Pakistan

Saudi ’gift’ violates pak law

6 April 2014 by Abdul Khaliq


Foreign aid is not an odd thing, if there are no strings attached. Pakistan has been receiving tied and untied foreign aid; loans, and grants from various donors ever since its birth. However, the recent massive cash grant of $1.5 billion by the Kingdom of Saudi Arabia is unprecedented by virtue of its size, nature and perspective.

Previously, the Kingdom extended a deferred oil payment facility, which was even generous. But that payment-facility was stretched over a period of three years. The wild jubilation in the government circles celebrating the USD1.5 billion Saudi ‘gift’ [this is what the Finance Minister, Ishaq Dar, called it) is understandable. Obviously, it has bailed out the cash-strapped Nawaz government besides helping boost the national economy to some extent.

However, the Saudi largesse has also triggered a new debate and controversy in the economic and political circles. The high-level of secrecy surrounding the deal is undermining the principles of transparency and accountability. The citizens of Pakistan have effectively been kept in the dark since the details have not been revealed even to the parliament. This is a clear violation of the Fiscal Responsibility and Debt Limitation Act 2005 and the National Debt Management Policy. 

Despite strong demands raised by the Opposition, the Finance Minister and his economic team have refused to reveal the details of this exceptional financial facility. However, in response to such Oppositional demands and media debate, contradictory statements have been issued by various official circles.

For instance, the Finance Minister claimed that the first tranche worth $750 million was received on February 19 while the second tranche was transferred on March 7. The transactions took place from one Central Bank Central Bank The establishment which in a given State is in charge of issuing bank notes and controlling the volume of currency and credit. In France, it is the Banque de France which assumes this role under the auspices of the European Central Bank (see ECB) while in the UK it is the Bank of England.

ECB : http://www.bankofengland.co.uk/Pages/home.aspx
to the other and the actual amount was submitted to the Pakistan Development Fund (PDF). However, the very existence of PDF is questionable. It is believed that PDF is laying redundant for some years now. In view of PDF’s redundancy, Finance Minister’s statement sounds indeed dubious.

Meanwhile, the Advisor to Prime Minister on Foreign Affairs, Sartaj Aziz, has said that $1.5 billion was credited to the Friends of Democratic Pakistan (FoDP) account. However, the budget for the past two consecutive years does not show a FoDP account. This shows that the FoDP account is not functional anymore. Thus a bundle of lies gathered by top government economic managers, is compounding the general confusion. Meantime, the Governor Saudi Central Bank has also declined to comment on the transaction details, spurring further rumors.

Questionable legality of PM’s personal warranty

Initially, we were told that Saudi money was a loan. Later on, we were informed that it was a grant against the personal warranty by Prime Minister Nawaz Sharif. Whether a public official can give warranty against international grant or a loan? According to Alejandro Teitelbaum, an Argentine jurist and debt expert, no public official [even a prime minister] can issue a personal guarantee for a loan to the State. The guarantee must be granted by the State through a duly authorized person representing it, through the established legal procedure.

 Though Charles Abrahams, another jurist and expert on the subject, thinks that a person, in his personal capacity, can provide guarantee yet, in his view, it is indeed odd. In any case, a personal warranty in such a case is dubious matter that requires debate and expert opinion.

However, the question of an individual providing a guarantee for state debts raises a number of potentially challenging issues. For instance, if Prime Minister Nawaz Sharif has made any personal commitment in his official capacity, it blur the lines between the official and private interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. . Secondly, it raises the question of the influence of ‘powerful individuals’ over the Pakistani state. A ‘contingent liability’ is created when influential individuals (as contingent creditors) dominate the state. They can influence financial and/or economic decision making, either directly or indirectly.

Amid this controversy, President Mamnoon Hussain also jumped into the fray by saying that “the aid has not been received from a smuggler but from a friendly country”. However, he forgot to recall that Pakistan has been receiving loans from international financial markets, which thrive on looted wealth.

The Opposition Leader in the National Assembly, Syed Khursheed Shah, has also expressed concerns over the question of personal guarantee given by Prime Minister Nawaz Sharif. He asked the government to tell the nation about the conditions attached to Saudi ‘gift’. He has rejected the official explanation that it is a ‘gift’. He alleges that the government is hiding the facts. ‘It is the biggest gift in the world history and should find a place in the Guinness Book of World Records,’ he said. He has also linked the ‘gift’ to the U-turn in foreign policy on Syria. Likewise, Opposition leader Imran Khan has warned the government against meddling in Syrian strife.

Though it is difficult at the moment to comment further without knowing the details of this funding yet one may claim that there is no known history of such unique ‘gifts’. The international aid flow including loans, grants, and gifts always carry either certain visible strings or a hidden agenda.

Whereas government team is bent upon befooling the people, making them believe this hefty amount is ‘gift by one King to another King’, people are not going to believe it. Instead of celebrating the Saudi ‘gift’, we must demand transparency and analyze the long-term consequences of such debt deals. Demanding clarity on Saudi ‘charity’ is our lawful and democratic right. 



The author is Focal Person, Campaign for Abolition of Third World Debt (CADTM) Pakistan and is Executive Director, Institute for Social & Economic Justice (ISEJ)

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Abdul Khaliq

CADTM Pakistan

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