One of the most obvious legacies of a crisis-ridden economy is a sharp increase in public debt. The country’s debt has grown since 2007, with successive governments making huge borrowings, pushing the country towards a debt trap.
As of March 2015, the total debt liabilities of the country stood at Rs19,299.2 billion. Every Pakistani now owes a debt of about Rs101,338. This figure was Rs90,772 in 2013. It was estimated at Rs80,894 in 2012 and was only Rs37,170 in early 2008.
This was the crux of a discussion held at a seminar jointly organised by the Institute for Social and Economic Justice (ISEJ) and the Islamic Relief Pakistan under the campaign ‘Breaking the Chains of Debt’, at Forman Christian College.
The debt-to-gross domestic product (GDP) ratio stands at 66.4%, in which foreign debt is Rs6.4 trillion and domestic debt is Rs12 trillion.
The external debt servicing reached close to $7 billion in fiscal year 2014, which is almost 50% of the current reserves of the State Bank of Pakistan.
The country paid $6.820 billion in debt servicing in FY15, including $5.910 billion as principal amount and $915 million in interest payments. Worryingly, 47% of whatever the government generates in revenue is going to pay off debt against 44% in the previous year.
Ideally, this ratio should be less than 30% to allocate more resources to social and poverty-related expenditures.
Speaking on the occasion, ISEJ Executive Director Abdul Khaliq said the debt situation was alarming and the government must review its reckless borrowing behaviour.
“We must demand an audit of the public debt,” he said. “All new loan contracts should be subjected to a debate in parliament and its approval.”
The government must stop reckless international borrowing and minimise reliance on foreign debt in the future and take measures to get the illegitimate loans cancelled, he said.
Khaliq emphasised the need for synergising efforts for a debt-free Pakistan and making the people of Pakistan the real drivers of the economy.
Prime Minister Nawaz Sharif during his election campaign made tall claims that on assuming power he will get rid of the ‘cancer of debts’ and promised to break the ‘begging bowl’, however, there is little evidence of measures towards freedom from debt, said political economist Dr Qais Aslam.
The government proved no different from its predecessors and started knocking on the doors of international lenders even more vigorously, he added.
In a country where 60% of the population lives below the poverty line and 58% faces food insecurity, this additional burden means more miseries for the generations to come.
Speakers further said the impact of mounting debt burden on the people is horrific. Fiscal space for social spending has drastically squeezed. Pakistan spends just 2% and 2.6% of its GDP on education and health respectively, making it the lowest in South Asia.