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Wednesday, November 17, 1999 Published at 15:40 GMT

World: South Asia

Pakistan cracks down on defaulters

Former MP Nawaz Kokhar is led away by an army officer in Islamabad

Pakistan's new military government has begun arresting former politicans and business leaders after they failed to meet a deadline by which to repay bank loans.

Pakistan in crisis
Five people have been arrested in Islamabad, including a former cabinet minister in the government of Benazir Bhutto.

Others have been picked up in raids across the country.

Security has been strengthened at the country's airports to prevent any defaulter from leaving the country.

The BBC's Owen Bennett-Jones: "The military are not giving many details"
The Finance Minister, Shaukat Aziz, said $3bn is owed to financial institutions as a result of loans taken out under previous civilian administrations.

When General Pervez Musharraf took power, he gave defaulters four weeks to pay back what they owed.

He pledged to come down hard on those who had used political influence to borrow money from banks, but failed to pay it back.

Legal action

Pakistan's official APP newsagency says Anwar Saifullah Khan, petroleum minister under Benazir Bhutto from 1995-97, was taken into custody.

Others arrested included former Pakistan People's Party MP, Nawaz Kokhar, Bashir Ahmed Bilour of the Awami National Party and former Pakistan International Airlines chairman, Waqar Azeem.

The authorities have also published a legal order to back actions against debtors which states that corrupt practices over the past 14 years are punishable by jail terms.

Politicians found guilty will be disqualified from public office for 21 years.

The military says it wants to concentrate on catching the major defaulters and not those who owe small amounts to the banks. Despite that, it has been the small debtors who have been the first to repay the banks.

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The BBC's Owen Bennett-Jones says many of the defaulters are businessmen who argue that their industrial units are not performing and that they are consequently genuinely unable to repay.

Most defaulters were reported to have ignored the deadline of midnight on Tuesday (1900 GMT) for repayment.

However, the government says that the deadline has resulted in $160m worth of loans being repaid in the form of cash.

That figure is expected to rise because information is still coming in from more remote bank branches, and some loans are being repaid in non-liquid form, such as shares.

Fleeing abroad

Mohammad Khalid of the state-run Small Business Finance Corporation said: "We have reports that a number of big defaulters have already fled the country."

Part of the problem is that much of the money borrowed is now in back accounts held outside the country, often in the Gulf.

Lists of defaulters' names have been put on exit control lists at airports.

Defaulters include senior politicians from all the main political parties, and major industrialists closely connected with ousted prime minister Nawaz Sharif.

Mr Sharif's own brother and his family owe Rs2.1bn ($40m), according to The News newspaper.

Recovering the loans has become a big test of the military's credibility.

The generals have promised to tackle both the dire state of the country's economy and the corruption pervading both government and business.

Transparency International, a Berlin-based anti-corruption watchdog, ranks Pakistan as the 12th most corrupt country in the world, alongside Cameroon, Nigeria and Indonesia.

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