As Pakistan awaits the revival of the IMF programme, the World Bank in its latest report stated that the country’s external debt crossed a whopping $108bn in 2020. According to the recent study conducted by the WB, a 7.6 per cent rise in Pakistan’s debt was recorded last year alone with the debts of stock rising by 16 per cent between 2018 and 2020. While the WB in its report has mentioned that the coronavirus pandemic is a reason behind a surge in external debt of low-income countries, we cannot rule out the mismanagement of economic factors by the ruling party that has added to the country’s increasing debt problem.
What is more worrying is the fact that the external debt only makes up one-third of the country’s public debt, which crossed the Rs40 trillion mark this year, making it 90 per cent above the GDP. A feat the government’s timely policy could have tried to avert. Free-flow of the currency in the inter trade market has cost us adversely with the rupee hitting record low against the dollar. Instead of relying on short-term relief packages or ‘lifelines’ from our strategic partners, the government must make serious efforts to control the depreciation. Afterall, it had been notified in September that the State Bank of Pakistan did inject $1.2 billion to stabilize the rupee. We must also not forget that Pakistan is one of the 50 countries in the world that are facing an imminent debt crisis. As a result, a growing debt will only increase poverty that no ‘biggest-ever’ relief package can offset. It must be noted that the per capita income in the country has only been experiencing a steady decline since 2018. It is ironic that it has been during the ruling PTI’s tenure, which has time and again made tall claims of setting the economy in the right track.
Advisor to Prime Minister on Finance, Shaukat Tarin, recently stated that the IMF programme is most likely to be back on track in the coming week. Considering that Pakistan has been dependent on the fund, the revival of it can help the economy but at the cost of adding to the already ballooning external debt. It is then safe to say that the prospects for Pakistan economy are even gloomier. Our economic managers need to act fast and work towards lessening this burden before Pakistan defaults on its debts.
