KARACHI: Chairman of the Pasban Democratic Party (PDP) Altaf Shakoor has said that the debt trap “is really strangulating the country’s economy” and “this deadly noose” will be further tightened in the years to come.
He said that successive governments took costly loans from foreign lenders, especially the International Monetary Fund (IMF), for unnecessary projects and now what the nation earns goes to pay the principal amount and the interest on these loans.
He said that the resultant vicious cycle is badly hurting the country’s already fragile economy.
He said that according to experts Pakistan is in a political and economic “death spiral” and the country could go over the cliff just as Sri Lanka did, since internal conflicts, regional instability, and global uncertainty all threaten the state’s very survival.
He said that Pakistan’s external debt servicing rose to USD 10.886 billion in the first three quarters of 2021-22 compared to $13.38 billion in the entire FY21. The external debt servicing was just $1.653 billion in 1QFY22 against $3.51 billion in the first quarter of 2020-21.
However, the debt servicing jumped to $4.357 billion in 2QFY22 and further to $4.875 billion in 3QFY22.
The increasing size of external debt servicing in each quarter indicates that the government has been borrowing dollars at higher commercial rates to meet its foreign debt repayment obligations.
Pakistan recorded a Government Debt to GDP ratio of 84 percent in 2021, he said, adding that it is a very disturbing sign that from what we earn almost all the money goes to paying off debt and interest on the loans.
He said that this year the government has earmarked Rs 3.95 trillion for interest payments and repayments on domestic and foreign loans (debt servicing), which is 41.57 percent or over two-fifths of the total budget outlay of Rs 9.502 trillion for FY2023.
Altaf Shakoor said that the country will spend Rs 510.97 billion on foreign debt servicing and Rs 3.439 trillion on domestic debt servicing.
The government spent a huge amount of Rs 3.555 trillion on public debt servicing in FY2022 against the budgeted Rs 3.059 trillion. He asked if “our parliament” is aware of this grim scenario. He wondered whether the ‘institution’ will do anything to save Pakistan from sinking into a sea of loans.
He said if the dangerous trend continues in the next few years “we will be paying all what we earn to our lenders”.
The PDP chief said that even a blind man could see that Pakistan is moving fast on the path of default, but the government, the parliament and the institutions are least concerned.
A database should be compiled about all the foreign loans taken by the country and the interest paid on them to see how much this poor nation had paid to the cruel foreign lenders so far.
A cap should be put in place on payments on foreign loans and their interest for at least 10 years, so as to bolster the declining economy, said the PDP chief.
He called for widening of the national revenue base, besides boosting industry and agriculture to create much-needed financial space to rid the nation and the country from the shackles of foreign loans.
He added that all the political parties and institutions should join hands to break the “deadly” debt trap the country finds itself in.
Copyright Business Recorder, 2022