The knee jerk debt crisis of the world’s top economy has caused sleepless nights in the financial grid stations of almost all countries that are still busy to understand and interpret at least the degree of meltdown that may immediately bring the shock waves to their glass house economies standing on the US axis. Surprisingly enough, movers and shakers of Pakistan appear to remain insulated from the US debt drama. The evidence is on display for any one to see. Pakistan’s current national debate is on the formation of new provinces rather than domestic or international ‘weather forecast’ in the realm of economics. However, the silver lining is that Pakistani press (print media) and economic think tanks have not lost sight of the bad times coming ahead.
The unprecedented downgrading of America’s top notch AAA credit rating by a major ratings agency S&P comes only 15 months before the next presidential election where the downgrade and the debt will be top issues for debate. Bitter political battles persist over ideologically fraught issues of spending cuts and tax reforms. The compromise reached by Republicans and Democrats this week calls for the creation of a bipartisan congressional committee to find $1.5 trillion of deficit cuts by late November, beyond the $917 billion already identified.
Apart from determining who is right and who is wrong in Washington’s corridors of power, the positive side of the crisis is that every body in on board and unlike Islamabad there are no mid-night verdicts passed to solve or dissolve looming national problems. There might be questions on the mode and manner of rightsizing the mountains of increasing debt but every party and every individual has exhibited a clear stance in the USA. No one is turning away, looking at the other side, drifting or abstaining from the mainstream national agenda. This level of transparency is rarely familiarised with governance in Asia. Analysts say that US deficit of trillion dollars is far easier to manipulate than to deal with $60 billion owed to Pakistan, sinking the economy day by day.
The problem is that Pakistan has been accumulating huge amounts of debt without any substantial means to pay it back. Every year, we are taking new loans on higher terms just to payback a part of our old debt. The height of misery is that the problem is not debated in the apex houses of the bi-cameral parliament. This should have been the foremost issue for people’s elected representatives but that is not the case. It reflects high degree of immaturity, ignorance and indifference of the ruling elite towards the common citizens who are valued not more than mosquitoes or house flies on the chess-board of sovereignty.
A plain numerate with ordinary sense of mathematics will bang his head against a wall if he is described the assets and liabilities of the state. By December 2010 Pakistan’s domestic debt was Rs5,497.4 billion and external borrowing and liabilities stood at Rs5105 billion. In total this comes out to be Rs10602 billion, meaning each Pakistani owes Rs589,000. This means that even street beggars, sweepers and daily bread earners are buried up to their neck under so much debt which they can never be able to pay back. In short, it seems a Herculean task for Pakistan where poverty levels are high, rate of industrialisation and hence employment are low and population growth eats up any economic expansion. If the population and economy grow at 2.4 per cent each then it means 0 per cent growth because additional population will balance it out. On the top of all this, the energy crisis has plugged all chances of a turn around during the current decade ending in 2020.
America’s national excitement and collective anxiety is a wake-up call to third world economies reeling under the heavy burden of increasing debt coupled with poor governance. It is said that ‘high wind blows on highlands’. Thus, a highland like America with five per cent inflation and a three per cent interest rate has muscles and vision to reverse the course. But Pakistan with an inflation rate as high as 20 per cent and interest rates ranging between 16-18 per cent, is still doing nothing and waiting for a miracle to tackle its ticking catastrophe.