Holbrooke corrects our poor accounting

According to newspaper reports, United States Special Representative on Afghanistan-Pakistan Richard Holbrooke had raised the matter of the 700 million dollars disbursed by the Friends of Democratic Pakistan (FoDP), but not added to the credit column by the Economic Affairs Division (EAD), with President Asif Ali Zardari.A visibly angered President, according to media reports, directed an immediate investigation into the matter and the EAD was then compelled to accept that the figure cited by Richard Holbrooke was accurate. An inquiry into who is responsible has been initiated, although, it is not clear who will undertake the inquiry. However, one can only hope that it is undertaken by an independent third party.

The Minister in charge of the EAD, Hina Rabbani Khar, downplayed this glaring error and reportedly stated that the figures stood reconciled and that the ‘confusion’ arose because it is difficult to assess which assistance is fresh and which already in the pipeline. She also added that as most of the FoDP pledges were in the project mode, therefore the EAD was unable to credit the amount as the money would not be disbursed till the project got under way. These explanations are inexplicable for two reasons.

First and foremost, basic accounting must enable a bookkeeper to distinguish between fresh assistance and assistance already in the pipeline. Thus, if Khar’s claim is accurate then she needs to send the EAD staff on a basic accounting course. The explanation of accounting basics will surely introduce them to some basic accounting principles, accounting concepts, and accounting terminology. And secondly, Holbrooke referred to 700 million dollars as assistance already disbursed to Pakistan, which accounted for his alarm, money that has probably been used for balance of payment support.

Therefore, Khar’s explanation of project assistance, not yet disbursed, is an erroneous one at best and an attempt to downplay a serious lapse by deliberately misleading at its worst. The reticent Secretary EAD, Sibtain Fazle Haleem, did not attend any calls from reporters and therefore, EAD’s explanations for the matter are not known. Given the fact that few in this country, be they ministers or indeed bureaucrats, voluntarily resign and take ownership of mistakes within their purview, makes one doubt if either Hina Rabbani Khar or Sibtain Fazle Haleem would do the honourable thing.

Thus, based on past precedents, their strategy would be to conduct the inquiry and either make a junior-level officer the scapegoat or else to delay the inquiry till such a time as media interest wanes and the entire episode can be brushed under the carpet.

Khar implied that as the figures have been reconciled, the issue must be laid to rest. However, what must be acknowledged is the fact that this ‘reconciliation’, made possible only after Holbrooke raised the matter with the President, subsequent to media reports of a total of 325 million dollar disbursement from the FoDP, more than a couple of months ago, has further widened the already large trust deficit of the international donor community with respect to this government.

In other words, the issue is serious and requires considerable damage control that must allow for some heads to roll. It is unfortunate, but one is forced to conclude that this is unlikely. The present government has been facing severe international criticism for failing to reduce the size of its massive cabinet or indeed to begin to tax its elite and, instead, has being going around the world requesting greater assistance to meet the needs of the flood victims.

Hillary Clinton, the US Secretary of State, has repeatedly said the world will not help Pakistan meet its financial needs in the aftermath of the floods, if it doesn’t take action to raise its own revenue collections and reduce profligate government expenditure.

In this context, the EAD fiasco would merely strengthen the international assessment of not only the lack of basic competence to undertake the terms of reference in the ministries/divisions, but also brush their mistakes under the carpet when these are highlighted.

In this context, it is relevant to note that the staff of the Ministry of Finance, of which EAD is a component, has been reportedly informed by the Federal Finance Minister Hafeez Shiekh not to interact with the press. In addition, he himself has failed to take the media into confidence that would have facilitated a meaningful partnership, which would be in his interest if his objective is to spread the perception that to tax the elite requires personal sacrifices by our parliamentarians, who must agree to a tax on their income from their landholdings as well as disseminate the benefits of a value-added tax to which he is committed to under the Stand-By Arrangement with the International Monetary Fund – Brecorder