Musharraf's Address 15 December 1999
General Pervez Musharraf became the Chief Executive
after deposing the Prime Minister Nawaz Sharif on 13 October 1999.
The following is the text of his second broadcast to the nation.
In this he elaborated the policies of his government.
Address to the Nation by Chief Executive General
December 15, 1999
Before I start my scheduled address I would like
to say a few words about the great tragedy at Lahore in which precious
lives of 100 innocent children were lost. I wish to express my heartfelt
condolences to the bereaved families for this irreparable loss at
the hands of an evil socio-path and his accomplices. The culprit
must be hounded and given- exemplary punishment.
Coming to my address now:
My dear fellow citizens!
About 60 days ago, I had identified areas of critical
importance adversely affecting the very foundation of Pakistan.
Three of the most vital areas were the dismal state of the economy
bordering on bankruptcy, inter provincial disharmony striking at
the roots of national integration and poor governance, or rather,
near absence of governance. Today, I will first take you into confidence
over the progress made on these issues and then turn to our Economic
On the economy, I must admit frankly, that having
assessed the extent of damage it is clear that the economy is in
much worse a condition than what we initially thought it to be.
However, even within this short span of two months, signs of revival
of investor confidence are becoming apparent.
The stock market has shown an upward trend by registering
an increase in the index since the 1211 of October.
During this period we have succeeded in concluding
debt rescheduling agreements with several countries and commercial
creditors for an amount of over $2.3 billion.
Our offer for rescheduling of sovereign bonds was
a great success as it received more than 90 percent acceptance.
This was a pioneering effort which set a record in the international
So far we have renegotiated agreement with 9 Independent
Power Producers. This will result in substantial savings of $749
After about 4 years of a slow-down in the textile
sector, there are now some distinctly positive signals pointing
to a turn around; and lastly
There are strong indications from overseas Pakistanis
and foreign investors showing interest in investing in Pakistan.
Inshallah some major projects generating significant economic
activities are expected to be launched shortly.
Our main focus is to generate economic activity. through
developing investors' confidence. This we intend achieving by ensuring
stability and continuity of policy and thus attracting resident
Pakistanis, Overseas Pakistanis and foreign investment.
There is a general feeling of slow movement on accountability
and that this may be a reflection of weakening of our resolve to
bring the corrupt to book. Let me assure you my fellow citizens
that there is no let-up in our resolve to fulfill our commitment
to the nation.
We stand by every word that we have uttered. We will,
Inshallah, meet your expectations.
The accountability process is on course and the apparent
delay is due to the inherent shortcomings of the investigative structure
supporting the National Accountability Bureau and these shortcomings
There are few specialists in our country capable
of investigating white-collar crimes, which require experts in
banking, tax laws, and commercial transactions. Suitable investigation
teams are now being formed.
The other problem is that there is an extreme shortage
of qual- ified prosecutors. These are also now being inducted.
And the last problem area is the establishment
of courts and appointment of judges which also has taken time.
I would therefore request you to show understanding
and bear with us as we proceed gradually, but surely, to our objective.
We have, to a great extent, overcome the initial hurdles. Six accountability
courts have been established and cases are being filed for trial.
Let me assure you, that with the passage of time
the accountability net will keep widening and many more courts will
be created all over the country. It must be appreciated that if
justice has to be done, it requires a systematic and institutionalised
approach avoiding whimsical, impulsive actions.
I want to share with you the details of the campaign
to recover defaulted loans. By any standard, our campaign has been
very successful. In just 30 days we were able to recover over Rs.
9 billion in cash and in 45 days this figure has now gone upto almost
Rs. 10 billion. In addition, a substantial sum has also been obtained
through new securities in the form of land titles, properties and
other valuables, whose total value is still being assessed. These
additional securities have been deposited in the banks by .defaulters
to make up the shortfall in their collateral.
Based on these recoveries, banks have extended commercially
viable repayment arrangements that would regularize a substantial
amount of loans.
Compared to all previous efforts, this has been the
most successful operation undertaken in less than a month. Of particular
satisfaction is the impact this operation has had on repayment of
Banks have reported that their current dues are recovered
promptly. There is generally a change in borrowers' behaviour in
making repayments. In fact this was one of our major objectives.
I would also like to correct the misperception that
the account- ability process is targeting only loan defaulters.
The accountability process is actually dealing with financial irregularities
in their totality, which include loan defaulters, outright corruption
cases like bribes and kickbacks and also misuse of office for manipulation
of policies for personal gains.
Of the first 26 NAB cases, 40 percent only are loan
defaulters while the rest fall in other categories of corruption.
While I appreciate the patriotic spirit of all those who have voluntarily
settled their dues, I regret the embarrassment and inconvenience
caused to individuals whose names erroneously appeared in the loan
defaulters list and the Exit Control List. We have tried to streamline
the procedures and I hope that such embarrassment will not recur.
With regard to national integration, this will, Inshallah,
be achieved through a balanced and just approach towards all provinces.
We will ensure equitable distribution of all resources, funds, and
The first manifestation of our resolve is reflected
in the balanced representation that we have given to each province
in our cabinet. We will pursue policies that reduce disparities
between provinces as also reduce disparities between regions within
The root cause of all our ills has been the absence
of good governance. Merit was ignored, and, as you all know, most
of our institutions were rendered ineffective. We are determined
to institutionalise good governance through selection on merit and
continuation in any position on the basis of performance. Adopting
such an approach over a period of time, we hope that the system
of merit will become all-pervasive, isolating and removing all pockets
of discrimination and inefficiency.
For the purpose of efficient Governance we have so
far established and appointed the National Security Council, the
Federal Cabinet, the governors and the Provincial Cabinets, the
National Reconstruction Bureau, the National Accountability Bureau
and a National Monitoring System. With all these organisations we
have now created an infrastructure which will facilitate implementation
of subsequent restructuring and reforms.
We are in the process of reforming the financial
and banking sector, public sector corporations and the railways.
Reconstruction and restructuring of other institutions will follow.
Let me now turn to the Economic Revival Plan.
In my first address I had pointed out that the country
was faced with an economic collapse.
Let me give you some indications of the precarious
and fragile economic situation that we inherited :
The growth rate in GDP has continuously declined
from 6% in the 80s to about 3% at present.
The overall volume of trade in the past three years
has declined by nearly $3.4 billion.
Tax collections in the past year have declined
from 12.4% to 10.3% of GDR.
Nearly 56% of the current budget is going towards
As on 30 June 1999 total external debt was $38.8
billion, of which $6.2 billion is short term, making us vulnerable
to the risk of default.
Private investment has almost dried out and shares
issued in the Stock Exchanges in recent years have been negligible.
The fundamentals of the problem are before you. There
are two basic reasons for this sorry state of affairs. Firstly,
the Government spent more than its resources permitted, and secondly,
we as a people, imported more than what we exported.
This state of affairs could not have been allowed
to continue. We cannot barter our future and the future of our children
by living beyond our means.
We have to learn to live and grow within our means.
This is not easy to achieve; there are hard decisions to be taken;
bitter pills to be swallowed. I cannot lead you up a garden path.
Let us face reality squarely and be prepared for sacrifices today
for the sake of a better tomorrow. The Economic Revival Plan that
I am going to present is not meant to be a mini budget but is an
effort to stabilize and renew the economy, to reinvigorate our productive
and institutional capacity.
At the outset, we need to build the confidence of
the business sector in our economy. Nothing has damaged this confidence
more than the ill-conceived decision of freezing the foreign currency
accounts and the needless entanglement with the Independent Power
Producers. With a view to rebuilding this confidence, I would like
to declare that:
First, although the present Government is not responsible
for this callous decision,, I, on behalf of the Government of
Pakistan, apologise to all those who were affected by the freezing
of the foreign currency accounts in May '98. It was a mistake
that should not have been committed. It shattered the confidence
of families, of businesses, of Overseas Pakistanis and it damaged
our financial credibility. I have directed the Law Ministry to
formulate legislative measures that will pre- vent the recurrence
of such events in the future.
The second major irritant, which has damaged our
image as an investor friendly country is the issue of the Independent
Power Producers. I have asked the concerned authorities to expedite
tariff negotiations with the remaining IPPS, and to finalise within
30 days pending investigations and submit a report to me. We will
thus be able to finally put this issue behind us and make a new
beginning in our bid to attract foreign investment.
There are two basic objectives that I have given to
my economic team to achieve.
Firstly, take the country out of the debt trap and
be more self-reliant.
Secondly, ensure that all our economic policies positively
impact on the common man. Negative implications should be minimised.
Let me now come to the main features of our economic
Our primary focus will be the development of a self-reliant
economy. This does not mean autarky or the absence of borrowings.
Rather our borrowings should be for productive purposes.
We have to lessen the debt burden because this burden
makes it difficult for us to increase our expenditures on education,
health and other social sectors for the poor.
We have succeeded in rescheduling our external debt
to both the official and commercial creditors for a limited period
of time. However, we need to do much more in this regard. For this
purpose we have identified precise policy measures:
(1) It is the intention of my Government to seek
relief in debt from our creditors and use the savings solely for
poverty reduction programs.
(2) We would reactivate the privatization program
on the following principles : (a) the strategic assets should
remain outside the program; (b) a law should be framed to determine
the manner and methods of privatization to ensure realization
of highest price, transparency and fair-play; and (c) the proceeds
from privatization should be used exclusively for retirement of
debt. It is unfortunate that since the inception of privatization,
we have sold units worth more than $1.5 billion but only a small
portion of this was used for retirement of debt and the rest was
spent elsewhere. We will not let this happen again.
(3) The domestic cost of borrowing is very high
and steps are being taken to reduce it by about 2 percentage points.
(4) Fourth, the Federal and Provincial Governments
will gradually eliminate borrowing to finance non-development
(5) Fifth, I would like to impress upon expatriate
Pakistanis the critical role they can play in lessening this burden.
Their remittances through official channels, will help improve
the balance of payments and reduce the need for foreign borrowings.
On the Government's part, I have asked the State Bank of Pakistan
to take necessary steps to ensure that commercial banks deliver
these remittances without any delay.
(6) Finally, a high level committee is being constituted
to suggest measures for the establishment of an efficient debt
management system and to reduce the debt servicing burden.
In the coming years we would like to focus on four
areas for the revival of the economy.
(a) Revitalising the agriculture sector.
(b) Promoting small and medium scale industries.
(c) Encouraging oil and gas exploration and development.
(d) Developing information technology and software.
Despite the fact that we possess an extensive agrarian
structure and the fact that about,-6,5. percent of our people earn
their livelihood, from agriculture, our country spends more than
$1 billion on the import o w eat and edible oil alone. Yet the prospects
for growth in the agriculture sector are phenomenal. We will take
several initiatives to unleash this vast potential.
(1) increase wheat and oil seeds production to conserve
on imports. In this regard the increase in wheat support price
from Rs. 240 to Rs. 300 will have a positive impact on the next
(2) ADBP will be revitalised and its effectiveness
will be improved to reach out to the small farmer.
(3) Credit for agriculture will be augmented.
(4) Agricultural prices as far as possible will
be related to market mechanisms. Government will intervened only
under exceptional circumstances to protect farmers.
(5) Water conservation is a very high priority for
this Government both in terms of rehabilitation of the irrigation
system and for the revitalization of the on farm water management
projects in all provinces. Special attention will also be paid
to the specific needs of and regions and to tap their potential
for agricultural productivity.
(6) Our country has an abundant livestock population
and this Government will therefore encourage the development of
exports in milk and meat products.
(7) Fisheries will be promoted through sustainable
exploitation of our marine Exclusive Economic Zone off the Sindh
and Balochistan coast lines, through institutional support for
value-added exports and the provision of credit.
(8) Large tracts of evacuee agricultural land in
the Tharparkar area in Sindh, which are being cultivated by poor
and land-less farmers for the past 28 years, will be allotted
(9) State land not distributed so far will be allotted
to land-less peasants. The Army's monitoring system will ensure
that the land allotted to the poor remains in their possession.
A special credit package will be made available to the small farmers
to help them develop their land and make it productive.
Pakistan's growing industrial base has been damaged
by the rapid shift of policies in recent years. I want to assure
our business community that our policy in this sector will be consistent
I will explain the main features of this policy:
(1) The highest priority will be for small and medium
industry. The Government will facilitate more credit and advisory
(2) Industrial finance will be revived through a
restructuring of the banking and financial sector and by lowering
the cost of funds.
(3) We will establish a new financial institution
to be known as the Corporate and Industrial Restructuring Corporation.
This entity will help revive sick industrial units. In cases where
rehabilitation is not possible, the new corporation will ensure
(4) Government will ensure an enabling environment
and provide infra-structural and institutional support. Laws relating
to trademarks, intellectual property rights, industrial relations,
workers compensation, bonded labour and work conditions will be
reviewed and improved.
(5) The Tariff Commission will be made autonomous.
Misuse of SR0s based on nepotism and corruption will be eliminated.
The next growth area in the government's program will
be the energy sector. The bill for oil imports in this year is likely
to be over $2.5 billion. Pakistan's demand for energy will continue
to grow as we develop. To move towards self reliance in the energy
sector, we will take these initiatives:
(1) The process of exploration and development of
oil and gas fields will be accelerated and increased foreign investment
in this sector will be encouraged.
(2) The development of recently discovered, large
reservoirs of gas will be expedited.
(3) Regulatory authorities will be established for
the orderly operations and development of the oil and gas sectors.
(4) Conversion of power plants from furnace oil
to gas will be encouraged.
(5) Upstream infrastructure including pipelines
will be developed for efficient transportation of imports and
(6) The petroleum sector will be deregulated and
the privatization process expedited for greater efficiency, for
new investment and for retirement of public debt.
(7) Margins of oil marketing companies will be rationalised
so that thy can invest in storage and other infrastructure for
(8) The price of LPG will be deregulated and the
use of CNG will be encouraged.
The fourth priority of our program is the development
of information technology and the software industry. Key elements
of this policy are:
(1) The telecommunications part of the Ministry
of Communications will be separated and placed under the existing
Ministry of Science and Technology as a division. Another new
division to be called Information Technology Division will be
created in the Ministry of Science and Technology in order to
stimulate growth in this critical sector.
(2) A large pool of IT professionals will be developed.
Charters for IT based universities will be liberally granted.
(3) IT and software industry will be eligible for
(4) The use of the inter-net will be expanded and
the FITC tariff structure for data communication will be substantially
reduced to encourage increased use by the I. T. industry.
My fellow citizens!
I have emphasised poverty alleviation as part of
our primary objectives. We plan to initiate specific programmes
in this direction:
(1) An annual allocation of Rs. 15 to 20 billion
will be made through budgetary re-adjustments for small public
works in the poorest and low income urban and rural areas. This
programme will generate significant employment for the poor and
will impact a large number of households in terms of their incomes.
The Monitoring System of the Army will conduct third party audit
of this program. I am pleased to announce that the Armed Forces
have voluntarily cut their Defence spending and have contributed
Rs. 7 billion to this programme.
(2) In the poorest of rural areas the program will
include development of farm to market roads, de-silting of canals.
lining of water courses, construction of spurs, culverts, ponds
and soil conservation. In the poorest urban areas, schemes of
water supply and sewerage and garbage collection and disposal
will be included.
(3) The food stamps program for the poor is being
revitalised and a special allocation will be set aside from the
receipts of General Sales Tax for this purpose. ,
(4) A Committee has been formed to conduct a comprehensive
reappraisal of the entire Zakat and Ushr system so as to ensure
its utilization for the most deserving.
(5) Our Government will establish a new Bank for
enhancing the access of poor people to credit. The Micro Credit
Bank will do business with established community organizations,
with NG0s involved in micro credit and with individuals. The Micro
Credit Bank will also promote the process of establishing community
organizations which can sustain credit operations and promote
the savings habit among the poor. Small infrastructure projects
will also be financed by the Bank. On completion these projects
will be maintained by the community organizations.
Let me now turn to the fundamental reason why the
State has been failing to meet its obligations to the people. With
the exception of those nations which are endowed with income from
natural resources, the only source of state revenues the world over
is taxes paid by the citizens. It would be naive to expect that
a state could be strong and stable where the culture of tax compliance
is widely disregarded. In fact, a state cannot survive where those
who pay taxes are those who cannot escape, where tax revision is
rampant, where the influentials proudly claim that no one can stop
them at the Customs, where certain classes of people are completely
exempted from tax.
Equally important, no state can survive whose tax
machinery is corrupt, oppressive, complicated and punishes the honest
tax payer in a bid to protect the interests of tax evaders. where
there is the unfortunate culture of promoting spurious economic
activities through tax exemptions.
At the center of our national rebuilding efforts
is the promotion of a cultured of tax compliance. We will come down
very hard on those who are tax evaders as well as on their abettors
in this crime. We have resolved to lay the foundation of a completely
documented economy where the cost of tax evasion will be very high.
Those who engage in this act against civil society will be pushed
to its very fringes.
The tax reforms program I am announcing is based
on the principles of minimizing the number of both federal and provincial
taxes, lowering the tax rates and broadening the bases, simplification
in assessment procedures and an efficient system of dispute resolution.
Since this is a new beginning, it is only reasonable
that an opportunity is provided to undo past mistakes. Accordingly,
a tax amnesty scheme is announced:
(1) On truthful disclosure of all tax-evaded assets,
a payment of only 10% as tax will allow people to bring these
assets on to their books. This amnesty will be available until
31 March 2000.
(2) Th Government has decided that no black money
whitener schemes will be allowed in the future. However, I want
to assure you that the immunities, protection and exemptions on
existing investments, deposits, bonds, foreign currency accounts
etc., will be fully honoured. The Finance Minister will provide
further details in this regard.
In terms of tax reforms:
(1) The government will ensure that agriculture
incomes are taxed on the same lines as incomes from any other
source. The Provincial Governments will design appropriate mechanisms,
which will be introduced in June 2000.
(2) As in most other developing countries throughout
the world, General Sales Tax is the major source of revenues.
It is also the basic tool for documenting the economy. Now that
we are starting. a new chapter in our taxation history, there
is no reason that the scope or potential of this tax be circumscribed
in any manner Accordingly, this tax will be applied at all stages.
At each stage, the application will be simplified and adapted
to the needs of each sector. I hope that all citizens will work
together in our shared national interest.
(3) A number of taxes in force at present will be
phased out gradually. At the federal level primary sources of
revenue will be income tax, sales tax and custom duties. Similarly
the provincial governments will be encouraged to minimize the
number of taxes.
Policy measures relating to simplification and reform
of tax administration will be announced by the Finance Minister.
Four highlights are:
(1) A Tax Ombudsman will be appointed to hear and
decide complaints against tax authorities.
(2) In consultation with the respective Chief Justices,
Revenue Benches will be established in the High courts and Supreme
Court to deal with tax disputes.
(3) Tax refunds will be allowed by the CBR within
a specified period. In case of delay the tax payer will be entitled
to a return on the refund. A mechanism will be announced in January
(4) Accrued refunds due from the CBR will be eligible
for offset against taxes payable.
Existence of a safe and secure civic environment is
a prerequisite for economic activities. Ensuring peaceful law and
order conditions in all major business centers of the country will
be a high priority of our Government.
I am also fully aware of the difficulties people
face in the payment of their utility bills. I have directed concerned
officials to take all necessary steps to ensure that people face
no difficulty in payment of their, utility bills.
I would now like to announce a benefit package:
(1) The 10% withholding tax on income from national
saving schemes is being withdrawn and refunds will be made to
those who have encashed their savings from September 1999 to-
(2) Old age pension of workers will be increased
by 48% from Rs. 425 per month to Rs. 630 per month by the employees
Old Age Benefits Institution.
(3) Death grant will be increased from Rs. 50,000
to Rs. 75,000 to the family of the deceased worker by the Workers
(4) Marriage grant of Rs. 20,000 will be provided
to surviving daughters of the deceased workers from the Workers
(5) Low paid employees in BPS I- 16 will be provided
an ad-hoe relief of Rs. 100 per month .with effect from 1 January
2000. This is to compensate for the recent increase in fuel prices.
The private sector is also expected to grant a similar relief.
(6) All electricity payments on agricultural tubewells
stand deferred without surcharge till 31st May 2000. New electricity
connections for agricultural tubewell can be installed with. only
to 25% down payment and the rest payable in 24 installments.
My fellow citizens!
We have assumed the burden of governance at a time
when the country is passing through the most difficult period of
its history. We are attempting to turn a situation of adversity
into an opportunity. It is a great challenge. But we have faced
challenges in the past, though of less severity. We have shown resilience
and an ability to emerge triumphant. We therefore need to galvanize
ourselves and summon all our energies to forge ahead. This is not
the time to look for relief. It is the time to display courage and
steadfastness. All great nations have risen from the depths of their
ruination. It may be our chance to prove that we are indeed a great
nation, the only Islamic nation with nuclear power, with over 130
million dynamic people. What is needed is the will, in every individual,
to change, and to change for the better, to earn respect and dignity,
to become a worthy nation. In this great and holy month of Ramzan
which embodies both the spirit and substance of sacrifice, my fellow
citizens, let us pledge that we will meet the challenge of change.
I have no doubt that there is a bright tomorrow, a promising future
that awaits us.
Let us remember that in the Holy Qur'an, Almighty
Allah has given us a message that is most relevant for us as we
begin this new journey:
"Verily, never will Allah change the condition
of a people, until they change what is in themselves."
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