Debt trap

As the new government struggles to manage a plethora of economic crises, a new SBP report shows the extent of the debt in which ex-PM Imran Khan’s government has left the country drowning

Pakistan’s total debt and liabilities almost doubled during Imran’s almost four years in power, rising by Rs23

7 trillion to stand at Rs53

5 trillion by March 2022

The debt also rose significantly in relation to GDP — rising from 76

4% of GDP when Imran took charge to 80% of GDP in March, even though the decision to ‘rebase’ the economy earlier this year reduced its debt to GDP ratio

The structure of the new debt shows that it is mostly non-productive, meaning that it will not translate into economic growth that would, in turn, make the overall debt to GDP ratio reduce over time

The stats show that reality is also a far cry from what Imran promised when he took charge in Islamabad — that he would cut the debt burden in half

In fact, he was so confident he would be able to do this that he set up a debt commission to probe how and why public debt quadrupled between 2008 and 2018 — under the previous two PPP and PML-N governments

Imran had claimed corruption was to blame

But for some reason, the debt commission report was never made public

Whether this was to cover up his own government’s failure at debt management, the relative efficiency of his predecessors, or other problematic factors, only Imran knows

What we do know is that everything that could go wrong did go wrong — the PTI government regularly failed to meet its tax targets, sent the rupee into a free fall, and failed to reform loss-making state-owned enterprises

Meanwhile, foreign currency loans were also taken from commercial banks, mostly to pad foreign reserves

Unfortunately, these have interest rates that are generally higher than government-to-government loans or borrowing from development banks and international financial institutions, meaning that they will disproportionately raise long term debt

The only saving grace for Imran since leaving office appears to be that the new government appears incapable of fixing what PTI broke

Published in The Express Tribune, May 24th, 2022

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Date:25-May-2022 Reference:View Original Link