The 22nd IMF programme, circular debt, G2G loans and an imminent 23rd programme lurking around the corner. Over the past 40 to 50 years Pakistan is trapped under heavy debt.
In a desperate attempt to save the country from default through the emergency sale of state’s assets to foreign countries, the federal cabinet, last week, approved an ordinance to bypass all the procedures for the process and also abolished regulatory checks including the applicability of six relevant laws.
Through the Inter-Governmental Commercial Transactions Ordinance 2022, the Centre has also empowered itself to issue binding instructions to the provincial governments for land acquisition, according to a copy of the ordinance.
While economists and financial experts take turns at solving what has now become a complex equation, perhaps it’s time to go back to the basics, which may be termed as Solution 101 — ‘earn more and borrow less’ — a solution which is admittedly easier to state than actualise.
Pakistan’s debt story is interwoven with the country’s 75-year journey. We entered the first IMF programme in 1958 and, since then, it has been one programme after another, while institutional and G2G debts have continued to grow simultaneously. As of Dec 31, 2021, combined foreign currency loans are more than $90.5 billion. The story of Pakistan’s debt is incomplete without taking into account domestic debt, which by the end of December 2021 had crossed Rs26.7 trillion (roughly $151.5bn based on the Dec 31, 2021, closing rate), resulting in total debt in excess of $242bn or around 77 per cent of GDP. There is also the circular debt, which grew from Rs161bn in 2008 to over Rs2.46tr by March 2022. It continues to grow, putting, oil, gas and power supply at risk.
A consolidated picture of Pakistani debt on a per person basis depicts the debt journey. Each Pakistani, irrespective of age and gender, carries upon their shoulders a debt burden of nearly Rs190,000, while devaluation and interest adds to this figure by the day. Pakistan must borrow to pay back its borrowings and borrow to pay back the interest on its borrowings. Bluntly put, we are no longer borrowing for growth, but to service and repay borrowings.
Tough decisions and belt-tightening are essential. The country’s policy framework, which has relied on imports, belies the requirements of a paradigm shift in thinking. The emphasis needs to shift to the development of a robust agro economy, making Pakistan not just self-sufficient in food, thus ensuring future food security, but also a country that can be a global supplier of food.
