By Faisal Shakeel

Pakistan’s economy has gone down the rabbit hole. Even Alice would find it impossible to rescue because of its multiple ailments. The burden of the war on terror caused it to crack after cumulative debts and corruption hollowed it. Now the flash floods seem to be wiping its remains clean.

Pakistan’s debt is expected to shoot up to $75 billion in the coming months as the moratorium on loans, given in the wake of the country’s co-operation in the war on terror, is set to lapse soon. There is a growing feeling at both the domestic as well as the international level that Pakistan should put its house in order before seeking aid from international sources.

But organisations such as Oxfam are calling for the cancellation of Pakistan's debts in view of the destruction caused by the flooding and the massive cost of relief and reconstruction. The agency says that some of the world's wealthiest countries are getting more from Pakistan in debt repayments than they have given to help victims of the floods.

Oxfam said France received $62 million in debt payments in the first nine months of the last financial year, more than 15 times its direct contribution to the flood response. Japan received $111 million, more than five times its contribution to the response. South Korea received four times as much, and China three times as much.

But experts at home believe bringing the rich into the tax net and removing corruption from vital sectors of the country would go a long way towards improving the economy and helping those in need. Their views conform with those of US Secretary of State Hillary Clinton, who asked Pakistan to tax its rich to help the flood-stricken.

“It’s absolutely unacceptable for those with means in Pakistan not to be doing their fair share to help their own people while taxpayers in Europe, the United States and other contributing countries are all chipping in,” Clinton said as she joined the European Union's foreign policy chief Baroness Ashton in pledging continued assistance. “The most important step Pakistan can take is to pass meaningful reforms to expand its tax base.”

The suo motu proceedings in the Supreme Court reflect a classic example of how the rich in this country have exploited the system. A sum of Rs300 billion ($3.5bn) had been written off by various banks from 1971 to 2010. The Supreme Court is now asking the State Bank of Pakistan to get this money back because it belongs to the people of Pakistan.

Prominent economist Dr Ikramul Haq says that during the last three years, certain industrialists obtained Rs6.8 billion in the form of loan write-offs from the government-owned banks alone. Shockingly, he says, the FBR did not tax these remissions as business benefit, causing the loss of billions of rupees to the national exchequer.

The big question is whether the international monetary institutions could be persuaded to write off Pakistan’s debt. Faisal Barri, another economist, believes it would be hard for the financial institutions to recognise Pakistan as a country fit for debt relief.

The countries whose debt cancellation is under consideration include Burkina Faso, Ethiopia, Madagascar, Nicaragua and Rwanda. All the countries under consideration are among the Heavily Indebted Poor Countries (HIPC), a category established in 1996. Pakistan is not among these countries.

Although steps are being taken to broaden the tax net, much has yet to be done to move the political parties at home to do more. A small initiative has been undertaken by the MQM party, seeking a limit upon vast landholdings in a bill submitted to Parliament.

The bill seeks transfer of land from feudal landlords to workers to generate economic activity and empowering people who have been exploited for decades. But how far would these measures go in helping 20 million people affected by the floods?

With the scale of devastation still unfolding, the international community must join hands with Pakistan to find ways to bolster its economy and help those waiting in vain for help. Could the lenders lend a helping hand again by seriously considering the campaign for cancellation of Pakistan’s debt?