Drowning in debt

As with so many of the ills that assail modern Pakistan, the current debt crisis has its origins in the era of General Ziaul Haq. He it was that triggered the money trap when he decided to underwrite state expenditure with external sources of financing. No government since has managed to turn this around and the current dispensation is even more addicted to foreign money than its predecessors. Continuing the addictive allegory the International Monetary Fund was the dealer, the pusher that had found a willing buyer. Dependency was strengthened and the illusion of ‘all is well’ was sustained by the oft-repeated claims that Pakistan was meeting IMF targets and that the national economy was being managed well.

It may come as a bit of a surprise to our money managers but there is no such thing as free money. Loans have to be paid as does the interest, the mark-up that is the profit margin for the lender who takes the risk of throwing money at a country that today is bordering on insolvency. The World Bank and the IMF offer perspectives of the current state of play — and Moody’s are predicting that external debt is likely to increase to $79 billion. Both the WB and the IMF observe that the gains made in the restoration of macroeconomic stability are being eroded as the imbalances in the balance of payments eats into confidence to say nothing of a galloping trade deficit and a drop in remittances — a source that has been increasingly relied on in recent years.

The mobilisation of revenue — specifically taxes and the failure to reform them and their collection — have seen the fiscal deficit rise to its highest level for three years. Corruption remains rampant as does poor fiscal management everywhere. The current finance minister, who arguably is the author of much of the current difficulty, is out of the country and unlikely to return in the foreseeable future. He is a close relative of the now deposed Prime Minister, Nawaz Sharif, and ‘protected’ — but not invincible. There is no quick fix. Cold turkey? It takes a very brave addict to go that road.

Published in The Express Tribune, November 21^st, 2017.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive all updates on all our daily pieces.