs. 100 billion and still stay above accountability. They operate the black economy which is not accounted for and is estimated at the lowest to be Rs. 500 billion. They control politics and the administration, the police and the accountability machinery is at their back and call. Their style of living is different from the rest of citizens having little bearing to the living of a common man. They have their own world and common interests and despite their manifest differences and labels they are one community. This is a privileged class and practically enjoys immunity from all kinds of accountability while common man is victim of unemployment and downsizing besides spiraling high prices of everyday needs. The labor force during ’60s was 17.2 million with total unemployed being 2,50,000, that is 1.5 per cent of the labor force. In 1995-96, the labor force is estimated at 36.7 million and the number of unemployed is about 1.78 million, that is 4.85 per cent. These are the official figures. The real unemployment and under-employment is three to four times.

This also stands true with regard to inflation and high prices. Following statistics give fair idea of the breathtaking and awe-inspiring increase in the prices of few essential commodities:-

Commodity	Unit	1948	1988	1996-97
Atta	40 kg	Rs. 16.0	Rs. 100	Rs. 306
Rice Basmati	per kg	Paisa 30	Rs. 6-8	Rs. 18
Sugar	- do -	Paisa 60	Rs. 8	Rs. 20
Ghee Desi	- do -	Rs.4	Rs. 45	Rs. 130
Ghee Banaspati	- do -	Rs. 2.25	Rs. 16	Rs. 57
Black Chana	- do -	Paisa 20	Rs. 5	Rs. 22
Dal Mash	- do -	Paisa 20	Rs. 5	Rs 22.75
Dal Moong	- do -	Paisa 35	Rs. 10	Rs. 22.75
Mustard oil	- do -	Rs. 1	Rs. 12	Rs. 55
Roti/Nan	one	paisa 5	paisa 50	Rs. 2
Mutton	per kg	Rs. 1.25	Rs. 40	Rs. 100
Beef	- do -	paisa 60	Rs. 18	Rs. 60
Milk	per lit.	paisa 50	Rs. 5	Rs. 20
Tea	per kg.	Rs. 4.3	Rs. 60	Rs. 252
Local bus fare		paisa 20	Rs. 1.50	Rs 2
Petrol	per lit.	paisa 12	Rs. 7	Rs. 18
Diesel	- do -	paisa 5	Rs. 4	Rs. 8

These massive increases in everyday prices can give an idea to what extent the life of the common man is disturbed. Comforts seen reserved only for the "lords." We have brought out a few prominent aspects of the economy. The overall picture of the last year is depicted in the State Bank of Pakistan’s Annual Report for 1996-97. After going through this report — an apparent avowal — there remain no need for anymore proof of the disappointing performance of the Government and the dismal failure of its economic policies.

State-sponsored Extravaganza

Albeit this grave and disturbing situation, the ruling elite sought confrontations and keep on inviting more tussles. For three months, the country was in the grip of intense political and judicial crisis, about which the finance minister revealed that it caused a loss of 5 billion rupees. If prime minister is taken to be correct, there was a loss of Rs. one billion daily. But despite this gravity the prodigality went unabated. Those claiming to have a small cabinet, exercise downsizing in government departments and frugality in spending, do have a budget of more than two billion rupees per annum for two houses viz. President’s House and Prime Minister’s House and offices. Many billions were spent on the Mughal style buildings of the PM’s Secretariat. The Federal Cabinet now comprises 27 ministers, 28 ministers of state and 24 more deputies with the status of ministers — in all 79 personalities of ministerial status in a country where 40 million persons live at subsistence level and whose total annual GDP is less than the production of Ford Motor Company. In the poorest province of the country (Baluchistan) where the number of Assembly members is 44, as many as 24 have been elevated to ministership.

As for the level of understanding of this multitude, it will suffice to point out that at its meeting held on 12th Dec. 1997 the federal cabinet expressed its "satisfaction over the economic situation" and the Finance Minister gave happy tidings that balance of payments has improved and that exports were increasing. So there was nothing to worry about.

Do the people at the helm of affairs really think that people living in this country are blind, deaf and dumb who can be fooled in any way and all the time? Or, are they bent upon repeating the scenario that prevailed prior to the French Revolution when a large mob of hungry and tortured people was wailing for bread, when the daughter of King Henry exclaimed, "Papa! if they don’t find bread, why not they eat cake?" That time is to be dreaded when the situation slips out of hands and gets uncontrollable. Economic damage has hurt the entire nation through and through. Everybody is feeling the pinch; it now needs no external call.

Logic behind Decline

In our view the real reason behind this deterioration is lack of fear of Allah’s wrath, and the indifference and unmindfulness about the accountability by the people. All the resources are in the grip of a particular group plunged in its own environs, aloof from the common people. Apparently elections are held and democracy is talked about but neither rule of law exists nor real authority stands transferred to the people despite attainment of independence. All powers, authority and resources, have been usurped by an organized group of power elite. They thrive under the misconception that they shall continue perpetrating their own will on the strength of propaganda alone but it is against history and natural law. With freedom of press, activism of judiciary, and above all awareness among masses about their rights and their preparedness for struggle and sacrifices, there is no possibility of furtherance of this system based on torture and exploitation. Its days are numbered now. For a change there are two courses: One, those in authority should shed off the tyranny of vanity and carelessness and get prepared for a change of self and a change of system and thus a change is ushered in through mutual understanding and legal channels; Two, the other course signals that the country is fast heading towards a revolution. And when these revolutionary forces get up against tyranny, those highly placed and very strong are pulled down and their fortifications are smashed. They have to choose either of the two, a voluntary change or a change with annihilation. Either change; or be changed.

Deterioration in economy has reached a stage that partial or superficial changes shall make no difference. Our performance during the last 50 years coupled with new international situation and experience call for structural changes. The economic policies have so far been revolving round the interests of those in authority or those wielding influence or have catered to the wishes of external forces. The pattern of economic policy-making has todate been the same as it was devised by the colonial power. Increase in production and providing additional privileges to rich sections of the society has been termed as economic development.

The Worsening Conditions

After the second World War and with the background of cold war, USA and the European nations devised a plan for a New World Order. Our leadership became part of it and tied itself to the strategy of IMF and World Bank with regard to foreign aid and foreign investment. Salient features of Pakistan’s working plan that emerged out of it are as under:-

Ridiculing Ideology: The economic policies had no bearing on the ideology of Pakistan and no connection could be established with the religious, moral, ideological and social feelings and values of the common people. Mundane thinking pervaded the economic field. In the early stage, the capitalist system was made ideal to be achieved and then socialism and nationalization were followed. Currently they are playing on the tune of free market economy, liberalization and globalization. Ignoring the question as to what are the real objectives of the nation? What have been its historical ambitions and where lay its real interests, and how the welfare and prosperity of the common man is to be achieved. National objectives like betterment of the country and the people, administering justice, social welfare, prosperity, increase in production along with equitable distribution of wealth and enforcement of collective justice — have never been the targets of our economic policy. That always remained subservient to the interests of self-seekers, serving their selfish ends. Time has come to demolish this demonism and to introduce basic and revolutionary changes in our economic policies and planning, so that the economic resources of the country are utilized for the welfare and prosperity of the common people. But it calls for new thinking and new approach. It is now a must to get rid of models provided by the West and to determine vivid targets and policies in the light of our own traditions, values and principles. Mere worship of the goddess of economic development has not only gripped our economy but it has also turned every earning person into a self-seeker and wealth worshipper. High ideals of life, respect for human rights, looking after the welfare of others on an equal footing — none of them could become a part of our social and economic life.

Renowned historian Arnold Toynbee, while analyzing the stories of the rise and fall of twenty-six civilizations has said that if man strives wholly for worldly objectives and mundane happiness, he fails in achieving real satisfaction despite all his struggles. But when his target is a grand objective like supporting truth and righteousness in comparison to evil, and harmonizing with Absolute Reality viz. Allah and His will, he gets mundane and worldly happiness and satisfaction by way of incremental benefits.

(Oxford University Arnold Toynbee,

Christianity Among the Religions of the World)

William Pfaff, a well known columnist of the daily International Herald Tribune has made an interesting analysis of market economy and globalization in the background of recent Asian economic crisis. He says that every society and every culture has its own temperament and targets and it can be much devastating to ignore these values for the sake of a global system only. Pleading for the need to revive the moral demands and incumbencies of wealth, William Pfaff writes:

This belief in the moral obligations of wealth persisted into the 1950s, expressed in the notion of "corporate citizenship" and a belief that companies had obligations to all their "stackholders" — labor and the community, as well as stockholders.

In today’s American capitalism, the idea of stakeholder capitalism has all but disappeared, to the benefit of stockholder and manager, and the national morality within which business and industry function has changed radically.

The United States remains the most religious of industrial nations in terms of avowed belief in God, and regular churchgoing, but religion has lost virtually all serious cultural or economic influence.

Religious influence has been driven out in the name of church-state separation, but also by the conversion both of elite and of the public to versions of hedonist individualism.

Dawn/IHT Service (Dawn, Dec. 10, 1997)

Wealth worship and absolute selfishness that pervades America and Europe and to which capitalism lends credibility, has also engulfed our elite and ruling junta. This attitude and culture of wealth worship has to be eliminated and instead we need to restore the relations between economy and morality and between wealth and justice that have been the characteristics of Islam and all other revealed religions, according to which wealth is considered to be a Trust, acquiring of which is desirable but its acquiring and spending both are intended for collective equilibrium, for honoring the right of the people and for the collective welfare and prosperity of the society. This very thing turns wealth and economic development into well being and develops the common well wishing and welfare into power and thus human society is saved from highhandedness and exploitation. First of all our economic policy needs this orientation.

Reliance on Others: Another basic thing that we need is self reliance so as to avoid dependence on foreign and external investment which affects our political and economic independence on the one hand and turns us into a market for foreign goods on the other with the result that real productive activity could not stablise here.

The system of global investments and money-lending based on interest as established by the Western nations is the worst instance of collective tyranny because efforts are afoot to hand over the entire world economy to the few international money-lenders. Globalization and Market Economy are the steps towards it. With the bitter experience of forty years we have vividly seen that no real development is possible through these interest-based investments. Both this capital and the foreign aid are parasites that sap up all the growth potential; and the entire "flora" is reduced to ashes.

When our own politicians and economic experts were harping in tune with American and European experts, planners, bankers and money lenders in favor of foreign aid and international investments in the name of economic development of Pakistan, so as to get us into this net, some far-sighted leaders tried that the nation should not tread this suicidal path, but it proved in vain. Today we need again to ponder deeply over what they said that the new strategy is free from past mistakes.

Maulana Syed Abul A’la Mawdudi while addressing at Karachi in Nov. 1951, warned the nation keeping in view the trends of time, saying — "Whatever is being thought and acted upon for construction and development of the country, we find two major drawbacks: One, in these Plans mostly external investment is being relied upon and is being invited. But these foreign investments while rendering some help in building and development of the country, do cause more economic and political damage. I find no example where any country after inviting this curse could get away without becoming a victim of political subjugation and economic exploitation, and I am not aware of any amulet that our state administrators possess and the use of which shall save us from the affliction of that curse.

Two, the other remises that we perceive is that major portion of those resources is not being utilised for the real development and productive works. Instead it is being consumed on such items of pomp and show as may apparently depict Pakistan a rich country externally so that an image be built up in the minds of our own ostentatious lovers and foreign on-lookers and they pay tributes that our leaders have upgraded the country to the level of developed nations."

(Hamarey Dakhili aur Kharji Masail,

Syed Abul A’la Mawdudi, Islamic Publications, pp. 28-29)

Then on 14th August 1957, Maulana Mawdudi in an interview appealed for establishing and developing basic industries especially steel industry and warned that Western media was misleading us and that we should fix our priorities very thoughtfully. Maulana Mawdudi said:

The Present state of development is that some essential basic industries have been ignored. For example, hindrances are being created in the establishment of basic industry of iron and steel although steel industry is essential for modernizing agriculture. The way these hindrances are created amply reveal the real intentions and underlying reasons which it is an open secret.

(Daily Tasneem, 14th August 1957)

During Ayub’s regime, the Maulana warned again on Nov. 1962:

So far it has been the practice that foreign aid is relied upon in most cases and this aid was obtained with humiliations. It creates an impression among our allies that we are their fostered lackeys. Results of this blunder are obvious now and if we fail to cover them up, we shall have to bear disastrous consequences.

(Weekly Asia, 19th Nov. 1962.)

Similarly, the former Prime Minister Chaudhry Mohammad Ali in his article, "Foreign Loans: Far Reaching Consequences," had warned the nation in clear terms:

The temporary impression of economic prosperity that has been created under these loans, is in fact very much like extravagant zamindar who makes merry with the loan amount spending beyond his means and when the amount of one loan is spent, he goes begging for another till he absolutely falls into the grip of the money-lender.

About the conditionalities of these loans he wrote:

Usually one condition included in foreign loans is that all the purchases out of the loans advanced would be made from the lender country. And in the largest lender country America, prices of goods are 35 to 40 per cent more as compared to the world markets. Thus we get practically goods worth six lakh or six and a half lakh dollars against a loan of ten lakh dollars. In addition the fee of experts and advisers has also to be paid and ships of the lender country have to be acquired for the transportation of goods.

About the utilization of these loans, Chaudhry Mohammad Ali wrote:

These huge loans were not utilized to acquire such vital machinery and heavy equipment that could add to the productive capacity of the country and enable us to pay back these loans. Instead, major portion was spent on defraying day to day expenses.

Chaudhry Saheb further writes:

Even if Pakistan does not take further loans after 1969-70 the repayment of outstanding loans shall continue up to twenty first century and we shall be compelled to get fresh loans to settle earlier loans and their compound interest shall destabilize our national economy.

About political implications of foreign loans, the late Chaudhry Saheb wrote:

When a nation treads the path of economic bankruptcy then the lending countries also try to deprive it of the freedom of thinking and action. Gradual infusion of foreign powers in national affairs can culminate into a situation leading to appointment and expulsion of men in power. It is possible that the common man remains unaware of the pressure of these powers but its devastating effect continues, especially when there arises need for new loans.

Some other knowledgeable persons also commented in their own way about foreign aid and external loans and explained the need for self reliance in agriculture and basic industries. After 50 years we can witness today with our own eyes the devastating effects we were timely warned about. But those in power are in no mood to wake up.

Recently an interview of Syed Shahid Hussain, former Vice President, World Bank has been published, which on the one hand carries the importance of being an "evidence from the household" and on the other it is a wholesome sarcasm on the performance of IMF and the World Bank during the last 50 years. He says:

I have never seen an economic system survive where the government has indefinitely depended on foreign loans, particularly short-term loans, to finance a part of its current expenditure. There is nothing in the (present) government’s programme that would reduce Pakistan’s dependence on increasingly expensive and scarce foreign funds. While expenditure reduction must be pursued, I do not see a solution to Pakistan’s economic problems without a significant increase in tax receipts.

(Weekly Friday Times, 17 - 23 Oct., 1997)

But the Government is piling up loans and presents every new trance as a certificate of success of its policies. It is completely ignoring the fact that moody practice of ‘enjoying the adversity’ is leading to have devastating effects for the country and especially the common man and the small income groups.

It is need of the hour that an open critical discussion is undertaken on this unsuccessful experiment of our economic planning. Recently whatever has happened in the East Asian countries and still going on is nothing less than a scourge and admonition. For smaller countries there is no alternative but to resort to an effective economic fortification; take a course of individual and collective self reliance; utilize their resources correctly, analyse with deep insight the effects and consequences of foreign aid and external investments; exercise restraint and frugality; shun ostentatiousness, enforce economy all around, and adopt a pattern of economic development as a result of which resources could be developed with the help of best technology. Consequently it should be possible to enforce equitable distribution of wealth, prosperity for everybody in the society and abundance of essential commodities and the resources. With that pattern of development it is possible to defend and lend stability to economical, social and political freedom while meeting both spiritual and physical needs of the people as well.