Lowering our debt burden

Pakistan seems to be up to its proverbial ears in debt. The country drifts across the high plains of high finance, rattling its seemingly begging bowl as it goes along, and each deal with a multinational lender is seen as some sort of achievement where, in fact, it should be a cause for concern since the burden of loans taken in the present will fall onto our children and their children. The latest in a long line of loans comes from the World Bank (WB), which will lend us a couple of billion dollars in exchange for the government enacting reforms in the power sector. These include the elimination of power subsidies, which currently run into tens of billions of rupees and eat up a significant chunk of the federal budget every year. In addition to the WB, the Asian Development Bank has also recently agreed to give us a loan and this, too, will have to be repaid in due course of time, with interest.



Of course, one is not advocating that a poor country like Pakistan not take any loans whatsoever since it is hardly in a position to make any such choice. However, what one can argue with some cogency is that countries such as Pakistan could, perhaps, ask for significantly lower loans and in due course of time lower their debt burden, if they ensured that their revenue collection machinery was efficient and did its job well. As things stand, Pakistan has among the lowest tax-to-GDP ratios in the world — our next-door neighbour India with whom we love to make comparisons, is far better off — and given the way that the Federal Board of Revenue is performing it seems that a stage where Pakistan will be able to fend for itself without resorting to take loans is somewhat far off. Furthermore, much of the conditions imposed by the multilateral donors — such as fiscal reform and streamlining of public corporations that lose billions of taxpayers’ rupees every year — are things that any government in Pakistan should be pursuing in any case. Ironically, many of those who blame governments for ‘begging’ donors for loans themselves do not pay their fair share in taxes. One hopes that with the course of time, these issues will be addressed as well.

Published in The Express Tribune, May 5^th, 2014.

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