With the economy experiencing an unprecedented period of stress due to multiple factors such as the novel coronavirus (Covid-19) pandemic, leading to a higher incidence of poverty and impoverishment, the government has been urged to cancel all debt payments.
This was urged by speakers at a forum organised by the Tax Justice Alliance and the Centre of Peace and Development Initiatives (CPDI) on Thursday.
Senator Usman Kakar said that the government spent 6% of its revenue on health while it paid 26.5% in debt servicing during 2019.
If debt relief is provided equivalent to a year’s debt repayments, Pakistan can triple its social protection and health spending which can be critical in addressing poverty and reverse the negative impacts of Covid-19.
Pakistan Institute of Development Economics (PIDE) Director Dr Ghulam Samad said that Covid-19 has put pressure on meagre revenue to increase spending to strengthen the health system and provide support to vulnerable people and small businesses who are badly affected.
CPDI Budget Study Centre Director Amer Ejaz argued that the major concern was the frail healthcare system. The situation requires that despite the economic slowdown and lower revenue collection, the government must respond to the crisis and protect public health and livelihoods.
He added that the government must increase its spending on health and social protection.
Due to the lock-down and global economic slowdown, he said that economic growth in the country is projected to be between -2.2 to -1.2 this year before improving to 0.3 to 0.9 in 2021 and 3.2 to 3.3 in 2022. This will lead to increasing poverty, joblessness and inequality. While the government distributed Rs144 billion amongst 120 million families to provide relief. However, with a ballooning external debt payment portfolio and low revenue collection, the government has no option but to take on more loans to meet increasing expenditures.
Published in The Express Tribune, October 23rd, 2020.
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