Pakistan’s debt dilemma

The real problem for our economy is not just the size of our debt but the repayments to creditors

Editorial February 26, 2017

Our government would have the public know that Pakistan’s debt liability has seen a percentage decrease in its share of the country’s GDP. Meanwhile, at the other end of the equation is the report that Pakistan’s debt is now large enough that were it to be paid off by the public, every individual would be liable for around Rs115,000. The real problem for our economy is not just the size of our debt, though at $74 billion it is no measly figure, but the repayments to creditors which have to be made on a frequent and regular basis. When it comes to foreign reserves Pakistan usually has a cash flow problem and as export income dries up and foreign remittances stagnate, our reserves appear to be diminishing. The pressure is only increasing with our government’s continued borrowing to cover its financing needs.

Also, our imports continue to increase not just for machinery and parts required for developmental projects but also in the categories of food items and auto vehicles. Exports however are suffering since the rupee’s appreciating value is making Pakistani products less competitive at international levels. In order to curb this balance of payments difference, the State Bank of Pakistan has recently introduced regulatory measures to discourage imports of consumer goods. By and large, as the situation stands, experts foresee Pakistan’s debt requirements increasing further in the coming years. It is predicted that the government will opt for another IMF bailout plan around the upcoming 2018 general election. For the previously completed bailout package, our government took short-sighted measures to fulfill the IMF’s requirements. For example, introducing more indirect taxes to raise funds rather than actually attempting to increase the tax net. Therefore, although the statistic of Rs115,000 may not mean much since the average Pakistani does not actually have to pay it, we are already paying for our government’s follies in a variety of different ways.

Published in The Express Tribune, February 27th, 2017.

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Praful R Shah | 6 years ago | Reply If one does not have it what lender can do?
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