Bucks to blunders: the debt deals dilemma
Business
Greece, a relevant case study for Pakistan where repeated IMF programmes made matters worse
By Javed Iqbal
The debt problem in Pakistan is severe, often quantified in economic terms because of the debt-to-GDP ratio of 80%. However, the reality is harsher and critical as the reckless handling of the country's finances leaves its masses vulnerable, their lives held hostage to the failures of economic czars.
Though there is good news about the deal with the IMF as premier Shehbaz Sharif himself is said to have worked on it, economists are still worried.
According to a report, the federal government added a net of Rs7.2 trillion to the debt pile in just the first seven months of this fiscal year, averaging billions per day. Shockingly, this seems to be only the tip of the iceberg.
As of Jan 31, 2023, the federal government's debt reached almost Rs58 trillion, increasing by Rs7.2 trillion from July 2022 to January 2023. The previous governments were no exception.
During the ‘decade of democracy’ from 2008 to 2018, opposition parties remained apathetic, failing to take a stand against blatant violations of the Fiscal Responsibility and Public Debt Limitation Act of 2005. The tragic irony of Pakistan's plight lies in the fact that those responsible for driving the country into debt hold the reins of power.
When Dr Shahida Wizarat, the economic expert, questioned finmin Ishaq Dar about Pakistan securing additional loans from the IMF despite it struggles with repayment, Dar had a fiery response. He likened the IMF to a global financial health doctor, emphasising Pakistan's significant assets amounting to a staggering $3,000 billion. In Dar's eyes, the current foreign loan of $100 billion was a mere drop in the ocean of Pakistan's wealth. It seems the underlying message was crystal clear - Pakistan's borrowing is inconsequential when compared to its boundless potential.
Also, Senator Dr Sania Nishtar recently unveiled some alarming facts in the Senate. The federal deficit stands at a staggering Rs6.5 trillion, while untargeted tax exemptions of Rs2.5 trillion favour the elite. She boldly described the budget as a "populist political appeasement budget," catering to the desires of parliamentarians and bureaucrats while neglecting the needs of the people.
Dr Sania proposed reducing public sector expenses by Rs2 trillion and implementing targeted subsidies. She also called for taxing all previously untaxed sectors, a sensible approach. Moreover, she questioned the rationale behind granting amnesty to real estate businesses as it is counterproductive.
— Senator Dr Sania Nishtar (@SaniaNishtar) June 14, 2023
Muhammad Shahid, an economics teacher, said: In a stunning turn of events, finmin Ishaq Dar confidently declares that Pakistan has no reason to worry about defaulting on its loans, citing billions of dollars' worth of assets. However, questions arise as the Karachi Port Terminal finds itself on the brink of being handed over to the UAE and Islamabad airport has already been outsourced. And if that wasn't enough, the iconic Roosevelt Hotel, Pakistan’s glory in New York, has already been leased out.
These developments leave us pondering: if Pakistan is truly brimming with riches, why are such valuable national assets slipping away? The plot thickens as we delve into the intricacies of these perplexing moves, searching for the hidden truths behind this intriguing twist in the financial landscape.
Mr Shahid said under the EFF's 9th review, concluded earlier this year, Pakistan has been promised $1.1 billion of the delayed $6.5 billion funding since November. Ironically, the coalition government in Pakistan had been striving to achieve this milestone for the loan installment. On the other hand, Pakistan has requested the IMF to consider relaxing conditions regarding $6 billion in external financing for the next fiscal year's budget.
Financial experts warn of the impending $24 billion returns in the coming year, creating further fear and uncertainty.
Pakistan's future hangs in the balance as its debt crisis reaches alarming levels. The severity of the situation cannot be ignored and it is crucial for the people to understand the impact on their lives. However, there is hope and it lies in building a transparent, accountable and sustainable financial system. The government must take bold steps to improve the country's fiscal trajectory and prevent it from falling into the debt trap again. This is a ticking time bomb that demands immediate action.
Greece serves as a cautionary tale of how reliance on international assistance can lead to further distress.
Pakistan must realise that external conflicts for financial gain will not solve the underlying problem. Instead, the focus should be on implementing transparent measures that prioritise the welfare of the people. It is time to break free from the shackles of debt and corruption and pave the way for a prosperous future, where the citizens' well-being takes precedence over all else. This is the time for action. Now or it would be too late.
