- Ticking faster and louder
The government can spit-shine the economy all it wants – higher exports, OK growth, less inflation – but in truth the debt problem has become almost impossible to manage. And without urgent and radical reforms an outright balance of payments collapse might not be averted. According to the State Bank, which spent much of Friday praising the present state of affairs of the economy, the government incorporated $6.9 billion in 2017 principally to manage rising imports and meet foreign debt obligations. Since these loans come with interest payments of their own, Pakistan is continuously pushing itself into a deep black hole.
Already the fiscal deficit is the highest in history, and no matter how much the finance ministry puts the spin on exports, the improvement has just not been sufficient close the broadening gap with imports. Remittances, too, have been thinning over the last few years. Add to that the recent rupee collapse, which Miftah Ismail celebrated as the best way forward, and total public debt now stands at almost $70 billion. Having just clocked the single largest annual accumulation of debt in the last four years ($6.9b), the government will no doubt delay any radical step ahead of the election, which leaves the decision to whichever government is formed later in the year.
But by then the deficit will have become even more unmanageable. Soon, Pakistan will either have to go knocking at the Fund’s door again or resort to deficit financing, which means higher prices for the working class. For far too long governments have only kicked the debt can further down the road. Each time a payments disaster is around the corner, the finance minister conveniently just borrows more to meet obligations. Eventually the burden will fall on the common man. Over time, we have become a country addicted to borrowing. Even the presidency and PM house run on borrowed money. But that is of little concern to political parties, especially now as the race for the election heats up and everybody goes out on a spending spree.
