Alarming debts of Pakistan

Every penny of debt beyond the threshold of 90 per cent of GDP results in decline of economic growth by at least one per cent because this deficit financing, the worst form of economic management, causes raises in budget deficit and inflation. At a time when external and domestic debt has risen to a colossal Rs4.3 trillion, twice the size of annual revenue collection, the national economy is extremely sluggish. This is the main cause of the recent European recession as several EU states, including Greece, Italy, Belgium and Ireland have obtained heavy debts without matching collaterals. But Pakistan’s economic managers seem to have learnt no lessons as they added another Rs37.5 billion to the distressing debt by auctioning Pakistan Investment Bonds on Wednesday making every Pakistani indebted to an amount of Rs 61,000. A State Bank of Pakistan report says that the outstanding amount of all such bonds floated so far touched the pinnacle beyond Rs4 trillion on Aug 31 this year. This means that at least this much debt has been added by the successive governments to the country’s outstanding liability. And yet, this government has been trying to obtain more loans from world donors which, however, refused to oblige Islamabad owing to the country’s poor economic management. Pakistan is now a classical example of bad economic governance (undoubtedly political also) as fiscal deficit as ranged between seven and eight per cent although international lending agencies have been urging Pakistan to bring it down to four per cent. The IMF even entered a programme with Pakistan to bring the deficit down and extended a loan of more than $11 billion but no results were achieved. Pakistan has not been adhering a fiscal discipline and all the economic policies are ill-conceived and priorities are also not determined judiciously. Economic managers probably prefer an easy, unrealistic and apolitical approach of begging for more loans for every scheme rather than mobilizing internal resources. This is an obvious outcome of not making efforts for the revival of state-owned enterprises and not reforming the revenue receipts and make revenue collection equitable by bringing in all groups and individuals eligible to pay to the tax net. This is a matter of serious concern as situation might become unsustainable as bulk of resources would be consumed on debt servicing and nothing would be left for development and pro-poor spending. Practically, this is a political probleem because almost all in the ruling elite do no pay due taxes. They cannot be taxed as the rulers lack political will and the intent of socio-economic development of the country seems a distant scheme of things. With parliamentary elections approaching, any remedy seems a distant probability. One fails to understand all this money has gone and how this debt is going to be repaid. The value of Pakistani rupee has fast eroded during the last four-and-a- half years and is feared to soon touch Rs100 to a dollar. Are we heading to Zimbabwe like situation where 100 billion Zimbabwean dollars can buy only three eggs?