Burden of debt

The enormous chunk taken out of the budgetary expenses pie by debt servicing has for long been a huge concern. With the nation unable to pay back this debt, the burden builds — placing a greater and greater strain on our future. Like other countries, notably those in Latin America, Pakistan stands the risk of crumbling under its debt burden. And its dependence on the IMF leaves it, in many ways, with even less space to wriggle through. The vice-like grip of international finance organisations has, of course, been widely written about by economists around the world.

The debt for budget financing now stands at a staggering Rs2.6 trillion, and the government has proposed a four-year extension in the period to retire it. This would, of course, essentially pass the problem on to the next government. Currently, debt owed by the federal government to the State Bank of Pakistan should, under an April 11 bill, be retired by 2019. This would coincide with the end of the PML-N government’s current tenure and it seems the government is keen that this deadline be avoided. To do so, a second waiver would be required from the IMF, with whom a meeting is due in August to discuss its $6.7 billion financing for Pakistan. The delay in meeting the IMF’s demand that the SBP be given autonomy is the key reason being put forward by the government for seeking an extension in the period set to pay back the debt.

But these are all, in so many ways, technicalities, as is the requirement for privatisation of PIA and financing through commercial banks. Right now, Islamabad seems to have no options but to follow IMF dictates. This is not a good place to be in. At the same time, the mounting debt burden places a terrible strain on the economy. The actions being taken right now will add immensely to our economic woes and cripple future governments. Delaying problems only adds to them and this is something we must avoid by devising an economic policy that can serve us now as well as in the future.

Published in The Express Tribune, June 22^nd, 2014.

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