The debt tower

The extent of how unsustainable the national debt has become is clearly illustrated by the latest SBP report, which shows a 26% spike in total debt and liabilities in just one year. That averages out to a daily increase of about Rs44 billion since September 2022. While experts have been quick to blame elected governments for their failure to bring the debt in check, the budgeting blunders of the caretaker government have been so brazen that the estimated annual interest due on the debt has gone up Rs1.2 trillion in just four months. Depending on how it is framed, that is either an inexplicable increase or an outright miscalculation of about 16% of the total interest due this year.

There is a serious need to bring sustainability to the debt, but the only way that can happen is by massive and sustained economic expansion which is not based on borrowing, or intense debt restructuring. Elected and unelected governments alike have failed to do the latter, while the former is only possible if we had a well-oiled system, and not the inefficient, government support-reliant industries that currently make up much of the economy. And while the problems of public sector companies are well known, the private sector is not faring much better, through a similar combination of mismanagement and failure to innovate leading to loss of competitiveness, all of which takes time and money to address.

Experts have suggested a few solutions that involve cost-cutting and waste reduction, but most of these will have a relatively nominal impact — shutting down federal ministries that became redundant due to devolution, reviewing provincial projects and improving defence expense management. Apart from these ‘savings’, one more example of the lack of seriousness in finding solutions is that the country’s debt management office has not been fully staffed for a long time — unless, of course, the government is saving on salaries because it feels there is no solution to be found.

Published in The Express Tribune, November 14^th, 2023.

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