We don't learn. Consider: Not only has a loan defaulters' list placed before the Senate of Pakistan embarrassed the present rulers, it has also sought to demean a number of genuine Pakistani businesspeople. Magna Carta is a charter agreed to by King John of England on 15th June 1215. Two of its clauses - 10 and 11- are quite profound in relation to money lending:
"10. If one who has borrowed from the Jews any sum, great or small, die before that loan be repaid, the debt shall not bear interest while the heir is under age, of whomsoever he may hold; and if the debt fall into our hands, we will not take anything except the principal sum contained in the bond.
"11. And if anyone die indebted to the Jews, his wife shall have her dower and pay nothing of that debt; and if any children of the deceased are left under age, necessaries shall be provided for them in keeping with the holding of the deceased; and out of the residue the debt shall be paid, reserving, however, service due to feudal lords; in like manner let it be done touching debts due to others than Jews."
Thus taking loans has been a familiar phenomenon for centuries. As society progressed, individual Shylocks were gradually replaced by institutions - the present-day banks.
On July 23, Ministry of Finance informed the Senate that banks waived off Rs 280 billion from July 1, 2013 to June 30, 2015. How much of this Rs 280 billion was interest, penal interest and principal amount we were not told. Whenever a loan is extended the lender is required to use his expertise to cover the risk. That is why banks have highly paid individuals that operate risk departments to vet every loan application. Non-Performing Loans (NPLs) normally soar in bad economic times and they remain within manageable limits when the going is good. Therefore, the Parliament needs to know about the quantum of NPLs instead of the amount of loan write-offs.
Since over 85 percent of banks are in private hands, the SBP or Parliament need not to worry about loan defaults in the private sector. But they do need to worry about sovereign debt especially the dollar denominated debt of the country and also the financial health of banks themselves. The Government of Pakistan can print rupees but not greenbacks (dollars) used for international settlement of trade. With home remittances exhibiting a tapering off, we need to remain vigilant that the balance of payment situation remains manageable since only export growth will help. We, therefore, need a change in mindset.
We have made laws for candidates fighting elections that can be flouted with impunity or bypassed. Implementation of laws appears to be our weak point. Executive branch is woefully complacent and inefficient as judicial system is being used to implement laws. Political issues cannot be settled by courts. Only the Parliament which is the legislative branch can do so. We appear to be barking up the wrong tree. Courts do not have the system to investigate a crime. Institutions in the executive branch can only do so. So let us strengthen these institutions without any further loss of time.
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