Round and round in circles

Circular Debt: It is not as though there are no solutions available to the government.

It is unfortunate when the government is unable to solve a complex problem owing to a lack of solutions. It is downright unacceptable when the government knows exactly what needs to be done but refuses to solve the matter purely due to a lack of political will. Such is the case with the circular debt problem, where almost every week there are revelations of just how bad the situation is and just how much of it is within the government’s own control.

Take, for instance, the revelation by Water and Power Minister Naveed Qamar that entities owned by or part of the federal government owe about Rs70 billion in unpaid electricity bills, an amount that appears to be in addition to the Rs155 billion owed by provincial government entities. This is nothing short of gross incompetence, especially when one considers the fact that the total amount of circular debt outstanding is estimated to be around Rs300 billion. While it is true that many private sector individuals and businesses have also not paid their bills, the numbers seem to suggest that the problem is largely that of the government not allocating enough money in its budget for its own running expenses.

This newspaper has been an advocate of the government trying to pare down its expenses as a means to control the budget deficit. However, we are shocked by what appears to be the government’s callous disregard for its financial obligations. How can the government possibly initiate a crackdown against power theft — a major problem in many parts of the country — when it appears that Islamabad itself seems unwilling to pay its bills?

It is not as though there are no solutions available to the government. The bond market in Karachi appears to be making it abundantly clear that, were the government to finance its outstanding bills by issuing treasury bills, it would find lenders more than willing to buy those bonds. Petroleum Minister Asim Hussain has been pushing this plan — originally initiated by former finance minister Shaukat Tareen — but he seems to be gaining little traction. Prime Minister Gilani, who has been approached on the subject several times by his cabinet colleagues, owes the nation an explanation as to why there has been no progress on this front. The national grid cannot afford to wait much longer.

Published in The Express Tribune, November 25^th, 2011.