ISLAMABAD: Economic Policy & Business Development (EPBD), a think tank, has called for fundamental restructuring of Pakistan's debt utilisation, advocating that borrowed resources be diverted from unproductive consumption towards productive economic investment.
EPBD maintains that Pakistan's Rs7.2 trillion annual debt burdens should finance growth-generating activities rather than subsidizing banking profits and inefficient state-owned enterprises, said a statement shared with the media.
The think tank claimed that the World Bank article in UNDP’s latest development report validates this position, explicitly stating that Pakistan's debt is "mostly used to finance consumption rather than investment" and that "public borrowing continues to crowd out private sector credit." The institution documents that Pakistan "contracts new debt equal to around 28% of GDP annually" while allocating merely "2% of GDP" to development spending - a stark indicator of resource misallocation.
Moreover, EPBD had stated that the ratio of current consumption to actual development deteriorated from 2.2:1 to 10.3:1 over a period of 15 years, demonstrating systematic shift away from productive investment.
EPBD argues that Pakistan's current approach wastes borrowed capital on guaranteed banking returns through government bond purchases and SOE subsidies that generate no economic returns. Instead, this debt should finance manufacturing expansion, export infrastructure, technology adoption, and private sector development that creates employment and generates sustainable returns to service future obligations.
EPBD added that Pakistani businesses face 11% financing costs compared to 5.5% regional averages, making them uncompetitive while banks earn guaranteed profits from public funds. With 59% of government debt in floating-rate instruments, reducing policy rates from 11% to 6% would generate Rs 3 trillion annually - resources currently transferred to financial institutions rather than productive economic activities.
It further stated that the World Bank confirmed that Pakistan “achieved a primary surplus in fiscal year 2025," providing fiscal space to redirect debt utilization. Rather than continuing current patterns of consumption-focused borrowing, EPBD advocates channelling these resources toward manufacturing competitiveness, export development, and business expansion that builds Pakistan's capacity to service debt through productive economic activity.
Regional competitors demonstrate superior performance by utilizing borrowed funds for business development and industrial expansion rather than banking sector subsidization and SOE support. Their approach generates 6% annual growth by directing debt toward activities that create value, employment, and sustainable economic returns.
EPBD maintains that Pakistan must choose between wasteful debt utilization that enriches financial institutions and SOEs versus productive debt deployment that builds economic capacity. The organization advocates immediate policy realignment to redirect borrowed resources from unproductive consumption toward manufacturing development, export infrastructure, technology adoption, and private sector expansion that generates sustainable returns and employment.
Copyright Business Recorder, 2025
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