According to figures released by the State Bank of Pakistan (SBP) on Monday, the federal government borrowed at an average rate of Rs15 billion per day from July through November 2018. This includes almost three and a half months of the incumbent government that is led by the Pakistan Tehreek-e-Insaf (PTI).
Debt figures for July-November 2018 suggest that the finance ministry currently lacks a credible strategy to deal with the growing public debt and has resorted to breaching the SBP Act 1956 which mandates the retirement of central government debt from the central bank, instead of adding to it. One of the key reasons is the depreciation of the rupee over the past five months. In June 2018, a US dollar cost Rs121.54, which rose to Rs140.268 by November 30, according to the central bank.
Moreover, the country has seen inflows slow to a trickle with a steep shortfall in tax revenues, coupled with uncontrolled spending on debt servicing, also adding to the debt burden. The ballooning public debt remains a concern due to the previous government’s inability to attract non-debt creating inflows and enhance tax revenues.
The PTI government seems to have walked blindly into an economic trap and has taken the only road that appeared before it: the fiscal policy set by the previous Pakistan Muslim League-Nawaz (PML-N) administration. With its plans of getting overseas Pakistanis to invest in the country petering out, it must now reach deep and summon some of that wizardry that it has long claimed of to lead itself and the country back into the light.
Published in The Express Tribune, January 9th, 2019.
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