Debt write-off: No, thank you!

Demands by social activists for debt write-off have gathered steam once again. Small demonstrations outside press clubs and foreign activists urge donors to consider the impact of the most devastating natural catastrophe on Pakistans already weak economy.
There is no denying the constraints foreign debt imposes on third world economies. Pakistans citizenry is saddled with roughly $55 billion in foreign loans. External debt servicing accounts almost 2.5 percent of GDP - $4.3 billion last year.
Acquiring foreign debt is a convenient yet dangerous way for emerging economies to bridge the gap between resources and expenditures, and, in Pakistans case, the gap just seems to continue widening. Resource mobilisation, while a key priority, has not yielded significant results thus far.
In an idealistic world, international lenders would write off $55 billion. From a global finance perspective the amount is chump change; the bank rescue stimulus in the US alone was nearly $1 trillion. And with the reset button pushed, leadership in Pakistan would rapidly erase the resource gap. Economic growth would increase manifold and its benefits be shared by one and all.
But in the real world, such a scenario is a near impossibility. Multilateral agencies have never written loans off unless a country declares itself a highly indebted country. And, as recently as last month, the government gave its guarantee that Pakistan would continue to meet is debt servicing commitments, signed by the SBP governor and the finmin.
Moreover, news flow from recent weeks suggests that Pakistan has already indicated interest in entering another IMF program at the culmination of the current programme, or even before.
Domestic resource mobilization is imperative for sustainable development of Pakistans economy. Some 30~50 percent of the economy is completely out of the tax net. Just over 1 percent of Pakistanis are registered with the tax authorities.
Calls for taxing the wealthy are being made not just domestically, but by donors and friends of Pakistan alike.
If economic benefits are set aside for a moment, non-monetary factors such a permanent loss of prestige and a placement in the least developed countries would be a direct consequence of getting external liabilities wiped clean.
In addition, the label of bankruptcy would be slapped on the country, which would hinder the ability of the government to raise funds in international capital markets in the long run.
Taking the high road will no doubt be full of challenges. Developing infrastructure, polishing human resource capability and tapping into domestic resources will take time. But lessons may be learnt from countries like Malaysia, Korea and Brazil that have emerged after decades-long efforts to reform their economies.
Parallels to Haitis recent debt write off may also be drawn, but does Pakistan really view itself in row with the worlds most impoverished nations forever, or does this nation see itself rising from its current lows?