‘Roti,
Kapra aur Mukan' (food, clothing and shelter)! This has been the selfless
slogan of the PPP rulers since the party was founded in the 1970s. Yet with the
delivery of the new budget Pakistan's rulers have come bearing gifts of a
totally different but not of an unexpected kind; new
tax rises, public
spending cuts and electricity
price increases to name but a few. The consumption based VAT
tax has been shelved but only until October 2010.
The poor like the rest of many Pakistanis will now actually have to make do
with less just as they always have done with every new budget.
Ordinary
Pakistanis have always struggled to make ends meet but now increasing numbers
find themselves challenged to procure even basic staples such as daal and
flour. The recent
suicide by a poor rickshaw driver's family in Lahore illustrates the
increasing poverty being faced by many Pakistanis. A new
report by the World Food Programme published days before the budget
concluded that nearly half the population of Pakistan is food insecure directly
as a result of spending on fighting the ‘War on Terror'. Add to this the fact
that electricity throughout the past two years has also becoming a disappearing
luxury with consistent blackouts due to the circular
debt crisis which has ruined industry and caused many to lose their jobs,
most Pakistanis can only look on at the current state of affairs with despair.
Finance
Minister Dr Hafeez Sheikh claimed that the Pakistani economy was now on the
road to recovery. The bitter truth is that with continuous rampant inflation
and the failure of the rulers to provide even the most basic provisions such as
universal healthcare and education there has never been an economic recovery for
the tens of millions who face poverty every single day. The most disturbing
aspect of the rulers' economic policy is the lack of a coherent strategy to
genuinely develop the economy by investing in its key sectors. In the
budget, under the Public Sector Development Program, Rs 10.8 billion was
allocated for Agriculture, Rs 3.2 billion for Industry and Production, Rs 15.7
Billion for Higher Education and Rs 1.6 billion for Science and Technology
research - a combined total of Rs 31.3 billion or $368 million. This pathetic
figure for a population of 180 million reveals the true regressive mindset of
Pakistan's rulers who publically promise advanced industrial and economic development
whilst practically investing next to nothing. It may play politically well to
increase the allowance and salaries for government employees but these only
form a fraction of the labour force; with no prospect of real industrial growth
millions of Pakistanis will remain unemployed or mired in low skilled low paid
work.
A
look at some basic but key figures in Pakistan's budget helps understand the
growing disaster facing Pakistan's economy. Even with new taxes and the IMF
driven elimination of government subsidies, the total resources expected to be
available this financial year is only Rs 2598
billion whilst expenditure will be Rs
3283 billion. Even if we take the government's massaged figures
at face
value, this will still leave a projected deficit of Rs 685
billion or over $8 billion, mainly to be financed with new borrowing once
again. Dr Hafeez Sheikh claimed that this will only be 4% of GDP,
an improvement on last year's 5.1%. The truth is that these now routine annual
budget deficits have become a cumulative mountain of debt for Pakistan.
With
28%
of government spending being used to service Pakistan's debt, Pakistan's
economy is bankrupt. Thanks to the IMF package of $11.3
billion initially agreed in the dying days of the Musharraf regime
Pakistan's external
debt will soon stand at over $57 billion; by the IMF's own projections this
figure is likely to reach $75 billion
by 2015. Together with a rapidly growing internal
debt of $54
billion, Pakistan's total debt has now crossed the $100 billion threshold
making every Pakistani man, woman and child a debtor owing $616 each - that is
about Rs 53000, just over half of the total annual GDP per
person.
The
real scandal though lies in the fact that a massive Rs 873
billion ($10.27 billion) will be paid out this year to service old domestic
and foreign loans, the vast
majority being interest; last year 46% of
government's revenues were used to service debt. To put that in perspective
Pakistan's entire defence budget this year after the 17% increase will be Rs
442 billion ($5.2
billion). The combined healthcare expenditure this year will be just Rs 24
Billion ($285 million) whilst total education spending will be Rs 39 billion
($465 million) with total federal government expenditure standing at $38.4
billion. The stupidity of the situation is self evident; Pakistan is borrowing
billions of dollars at exuberant rates whilst at the same time making huge
payments on old debts.
Whilst
it would cause governments in other countries to be humiliated, in Pakistan it
is a measure of how severe Pakistan's economic problems have actually become
that new IMF loans have actually become a cause célèbre for Pakistan's rulers.
Mightier states such as the Roman and British Empires have folded under the
burden of debt. America's economy today is facing a similar crisis as it
struggles to control its debt of over
$13 trillion. Pakistan's pigmy rulers do not even rank amongst this
illustrious company yet behave as if there is no tomorrow by continuing to
borrow without end.
Institutions
like the IMF and World Bank understand this yet they persist in giving new
loans like a dealer continues to give an addict his next fix. Like drug dealers
they do so at an extortionate price. Pakistan's wealth is being drained away
every year thanks to the agreements Pakistan's rulers, past and present, have
struck with these international loan sharks over the past many years. The fact
is that these Western run institutions are colonial tools which countries like
America and Britain use to control the economies of poorer countries like
Pakistan, siphoning off their wealth. The people are made to work ever harder
as the rulers in these countries follow every Western diktat in a Faustian pact
whilst enriching themselves beyond their wildest dreams. It should be no
surprise then that Asif Ali Zardari is rumored to have has an estimated wealth
of $1.5 billion, marking him out as the eighth
richest ruler in the world.
The
mortgaging of the country in Pakistan's case doesn't just end there; Zardari
and Gilliani have made much of the Kerry-Lugar aid bill which will supposedly
bring $1.5 billion per year of aid for the next five years. The real level
of regard that Zardari's American friends hold Pakistan in becomes clear in
reading the fine print; the US Secretary of State must certify that an
exhaustive set of intrusive
requirements related to the ‘War on Terror' have been met every six months
before funds can be released. It remains to be seen whether Pakistan will get
all of this aid; much of the $2 billion bill incurred by Pakistan's military in
fighting the ‘War on Terror' in the tribal areas is yet
to be reimbursed under the Coalition Support Fund (CSF).
The
American ‘War on Terror' is driving Pakistan's economy into the ground with the
impact being felt right across the country. The hike of 17% in the Defence
budget this year comes after years of inflationary only increases. With further
military operations planned in the tribal areas the true cost of fighting the
‘War on Terror' is actually much higher. Hillary Clinton's recently announced $500 million
worth of energy, health and water projects pale in comparison to what the
Finance Ministry's official Saqib Shirani let slip that the real defence
related spending this year will be Rs
675 Billion ($7.94 billion), the true cost of fighting America's war as
America ironically loses
in Afghanistan and hastily calls for negotiations
with the Taliban. Zardari's own
government has further admitted that Pakistan has lost
at least $43 billion as a result of fighting America's terror war since
2001. The destruction caused in Swat and Waziristan, the re-housing of three
million internally displaced people will cost billions of dollars to put right.
The continuous terror attacks and suicide bombings, something that never
occurred before 2001, have become a persistent feature ever since Blackwater
(Xe), DynCorp, and the CIA became operational inside Pakistan. Any person can
understand that economic growth and prosperity can never ensue as long as
violence grips the country. This though is the chosen path of Pakistan's rulers
in deciding to serve America.
Simultaneously
the IMF loan package agreed in 2008 came with tough
conditions, principally the reduction and eventual elimination of all
government subsidies together with new tax hikes. This explains why over the
last two and half years Pakistanis have seen their gas, electricity, petrol,
CNG, diesel, wheat and other basic staples prices go through the roof along
with the inevitable knock on effects on the wider economy; inflation by Dr
Hafeez Sheikh's own
admission has been running at 25% made worse by a weakening rupee as
imports become more expensive. For an IMF accountant supposedly trying to
eliminate the red ink from Pakistan's balance sheet it may be all in a day's
work but the social havoc and poverty it is creating in Pakistan's society is
way beyond the comprehension of any text book free market theory.
It
should be clear to anyone who is honest with himself that Pakistan's economic
problems are extremely serious and remarkably still getting worse. Pakistan's
rulers are devoid of any solutions, they simply masquerade in front of the
world begging for more aid and loans whilst seeking to imitate Western free
market solutions and allowing foreign ownership of key essential services under
the guise of public-private
partnerships. One such gimmick is the ‘Carbon tax',
apparently designed to reduce the consumption of energy in Pakistan to protect
the environment. In a country where more progress is being made towards the
Stone Age rather then the 21st century as the lights go out it
represents another cruel slap in the face of Pakistanis as their rulers come up
with yet another novel method of ripping off the ordinary man. This is made all
the more bitter knowing that these tax rupees will be collected by rulers that
have made Pakistan recognisable as one of the most corrupt countries on the
face of the earth according to Transparency
International's 2010 survey.
The
fact is that Pakistan's economic problems are chronic, endemic and systemic,
beyond the capacity of Pakistan's rulers to fix. Whether it has been military
rule or democracy, Pakistan's autocrats and democrats have all failed to solve
these problems which are becoming insurmountable year by year. This has been
the case throughout the last 63 years of Pakistan's chaotic history. The likes
of General Ayub Khan, General Zia ul Haq, Zulifiqar Ali Bhutto and his daughter
Benazir, Nawaz Sharif, General Pervez Musharraf and now the duo of Asif Ali
Zardari and Syed Yousef Raza Gilliani have all failed to arrest the economic
anarchy which Pakistan is succumbing to. Debt has become the ugly hallmark of
Pakistan's economy together with rising poverty. This debt burden which has
simply increased over time has now reached the tipping point where it is
overwhelmingly suffocating and crushing Pakistan's economy. As the debt crisis
in Europe currently shows a point will come when lenders will stop lending to
indebted borrowers; in Pakistan's case the much hyped ‘Friends of Democratic
Pakistan' has been an
abysmal failure with only $700 million materialising. If the German,
French, British, Italian and Spanish governments are being forced to cut their budget
deficits, what planet are Pakistan's rulers' living on?
In
all of this madness the tragic sad irony remains that Pakistan is a country
located strategically, rich in agricultural and mineral resources whilst being
blessed with a large and youthful population. Pakistan in its current state is
still one of the world's biggest wheat, milk and meat producers; Nestle
opened the world's biggest milk processing plant in Punjab in 2007.
Pakistan has huge untapped coal reserves, one of the largest in the world,
which if used with the right investment would easily help overcome the current
electricity crisis. Pakistan also has one of the world's largest copper and
gold reserves, with just one mine in Reko
Diq, Balochistan worth at least $96
billion at today's market prices, worth more than it's entire external
debt. And of course we know that Pakistan has a large strong military that is
equipped with modern fighter jets, tanks and submarines together with a proven
nuclear weapons capability. How is it that a country that has so much in
abundance has been reduced to being mere chattel for the West where it's
soldiers are being sold out as mercenary slaves?
The
answer lies in the fact that all economic decisions are in the end decisions made
by politicians; hence they are all political decisions in origin. Whether it is
the continuing failure of the education system, allowing multinationals virtual
monopolies, permitting corporate farming, building new dams or power plants,
all of these decisions are political. The fundamental reason why Pakistan's
rulers are failing to solve these problems is ultimately because of the failed
political system to which Pakistan's rulers' remain beholden to.
Pakistan's
political system is corrupt and broken, a system which the West has exploited
to its advantage. It has allowed the feudals, industrialists, bureaucrats and
the generals to keep power to within themselves. It is an environment which
allows the insincere to breed and flourish at the expense of good people.
Military dictatorial rule is unfair in itself and has proven unworthy but
democracy has also proven to be no better. It is bad enough to have people
enter politics that see themselves as career politicians who look to accumulate
political power and personal patronage but in Pakistan's case many of these are
simply career criminals who look to loot and plunder in all instances.
If
Pakistan's ruinous economic problems are to be solved a new radical
alternative, a completely new way needs to be adopted that completely changes
the fundamentals of the political and economic parameters that Pakistan is
constrained by. The problems are immense and demand an urgent new radical
approach to the situation. The question that naturally arises is such an alternative
possible? What shape and form could such change take place in?
As
we stand at the end of the first decade in the first century in a new
millennium we are witnessing Western driven Capitalism in severe turmoil. ‘Boom
and Bust' has always been an integral feature of Capitalism; but today those
systemic fault lines are being brutally and perhaps fatally exposed. The global
financial crisis that began in 2008 shows no signs of abating. What started as
a ‘credit crunch' for many businesses and consumers alike in the West has now
turned into a full blown sovereign debt crisis thanks to governments spending
beyond their means and Western governments adopting the hypocritical practice
of giving huge bailouts to Western banks by practising state socialism. We are
now witnessing the next phase in the global financial crisis as Western
governments drastically cut spending and start raising taxes in a cruel
transfer of immense wealth from the ordinary masses to the elite bankers and
their supporters in political establishments across Western capitals'. As the
situation in Greece shows it takes no genius to realise that this economic
crisis is fast morphing into a political
crisis threatening to shake the very foundations of the Western political
system. In the case of Pakistan, arguably Western imitation by applying
capitalistic solutions has had a fair run and we observe Pakistan being
enveloped in the resulting chaos today. In Pakistan Capitalism has failed and
run its course.
Communism
and Socialism lie dead and buried with even the likes of China having walked
away and starting to adopt Capitalism as a means, becoming entangled within the
Western controlled financial system, with its fate tied to theirs. Today as the
global financial crisis deepens and the Chinese export driven economy slows
down as Western consumption drops, the huge wealth inequality that already
existed in China with vast low paid workers is beginning to get worse and
threaten political stability. China has been forced to introduce its own
domestic stimulus
package of $586 billion as
it confronts rising inflation, an inflated housing market and increasing
consumer debt. The Chinese have artificially manipulated and held down
the value of the Yuan creating
serious political tensions with America by dumping cheap Chinese goods. In
the good times the Chinese pacified the Americans by lending back the vast
dollars they earnt by buying American government bonds in a favourable circle.
Now as America's economy struggles with a deep recession this situation cannot indefinitely
continue; with a huge debt, the dollar's long term world reserve currency
position in doubt and inevitable rise in the interest paid on its debt, the
Sino-American relationship will need re-adjustment.
In a country not known for it's political openness with the Chinese Communist
party more used to using state intimidation rather than any coherent ideology
to hold sway over its people testing times lie ahead.
For
those who are not believers the point has now arrived that only leaves Islamic
economics as the only alternative that merits serious examination. Whilst this
is true for all others, for the majority of Muslims in Pakistan this is an
article of faith that is just waiting to be implemented. For indeed the years
of economic failure in Pakistan are not the fault of Islam which has been
brushed aside but the blame rightly deserves to be laid at the feet of
secularism which has held sway, be it under democracy or military rule, for
nearly 63 years.
Islamic
economics offers fundamental changes in the way a state's economy would be
managed, unprecedented in modern times. To begin with it would ban the giving
or taking of interest, the scourge of the global financial debt crisis. This
would mean that whilst the state may honour any previous legitimate debts it
would refuse to give any further interest payments. Neither would it seek new
interest based loans. This would be adhered to across the board whether applied
to International loans and debts or domestic loans for individuals. In an
Islamic system the Bait-ul-Maal would be used to provide interest free loans to
the needy and poor who may wish to start new businesses or fund other personal
projects.
Moreover
it would introduce the Gold / Silver monetary standard. Today under the fiat
currency system every time the Pakistani government want's to get itself out of
a hole by ‘borrowing' from the State Bank of Pakistan it is not only creating
more debt but it is also effectively printing money thus increasing inflation
and eroding the value of the rupee in everyone's pocket. In Islam any paper
currency issued in lieu of the monetary standard must be backed by gold or
silver and be fully convertible on demand.
Another
area that would see complete change is taxation. As we painfully know nearly
everything and everyone in Pakistan is taxed except the rich and powerful who
are either not
legislated to be taxed or simply flout the law. In Islam the principle of
taxation is based on the amount of wealth a person owns, not on income itself.
Thus those who own wealth above a certain limit (a Nisab) would see that wealth
taxed, whilst those who may earn a large income but end up with less than a
Nisab after essential expenses would not be taxed. Those who surpass the Nisab
threshold for taxation would have the annual Zakat tax levied at 2.5%.
Non-Muslims would pay the Jizya tax at 2.5% if they can afford to whilst being
exempt from the Zakat tax.
Agricultural
land reforms would be an important part of the transformation. Today in
Pakistan despite having such fertile land, the dietary needs of the people
cannot be met because most of the land is locked up in the hands of the
Zamindars. In Islam any landowner who does not cultivate the land for more than
3 years would have that land confiscated and given to the poor who would use
it. This would provide both an opportunity and warning to those who own land to
use it in a productive way or face losing it. Any landowner would pay the
annual Kharaaj tax
imposed on the owner of land based upon its productivity whilst Usher would be
collected on any agriculture produce. The overall tax base would be
considerably lower and is designed to encourage spending, investment and
entrepreneurship.
Mineral
resources and utilities such as oil, gas, gold, copper, electricity and water
would be publically owned and managed for the benefit of all rather than being
allowed into private ownership as this is not permitted by Islam; neither would
foreign multinationals be allowed ownership although they may be paid a fee for
their services in extraction and provision. The state would be bound to provide
essential utilities such as water, gas, electricity and fuel for transportation
at cost price by investing in the infrastructure required. Islam is not against
competition neither does it seek to implement price controls in the market; in
fact it sees a fair market as essential to motivate the producer. What it does
seek though is to protect the vulnerable by preventing key essential resources
ending up in the hands of powerful individuals as is the case today under
Capitalism under the guise of freedom of ownership who use them as a license to
mint money. Private individual ownership would be allowed and encouraged in all
other spheres as permitted under the Shariah.
The
stock market as we know it would be abolished all together along with all the
other capitalist paraphernalia such as derivatives, securitisation, bonds,
hedge funds and credit default swaps that go hand in hand and have lead to so
much devastation on a global scale. It is mandatory in Islam to own a commodity
or service before being allowed to trade with it. This is unlike Western
financial markets where trading has become akin to a grand casino by allowing
the same commodity to be traded many times over under various financial
instruments without even leaving the original owner. Thus profit or losses are
created and leveraged over and over again in bets and transferred to others; as
we now know in an economic crisis huge losses conveniently hidden away will
eventually become apparent. The requirement for ownership will prevent such
ridiculous feverish speculation and short trading that has undermined Western
economies by inflating and depreciating prices on a huge scale, triggering
shocks in the global financial system.
These
are simple but powerful changes to the parameters of an economy that would
completely change its dynamics and bring stability. To some this may seem
unworkable as Pakistan continues to borrow from and trade with the West. How
would this be possible?
The
answer to this question is that Islam's economic system does not come on its
own, it is embedded as part of the Khilafat state (Caliphate). The
re-established Khilafat would be a powerful state on the method of Prophet
Muhammad (saw)
that will have an independent foreign policy essential to bringing the economic
change to the people of Pakistan that is so desperately needed. Moreover it
would be a state bound by the limits of the Shariah with the rich and powerful
being subject to the law. So the ruler may change but the political system
would remain the same where new laws could not be created to favour special
interest groups. The result would be that it would cut bureaucratic red tape
and eliminate the culture of corruption plaguing Pakistan today by implementing
the Shariah punishments' on the rich and powerful as well as the poor. This
would have the effect of greatly stimulating small and medium scale business
enterprises that would form the backbone of a successful economy by bringing
employment on a massive scale.
The
Khilafat will be a state that will have political strength and ideological
vision, unifying its people on the basis of Islam that will seek to unify the
rest of the Muslim world. If the European Union can exist between twenty seven
member states seeking closer political and economic integration, some of whom
like Britain and Germany who have fought bitter wars with each other and the
United States can bring fifty states together into a federal union, then it is
certainly legitimate and viable for the Khilafat to seek unity for the Muslim
world. This in time would create a huge market of Muslim consumers that will
help create prosperity and raise standards of living as supply and demand would
be stimulated. The Khilafat will control some of the world's most plentiful
resource rich lands and the world's most important strategic waterways backed
up with a powerful military.
It
is important to realise that Pakistan's economic failure is inherently linked
with its political system that allows Western interference facilitated by
corrupt rulers. Western policies of free market economics are imitated by its
failed rulers when in reality the current international order, both economic
and political, is loaded against countries such as Pakistan such that these
policies only bring disaster. The solution requires the re-balancing of
Pakistan's international relationship with the West to ensure parity and
stopping the cruel exploitation by the IMF and World Bank which are tools of
hegemonic Western powers. They allow Pakistan's creditors to have an undue
weight and disproportionate influence on Pakistani policy formulation.
Independence of economic and foreign policy is a pre-requisite for economic
growth and prosperity to develop.
This
can only be achieved with a new vision where the ruler is prepared to stand up
for vital interests, even if it means crossing swords with the West by
implementing new policies that are geared to mass industrialisation, generating
internal consumption, developing its agricultural resources, encouraging new
businesses and by seeking new export markets to sustain the viability of these
ventures. This can only be achieved with a new political solution that the
Khilafat state would provide. The Khilafat in time would re-unify the Muslim
lands, assert its sovereignty and apply the Islamic economic system as a whole
coupled with an independent foreign policy.
There
is a much more detailed discussion to be had on each of these proposed
solutions and changes which are beyond the scope of this article. Yet
Pakistan's present course cannot be sustained any longer, it is leading to
catastrophe and the time has come for an urgent debate on Islam's solution to
Pakistan's crisis as well the current global crisis. The choice before Pakistan
to transform itself will not be easy; above all it will require willpower,
sacrifice and dedication. The reward for this change though is clear; the
Muslim world was once the envy for the rest of the world for many centuries
because of its leading developments in science, economics, jurisprudence and
its military prowess; all of this was achieved under the Khilafat system.
Adam
Smith, the father of modern Capitalism revered in the West, observed
"the empire of the Caliphs seems to have been
the first state under which the world enjoyed that degree of tranquility which the cultivation of the
sciences requires. It was under the protection of those generous and
magnificent princes, that the ancient philosophy and astronomy of the Greeks
were restored and established in the East; that tranquility, which their
mild, just and religious government diffused over their vast empire, revived
the curiosity of mankind, to inquire into the connecting principles of nature."
The
Muslims of Pakistan have a chance to start over and rekindle their future under
Islam which helped shape one of the most powerful and dynamic states in
mankind's history.
Or,
See
this Link:
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