Four leeches

Leech number 1: The electricity sector. In August 2018, when the PTI took over the reigns of the government, circular debt in the electricity sector stood at Rs1.2 trillion. In November 2019, Nadeem Babar, special assistant to the prime minister, told the National Assembly’s Standing Committee on Privatisation, that the circular debt will increase to Rs1.7 trillion by December 2020, at which point, Babar said, ‘it will stop rising”.

According to a study titled 'Fixing Pakistan’s Power Sector', the circular debt stands at Rs2.2 trillion and by 2025 circular debt “can inflate up to Rs4 trillion”. For the record, the PTI government has added Rs1.2 trillion worth of circular debt over the past two years. This leech takes an additional Rs45 billion a month, every month. Or, an additional draining of Rs1.5 billion a day, every day for the past 720 days.

The PTI's Election Manifesto 2018, 'The Road to Naya Pakistan', reads: “PTI will complete electrification of rural areas, solve circular debt issue through reducing transmission and distribution losses (Page 31).”

Leech number 2: Commodity operations. This leech does not get much attention but as of March 2020, according to the State Bank of Pakistan (SBP), this leech had taken Rs649 billion. These are commodity-related debt obligations of the federal and provincial food departments on account of wheat, sugar and fertilizer stocks. In theory, the value of the stocks equals the debt obligation but in practice there exists a multi-billion rupee hole. What that means is that the federal and the provincial food departments owe hundreds of billions of rupees to banks for which there’s very little to show for.

Leech number 3: The Federal Bureau of Revenue (FBR). On July 9, the FBR told the National Assembly Standing Committee on Finance that there were Rs532 billion worth of tax refund claims outstanding that the FBR did not report for the period starting June 2014 to June 2019. This means two things: the FBR’s tax collection has been grossly over-reported; and that there exists a circular debt in the amount of Rs532 billion that the government owes on the account of sales tax, customs duty and income tax refunds.

Leech number 4: LNG. Sui Northern Gas Pipelines (SNGPL) owes Pakistan State Oil (PSO) Rs103 billion. PSO claims that it has defaulted on payments to Gunvor, PSO’s LNG supplier, because of SNGPL’s non-payment. SNGPL also owes Rs30 billion to Pakistan LNG Limited (PLL). As a consequence, PLL is going bankrupt. The Sui Southern Gas Company (SSGC) owes SNGPL Rs50 billion. SNGPL claims that RLNG was diverted to the domestic sector and an amount of Rs85 billion has not been recovered from the domestic sector. Round and round in the LNG sector too.

Lo and behold, the four leeches have so far sucked an amount of around Rs3,700 billion or more than eight percent of Pakistan’s GDP. As a consequence, each and every Pakistani family is indebted to the tune of Rs125,000 – and this is in addition to our central government debt of Rs35,000 billion (which converts to more than Rs1 million for each and every Pakistani family).

To be certain, no economic policy will work as long as these leeches continue their blood-sucking operations.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh