Neglected issues for the new Pakistani government. Eliminating food, fuel subsidies, keeping out the IMF, and stopping the US drones, and halting the Afghan mercenaries coming from across the border

Will Deficit financing based Darnomics also called Supply-Side Voodoo-economics work in Pakistan? or is it a recipe for bankruptcy, disaster and IMF control of Pakistani assets?

The Peoples Party forced the interim government to raise the oil prices, so that the inflation could be blamed on the previous government. The surprise to the consumers is that oil prices will be raised again despite the $300 million Saudi oil “facility”. Mr. Sharif now wants to give a “relief package” to the people which essentially means deficit financing (11 Billion Dollars to date in May) by borrowing money from international doners at exorbitant interest rates. In the short span of a few weeks Mr. Dar has done what he does best–he has borrowed money in short term loans from every possible source. This is a recipe to invite the IMF back into Pakistan with disastrous consequences for the sovereignty of the country. (See “CIA connection….on this site).

The entire nation is held hostage while these unelcted “leaders” play Carmend Sandiego (“international hide and seek”) across world capitals.

Mr. Sharif seems to demonically possessed, totally posessed with only one issue–the issue of his friend Mr. Iftikhar Chaudhry with whom he had planned a judicial coup to impose the “Bangladeshi” solution (where the Supreme Court judge becomes the president) on the Pakistani nation.

Mr. Sharif playing ethnic politics has not fooled the Pakistanis. He will be reduced to the museum of history like Mumtaz Bhutto’s NPP

The PPPP knows that the worst ministry to have in the new government right now is the Finance ministry. Huge problems face the new government. From the rise in oil prices, to the trade deficit, to decline in Textile export, there are poison pills left for the new government. The new Finance Minister of Pakistan is Mr. Ishaq Dar who was the Finance Minister of Mr. Nawaz Sharif.

The track record of Mr. Nawaz Sharif’s financial bungling is well known.

1) During the two terms of Ms. Bhutto and Mr. Sharif the debt grew from $12 Billion to $38 Billion without any meaningful display of infrastructure development other than the really expensive $500 million Lahore-Pindi freeway. It should have cost $100 million. The return on investment of spending $500 million on the Pindi-Lahore route is minimal other than providing the Sharifs who were Lahorites easy access to the capital. An investment of $500 million in increasing arable land in Baluchistan would have a better ROI.

2) The other major fiasco of the Dar era was the Yellow Cab scheme which imported $1 Billion of Korean junk that now ply the roads in Kabul and Karachi and everything in between. For $1 Billion Mr. Dar he could have constructed an automobile manufacturing plant providing permanent manufacturing jobs in Pakistan.

3) The third major fiasco of the Dar era is the confiscation of the Dollar Accounts of overseas Pakistanis. To add salt to the wound of small account holders like me, Mr. Sharif and friends transferred their own personal Dollar accounts to safe quarters one day before the seizure of the accounts.

4) The 4th deadly sin of Mr. Dar and company was depleting the Foreign Exchange reserves to the dangerous levels of $200 million. (almost zero). He is doing the same now. From $19 Billion the reserves are down to $12 Billion. As a result the Rupee is at 70 per Dollar, its lowest since independence.

5) Mr. Dar and Mr. Sharif took loans from international institutions at usury rates of 24% and even higher. It goes to the credit of the maligned Mr. Aziz who worked behind the scenes to pull Pakistan back from bankruptcy. He is doing exactly the same now.6) It has been also alleged by aggravated Japanese journalists that on Mr. Dar’s advice, Mr. Sharif cancelled an invitation from the Japanese Emperor (a very rare event) and went off to Korea to purchase Kia cars with a huge kickback.

7) The most dangerous part of the  era was the interference of the IMF in Pakistani politics. Because Pakistan was on the verge of bankruptcy, the IMF and the World Bank were insisting on Pakistani politicians to sign the Nuclear Proliferation Treaty (NPT) and roll back the Pakistan Nuclear Program.  In a month he has borrowed more than $3.5 Billion at high interest rates. The old finance minister used to ask for an FTA and a University when they met foreign leaders. This Foreign Minsiter asks for loans. If this contrinues the IMF will be back dictating poltics to Pakistan. One of their first diktats was to “roll back the nuclear program”.

Mr. Dar asked Saudi Arabia to give Pakistan a $300 million oil “facility” to Pakistan to overcome the high level of oil prices. The sad part of the episode was that the savings were not passed on to the consumer who continued paying the market level prices which the government used the money for deficit financing. This was not part of the budget and was revealed when an audit was conducted by Mr. Aziz. Those and other others were the Seven Deadly Sins that have been forgiven by the people of Pakistan.

THE IMF MANDATED ECONOMIC RESTRUCTURING IS POISON FOR PAKISTAN

“Strong Economic Medicine”: Weakening Pakistan’s Central Government

Pakistan has a federal structure based on federal provincial transfers. Under a federal fiscal structure, the central government transfers financial resources to the provinces, with a view to supporting provincial based programs. When these transfers are frozen as occurred in Yugoslavia in January 1990, on orders of the IMF, the federal fiscal structure collapses:

“State revenues that should have gone as transfer payments to the republics [of the Yugoslav federation] went instead to service Belgrade’s debt … . The republics were largely left to their own devices. … The budget cuts requiring the redirection of federal revenues towards debt servicing, were conducive to the suspension of transfer payments by Belgrade to the governments of the Republics and Autonomous Provinces.

In one fell swoop, the reformers had engineered the final collapse of Yugoslavia’s federal fiscal structure and mortally wounded its federal political institutions. By cutting the financial arteries between Belgrade and the republics, the reforms fueled secessionist tendencies that fed on economic factors as well as ethnic divisions, virtually ensuring the de facto secession of the republics. (Michel Chossudovsky, The Globalization of Poverty and the New World Order, Second Edition, Global Research, Montreal, 2003, Chapter 17.)

It is by no means accidental that the 2005 National Intelligence Council- CIA report had predicted a “Yugoslav-like fate” for Pakistan pointing to the impacts of “economic mismanagement” as one of the causes of political break-up and balkanization.

“Economic mismanagement” is a term used by the Washington based international financial institutions to describe the chaos which results from not fully abiding by the IMF’s Structural Adjustment Program. In actual fact, the “economic mismanagement” and chaos is the outcome of IMF-World Bank prescriptions, which invariably trigger hyperinflation and precipitate indebted countries into extreme poverty.

Pakistan has been subjected to the same deadly IMF “economic medicine” as Yugoslavia: In 1999, in the immediate wake of the coup d’Etat which brought General Pervez Musharaf to the helm of the military government, an IMF economic package, which included currency devaluation and drastic austerity measures, was imposed on Pakistan. Pakistan’s external debt is of the order of US$40 billion. The IMF’s “debt reduction” under the package was conditional upon the sell-off to foreign capital of the most profitable State owned enterprises (including the oil and gas facilities in Balochistan) at rockbottom prices .

There are obvious similarities in the nature of US covert intelligence operations applied in country after country in different parts of the so-called “developing World”. These covert operation, including the organisation of military coups, are often synchronized with the imposition of IMF-World Bank macro-economic reforms. In this regard, Yugoslavia’s federal fiscal structure collapsed in 1990 leading to mass poverty and heightened ethnic and social divisions. The US and NATO sponsored “civil war” launched in mid-1991 consisted in coveting Islamic groups as well as channeling covert support to separatist paramilitary armies in Bosnia, Kosovo and Macedonia.

A similar “civil war” scenario has been envisaged for Pakistan by the National Intelligence Council and the CIA: From the point of view of US intelligence, which has a longstanding experience in abetting separatist “liberation armies”, “Greater Albania” is to Kosovo what “Greater Balochistan” is to Pakistan’s Southeastern Balochistan province. Similarly, the KLA is Washington’s chosen model, to be replicated in Balochistan province. (Michel Chossudovsky is the author of the international bestseller America’s “War on Terrorism” Global Research, 2005. He is Professor of Economics at the University of Ottawa and Director of the Center for Research on Globalization)

New Pakistan finance minister will have tough job

ISLAMABAD, March 16 (Reuters) – As economic storm clouds gather over Pakistan, two names have emerged as front-runners for the finance minister’s slot.
Whoever gets the job in the country’s new government will have to deal with widening budget and trade deficits in an economy pressured by rising international oil prices and chronic shortages of energy and staples.
The two main opposition parties that won last month’s election are working out their coalition government line-up though no posts have been filled, not even that of prime minister.

The Pakistan People’s Party (PPP) of assassinated former prime minister Benazir Bhutto will lead the incoming government expected to be sworn in later this month.
Its main partner is the the Pakistan Muslim League (Nawaz) of Nawaz Sharif, the prime minister President Pervez Musharraf deposed when he came to power as a general in a coup in 1999.
A Sharif party official said if the party got the finance portfolio, it wanted the post to go to Ishaq Dar, who served as commerce minister and finance minister in one of Sharif’s governments in the 1990s.

A PPP official said the PPP wanted Sharif’s party to take the finance post, adding the PPP had “a lot of respect for Mr Dar”. But if the post came to the PPP then another former finance minister, Naveed Qamar, was expected to be the party’s choice.
Analysts were generally favourable about both the possible candidates, but some said Dar, an accountant and former businessman, had more experience.

“Ishaq Dar was a very good finance minister. He’s very well informed and knows the job,” said S.M. Muneer, a former president of the Federation of Pakistan Chambers of Commerce and Industry. “He was one of the best Pakistani finance ministers. A very humble and down-to-earth person.”

“DARNOMICS”
Dar, 60, was commerce minister in a pro-business Sharif government in 1997 and identified export-led growth as a cornerstone of economic strategy. He set ambitious export targets and relaxed restrictions on imports of raw materials from India.
He became finance minister in November 1998 and concluded negotiating an IMF rescue package to meet an economic crisis triggered by sanctions over nuclear tests in May that year.

Throughout the negotiations he refused to accept a devaluation or a rise in utility charges or tax rates.

“Whether you call it voodoo economics or Darnomics, he has moved things,” the head of a state-run bank said a short while later.
But Dar, a top student from Punjab University, was criticised for what some saw as a naive approach to markets, blaming speculators for every rapid movement of the currency and stocks.

Dar was detained for nearly two years after Musharraf overthrew Sharif.
Qamar, as chairman of the Privatisation Commission under Bhutto in 1994, set an ambitious two-year target for Pakistan to complete its privatisation programme.
A big landowner from a prominent political family in the southern province of Sindh, Qamar, now 52, was a staunch Bhutto loyalist and was made privatisation minister in July 1996.

Three months later, the American- and British-educated Qamar took over the finance portfolio from Bhutto.

Analysts welcomed his appointment, saying it would improve credibility with the International Monetary Fund after uncertainty over who wielded economic influence.
He was only finance minister for a few days before Bhutto’s second government was dismissed over corruption accusations. Qamar was detained for a period but never convicted.
“Both would prove a good finance minister. Ishaq Dar is very competent while Naveed Qamar is also very polished,” said Azhar Saeed Butt, deputy of the Federation of Chambers of Commerce.

“Qamar was privatisation minister and knows the economy and would not be a bad choice but if Dar is given a chance then he would have an edge as he knows the problems at the ministry.” (Editing by Robert Birsel and Jerry Norton) Business

Dar blames everything on the old government

Rising food inflation and economic hardship faced by ordinary people played a big role in the defeat of allies of President Pervez Musharraf in Feb. 18 polls.

Dar said the new coalition government, led by the Pakistan People’s Party of slain former Prime Minister Benazir Bhutto, would curb borrowing from the central bank and reduce monetary growth to contain spiralling inflation.

A latest report by the U.N. World Food Programme covering the year to March, showed that due to a surge in food prices, the number of people facing risk of going short of food has risen 28 percent to 77 million from 60 million in the previous year.

Fiscal deficit is another area where the government would miss its budgetary target of 4.5 percent for the 2007/08, Dar said.

“For the first eight months ending on Feb. 29, 2008 the fiscal deficit should have been 2.7 while it is actually 4.7 percent of the GDP,” he said.

Similarly, the current account deficit for the fist eight months of the 2007/08 fiscal year was 5.3 percent of GDP, compared with an initial full-year target of 4.8 percent. The central back has forecast the deficit to increase to 6.0 percent of the GDP.

Standard & Poor’s Rating Services said late last month it was maintaining its negative outlook on Pakistan, and warned that despite a more positive political outlook, Pakistan’s ratings could be lowered if the new rulers proved too distracted to deal with problems.

Dar said the government has already started to implement a programme to face the challenges.

“We will restore growth momentum and stabilise the economy through rejuvenation of agriculture and manufacturing to improve national productivity.” (Additional reporting by Kamran Haider)

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