Danger of Loans

Hefty claims by government to stabilize Pakistani economic tsunami does not seem to materialize. With prices of food commodities soaring high, crisis of electricity, shortages of food staple, downward trends in a number of industries further adds to misery of already dwindling economic situation. Fruits of adherence to Capitalism reaped and here we are in the midst of not so ending global crisis. Thousands have made cuts in their spending, another hundred thousand don’t have resources to meet their daily basic needs whilst there is a huge list of those who lost this battle of survival waged on them by their own, all so handsome and dear to west, rulers over Muslims.

Adverse political and instable security situation in Pakistan, which marked its beginning from General Mussharaf era, led to huge out flow of foreign reserves and resulted into shortage of foreign currency reserves. To solve this problem amazing is the approach of those in charge on us, our rulers. Their high profile financial experts, economists and gentleman from leading business schools of the world, can only give them petty and futile solutions to avert economic turmoil, such as loans from IMF. Another loan trench is already in line!

Loans shall inject dollars in our reserves, but for someone who think and care what is happening with their country ponder that is it the solution? Have we comprehended the consequences which result from such loans? A quick look to our past reminds dark episodes which this Nation has faced because of loans since 1947. The danger of loans is such that British Empire was able to make hold into Egypt, when in Egypt, the government continued to take loans between 1864 and 1875 till the debt reached about £95 million. Kaif mission came in 1875 to examine the finance of Egypt and, for the purpose of its reforms, it recommended the establishing of a committee to supervise its finance, and they should submit to its counsel. No loans has to be decided without its agreement, and a debt fund was made in 1886 to receive the amount assigned to the debts coming from the local services, thus the committee was a foreign government inside the Egyptian government.

Today these committees have been transformed into so called financial experts over projects and economy. They give their plan of loan to the country and their so called “expert” suggestions of cutting down expenses and essentials. Instability in economy and poverty take place by forcing certain projects and conditions to government which further adds to problems. The government has to make cuts in jobs, it levy new taxes, privatize state owned institutions and devalue its currency as a part of program suggested by these experts, thus a country is forced into another severe crisis of poverty elevation.

The loans of IMF are to be repaid in dollars and to earn dollars government is advised to increase their exports. Countries like ours, who do not produce high valued industrial goods but have good agricultural lands, is advised to produce cash crops instead of food crops. The cash crops are exported and sold at lower price in international market whilst the local market suffers because of shortage of food, thus government is forced to import food crops. To import food crops, country needs more dollars, and to get dollars a country is forced to take more loans from institutions like IMF. This happened in Egypt in 1992 when Egypt exported cash crops, because of IMF conditions, whilst it imported food crops to feed its own people. This resulted into deficit of $4 billion in Food trade. These are few evidences to the fact that how a country suffer by adhering to capitalism and resorting to institutions like IMF. Countries like Egypt, Iran and Turkey have suffered because of such institutions when they took billions of dollars in loan yet their economical situation deteriorated to such an extent that they were, before taking loans, economically better than they are now.

Even Americans have given statements over the consequences of loans. On 12 July 1962 the Judge William Douglas, one of the High American Court Judges, gave a speech in a Masonic meeting in Spatel, where he announced that, “there were many states whose situation worsened due to their receiving of American aid. The senior officials in these countries became rich due to the American aid and at the same time the members of the public started starving. The USA started to lose its reputation in the undeveloped countries. We used to, at the time of Truman and Eisenhower, struggle against the communism outside by the planes, bombs, guns and dollars. The financial aid was used to promote the status of the feudalists not to fund the reformation projects. These financial aids were spent in supporting the leaders of feudalism not supporting the people to achieve an economical justice.” This is the reality of loans which has nothing good to do with economic condition of a country rather situations get worse for loan taking country.

On the contrary Islam has given comprehensive solution to create economic activity and stability. Instead of resorting to IMF option, we can easily revive economy by implementing economic system of Islam. Islam will abolish dependency on US dollar by opting to gold based currency. This will lead towards abolishment of dollar reserve system and abolishment to the adherence to institutions like IMF. In addition to gold based currency system, Islam has given details through which a State can generate huge funds and procedure of distribution of those funds to general people. Few of these funds are Khiraj (tax on agricultural land), Jizya, Ushur, and Zakat. A study revealed that collection of Khiraj only can generate trillions of rupees per annum not to forget the Zakat fund which, even today, is collected in billions. These are only two sources of funds through which we can generate huge amount of money while we shall not forget that there are other ten sources of fund generation proved from the text (Quran and Sunnah). Islam do not allow to give huge resources into private hands thus privatization of mineral reserves and other huge natural resources will seize and will be given the status of public property, thus benefit will be distributed to everyone individual.

The solution is not in resorting to institutions like IMF or any other capitalist institution. Survival is only in adherence to the Shariah of Allah (swt) and hastening towards it. This will be achieved by comprehensively implementing Economic System of Islam through the establishment of Khilafah.

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Tags: Debts, Islamic State, khilafah, Loans

This entry was posted on Saturday, January 16th, 2010 at 07:57 and is filed under Current Affairs. You can follow any responses to this entry through the RSS 2.0 feed.