Pakistan’s budget deficit has now soared to such astronomical levels — over one trillion rupees at last count — that the government has had to resort to creative means to finance its operations. In the current fiscal year, the government raised Rs182 billion by issuing a Sukuk, or Islamic bond, which offered returns against the Jinnah International Airport in Karachi. This is because the government’s economic performance over the last five years has been dismal. To deal with the budget crisis, it has printed money at an alarming rate, causing runaway inflation. Private lending by banks has also ground to a virtual halt as almost all loans are now given to prop up our empty exchequer. This is unsustainable but the government has shown no inclination to cut down its expenditures.
Issuing bonds is preferable to other methods of raising money but it is unwise to use vital installations, like the biggest airport in the country, as the security for these bonds. Airports serve a vital national security purpose and so, while the Quaid-e-Azam airport is likely to continue being profitable, the government has been incautious in selling bonds against it, since there is a slight possibility that an attack, etc. could cause the airport to suspend functions. How the government will then be able to pay out returns on these bonds is unclear.
This government’s term is about to end but the next administration will have to make the budget deficit it inherited its first priority. Soaring energy prices and the resulting circular debt has bankrupted the country and there seems to be no way of countering that. Paying off our debt and bridging the deficit is a duty that must be borne by all of us. Raising revenue simply will not be enough. It must be accompanied by austerity measures to bring down government expenditure. An obvious area of belt-tightening is the bloated defence budget but no government has had the courage to question the military. But for the sake of our economic survival we will need to declare every aspect of the budget open to scrutiny.
Published in The Express Tribune, February 14th, 2013.