Horrors of debt

Pakistan faces a looming debt crisis, requiring $100 billion in four years, with political instability.

That Pakistan is in the quagmire of debt goes without saying. With almost 50 per cent of the fiscal budget going towards debt-servicing, no amount of external financing is able to pull the economy out of the woods. The disclosure from the Deputy Finance Minister to a parliamentary committee that Pakistan will be needing $100 billion in the next four years to retire its debt obligations is shocking, to say the least. That is a staggering proposition and accounts for more than 10 times the dwindling foreign exchange reserves of the beleaguered exchequer.

There is a realisation in the corridors of power that despite securing the IMF's programme that comes with annihilating conditionalities, the economy will not be able to turn around in the foreseeable future. That is tantamount to a disaster in the making and enlists that living beyond means and borrowing for easing outstanding debts is a fiasco at work.

Pakistan's total public debt and liabilities stand at $223 billion, of which $100 billion are payable in the next few years. This reminds us of the enigma of how the country is faring with liabilities, and how difficult it was for the government to seek a rollover of loans to the tune of $12 billion from friendly states and stash another $2 billion before getting the nod of approval from the Fund for the 24th external financing programme. A simple riddle is: are we defaulting? And what if Pakistan is not able to fulfil its sovereign guarantees to the lender?

The so-called privatisation deal to sell off assets is a non-starter, and there is a credibility gap that is not driving in investors. Adding fuel to the fire is the surging political instability creeping inside the body politics of economic decision-making. With a default on financial obligations looming large – as there is no recourse to FDI and exports – the present casino economy is in troubled waters. Buoying industry and production is the way to go, and that cannot be attained with the energy tariff that is in vogue. Is it time to sit back and think about the ultimate?