Why should Pakistan trust us?

28 July 2010 by Nick Dearden

The Afghan ‘war leaks’ have revealed in stark detail the mistrust and tension that lies at the heart of the West’s relationship with Afghanistan and Pakistan. But this mistrust is not merely the product of a nine-year war, but of decades of economic control which have sewn the seeds of inequality, injustice and appalling governance across the Muslim world.

Indeed for Western governments to lecture countries like Pakistan about democracy and stability, as David Cameron did this morning, must seem a cruel joke to many in that country. Our part of the world has a long history of generously lending money to fuel violence, prop up undemocratic, often brutal regimes and exacerbate poverty.

Pakistan is a country with only 54% literacy and where 38% of small children are underweight, yet spends nearly $3 billion a year servicing its debts – almost three times what the government spends on health care.

Loans have flowed freely into Pakistan in order to keep favoured military governments in power. Under the most recent military regime of General Musharraf, Pakistan’s debt increased from $32 to $49 billion.

A more recent $7.6 billion International Monetary Fund IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.

http://imf.org
loan, needed so the country can keep paying off its old debts, is instructive. The conditions applied to the loan include reducing budget deficits, eliminating fuel and electricity subsidies and increasing indirect taxation. So as usual, ordinary people will pay for the West’s ‘largesse’ which kept in power governments subservient to Western interests, regardless of how little they did for these same people.

Of course such injustice doesn’t stop at Pakistan. Consider Indonesia, supposedly a leader of the developing world, with a booming economy. But Indonesia still has 61% of its population living on less than $2 a day.

Like India, as Mr Cameron reminded us this morning, fighting poverty in Indonesia will be central to the success of the Millennium Development Goals. But just like India, this seems a second priority compared to selling scores of Hawk fighter jets to the country. Indonesia is still paying for similar ‘generosity’. The country pays over $2.5million every hour servicing its massive $150billion debts, much of this debt based on loans given to the brutal dictator General Suharto.

Suharto was guilty of crimes against humanity by any standard, killing up to 1million political activists in his first year in office, not to mention mass murder in his suppression of islands such as East Timor and Aceh. He borrowed heavily throughout.

Indonesia still owes the UK over $500 million for Hawk jets, Scorpion tanks and other military equipment sold to Suharto, the subject of our new ‘Dodgy Deals’ campaign. These weapons were used against civilians, for example when suppressing university students and during attacks on Aceh. Today, these loans are being repaid by the very people who suffered their effects.

In all likelihood Indonesia would have already repaid these loans were it not for the South-East Asian crisis of 1997, in which financial speculators devastated the country and the Western-controlled International Monetary Fund urged a toxic recipe of privatisation and austerity as a medicine. As millions of people were made unemployed, and thousands of companies declared bankrupt, the debts to the same institutions giving the wrong advice, kept on climbing.

Is it surprising if Indonesians think their lives matter less than the financial and strategic interests of the West?

Then there’s Lebanon, a country which spends 50% of its budget servicing debts run up while the country was being torn apart by civil war and occupation – this is more than twice what Lebanon spends on education and health combined.

Lebanon is considered an upper middle income country, but has large pockets of

poverty. Almost 300,000 individuals are unable to meet their basic needs, and they tend to be concentrated along religious lines, further fuelling tension and mistrust amongst the Shia population.

Even Afghanistan itself, rushed through the debt cancellation process to prevent any embarrassing examination of past lending, has been forced to privatise its banks as a condition of its debt write down. Even so, Afghanistan will return to the same point of heavy indebtedness in years to come – it serves the government which needs the finances to hold onto power, and it serves the West which need the debts to keep control after the soldiers leave.

These are just some of the reasons why the talk of democracy, stability and fighting poverty ring hollow throughout most of the ‘Muslim world’ – and indeed beyond. Control can be maintained through this same deeply unjust economic system, through playing one faction off against another, through fighting when everything else fails to work. But it is impossible to see how democracy, stability and trust can be built on such a basis.

That would require something far more radical, but not impossible. It is possible to stop lending in such deeply unjust ways, imposing different standards on when we lend and when we don’t. It is possible to cancel debts based on loans that should never have been lent in the first place. It is possible to stop forcing countries to pay what they are unable to afford or to force them to make their economies work in our interests simply because we can.

As repayments on deeply toxic debts continue to drain Muslim countries of their wealth – from Indonesia to Afghanistan, Lebanon to Pakistan – we need to realise that the debts, or reparations if you prefer, which our governments owe the Muslim world are vast and rising. Trust will not be possible until they are paid.


You can view Jubilee Debt Campaign’s new report: ‘Fuelling Injustice: the impact of third world debt on Muslim countries’ is available at www.jubileedebtcampaign.org.uk.

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