China to the rescue with loans galore
Mr Micawber’s eloquent speeches in ‘David Copperfield’ on his own optimistic prospects in life end in his incarceration in debtor’s prison, but he left these immortal lines on the need for living within one’s means : ‘Annual income twenty pounds, annual expenditure nineteen, nineteen, six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds, ought and six, result misery’. Wise advice for financial management in any field, whether domestic or the broader national sphere. But it is also counsel anathema to our free-spending elitist leadership, as it begs, borrows, cajoles, inveigles and sweet-talks (the mysterious Saudi ‘donation’ of $1.5 billion, but at what cost?) lenders in order to pursue grandiose projects of doubtful usefulness and misplaced priority. Decadent life styles and spendthrift ways have sunk the country in an ocean of foreign debt with every Pakistani entering hostile world owing over Rs.100, 000. Moody’s has estimated our external debt at a staggering $79 billion by end June, a recipe for bankruptcy. Reportedly, airports, motorways and even buildings have been pledged as collateral in the frantic rush for desperately needed but always inadequate foreign exchange reserves.
And herein lies the root of the dilemma. Pakistan is caught in a debt-trap, as it needs to negotiate fresh loans at ruinous rates of interest with a short time- fuse attached just to settle older debts, being unable to generate the necessary funds from exports and inward remittances. And so the country is forced to turn again to the ultimate panacea of all our financial ills, China, for another $1 billion bailout in settling two loans totalling $1.05 billion due in June. This would be China’s third such fire-fighting assistance after earlier hand-outs of $900 in 2016 and $300 million in the first quarter of 2017. But as a consequence of Chinese generosity, Pakistan’s debt-servicing payments to it have tripled in the last year alone. With reserves tottering at $17.1 billion (February 2017), a visit to the IMF with the familiar begging bowl appears inevitable, perhaps even before the 2018 national elections.