Pakistan is on the verge of receiving around $1 billion debt relief under the G20 plan. A much-needed good news for Economic Affairs Minister Khusro Bakhtyar. This loan suspension will, undoubtedly, provide fiscal space to our economy so that Islamabad can focus on the already-hardening battle against COVID. While indicators of a severe debt crisis were present in Pakistan long before the pandemic, being forced to completely shutter down has taken a great toll on its finances. With the third wave knocking on our doorstep with full force, we need all the help we can get.
It is for this reason alone that PM Khan is repeatedly making a case for debt relief for stressed countries. His call for suspension of debt payments until well after the pandemic if not debt cancellation was echoed by Ethiopian Prime Minister, Abiy Ahmed. As Khan is taking his bedridden economy to important UN gatherings, Ahmed wrote in The New York Times, “if the world is to survive the punishing fallout…this initiative needs to be even more ambitious.”
Pakistan’s debt problem is an open secret. We owe the world much much more than we can squeeze out of our wallets. During such testing times, when we are being forced to balance our heavy liabilities with the public health crisis. Partial lockdowns have put millions out of work; pushing 40 per cent of Pakistanis below the poverty line. With literally nill market activity and a deafening silence haunting industries, how are we expected to abide by the bullying deadlines and conditions of our creditors? To many, this $1 billion relief may sound like a drop in the ocean. After all, our gross public debt has soared from Rs 24.95 trillion in June 2018 to Rs 36.95 trillion in September 2020. The recent addition of $500 million from the alleys of the IMF is yet another story that comes with its own set of restrictions. Despite his wholehearted commitment to the issue of mounting debt, PM Khan is still playing the same old game. Debt-servicing constituted about 41. 28 per cent of the federal budget for the current year. But his ruthless critics fail to bring into consideration the worst-ever economic crisis the PTI government had inherited. Manipulation by previous administrations to artificially control the Pakistani rupee has taken its finances by storm. And it is this urge to keep our economy afloat that Islamabad is looking to the international community for a graceful way out.
Unfortunately, our outspoken position on this issue has sparked threats from Credit Rating Agencies with risk downgrade. More troubling is the vehement opposition of the US to our call for comprehensive relief at international gatherings. Ergo, when financial institutions paint a rosy picture to disguise dragging out economy to intensive care, allies, like China, hold the key to our true salvation. How on God’s green earth do the creditors expect a country with negative GDP, 12 per cent inflation rate and an over 80 per cent debt-to-GDP ratio to stick to their instalment plans?
It can only be hoped that the next quarters see a realisation of wealth-creation initiatives (Lahore’s Ravi Urban Project, Central Business District and Sindh’s Bundal Island) being undertaken by the state. Only, a self-sufficing economy can kiss the crippling debt spiral goodbye. Nothing less, nothing else! *