Debt crisis concerns

International agencies continue to worry about Pakistan’s economic prospects — like most of the country — and a recent report asserts that debt is the United Nations Development Programme’s top concern. The UN agency’s new Development Advocate Pakistan publication says that apart from a good debt management plan, the country needs a reform agenda centred on responsible financial management, increasing revenue, enforcing fiscal discipline and diversifying its funding sources.

While there may not have been a lot of surprises in the broader points, a few specifics are worth focusing on, including increased parliamentary oversight for treasury operations — while parliament does have oversight of the treasury, most ruling parties use their parliamentary majorities to bypass this authority and keep debate on any related decisions limited to the cabinet. The end goal here would be economic stablisation and sustainable growth, along with lowering the debt-to-GDP ratio. But reaching that goal will be an uphill task because of the shape of the economy as it stands and the country’s increasing dependence on short-term fixes for those economic woes. Most of the quick fixes being employed depend on borrowing, meaning that keeping the country from going bankrupt is a major factor behind the ballooning national debt. As the report puts it: “Without correcting the underlying systemic faults producing debt crises, the country will just be delaying the problem rather than solving it.”

Another ‘fresh’ suggestion is for Pakistan to join the Open Government Partnership, which would promote transparency, accountability and citizen engagement while also opening the door for cooperation with other member states on adopting best practices. This may be one way for the new government to come up with a debt management strategy that doesn’t force it to expend all of its political capital, because debt is only one piece of the puzzle that the party in power will have to address through unpopular decisions that will invariably break election promises.

Published in The Express Tribune, December 28^th, 2023.

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