Pakistan on verge of economic collapse
From Our Special Representative NEW DHLHI, June 1: The East Bengal crisis has brought Pakistan on the verge of an economic collapse, and she can hardly survive another three month on her own, so far as her foreign exchange assets go, without a political settlement. With total stoppage of export earnings and revenue collections from East Bengal; and with a daily expenditure of about a care of rupees on military operations in Bangladesh economic and financial experts opine, Pakistan’s Foreign exchange resources and expenses will be exhausted by the end of August next, if not earlier. A world Bank and international monetary team is currently on a visit to Dacca for an on the spot study of the economic situation and assessment of aid require ments of Pakistan. But the team’s report and its processing as also decision by the aid Pakistan Consortium will take more than three months. It is unlikely that the U. S. A Government and the World bank will agree to any substantially economic aid and loan assistance to Pakistan without restoration of peace and normalcy through a political settlement in East Bengal. Bilateral assistance from countries like U. K. Middle-East countries and China might be forthcoming but that itself will not suffice.
PROMISES
In February this year Pakistan foreign exchange resources including gold reserves stood at about 175-180 million dollars or about 80 crores of Pakistan rupees. With a monthly loss of about Rs.10 to 12 crores of export earnings from East Bengal this would have fallen to about Rs. 60 crores by the end of May. With reduced implies of about Rs. 10 crores a month this would have been reduced to Rs. 30 crores, but Pakistan managed to serve about Rs. 20 crores by deferring or defaulting in payments of foreign debts. Pakistan has also succeeded in obtaining a 170 million dollar aid from China of which about 20 million dollar might have been received by now. Pindi has also succeeded in securing promises of another 25 million dollar assistance form one Middle East countries and in addition she has been able to arrange some supply credits from man and one or two other countries.
But taking all into account Pakistan as on today may not be left with more than 140 to 150 million dollars or roughly about 75 crores of rupees.
In a normal year Pakistan’s monthly imports used to be of the order of Rs.30 crores. Early in April this year she announced stringent restriction on imports. Even so the monthly imports would be about Rs. 20crores.
EXPORTS
Thus on present reckonirg with exports from East Bengal dried up, with imports bill remaining at about Rs.20 crores, Pakistan can just last for another three months on her own on the economic front.
If Pakistan Government does not agree to some form of political settlement leading to establishment of an administrative set-up which may be regarded as representative of East Bengal it will be difficult for Pakistan to get any substantial aid from the World Bank and the international Consortium according to knowledgeable sources.
Pakistan used to export annually about Rs.300-350 crores worth of goods; out of which about 55 per cent comprised of jute, tea and other commodities from East Bengal But exports from the Eastern wing had practically dried up from East Bengal since the end of February and there were no exports through Chittagong and Chalna ports in March and April. There was very little of ship movement in may either.
As against the normal exports of the order of Rs.300-350 crores, Pakistan’s imports amounted to Rs.600-850 crores, the gap being met by external assistance but even before the trouble started in Bangladesh in February -March there had been noticed a fall of about Rs.10-12 crores per month in Pakistan’s foreign exchange assets. Between October, 1970 and February 1971 there was a net decline in Pakistan’s foreign exchange assets included gold reserves by about Rs.50-60 croers. Exports out of East Bengal from the first weeks of March would not add up to even 5 million dollars. The Chittagong and Chalna ports were completely immobilized as dock workers on strike.
IMPLICATIONS
Raillines from Chittagong to Hinterland are totally dislocated which cannot be repaired or restored before the monsoon is over. Similarly road links with Chittagong and Chalna are disrupted. There is thus serious difficulty of moving jute or other goods from the interior to the ports. Pakistani military rulers have given up hopes of resumption of rail or road transportation, and they are now thinking of inland water transport.
The present situation in Pakistan on the economic front is dismal (,) and the happenings in Bangladesh have grave implications for Pakistan’s economy and budget. Pakistan’s annual budget of Rs.1500 crores includes development expenditure of about Rs.700-800 crores. The Pakistani rulers had envisaged an expenditure of Rs.680 crores during the first year (1970-71) of their Fourth Plan . But they admitted last week that the total developmental expenditure during this year wts unlikely to exceed Rs. 450 crores. But the actual reality might be much worse.
Out of about Rs. 800 crores of tax revenue about Rs.400 crores used to come from East Bengal. The non-payment of tax movement started from January last and from the beginning of March revenue collections in East Bengal have been nil. Exports earnings similarly have dried up (, ) trade and industry in East Bengal stand completely paralyzed. It has its inevitable repercussion in the West Pakistan. In Karachi there is an atmosphere of global Pakistan has admitted that roughly Rs.40 crores of realisation from East Bengal on account of trade has not come to West Pakistan. There had been no lifting of West Pakistan manufactures by East Bengal during the past two and a half months, and manufacturing units in West Pakistan are either closing down or laying of workers. This in its turn has produced serious problem of industrial relations and many trade union leaders have been put in prison. Both in Karachi and Lahore stock exchanges are getting depressed and share markets are falling.
According to available reports the Pakistan authorities which seed to pay their staff in foreign passion wholly in foreign exchange have how reduced the foreign exchange payment to 60 per cent.
Reference: Hindustan Standerd 2.6.7