Daily Times

Undeniably, debt is abominable. The one thing that will undoubtedly spawn a financial crisis is a debt; arguably perhaps the Devil’s most dangerous tool to wreck havoc and chaos on this earth. On the other hand, sometimes you have to borrow for constructive and productive reasons, debt is then a necessary evil.

Those of us belonging to the middle and lower classes have at one time or the other needed to borrow by necessity under strenuous circumstances, or have borrowed by choice mostly to acquire a house or a car. In the latter case, the debt is most always covered by the value of the asset, and the objective is to pay the debt as quickly as possible. Notwithstanding, recall how stressful it is to be under debt. Apparently, this is not how the government operates.

According to the State Bank of Pakistan (SBP), and you cannot get more authentic than that, Pakistan’s total debt and liabilities, domestic and external, amount to at Rs 22.45 trillion at fourth quarter FY 2016. Nope that is not a typo; it is a trillion with a “T”, and not a billion with a “B”. Others have already done the math to calculate how much each of us is in debt today, so won’t attempt that, but let the amount simply sink in. Before moving on, for those of you who hold democracy near and dear, my apologies; however, such a wonderful opportunity to take a swipe at democracy could not be ignored.

Around June 2008, Pakistan’s total debt and liabilities were around Rs 7 trillion. The usage of the word “around” is necessitated by the suspicious absence of historical data relating to Pakistan’s total debt and liabilities on the SBP website. Suspicious because this was previously available and one sincerely hopes that should a competent authority at SBP come across this article, perhaps they can rectify this omission. So, after 60 years of independence, three martial laws, spending money on Tarbela and Mangla dams, constructing the Lahore-Islamabad motorway, embarking upon industrialization, acquiring of nuclear capability, fighting two wars with our eastern neighbour, deep into war on terror, and a lot more, the total debt and liabilities of the nation still did not exceed, assuming the worst, Rs 8 trillion.

By FY 2013, the nation’s total debt and liabilities, again as per SBP, stood at Rs 15.234 trillion. I am sure all of us remember that this was when a democratically elected government had completed its full term in government; an occasion much celebrated in certain circles. However, in 5 years, our democratically elected government had managed to borrow roughly the same amount that the nation had borrowed in the previous 60 years. A remarkable achievement by any standards, except for a small anomaly, they built absolutely nothing. At least I cannot identify any projects built during this period which could be worth even one trillion, let alone Rs 7 trillion. All that we can perhaps recall from that time are stories of corruption at every level.

Today, after a little more than three years, another democratically elected government has borrowed an additional Rs 7 trillion with total debt and liabilities now standing at Rs 22.45 trillion. A clarification, this amount includes external debt for which data was available on the SBP website. For the record, and according to SBP, at December 31, 2007, Pakistan’s External Debt and Liabilities stood at US$ 42.78 billion and official liquid reserves at US $ 13.43 billion. At June 30, 2013, Pakistan’s total External Debt and liabilities stood at the US $60.89 billion while official liquid reserves were at US$ 6.04 billion. At June 30, 2016, Pakistan’s total External Debt and liabilities stand at US $72.97 billion while official liquid reserves are at US$ 18.17 billion. Based on these numbers it can be concluded that while the previous democratically elected government went on a dollar borrowing binge, the current government has a break even when it comes to borrowing in foreign currency; kudos to them for that! In fact, by this methodology, their net borrowing during their tenure till now comes down to around Rs 6 trillion, notwithstanding that one is not exactly sure of this particular strategy and how it works.

Before getting to the pertinent question, which is the title of today’s write up, a few numbers to get the context right. When we built the Lahore-Islamabad motorway back in 1997, the 367-kilometre road together with all amenities, cost around US$ 1billion, around Rs 30 to 40 billion in rupee terms back then. The Neelum-Jhelum hydropower plant is now expected to cost around US $4 billion, which is arguably the biggest infrastructure project ever in Pakistan. The 27 kilometre Islamabad-Rawalpindi Metro’s cost was around the US $450 million, although the project seems never to end. The Kalabagh Dam was estimated in 1984 to have a cost of US $8 billion; today perhaps it might be around US $10 billion. And with the US $46 billion amount under CPEC will be used to construct roads and corridors across the length and breadth of Pakistan, install roughly 15000 megawatts of power generation, build an orange line in Lahore and what else not. Accordingly, Rs 14 trillion of more debt is sufficient to build 14 dams the size of Kalabagh, around 30 hydropower plants the size of Neelum-Jhelum, fill the country with motorways or have a metro in every city in Pakistan.

Dear readers, surely most of you might have figured out the layman’s quandary already. What exactly did the government do with the roughly Rs 14 trillion that it borrowed during the past roughly eight years when the nation was fortunate enough to have experienced genuine democracy. Is it too much to ask the elected government to provide a cash flow statement of where the money went exactly and perhaps a forecast of how much are we going to borrow in the foreseeable future and why?

In defence of the current government, perhaps we are borrowing to pay our previous debt alone. But if we are stuck in the debt trap, then we should at least acknowledge it and enforce austerity measures on the government and if needed the nation, since continuing to borrow and unrestrained spending will only make things worse. Perhaps we need to cut down the size of government. By the way, even if we sell all the State-Owned Enterprises, we still won’t be able to pay all this debt. Frankly, with declining exports and dwindling workers’ remittances, there seems to be no solution of paying off our dollar debt, short of a miracle like an elephant size oil strike or we can hope that our good friends the Chinese foot the bill.

Irrespective we can continue to procrastinate or do something about the Rs 22.45 trillion debts; in the case of the latter the first step is to ask, where did the money go?

The writer is a chartered accountant based in Islamabad. He can be reached at syed.bakhtiyarkazmi@gmail.com and on Twitter @leaccountant