The economic managers of our country have received another pat on the back from IMF. Or so we are told after a meeting between the President and Mr Abbas Mirakhor, an executive director of the fund. This means that the IMF dollars would continue to flow and the dreaded default will be kept at bay, at least for the moment. Thus, we continue month-by-month, year-by-year. Missions come and go, doling out a few dollars here, a few dollars there. Like mischievous school children, we are occasionally scolded for our naughty ways. On promise of good behaviour, there is a reprieve but never for long. We are on a short leash and it is getting tighter by the day.

Globalisation has sucked all of us in. Just as no man is an island, no country or no economy exists in isolation any more. The world is now intertwined and interdependent; hiding in a cocoon is no longer possible. When you become part of a greater whole, your rules and regulations and your decisions become subject to global laws. Your acts are no longer contained within your boundaries. Whatever you do has consequences, global consequences.

Some hot heads among us advocate default as a way out of our debt crisis. They are either fools or charlatans. We have no choice but to bear the burden of our sins. This is the way the world works now. You cannot be brigands and pirates anymore. You cannot take other peoples money and run. If you do, the long arm of global law will get you. That is why default is not option. That is why the lifeline that IMF extends to us is so important.

If this threatens our sovereignty, the answer is not to flail about like lunatics. The answer lies in taking a hard look at our reality and then to adjust our priorities. We have an external debt burden of 38 billion dollars or is it 46. No one, not even the Finance Ministry knows for sure. The internal debt is way over a trillion rupees and that may also be a guess because we keep misplacing billions without anybody batting an eyelid. Large, enormously large amounts of SAP (social action programme) funds are unaccounted for and just the other day the President informed us that ADBP has misplaced 30 billion rupees. How can you misplace 30 billion?

We have just about reached the saturation point in our revenue generation. Yes, very few people in a country of 140 million pay taxes but our capacity to bring them into the tax net is just not there. In any case, as Farrukh Saleem has pointed out in a column, our tax to GDP ratio is comparable to or better than the rest of the developing world. This means that those who do pay, are paying a far higher percentage of tax than is justified either by economics or fair play.

Given these conditions, it is a safe guess that 450 billion rupees are just about the maximum that this recessionary economy can cough up. We have never collected this amount ever but I am taking the outer edge of possibility, all other things being equal. There are high hopes associated with agriculture but even if we are able to enforce Agriculture Income tax, the projections for the next few years are not more than four or five billion rupees. This is a drop in the bucket when you consider that our debt servicing each year is about Rs300 billion and on the way up.

If our income is reaching close to a saturation point how are we going to pay our debts or meet our international obligations? We can continue to borrow and then borrow some more but this will only add to our debt. If we are able to meet immediate obligations by this strategy we are not solving the problem. We are only increasing our problem. And, if someone pulls the plug someday and refuses to lend, we would really be left high and dry.

The only other formula designed by man is to cut expenditure. It is my guess that the expenditure of the civil government has already been cut to the bone. It can be further cut if the Government is willing to lay off half its employees. I believe the Planning Commission has prepared some such plan. However, who will have the guts to do this and then face a major political upheaval. Not this government or any other government for that matter.

A lay off strategy must be put in place but it will take years if not a decade to show substantial results. In any case let us not forget that the civil expenditure is hardly ten percent of the budget. Even if the lay off strategy works it will only reduce expenditure by a few percentage points. Hardly the panacea for our ills.

We have been postponing our problems by cutting development expenditure in the last few years. The problem of cutting development in a small economy is that it has severe recessionary impact and also increases poverty. Our poverty statistics have gone up from 17 percent to 38 percent of the total population in the last decade. This has economic fallout and social consequences. Perhaps this is why the government has chosen to launch the so-called mega projects. With development now being given the importance it should have received in the first place, there is little chance of any cut here.

If we cannot cut development and there is little chance of reducing civil expenditure, what is the choice left to us. We have already discussed the impossibility of defaulting on our debt obligations, a major component of our budget. The only other major part of the budget that offers some possibilities is the defence expenditure. If we have any hope of getting out of the debt trap or taking our economy to a higher level, we have no choice but to look for ways to reduce the burden of defence.

Every time we talk of defence, suddenly the geo-political and the geo-strategic scenarios are trotted out to dampen any talk of a cut. Before we go to these lofty heights, let us look at the mundane aspects of our defence budget. The Army Welfare Trust, an organization that pays no tax, has suddenly gone belly up. It is now asking the federal government to give it five billion rupees or underwrite such an amount. Has anyone been held accountable for these monumental losses? Has the famous internal accountability mechanism of the Army come into play? I think the nation needs to know what has happened and who is responsible.

There may be other areas of the defence budget that do not necessarily relate to defence preparedness but take a lot of money. One has only to visit some of the army messes in Rawalpindi, the air force mess in Islamabad, and the navy mess in Karachi to see where economies can be made. A visit to the National Defence College is an eye opener. The facilities, the decor, the marble that has been used would put any first world institution to shame. For a country on the verge of bankruptcy, such expenditures are a crime and we must put a stop to all such luxuries in the future.

I am only referring here to the peripheries of the defence budget. There are many other big-ticket items that need to be looked at. But no such big item can be touched, unless the threat perception goes down. That is why the issue of peace with India is so important. It is not just a question of having an equitable solution to the Kashmir dispute. It is also a question of giving Pakistan a fair chance in the years ahead.

There are some amongst us, in important positions, who refuse to look at reality. They have visions of glory far in excess of our capacity. When you tell them about the harsh economic realities that cannot be wished away, they only appear more determined. They also tell us that we have no faith. They are being kind otherwise we could easily be accused of treason for pointing out the obvious. Whenever I see a gleam in the eye of our armchair warriors and a far away look, I shudder. There is nothing more dangerous than limited minds enmeshed in delusions of grandeur.