Skyrocketing debt

More bad news on the economic front was published by the State Bank of Pakistan on Friday, namely that public debt had skyrocketed to Rs31.8 trillion by the end of June. In just eleven months, the PTI-led government has added Rs7.1 trillion in debt, which is more than the PPP did during its entire five-year tenure from 2008 to 2013. The figure is equivalent to 66% of the debt added by the PMP-N in its recent five-year term and is the highest single-year increase in the country’s history. Also worrying is the fact that this does not include the debts of public-sector companies.

The 28.8% increase has been blamed on shortfalls in tax collection, uncontrolled spending on debt servicing and defence, and currency depreciation. The staggering debt figure may be an embarrassment for Prime Minister Imran Khan, who slammed the economic policies of the PPP and PML-N governments and set up a Debt Inquiry Commission to investigate how the two parties added Rs18 trillion in debt in their combined 10 years in charge. And yet, Imran’s government is almost halfway there in just one year. If aggressive efforts are not made to address the problem, public debt could easily double by the time the PTI completes its term. Also of concern is the fact that while most countries use public debt to grow the economy or offer better services, the previous budget saw massive reductions in development spending and public services.

The FBR, meanwhile, alone sustained a record Rs580 billion shortfall in tax revenue in the last fiscal year, but the prime minister did not hold anybody accountable. External debt increased by 41.8% to slightly above Rs11 trillion in the last fiscal year. This was blamed on currency depreciation and current account deficit financing, but more worrying is that it does not include the $5 billion in loans obtained from Saudi Arabia and the UAE because these loans are the responsibility of the central bank. The only silver lining was a reduction in short-term debt — 38 per cent — but even that was offset by the fact that long-term debt more than doubled over the same period.

Published in The Express Tribune, August 11^th, 2019.

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