A patriotic Pakistani has raised an Alarm over the Extensive Borrowing by Nawaz Sharif Government. This will almost double the National Debt to Western Lenders, who will again dictate Pakistan’s Foreign Policy within the Region. In the past such Diktats have resulted in Pakistan being forced to join foreign adventures as a proxy, such is the case in Afghanistan. Another pressure Pakistan is facing is to allow Anti-Iran terrorist elements, like Jundullah to operate from Pakistan. Pakistan’s enemies finance many of these terrorists. So, heavy borrowings by Pakistan Government are not without deleterious consequences. An inept team, whose selection is based on Nawaz Sharif’s Biradari, rather than pure skillsets and merit, leads Nawaz Sharif Government. IN this government, meritocracy has taken a backseats. Toadies and sycophants of Sharif Family and Biradari have key positions. Among the worst offenders are Khawaja Asif, Pervez Rasheed, Ishaq Dar, Ahsan Iqbal, and Saad Rafiq. There only qualification is their Amritsari Kashmiri background, similar to Sharif Bros. Countries, which are run by such incompetent leadership end-up in disasters. Recently, Argentina, Paraguay, Mexico, and Brazil, were almost on verge of default due corruption by friends and relatives of the ruling elite. Maryam Nawaz Sharif was recently picked to head almost a $ 0.5 Billion, Business Loan scheme. Her only qualifications are that her father is Prime Minister Nawaz Sharif. The business loan scheme is clever tool to skim money from Pakistan’s Treasury and use it to finance huge Ittefaq Enterprises foreign ventures in UAE, Malaysia, Thailand, Singapore, US, Arabia and Cayman Islands Banks.
In light of these blatant examples of corruption, we have launched a series to block misuse of foreign funds through borrowing from IMP and the World Bank. Pakistan is NOT a Fiefdom of Sharif Bros. The people of Pakistan elected them and the people can also remove them. We urge all our Pakistani Members to support initiative taken by patriotic individuals like Attorney, Fahad Ahmad Siddiqi
LAHORE: The Lahore High Court (LHC) on Wednesday took up a constitutional petition against excessive borrowing by the federal government and extensive new currency notes printing by the State Bank of Pakistan (SBP) that resulted into double digit inflation.
The court asked the petitioner’s counsel Fahad Ahmad Siddiqi to inform it whether the LHC has the jurisdiction to intervene in the fiscal issues.
The court also the sought judgments of Pakistani, Indian and American superior courts on the point as reference law.
Justice Ijazul Ahsan issued this order on a petition moved by former MPA Dr Humaira Awais Shahid through her counsel Siddiqi.
The federal government and the State Bank of Pakistan have been made respondent in the case.
The petitioner pleaded inflation is rampant in the country and the successive governments have been spending more than the tax revenue and financing the difference by internal and external borrowing for a long time.
He said the cumulative amount of borrowing has reached a stage where the servicing of the outstanding debt has become the single largest item of expenditures, which in combination with defence expenditures, leave very little revenue for other purposes.
He said the main cause of inflation is the SBP’s printing of currency notes indiscriminately on the instruction of the government, which also borrows from commercial banks to meet its expenditures rather than imposing direct taxes on the rich.
The SBP’s third quarterly report on Pakistan’s economy (2012-13) also bears out the petitioner’s stance.
He said the recent provisional data on the monetary aggregates showed the government is printing Rs5.8 billion per day (Rs242 million per hour and four million rupees every minute).
He prayed the court to declare high inflation is trampling the fundamental economic rights of poor people.
It was further requested to declare the loss of purchasing power of citizens as violative of the principles of natural justice and extortion on the part of the government.
The petitioner further prayed to the court to declare inflation as a tax illegally collected from the poor through price hike without the approval of the national assembly, which is the only authority under the law to impose a tax. It was further prayed to declare the frequent government borrowing from the SBP as illegal and unconstitutional.
He also prayed to direct the SBP to limit note printing that can ensure that inflation does not exceed single digit and exercise its lawful authority to refuse lending to the government.
IN THE LAHORE HIGH COURT AT LAHORE Writ Petition No. _______/2013 Dr Humaira Awais Shahid, d/o Abdul Hameed Bhatti, r/o 106-Sarwar Colony, Cantt; Lahore. PETITIONER VERSUS 1. Federation of Pakistan through its Ministry of Finance, Room No. 514, Block “Q”, Finance Division, Pak Secretariat, Islamabad. 2. The Monetary & Fiscal Policy Coordination Board, through its Secretary, State Bank of Pakistan, Lahore 3. State Bank of Pakistan and its board of directors through its Governor, Shah Rah-e- Quaid-a- Azam, The Mall Road, Lahore RESPONDENTS WRIT PETITION UNDER ARTICLE 199 READ WITH ARTICLES 3, 8, 9, 24 & 25 OF THE CONSTITUTION OF ISLAMIC REPUBLIC OF PAKISTAN , 1973, Respectfully Submit herewith: That the brief facts leading to the filling of the instant writ petition are:
1. That inflation is rampant in the country and even the official price statistics that understate the actual rise in prices show that during the last decade inflation has remained in double digit. 2. That the government has increased its borrowing from the State bank of Pakistan recently and that the consequent rise in inflation Page 1is a cause of immediate concern and that a high inflation puts a burden on the lives of the poor people whose meager earnings in nominal terms are reduced stealthily by high inflation which is an implicit tax collected by the state from the poor without lawful authority. The copy of the news publication is appended here with as
ANNEXURE “A”. 3. That the governments, chosen by the people or imposed on them, have been spending more than their tax collection and financing the difference by internal and external borrowing for a long time. Initially borrowing was found to be a solution of the problem of shortage of tax revenue compared with expenditure. With the passage of time, that solution became a part of the problem. The cumulative amount of borrowing has reached a stage where the servicing of the outstanding debt has become the single largest item of expenditure, which in combination with defense expenditure, leaves very little revenue for other purposes. 5. That inflation is a regressive and destructive form of taxation and every country has set up a central bank to follow a monetary policy that keeps money supply under control and thereby keeps inflation in check and that the State Bank was set up as the central bank of the country to fulfill this responsibility. The copy of the news publication under the title of “Inflation -causes and cure” is appended here with as
ANNEXURE “C”. Page 26.
That the State Bank of Pakistan has failed to discharge its statutory duty to control money supply and inflation and to put a prudent limit on government borrowing from the State Bank of Pakistan. The money supply has increased excessively in the last several years due to excessive note printing by the State Bank of Pakistan in violation of its statutory responsibility and excessive government borrowing from commercial banks. The State Bank board of directors has failed to exercise its legal authority to “determine and enforce” a limit on government borrowing. The copy of the news article with the title of “ Govt. borrows record Rs. 804 Billion from SBP” published in daily News in its 23rd September is appended herewith as
ANNEXURE “ D”. 7.
That Inflationary expectations seem to have taken root creating a momentum for price increases. Now most of the people can barely eat two-square meals a day. They cannot pay the school fees of their children and are unable to afford medical treatment for their aged parents. Millions and millions of people are suffering under the burden of rising costs. Faced with these circumstances they feel their life is not worth living any longer and are committing suicide .The country has entered a vicious circle in which actual price pressures and inflationary expectations have begun to feed each other. The ravages of high inflation are well known and those include deeper income inequality and poverty, falling saving and rising consumption, widespread speculation, hoarding and black marketing, balance of payment vulnerability, social tensions and political instability. 8. That the central bank continues to print money with consequent inflation to finance the rising government spending. The recent provisional data on the monetary aggregates showed that the government has been printing Rs 5.8 billion per day with Rs. 242 million per hour and Rs4 million every minute. It is pertinent to be noted here that containment of money supply within the safe limits is Page 3the responsibility of Respondent No. 3 i.e. State Bank of Pakistan. Under the Provisions of Section 9A of the SBP Act, it is the legal obligation of SBP to keep money supply (= liquidity) within safe limit to have a control on inflation. It is further pertinent to be noted here that for the purpose section 9 A gives to the SBP power to “determine and enforce” the limit on government borrowing from the SBP but it has failed to do so violating its statutory responsibility, hence resulting in a recent sharp rise in inflation causing gross hardship to the citizens of Pakistan by aggravating inflation 9. That it is further stated here with respect that, the Respondent No.2 permitted rampant borrowing opportunities to the government, which not only gave exponential rise to inflation but has badly impacted the economic growth and private sector lending. The unprecedented increase in government borrowing is in stark contrast to the provisions of section 9 C of the State Bank Act . 10. That the double digit inflation created by the ministry of finance and the State Bank of Pakistan in violation of their statutory responsibilities is an abuse of the concept of Fundamental Guarantees enshrined in the Constitution of Pakistan, it is peculiar to be noted here that the Provisions of Article. 3, 8, 9, 24 & 25 of the Constitution categorically restrict the deprivation of Property of Citizens except in accordance with law. Whereas the increase in inflation directly results in loss of purchasing power of the citizens hence it is a hidden tax which the subjects are bound to pay despite the fact that it has not been imposed by the Parliament and in fact parliament passed amendments in the State Bank of Pakistan Act to ensure that taxation through inflation does not take place. 11. That the nature, scheme and failure of the State Bank of Pakistan to act in accordance with the provisions of State Bank Act and thereby failing to control inflation rate in the Country is unconstitutional , illegal, confiscatory, coercive and exploitative tools Page 4that financially cripple the law abiding tax payer and in so doing blatantly disregard binding dictates of law and the Constitution . the same are therefore liable to be declared unconstitutional , illegal and ultra vires inter alia on the following
GROUNDS a. That direct impact of ignoring merit and regulating criteria prescribed by the State Bank Act of 1956 is causing harshly adverse consequences to the life of ordinary citizen including unjustified inflation in retail prices for consumers, thus depriving the people of Pakistan of their incomes, assets , quality of life and dignity save in accordance with the provisions of Article 14 of the Constitution of Islamic Republic of Pakistan. b. That it is submitted here with respect that developing sound and strong public institutions was a constitutional obligation with its foundations pillared in democracy, equality, tolerance, social, economic and political justice. Institutional design and the configuration of its governance must be sensitive to the Fundamental Rights of the people and its vision aligned with the Principles of Policy. Such broad principles translated into institutional literature required the public institution to be open, equitable, accessible, transparent, rule-based, participatory and inclusive. Public institutions were trustees of the people and worked for the advancement of public interest. c. That it is further stated here with respect that to be inclusive, economic institutions must feature secure private property, an unbiased system of law, and a provision of public services that provided a level playing field in which people could exchange and contract. Institutions opposed to the properties of an inclusive institution were called extractive institutions – extractive because such institutions were designed to extract incomes and wealth from one subset of society to benefit a different subset. Page 5d. That it operates under the State Bank of Pakistan Act, 1956, which has been amended by the parliament several times to strengthen its authority to regulate and control money supply and keep inflation under control. It’s most relevant provisions from the point of view of formulation and conduct of monetary policy are in section 9A, 9B, 9C and 46B of the State Bank of Pakistan Act. e. That section 9A (b) of the SBP Act of 1956, mandates the board of directors of the State Bank to “determine and enforce, in addition to the overall expansion of liquidity, the limit of credit to be extended by the Bank to the Federal government, provincial governments and other agencies of the federal and provincial governments for all proposes” to keep money supply and inflation under control; it may be understood that expansion of liquidity means the same thing as money supply in economic jargon f. That section 9B constituted a Board for the coordination of fiscal, monetary and exchange rate policies which is mandated to meet every quarter for the purpose g. That the board is a coordinating board and is prohibited by section 9A (6) from “taking any measures that would affect the autonomy of the State Bank of Pakistan as permitted in this Act”. h. That section 9C was added through an amendment passed by the parliament on March 13, 2012 mandating that “federal government borrowing from the Bank shall be such that at the end of each quarter they shall be brought to zero” and further that in the case of failure of the government to do so “the Finance Minister shall place before the parliament giving detailed justifications for the said failure”. i. That the Respondent No.1 has violated the provisions of section 9C (1)of the State Bank Act by continuing to borrow from the State Bank of Pakistan without bringing it down to zero each Page 6quarter as required by section 9C of the SBP Act. j. That the Respondent No.1 has violated the provisions of section 9C (3) of the State Bank of Pakistan Act by not placing before the parliament justification for its failure to do so. k. That the Respondent No.1 and the Respondent No. 2 have violated section 9B of the State Bank Act by not holding regular meetings of the Monetary and Fiscal Policies Coordination Board every quarter. l. That Respondent No.1 has violated section 46 B of the State Bank Act by issuing instructions to commercial banks in contravention of the prohibition contained therein. m. That due to the above violations, money supply was allowed to increase much more excessively than the genuine requirements of the economy which has caused a high rate of inflation . n. That it is a settled law that no pecuniary burden can be imposed upon the subjects of this country by whatever name it may be called , whether tax, due, rate or toll except upon clear and distinct legal authority established by those who seek to impose the burden. That it is further significant to be noted here that it is again a cardinal principle of Taxation law that the charge, application and administration of the Tax must be well defined and prescribed so that the payer and the collector both must know what one has to pay and what the other has to gather, that it is further peculiar to be noted here that no tax can be imposed on the people of Pakistan without being notified by the Parliament, whereas in actual the people of Pakistan are paying constantly a hidden tax named as Inflation for which law provides no compensation. o. That apart from the glaring legal infirmities inherent in nature, scheme and rise in unjustified Inflation over the couple of years in Pakistan, the same carries draconian and devastating financial Page 7ramifications for the law abiding tax payer. The nature, scheme, and imposition of the impugned rise in Inflation leave the subject with no other option but to suffer more cut in his living standard after already paying tax under other applicable fiscal laws. The impact of the unjustified inflation is therefore, punitive and confiscatory. This is especially so for the law abiding citizenry of Pakistan who, after having duly paid their taxes and contributed to the public welfare their entire lives , are thrust into financial ruin by the loss of purchasing power due to inflation. p. That the failure of the State Bank of Pakistan to act in accordance with the provisions of State Bank Act and thereby failing to control inflation rate in the country is un-constitutional , illegal, confiscatory, coercive and exploitative tools that financially cripple the law abiding tax payer and in so doing blatantly disregard binding dictates of law and the Constitution, the same are therefore liable to be declared unconstitutional , illegal and ultra vires. q. That the titled writ petition challenges the vires, validity and constitutionality of the impugned suppression of purchasing power (inflation) in as much as devaluation of Pakistani Rupee, therefore pursuant to law settled by the Honourable Superior Courts of the country, the Constitutional jurisdiction is the only remedy available to the petitioner, hence the titled writ petition. That In view of the above, it is most respectfully prayed that this Honourable Court may kindly be pleased to: a. Declare that the fundamental economic rights of poor people are being trampled by high inflation as a means of financing government expenditure instead of tax reforms to collect taxes from the people according to their ability to pay. It is further most humbly requested to declare that the impugned (inflation) loss of purchasing power of citizens as violative of the principles of Natural Justice and an Extortion on the part of the Government . Page 8b. Declare inflation as a Tax, illegally collected from the poor through price hike without the approval of the National Assembly which is the only authority under the law to impose a tax. It is further prayed that the this Honourable Court may very graciously declare, rampant borrowing by the Government of Pakistan from the State Bank of Pakistan on a frequent basis as ultra vires to the fundamental rights of the petitioner, illegal and unconstitutional . c. Direct SBP to limit note printing that can ensure that inflation does not exceed low single digit and exercise its lawful authority to refuse to the government excessive lending that causes it to print notes and to direct Respondent No.1 to stop interference in the SBP autonomy and let it fulfill its statutory responsibility of controlling money supply and inflation. d. Direct Respondents No. 2 to adhere to the SBP Act, 1956 so as to relieve poor people from the miseries of inflation and to lower government borrowing, and reduce money supply and thereby bring inflation down. It is further most humbly prayed that a direction may very kindly be issued to Respondent No. 2. to act as an autonomous central bank as provided for in the SBP Act and fulfill its statutory responsibility to regulate private liquidity which is a jargon used for money supply. e. Direct Respondent No. 1 & 2 to meet quarterly as required by the SBP Act, 1956 to coordinate monetary, fiscal and exchange rate policy. A further direction may be issued to the Respondent No. 1 to reduce its borrowing from the SBP to zero at the end of each quarter and take steps to reduce the outstanding amount of debt every year to bring it to zero within the stipulated period. Page 9f. Direct Respondent No. 1 to report to the parliament the reasons for its failure to act in consonance with the provisions of SBP Act, 1956 in the past g. Direct the Respondent No. 1 & 2 to strictly adhere to the mandate contained in the provisions of Section 9 (A), (B) & (C) read with Section 46 (B) of the State Bank Act. h. That while keeping in view of the peculiar circumstances of the instant matter, any other relief that this Honourable Court deems just and proper may very graciously be extended in favor of the petitioner.
PETITIONER THROUGH Fahad Ahmad Siddiqi Advocate High Court Qadeer Ahmad Siddiqui Law Associates Ground Floor, Siddiqui Plaza, 7- Turner Road, Lahore Dated: 16.12.2013 Reliance is placed upon Article 3 of the Constitution of Islamic Republic of Pakistan Article 8 of the Constitution of Islamic Republic of Pakistan Article 9 of the Constitution of Islamic Republic of Pakistan Article 14 of the Constitution of Islamic Republic of Pakistan Article 24 of the Constitution of Islamic Republic of Pakistan Article 25 of the Constitution of Islamic Republic of Pakistan Article 199 of the Constitution of Islamic Republic of Pakistan Section 9, 9(A), 9(B) & 9 (C) of State Bank of Pakistan Act 1956 Section 46(B) of State Bank Act of 1956 2012 PLD 132 Supreme Court of Pakistan 2013 PLD 343 Lahore High Court
