PML-N govt on a borrowing spree

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A trillion added to national debt in first quarter

The figures are staggering – and unprecedented. The borrowing binge that the PML-N has gone for has added to the national debt stock by about Rs one trillion in only the first quarter – Rs10.9 billion a day – of its third stint in office. This spike by seven per cent – or 2.33 per cent for each month in office – has taken the total pile to a shade under Rs15 trillion. And this is without accounting for the debt acquired from the new IMF programme, which increases our indebtedness despite basically being a loan swap but with crippling, anti-growth conditionalities as add-ons. And since this borrowing is mostly short term and expensive, combined with the steep loss of rupee’s value, it acts as a force multiplier impact for the already acquired loans become higher in value – along with spawning inflationary trends that put the economy in further peril and the common man in increased jeopardy. Another huge impact of the government squeezing out the entire available liquidity from commercial banks and the State Bank is that the private sector does not get the cash flow, denying investment into setting up and refurbishing industrial units, which results in lower GDP, lesser agricultural growth etc. and in turn lesser taxation revenue, thus putting the entire economy into a vicious cycle.

But this was bound to happen. When a government goes back on its electoral promises of breaking the begging bowl, refuses to take austerity measures that could save tens of billions and eliminates circular debt worth Rs500 billion without a care in the world about the veracity of the bills (about which there is serious suspicion that they were grossly inflated – charging the government for fuel not bought and electricity not produced), and without the slightest effort at seeking concessions for bulk payment. A consequence of this strange refusal for due diligence and eliminating rapacious practices of the IPPs is that the monster of circular debt has in a matter of months reached an unpaid Rs100 billion.

In five years of similarly exceptional difficult times, the much-maligned PPP government had added Rs7 trillion to the national debt stock. The PML-N has acquired one-seventh of it in just three months. The irony is that the PML-N had condemned the ‘high level of borrowing’ while in opposition but has outdone its political rival once back in power. Stepping deep into this quicksand has financial implications far more horrendous than mere breaking of an electoral promise.