Do not look a gift horse in the face!

Criticism against the government has not died down for the second week running with respect to the 1.5 billion dollars “gifted” by the Saudi government to the Pakistani government. Instead confusion prevails with the Minister of Finance Ishaq Dar publicly maintaining that the amount is parked in Pakistan Development Fund (PDF), while the Advisor to the Prime Minister on National Security and Foreign Affairs Sartaj Aziz revealed in an in-camera session of a parliamentary committee that the amount is parked in Friends of Democratic Pakistan (FoDP) account.

There are several people who lend greater credence to Sartaj Aziz as his revelation came in an in-camera meeting which he may have thought would not be made public – a view that he must have been quickly disabused of as Haji Adeel of the ANP, Mushahid Hussain of the PML-Q and Sughra Imam of the PPP revealed all to the waiting media as soon as they exited the in-camera session. The majority, however, argue that as Dar is the relevant man he would know better. While a look at the State Bank of Pakistan website indicates that there is neither a FDP account nor FoDP account and the website does not yet provide post-disbursement data of the $1.5 billion. Be that as it may, Dar on 18th February, after the three-day visit of the Saudi Crown Prince, did indicate that a PDF would be set up – and one would have assumed that enough time has elapsed for the SBP to have done the needful.

The government’s defence, which it does not consider is required in the instance based on the proverb why look the gift horse in the face, is that the money has been credited, it is not to be paid back, and would be in use for development projects only. Why not bask in the benefits of this inflow, so argue government stalwarts, which include the recent strengthening of the rupee vis-a-vis the dollar, and is expected to be followed by a reduction in electricity and oil products by the beginning of the month when prices of these items are adjusted.

The opposition is not convinced. And the why is related to lack of credibility of Ishaq Dar that began when he compelled banks to open on a Saturday, the second last day of fiscal year 2012-13, to lend 480 billion rupees to the government to enable it to retire the inter-circular debt that would raise the budget deficit with the blame, he no doubt argued, being laid squarely on the PPP government and the caretakers. Secondly, he overstated the revenue collection as he admitted eight months along the line but in all fairness this practice is not unique to him and all finance ministers have overstated revenue targets in their budget documents. Thirdly, he obviously manipulated the quarterly macroeconomic data (July-September 2013) released by the Pakistan Bureau of Statistics (PBS) for the first time ever; senior officials of the PBS cautioned the public that the data is not flawless and negotiations and training is under way with multilateral agencies to improve the quality of the quarterly data. Jeffery Franks the International Monetary Fund (IMF) team leader for Pakistan under the 6.34 billion dollar Extended Fund Facility (EFF) maintained that the Fund would seek to verify data as much as possible. Be that as it may, the tendency to manipulate data has been common enough to all our finance ministers during the past decade and a half though the scale does vary.

The opposition is speculating that the money could be simply parked in an account to strengthen the country’s net international reserves like the China Safe Deposits which were not shown as external inflows by any of the former finance ministers except Dar. In other words, by engaging in some rather obvious accounting jugglery he has compromised his own credibility. If he doesn’t spend the 1.5 billion dollars till the end of the current fiscal year, as is likely given that he claims it is to be used only for development projects and a project – from conception to procurement – takes months with the preparation of PC-1 followed by approval of ECNEC, then his detractors may argue that it is like the China Safe deposits where the money is not ours to spend. Analysts, however, argue that he would be compelled to use it for budgetary support and to show accounts that not only indicate (i) higher international reserves, but also (ii) lower budget deficit if he is to meet the structural benchmarks that he agreed with the Fund staff. In short the site to look at every hour on the hour is not a news website but SBP reserves.

Why would the Saudi royal family not want the people of Pakistan to know of their largesse? Or as Dar said in a press conference “Why do you want to expose our friends? The countries who have helped us don’t want us to disclose the source.” The usage of the word exposure was unfortunate as it indicates that the money is to be used for activities that are not expected to be appreciated. Government supporters, albeit facetiously, explain that the favoured way to give charity in Islam is not to let the left-hand know what the right-hand is doing. Others point out that even though Saudi Arabia has extended limited grant assistance to Pakistan in the past and notably only for natural disasters (amounting to under 150 million dollars in the 2005 earthquake when hundreds of thousands suffered), though many would put the economy on the same platform as a natural disaster in terms of scale, yet the Saudis have also given charity to Pakistan for example goat skins after Eid-ul-Azha. The 1.5 billion dollars, they argue, means a lot more goat skins this year.

Khursheed Shah, Leader of the Opposition, began by saying that this is the biggest gift in the world’s history and should be included in the Guinness Book of Records. However, after the Prime Minister stated that the government has no intention of changing its Middle East policy Shah stated that “we should trust the statement of Prime Minister Nawaz Sharif about not sending troops to another country” raising speculation of yet another deal between the PPP and the PML-N.

That effectively leaves only Pakistan Tehreek-e-Insaf concerned about the inflow. The PTI leadership has referred to the past massive inflows, greater than 1.5 billion dollars, notably from the US as ‘blood money’ given that it fuelled terror attacks resulting in loss of thousands of lives and a security nightmare that persists to this day. Besides during the Musharraf era the country was left with heavy loadshedding, water problems and no increase in the percentage benefiting from social or infrastructure sectors.

Reuters reported that a senior Pakistani government official disclosed that the money was released “on a personal guarantee of the prime minister.” If it is a personal guarantee extended by an individual then it indicates that conditions, economic or political, are attached. The Reuters report creates further ambiguity by quoting a senior official that “we have a promise of 3 billion dollars of which 1.5 billion dollars has been received so far. Most recently we got 750 million dollars from the Saudis.” So if the Saudis gave 750 million dollars where did the rest come from? And here analysts have begun to cite the recent official visit of Bahrain’s King when he called on the Joint Services Headquarters as proof that our armed forces may be used to quell protests and/or support insurgents in Middle Eastern countries. The King left with no major monetary announcement: lessons learned or to hide the truth?

One would hope that Dar would attend the national assembly session today to explain all. He does need to lay his cards on the table. The SBP website refers to the establishment of Access to Finance Services Fund for 20 years so why not to a PDF or FoDP fund with 1.5 billion dollars?