Binge borrowing

Pakistan's debt crisis necessitates long-term economic stability requires holistic policy reforms

Pakistan’s debt is galloping fast — at a breakneck speed rather. In the previous fiscal year (FY23) alone, country’s debts and liabilities surged by 29% or Rs17.33 trillion — reaching Rs77.1 trillion from Rs59.77 trillion in FY22, according to the latest figures released by SBP. And as a percentage of GDP, total debt and liabilities have reached 91.1%, up from 89.7% in FY22 — far higher than the recommended limit of 77%.

While the debt is multiplying at an unsustainable pace, there is no credible strategy to tackle the unmanageable growth. Every incoming government has turned out to be worse in tackling the debt burden. The total public debt stood at Rs6 trillion when Gen Musharraf relinquished the helm a month after FY08 had ended. The successive governments led by PPP and PML-N added Rs18 trillion to the debt stock, taking it to Rs24 trillion by the end of FY18. The PTI government, taking over the reins in August 2018, added nearly the same amount — Rs18.1 trillion — during its 44-month rule that the PPP and PML-N governments combined had done. Even worse, the PDM coalition government took just 15 months to add nearly as much amount — Rs17.33 trillion — to the total debt.

The inability of the successive governments to create an enabling environment to attract FDI and enhance exports has worsened the balance-of-payments crisis — to something like $35 billion from $12 billion five years back. The situation has left the government of the day with no other option but to continue reliance on friendly countries as well as the IMF, only adding to the debt burden. The newly-established Special Investment Facilitation Council — aimed at attracting foreign investments in sectors such as agriculture, mining, IT and energy — has come up as the nation’s sole hope amid the worsening economic crisis. But the Council can only serve as a stepping stone, as the long-term economic stability requires holistic policy reforms addressing structural challenges.

Published in The Express Tribune, August 20^th, 2023.

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