Rapidly rising debt

Government debt reaching new heights is not a particularly unusual event, but the news on November 5 that the national debt had climbed by Rs1 trillion was alarming nonetheless. The amount itself, though terrifyingly high, was not the only cause of concern. What was troubling was the fact that this rise took an astonishingly short three months to occur. Even more worrying is the fact that the Rs15 trillion figure for government debt does not include the new debt taken on as part of the International Monetary Fund’s bailout package. The figures for Pakistan’s national debt have grown with such regularity that journalists have almost entirely given up trying to draw attention to them anymore. Even the State Bank of Pakistan has been provoked to start using unflattering epithets to describe the finance ministry’s behaviour.

So addicted is the government to borrowed money that it has virtually sucked the life out of the private sector’s ability to borrow. After the banks are done lending to the government, there is nothing left to lend out to businesses and entrepreneurs to invest, create jobs and lift people out of poverty. The vicious cycle of inflation driving more and more people into poverty continues. The only way out of this crisis is for the government to simultaneously reduce its expenses and raise tax revenues. But alas, the current administration appears to have taken action on neither front. It has been repeated ad nauseum, but it is worth saying again: the government of Pakistan has done a woefully inadequate job of trying to tax the country’s wealthy, a point that has been made bluntly and loudly by virtually every observer of the nation’s finances. The IMF recently took to calling upon the government to remove the privileges, both de jure and those that exist in practice, that benefit the wealthiest of our citizens. It really should not take a lender based in Washington for Islamabad to figure out that the rich in Pakistan are not pulling their weight when it comes to paying taxes.

Published in The Express Tribune, November 8^th, 2013.

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