All signs indicate a doomsday economic scenario is nigh
Lacking the will and resolve for constructive action, and in the absence of considered plans and policies for economic uplift, various governments resorted to the easy but disastrous stratagem of borrowing right and left. Selling dollar-denominated bonds or obtaining short term foreign commercial loans was their mantra. Instead of raising domestic taxation, increasing exports through diversification, providing incentives and security to wary expatriates for remittances, and adopting an austere economic regime, the economic wizards have turned to short-term bailout measures which keep the wolf away from the door for the present. These include, apart from the rampant scrounging with begging bowl in hand, our particular economic genius of repeated money whitening schemes, which actually attract few takers from amongst our savvy tax evaders. And the country’s imports are rising by the day, due to ongoing CPEC projects and our runaway consumerism.
Now, the time of reckoning seems at hand. A 10-year Eurobond for $750 million at around 6.875 percent floated by the Musharraf government in 2007 is ripe for repayment and there is no money to pay for it. As always when the water reaches its head, the government has turned to all-weather friend and CPEC patron or partner for yet another $750 million loan, which would raise our total liabilities to China to over $ two billion in the past six months alone! By its failure to repay loans from its own resources, Pakistan’s vicious debt trap has come full cycle and become circular, like the national energy debt. The $2 billion Eurobond and $1 billion Sukuk Bonds sold in 2014 and the $1 billion Sukuk Bond of 2016, due in five and ten years, at ruinous rates of interest, among others(reportedly totalling $25 billion in the last three years!), point to catastrophic economic meltdown, meaning insolvency. Loans taken under IMF conditions to shore up foreign currency reserves, or, in the case of Sukuk proceeds, to retire domestic debt, will no doubt end up as ‘development funds’ in bottomless pockets, with the national elections looming.
