The economic team of the PTI seems to be engaged in chest-thumping after getting the nod from the IMF for $1 billion to steer the country’s storm-tossed economy towards ‘boom’. The ruling party shouldn’t consider this the martial plan for Pakistan to reverse the downward trajectory and stagflation of the economy.
By now, economic pundits of the PTI should have come to terms that foreign aid has turned out to be worse than a curse. After coming to power, in 2018, the PTI leadership pledged to the debt-ridden nation that it would enable the country to stand on its own economic feet without any financial cushion from lenders. In contrast, the incumbent government has broken all previous records by taking huge loans from multilateral lenders and friendly countries.
The utter economic failure of the PTI has made people realise that political parties employ fancy and empty slogans before elections to rally public support for electoral victory. Practical experience matters a lot in politics and economic affairs; a lack of it lures a person to show daydreams to his adherents. Prime Minister Imran Khan pledged to reduce the total debt and liabilities to Rs20 trillion from the inherited Rs30 trillion.
But stagflation, the failure of the PTI’s macroeconomic policies, and uncontrolled circular debt have played havoc, surging the total debt to a whopping Rs50.5 trillion. The dark shadows of bankruptcy are hanging like the sword of Damocles over the economy. If the upward trend in rising debt is not stopped, Pakistan’s lenders – mostly neo-colonial powers – will be in a position to decide the fate and direction of the country’s economy.
Since its independence, Pakistan has taken 20 bailout packages from the IMF. Also, successive democratic and military governments have sought financial aid from almost all friendly states. Now, the debt of this resource-rich country has jumped to almost 80 percent of the total GDP. As per the prime minister, his government is paying 60 percent of the country’s annual revenue to service multiple debts. And much of the remaining 40 percent goes in paying the salaries of public employees –rampant corruption also eats away a big chunk of the faltering fortunes of the country.
The only positive effect of foreign debt for Pakistan is the short-lived stability of the forex reserves. One wonders that if the government optimally utilises billions of remittances and prevents the increased smuggling of the dollar – over $10 billion as per the US State Department – the country does not need to knock on the door of select lenders for dollars. Also, the diversification of exports can help churn out adequate forex reserves. Unfortunately, the ‘imported’ economic team of the PTI sorely lacks the insightful vision to devise long-term and pragmatic policies for the sinking economy.
Both state and individual encounter crises as part of their natural growth. It is a divine process to test and strengthen the mettle and grit of individuals or entities before their elevation. Sometimes, both the state and the individual commit a major mistake in this process: they resort to seeking help from others. As a result, they do not bother to diagnose the underlying causes behind their fall and possible panacea for it.
Similarly, due to the germ of economic reliance, Pakistan has dismally failed to produce a needed pool of effective and efficient indigenous economists since its birth. Besides, the dependency syndrome has not strengthened the state to the level so that it can withstand a pressing financial crisis without a helping hand.
The spectre of debt has hamstrung the government in terms of providing respectable jobs and shelter to the burgeoning population. The government is spending about 60 percent of its revenue on debt servicing. Debt-servicing requirements have rendered the state bereft of monetary resources, making it unable to inject quality reforms in its educational and socio-political spheres. In June 2018, the country spent $7.5 billion in external debt repayment and its servicing. This cost has increased to $13.4 billion this year, a surge of 79 percent in three years. The state is left only with the begging bowl to get money for its developmental projects.
The presence of a pool of uneducated and unskilled young people will prove a severe liability for Pakistan in the future. Like the incumbent government, its successors could also be preoccupied with the thought of paying back the debt of the country. Thus, the current 38 percent poverty ratio may rise to around 50 percent.
No nation can rise to the height of glory by turning a blind eye to its human development. A jobless, poor and disillusioned nation could explode like a volcano if the state does not redress its grievances.
Developed countries such as South Korea, the UK and Japan strive to hand over the potentially growing economy to their posterity. They, too, remain in the throes of financial shocks, but these states do not spread begging bowls so that their future generations do not face financial obstacles. On the other hand, we are leaving a debt-ridden economy for our upcoming generations. As seen from the reckless borrowing of the present government, the debt-to-GDP ratio is likely to jump to 100 percent in a couple of years.
What is the fault of the posterity of this country that we have saddled them with billions of debts? What is the fault of today’s young Pakistanis that they have been exposed to derision and national ridicule on account of debt? The father of this nation carved out an independent state rich in resources for the people. Our successive governments have so aggressively taken loans that each Pakistani is presently burdened with over Rs0.2million debt. Our rulers are going to outshine Louis XVI – the monarch of France before the French Revolution of 1789 – in terms of amassing debt of the ‘geo-economically’ important country. Where is our purported policy shift from geopolitics to geoeconomics?
A country teetering under a debt-ridden economy cannot safeguard its prestige and project its power in the comity of nations. The loss of status on the world stage brings forth dire consequences for a nation. Today, the world does not pay earnest heed to Pakistan’s repeated warnings about atrocities of hapless Kashmiris in the hand of the supremacist BJP regime.
Also, despite Pakistan’s compliance, the FATF is reluctant to remove Islamabad from its grey list. Westphalian nation-states have always preferred wealth to human rights. India is a market of 1.38 billion customers, having the 6th largest economy in the world. Therefore, the world has turned a blind eye to recent uranium black marketing in India, blatant human rights violation in Indian-occupied Kashmir and New Delhi’s disruptive role as disclosed in the EU DisinfoLab.
The shocking story of debt does not end here. Sovereignty is a key element and pride of an independent nation. Nations sacrifice their lives for the protection of their supreme power. Under the burden of debt, Pakistan had to compromise on its sovereignty time and again during the war on terror. American drones used to penetrate Pakistan’s airspace and carry out attacks. Islamabad couldn’t bar Washington due to its heavy reliance on the IMF and forex reserves.
In short, nobody can deny the fact that the country is on the edge of an economic precipice. But there is still some light at the end of the tunnel for Pakistan to hit the jackpot. What should be kept in mind is that it isn’t going to be a meteoric rise for the struggling economy to be out of woods in the near future.
The government should select some sharp-sighted economic managers who can whisk off the outdated economic matrix and devise consistent macroeconomic policies, invest in industries and social infrastructure and cut down the unbridled import bills.
The writer is an independent researcher.
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