In case of US government default there will be no impact on Pakistan’s trade as it is not dependent on the USA. However, in the case of a US default Pakistan might face further cut in aid and pressure for ‘doing more’ from the US in the coming days.
Economists while talking to Pakistan Today said that the US default is a political issue and it has very little to do with economic problems. They said that the congress would enhance the ceiling but in return the government would have to take certain measures like controlling expenditures and imposing new taxes. They said Pakistan could face further cut in its aid and US would mount more pressure on us.
US hit its debt ceiling on May 16 but used spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally. Public Debt Outstanding of USA is hovering around $14.46 trillion and was approximately 98.6 per cent of calendar year 2010’s annual gross domestic product (GDP) of $14.66 trillion.
Former Finance Minister Dr Salman Shah said that it is a political problem and the Republicans would mount pressure on Democrats. He said there is no chance of default of US government and it is likely there will be a breakthrough. He said if USA defaults then it will not have any significant impact on trade of Pakistan. However, other global economies could suffer. “The cost of debt servicing for US and borrowing rates would go up,” Dr Salman Shah said adding Chinese could face problems, as they have huge investments in treasury bonds.
International affairs specialist Tariq Majeed said Republicans would put pressure on Democrats through default threat. He also pointed out that it is a political issue and Democrats are under pressure because of the problem. He said there is no chance that the US government could default but the whole episode would be damaging for the Democrats. He said Obama has agreed in principle to deep spending cuts, including savings from social safety net programs and health sector. Tariq Majeed said that Pakistan government and policymakers should not get worried about a US default, as our economy is not dependent upon USA.
Economist Dr Shahid Hasan Siddique said that US default would have no significant impact on Pakistan, as our exports are consumer based and consumption is unlikely to be effected. He said in recent years the US has not disbursed the committed aid to Pakistan. “Now tough times are ahead for US on the economic front and it will try its best to curtail expenditures on Afghanistan war and consequently Pakistan will face more pressure. The US is likely to decrease aid to Pakistan,” he said adding that Asian growth is not US driven therefore there will be very nominal impact on Asian countries.
