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December 1, 2019

The debt bomb

Opinion

December 1, 2019

From 1947 to 2008:over the 61-year period we had four governor-generals, nine presidents and twenty-three prime ministers. All of them put together managed to accumulate a mere Rs6 trillion in debt. In 2008, our per capita debt stood at Rs36,000.

2008-13: Over the five-year period we had Asif Ali Zardari as president and two prime ministers – Yousaf Raza Gilani and Raja Pervez Ashraf. The three of them managed to take our debt from Rs6 trillion to Rs16 trillion. Over the five-year period we added a colossal Rs10 trillion worth of debt. Over the five-year period, on average, we were taking on Rs5.5 billion worth of debt every single day.

Over the 5-year period, the PPP government increased our per capita debt from Rs36,000 to Rs88,000. Imagine: it took us 61 years to accumulate Rs36,000 worth of debt on a per capita basis but a mere five years to more than double it to Rs88,000.

2013-2018: Over the 5-year period we had Mamnoon Hussain as president and two prime ministers – Mian Nawaz Sharif and Shahid Khaqan Abbasi. The three of them managed to take our debt from Rs16 trillion to Rs30 trillion. Over the five-year period we added a colossal Rs14 trillion worth of debt. Over the five-year period, on average, we were taking on Rs7.5 billion worth of debt every single day.

Over the five-year period, the PML-N government increased our per capita debt from Rs88,000 to Rs144,000.

2018-2019: over the one year period we had Dr Arif Alvi as president and Imran Khan as prime minister. The two of them have managed to take our debt from Rs30 trillion to Rs41 trillion. Over the one year period we have added a colossal Rs11 trillion worth of debt. Over the one year period, on average, we have taken on Rs30 billion worth of debt every single day. Imagine: we accumulated Rs30 trillion worth of debt in 71 years and an additional Rs11 trillion just in one year.

Over the one year period, the PTI government has managed to increase our per capita debt from Rs144,000 to Rs187,000. Alarmingly, debt taken on over a 71-year period now comprises 73 percent of our total debt and debt taken on over the past year now comprises 27 percent of our total debt.

The PTI’s mathematicians claim that they have taken on debt to pay off previous debt. Al-Khwarizmi, the Muslim mathematician during the Golden Age of Islam, is puzzled: if you have paid off previous debt then the final figure should be lower not higher. How come it is Rs11 trillion higher?

To be certain, PTI has simply taken on Rs11 trillion worth of additional debt. Yes, there is an element of devaluation in it but the same element of devaluation is present in all the previous calculations as well. We must compare apples with apples.

In 1971, every Pakistani man, woman and child owed Rs500. The same has since gone up to Rs187,00 in 48 years. Excessive public debt means higher rates of interest and a higher risk perception. A higher risk perception means investors will not invest or will demand a higher rate of return. All that means is little or no economic growth. Yes, excessive public debt is like “driving a car with the emergency brake on”.

The writer is a columnist based in Islamabad.

Email: [email protected] Twitter: @saleemfarrukh