Huzaima Bukhari & Dr. Ikramul Haq
In the wake of February 2008 elections, the people of Pakistan thought that the rulers would respect their mandate by moving towards an egalitarian society—the essence of people’s rule. The ruling elite—unholy alliance of bureaucracy, politicians and businessmen—always resist any such change. When matter comes to surrendering their ill-gotten wealth—the main source of their power—for the benefit of masses, the privileged classes, despite their political/ideological differences, start showing “gestures of reconciliation”. As soon as media start exposing their financial corruption, tax evasion, plundering of national wealth, they “unite” (sic)—immediately meeting at sumptuous dinners and talking about working together for “national interest” (sic) by bridging their “differences” (sic). They start feeling threatened with open public debates about their tax declarations and figures of loan write-offs.
Tragically, the apex court has yet not decided the issue of loan-write-offs though suo moto action was taken twice—in 1996 and 2008. In 2008, according to Press reports, the Supreme Court took serious notice of the fact as to how banks wrote off a staggering amount of Rs. 125 billion as “bad debts” during 2000-2006, against Rs. 30 billion written off during 1985-1999. According to reports, larger numbers of loans were written off under Circular No 29/2002, issued by the State Bank of Pakistan (SBP). It was admitted by SBP during the hearings that the major beneficiaries were leading politicians and industrialists.
During the self-acclaimed “transparent era” of Musharraf-Shaukat, loan write-offs in just seven years (2000-2006) crossed the figure of Rs.125 billion, whereas in the much-publicized “corrupt eras” of elected governments (1985-1999) it was merely Rs. 30 billion. The country’s banks and other financial institutions wrote off an amount of over Rs 30 billion during the governments of Muhammad Khan Junejo, Benazir Bhutto and Nawaz Sharif. During the two tenures of Nawaz Sharif (1990-93 and 1997-99) Rs. 22.35 billion loans were written off—during his first tenure, a total of Rs. 2.39 billion were written off and in his second, the amount went up to Rs. 19.96 billion. The written off loans during the two tenures of Nawaz Sharif constituted approximately 74.5 percent of the total of Rs. 30.18 billion, written off between 1986 and 1999. During the two tenures of late Benazir Bhutto, a total of Rs. 7.23 billion loans were written off, constituting 24.2 percent of the total written off loans—Rs. 494.97 million in her first tenure and Rs. 6.74 billion in the second term.
During the Musharraf-Shaukat era, an unholy alliance of bankers, businessmen-cum-politicians and bureaucrats managed to plunder public money through an amnesty scheme from SBP, though banks had liquid securities to recover the loans. The SBP submitted before the apex court that amongst the beneficiaries of Ccircular No 29/2002 were two sitting chief ministers of PML(Q) regime.
The ruling elite skilfully engineered the amnesty scheme to get the benefit of write-offs and a consequential concession in tax law for no-taxation of benefits derived, whereas their personal wealth kept on increasing. All these beneficiaries of loan write-offs still possess assets worth billions of rupees. The criminal culpability of successive governments in this matter has tarnished the image of Pakistan—worldwide known as a haven for the corrupt, plunderers and tax evaders.
Table A depicts the cumulative position of the non-performing loans and advances of banks and non-banking financial institutions from 1982 to 2008, which has been compiled from their published Annual Accounts. This shows not only the quantum of non-performing loans, but lack of political will to recover billions of rupees of deposit holders when the creditors are in possession of securities and through introduction of a simple foreclosure law, assets of debtors can easily be liquidated to recover the amounts due.
TABLE A
1982 Rs. 8 billion
1988 Rs. 39 billion
1993 Rs. 62 billion
1998 Rs. 118 billion
1998 Rs. 140 billion
1999 Rs. 164 billion
2000 Rs. 171 billion
2001 Rs. 185 billion
2002 Rs. 218 billion
2003 Rs. 229 billion
2004 Rs. 241 billion
2005 Rs. 255 billion
2006 Rs. 265 billion
2007 Rs. 269 billion
2008 Rs. 274 billion
The Supreme Court of Pakistan, way back in 1996 (Reference: Dawn dated 16th October, 1996), taking suo moto cognizance under Article 189 of the Constitution of Pakistan, took up this issue of loan write-offs and expressed intention of studying all the governing laws in this regard. The apex court vowed to make authoritative pronouncement that “would eliminate the chances of misusing the laws for siphoning of public money”. There is, however, no track as to what happened to that public interest litigation case, it appears the same is still pending even after a lapse of 13 years.
The said public interest litigation originated from a reference filed by then President, Late Ghulam Ishaq Khan against a PPP, MNA, Rao Rasheed Ahmad, who as a member of loan write off committee, blatantly ordered to write off a loan of his wife. There have been many such examples where the rich and mighty managed to plunder the savings of the have-not (small depositors) in a shameless manner. An unholy alliance of bankers, businessmen-cum-politicians and bureaucrats has destroyed the entire banking/financial system.
The politics of writing-off loans in this country requires proper investigation and study as it will unveil many “big names”, who are responsible for failure of democratic process in Pakistan. The country lost billions of rupees as revenue as well because bad debts written off by the banks on specific directions of SBP were also exempted from income tax. The Government of Pakistan, SBP and Federal Board of Revenue (FBR) never considered the report of Auditor General of Pakistan in this regard issued far back in 1992, showing loss to public exchequer of Rs. 120 billion. It is a matter of record that the Board of Revenue despite this audit report from the Auditor General of Pakistan, issued another instructions on February 4, 1993 vide its letter No. 13(26)/IT-1/79 giving further concessions to the banks. The cases relating to plundering of public money to the tune of billions and blatant abuse of powers by rulers and their henchmen pose a serious threat to our democratic culture.
The unscrupulous businessmen (most of them are now politicians and elected members of parliament), state functionaries and corrupt bankers have joined hands to deprive this nation of billions of rupees of public funds and colossal loss to public revenues. The big bosses of the State Bank and FBR should be summoned by the apex court—Public Accounts Committee will not do so to protect fellow members—to explain who had forced them to issue “administrative instructions” in gross violation of law for loan write- offs and allowing unprecedented tax exemption to the beneficiaries. The inquiry into loan write-offs will not only reveal the modus operandi through which public money is siphoned off but can unveil the real beneficiaries. If we want to establish true democracy in Pakistan, public money looted by these criminals should be recovered, they should be disqualified permanently from holding public offices and all those who facilitated them should be given exemplary punishment.
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The writers, tax lawyers and authors of many books, are visiting professors at the Lahore University of Management Sciences (LUMS).
