At a time when the new government has prioritized economic uplift and industry is crying for relief, commercial financing through the banking sector remains badly underutilized. However, the scourge of non-performing loans (NPLs) places an unacceptably high burden of risk on commercial banks and undermines its utilization as a critical tool to bolster the fledgling economy.

According to an Investor Service’s report released recently by internationally reputed financial advisory firm, Moody’s, a staggeringly high percentage of loans (nearly 10 percent) disbursed by the Pakistani banking industry fall under this category. These NPLs exist for a number of reasons. An adverse economic environment, weak corporate governance and poor financial planningare all important contributing factors; some borrowers are genuinely unable to meet their obligations. Yet there are many debtors who act in bad faith and willfullyavoid clearing their debt, through the exploitation ofpolitical connections.

In Pakistan, the Honourable Supreme Court of Pakistan recently took suo motu notice of the abysmal state of loan defaults in the country and issued notices to 222 individuals and companies whose loans were written off illegally between 1971 and 2009. Unsurprisingly, many had strong political affiliations and were able to contest in 2018 General Elections from different constituencies.

Despite such a high level of scrutiny at the national level, major defaulters still operate with complete impunity.Most prominent amongst these is a large conglomerate with notable holdings in textile, sugar and the import of luxury automobiles. As per national media reports, the group has attained an almost legendary status, racking up over PKR 50 billion in debt from the commercial banking sector. Indeed, its brazen obstinacy in not acknowledging liabilities has seriously damaged the financial viability of several, smaller banks.

Commercial bankshave attempted to tackle the predations of this Group by forming a Steering Committee to formulate a mutually acceptable solution to handle the Group’s debt. Regrettably the arrangement has not yielded the desired results. Those at the helm of the Group have attempted to pay their debts on unreasonably relaxed terms. This is naturally unacceptable to the vast majority of the Banks/DFIs and perceived rightly as delaying tactics to forestall a debt restructuring plan and legal action.

While representatives of this Group are running from pillar to post to avoid paying their debts, on the other hand, the Group represents one of the most prestigious global luxury automobile brands in the world, BMW and Rolls Royce; luxury cars used by Presidents, Prime Ministers and blue blooded royalty.

The Group’s Dewan Farooque Motors Ltd. (DFML) recently revived its production facilities to manufacture vehicles of different segments under a joint venture between Yousaf Dewan Companies and the KOLAO Group based in South Korea. It beggars belief that under the cloud of so much financial impropriety, this Group operates without any hindrance whatsoever.Why is this blatant disregard of rule and law allowed to happen and with whose blessings?

Clearly, the Group’s inability to repay their outstanding loans is not for a lack of resources as they actively pursue new projects without interference. It has also been widely reported in the media that the Group is expecting to raise new funds from the sale of Dewan Cement Ltd. So the question remains, where is the will to settle their obligations so glaringly obviously?

The message is clear: Take loans, default and no harm will come to you. Such a defaulter is emblematic of the lengths the powerful go toavoid their debts. It is also underlined how badly the flow of economic activity is impacted. For example, Banks become reluctant to provide loans, legitimate businessmen are hurt and the economy suffers as a whole. Foreign investors also worry about entering long term arrangements with local firms. It conveys that the legal system and state institutions can be easily subverted through political connections.

There is a dire need to hold all defaulters accountable. Support is urgently required from SBP, SECP, the Superior Courts and the Government of Pakistan to recover the huge sums of public money in the hands of such disreputable enterprises. Such cases of willful default must be dealt with an iron hand. Clearly matters have come to a head. Swift and decisive action is now required for the sake of national interest.