Actions and consequences
Pakistan “does not face any difficulty in respect of its debt servicing obligations”, the finance ministry said in response to a recent Bloomberg red flag regarding the country’s debt burden. Granted, “improving growth prospects, lower inflation and smaller budget deficit” can be marketted as ‘achievements’ of the last fiscal or so. And the ministry’s line about being “committed to successfully implementing its IMF macroeconomic stability programme” also added a touch of political correctness to the picture. But scratch the surface a little and the foreign publications apprehensions become understandable, just as the government’s claims leave a little something to be desired.
Growth has improved a trifle, just as inflation has eased somewhat, which means the deficit number isn’t as bad as, say, two years ago. But driven as these developments have been by exogenous factors, like the record slump in Brent crude, as against indigenous policy decisions, they are more welcome, unexpected relief than the fruit of the government’s labour. And the less said about the commitment to IMF’s stability programme the better. Once again the government went to the Fund to avert another external payments crisis; and once again it failed to meet quarterly benchmarks throughout the duration of the programme.
The country might not face immediate threats of default, and the finance ministry has rightly been quick to deflect such assumptions. Bloomberg is taken seriously by all sorts of international investments, and this piece could hardly have come at a worse time for Pakistan; just when it was wooing investors to park funds here. But while spit-shining the economy might be acceptable convention, playing with numbers is not. That credit default swaps surged 56bp last week will not have gone unnoticed, especially since it is the most pronounced jump after Greece, Venezuela and Portugal. This is the result of years of mindless borrowing; to the point that successive governments have had to use loans just to stay afloat. Sadly, though, people who pay back these loans will be simple, hardworking Pakistanis who had no part in this obsession with debt.