PAKISTAN; Running On Loans


The government is trying to run everything on loans it seems. Pakistan signed three loan agreements worth a total of $918 million with the World Bank (WB). The three projects that will be improved with the assistance from WB include federal revenue system, higher education system and resource management in Khyber Pakhtunkhwa (KP). The goals are noble. But why is the government relying on loans for developmental projects like these? The country is already in talks with the International Monetary Fund (IMF) to sustain its economy. And the conditions of the IMF to grant loans to Pakistan are extremely harsh ones as we see the reverberations of IMF’s terms in the national budget presented only recently.

What is beyond comprehension is the fact that the government has already slashed the funding of Higher Education Commission (HEC), but it wants to keep HEC working through loans. This is not a secret anymore that WB gives loans with conditions attached. And because of the conditions, the HEC may lose its autonomy. The terms and conditions that the government has agreed on with WB are made public. Moreover, given that the government will pay the loan back, and that too, with interest rate, one should not be surprised to witness a hike in costs of education. Even a slight change in costs of education can discourage a high number of students from pursuing higher education.

Similarly, the federal government wants to improve its revenue collection system by taking a loan from WB. Is loan from WB needed to bring reforms in the domestic revenue? A press release that the Economic Affairs Division has issued says that the loan will increase the domestic revenue by broadening the tax base and facilitating compliance. But how? The Economic Affairs Division is silent on that. Also, there, too, no guarantee is given that the program will generate the desired results.

The KP government signed an agreement of $118 million for revenue mobilisation and resource management program. In the past, many international organisations had tried their luck by assisting the provincial government in this regard. However, the projects were doomed to fail. The reason is apparent for the failure of such ambitious plans: such projects need a constant supply of financial assistance that the Pakistani state cannot provide given its economy is fragile. What is suggested is that the government should look at the approaches of countries like India and China towards revenue collection. Both these countries broadened their tax bases without taking any loan from WB. Courtest The Nation