Garbage collection and foreign loans
March 29, 2019
Modern slavery for Daily Time
March 29, 2019

Loans make beggars



“bus ke leta hun har mahiney qaraz,

or rehti hey sood ki takrar

Meri tankha men  ik tihai ka

ho gia hey sharik sahookar”                                 Mirza Asad Ullah Ghalib


In 1989, the Supreme Court of Pakistan declared bonded labour to be unconstitutional.  Entire families of  men, women and children, mostly working as brick kiln workers, bonded in return for loans to their parents,  for amounts  as little as two thousand rupees,  could  now choose to be free.  Bonded labour, also called “debt bondage”  is recognised as another form of “slavery” and is prohibited under the 1956 UN Supplementary Convention on the Abolition of Slavery.  Debt bondage violates a range of basic human rights of liberty, options and equality, to which all human beings are entitled.  But despite these significant legislations, debt bondage continues to thrive at home as well as the national level. It is estimated that there are over 50,000 bonded labourers in Sindh alone, while at the national level the entire population of 150 million Pakistanis is bonded in return of  the loans taken on their behalf.  Thus not just the current but  many future generations  of Pakistanis would continue to live as “debt slaves” to western banks for loans contracted by their governments, that were neither for their good nor by their will.  Every new child born in this country  begins the first day with  mortgaged liberty, options and  opportunities, besides an inherited   debt of  Rs.14400.    This article is intended to discuss how loans taken by irresponsible and  corrupt governments  have only added to the poverty and misery of the people in whose name the loans were taken.  It is also intended to suggest that the solution to this problem can not be sought from the World Bank “experts” but from the very people who are the greatest and the ultimate victims of  the  debt bondage.



The global dictatorship of debt

Poor countries live under a perpetual dictatorship of debt, which  grows more crippling  by the day.   Addiction to loans coupled with the new world trade order, has not just brought untold misery and poverty to much of humanity, but also widened  the cruel gap between the very few “haves” and the very many “have-nots”. Let us take an overview of  the global havoc caused by the disease of debt bondage:


  • The developing world now spends $13 on debt repayment for every $1 it receives in loans and grants.
  • In six of the eight years from 1990 to 1998, developing countries paid out more in debt service (interest plus repayments) than they received in new loans – a total transfer from the poor South to the rich North of $77 billion.
  • The lives of 7 million children will be needlessly lost this year [2003] because the indebted countries failed to reduce poverty levels.
  • The poorer the country, the more likely it is that debt repayments are being extracted directly from people who neither contracted the loans nor received any of the money.
  • 51 percent of the world’s 100 wealthiest bodies are not countries but corporations.
  • The combined wealth of the world’s 200 richest people exceeds $1 trillion, while the combined incomes of the 582 million people living in the 43 least developed countries is only $146 billion.
  • Less than one per cent of what the world spends every year on weapons is needed to put every child into school,  and yet it has not happened.
  • A mere 12 percent of the world’s population uses 85 percent of its water, and these 12 percent do not live in the Third World.




The more the debts –  the greater the poverty.

Of the  47 most indebted poor countries, Pakistan, Indonesia and Nigeria have the distinction of being the world’s  three largest debtor nations.  After almost 30 years of consistent begging and borrowing, Pakistan is caught in a classic debt-trap, incapable of escaping  insolvency except by undertaking  yet more debt-creating loans. Unemployment is rising, up from 5.89% in 1999 to 7.82% in 2002. Exports have remained near static for a decade, and there has been a particularly dismal performance by large-scale manufacturing.  With half of the  yearly  budget extracted by the Western banks on account of  debt servicing, another quarter  set aside for military’s massage, there is little left  to improve the lot of the remaining 150 million.  The debts have been particularly harsh to the poor, whose poverty has known only  an upward trend in all these years. In 1990, some 22% people were living below the poverty line. This figure  rose up to 35% in 1999 and to a shameful 44% in 2002.     The per capita income has consistently dropped from US$480 in 1997, to US$ 470 in 1999,  US$440 in 2000 and US$420 in 2002.  It is alarming to note from the State Bank of Pakistan report that 32 per cent of the population numbering 45 million  has a monthly income of less than Rs.650 per month.   The rise in Pakistan’s external debts  from US$ 20.89 billion in 1990  to  US$ 36.53 billion in 2002,  harshly highlights the  warped relation between debt and poverty.  The more the debt – the greater the poverty.  The rise in debts has caused an “across the board”  devastation in almost  every aspect of social development.   The latest  infant mortality figures indicate  83.3 deaths per 1,000 (compared to Thailand 27.9, Indonesia 40.9 and Bangladesh 60).   17% of the urban, and 47% of the rural population has no access to the most basic human need of  clean drinking water.   With the  development  expenditure shrinking  with each passing year,    (from 6.4% of GDP in 1991 to 2.8% in 2001), the people of Pakistan can be certain  of a bleak future, unless they can urgently detoxify the government from its chronic loan-taking addiction.




Are the poor destined to remain poor?


Can Pakistan even hope to come out of this deepening  quagmire of poverty and bondage, or is it ordained that  its poor are destined to remain poor.  The answer is “yes”,  it can overcome poverty provided it understands and is willing to rectify the root causes of this self-acquired  affliction.   The poverty of Pakistan is due to: (1) loans and debts  that have created an  atrophy of independent thought and action.  (2) bad governance (3) backwardness in science and technology (4) low educational levels (5) rapid population growth (6) an unfair international economic system, and (7) environmental degradation.  While most of these causes would be discussed in separate articles, we shall only focus here on how loans destroy a nation’s ability to think and act on its own.  Consider the following  random sample of foreign funded  projects contracted by Pakistan:


  • US$ 28.8 million.    This World Bank project  was aimed at improving financial reporting and auditing. The project was to  help develop accounting standards, reporting systems and financial administrative procedures, and capacity.


  • US$ 250 million.    This  World Bank project  was aimed at supporting the country’s banking sector reform. The loan was to provide balance of payment assistance to the government and central bank of Pakistan


  • US$ 250 million. 1998. This  World Bank project  was to support the Government of Pakistan’s nation-wide effort to improve basic social services.


  • US$ 350 million.   This World Bank project  was to support structural reforms underway in Pakistan, focusing on governance, economic growth and social service delivery.


  • US$ 500 million.   This World Bank project will provide balance of payments support and will focus on engendering growth, improving governance and human development, and enhancing social protection and employment opportunities for the poor.



One can clearly recognise the emphasis on  vagueness and jargon  to describe these high and “noble” sounding programs.  None of these programs required  a level of technology that was  either not known or could not be managed by our own people.  What we got in return  was  a bunch of irrelevant western “experts”, their inadequate appreciation of local problems, their inappropriate recommendations and their disproportionate  perks and payments. The so-called “technical co-operation and technology transfer” projects are a common way in which poor countries are exploited and befooled.  Financed by foreign loans and tied with attached strings, such projects provide huge salaries and other expenses to the  mandatory foreign  “experts”.  These costs may take as much as 75% of the project funds, including bribes for government officials and politicians.  Whether the projects succeed or fail, as often they would – the country must repay the loan plus the interest.  Meanwhile,  development remains an elusive dream, which must be conveniently postponed to a yet another loan. The greatest impact, besides the  accumulation of  non-sustainable  debts is the crippling effect on the ability  to think and act with one’s own faculties and resources.  These faculties are henceforth surrendered to the lending institutions, who begin to decide what is good and not so good for us.  Slavery of thought is thus the  largest piece of poverty that comes in the same package that contains the  bondage of debt.



The external debt today is more than an instrument of extraction of wealth from poor countries.  It is a weapon for subjugation, a modern form of slavery.  A nation cannot  embark upon liberating others (Pakistan’s favourite ideological pastime), before it has liberated its own self.  And liberation is not possible, unless we break the chains of debt.  Perhaps our schools  may like to include this  little  rhyme in their books (even without waiting for a yet another syllabi improvement CIDA grant.)



“Rags make paper

Paper makes money

Money makes banks,

Banks make loans,

Loans make beggars,

Beggars make rags.”




Naeem Sadiq