The debt bomb
It seems every successive government of Pakistan is destined to break its predecessor’s debt records. A new report says the PDM government got to raise the debt burden on citizens by over 25% per capita in FY23, its only full year in charge. The preceding PTI, PML-N, and PPP governments also set debt records almost every year, carrying on from the same pattern under both democracy and dictatorship for almost all of the country’s history.
With the PDM’s major component parties looking set to form the new government, we are sure to see substantial government resources committed to spinning the debt increase as necessary and unavoidable, especially in the context of the foreign exchange reserve and currency crises of the past couple of years. However, that would only be an effort to wax over questionable spending approvals for coalition partners to keep them in line, and the unfortunate policy of chasing quick fixes instead of structural reforms. Many of the spending issues relating to diverse coalition governments are bound to reoccur as the PML-N and PPP make concessions to minor parties, independents, and each other in an effort to maximise the size of the government benches. Whether or not the new government will be up to fixing perennial problems is still up for debate, but there is precious little to suggest solutions will be forthcoming, because all of them involve risking votes and seats.
While the biggest problems are almost universal among troubled economies — bloated pension and benefits systems, bad spending priorities, large international trade imbalances, currency crisis and the difficulty of setting aside funds to pay down loan principal — we are now at the point where we must borrow to pay interest alone. And while sensitivity to natural disasters is also a factor, the report shows that most fiscal slippages occurred in areas unrelated to the floods, meaning natural disasters are a convenient ‘act of God’ excuse for things that are very much within decision-makers’ control. But without tough decisions, the debt bomb is sure to go off soon.
Published in The Express Tribune, February 13th, 2024.
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