Pakistan’s total debt and liabilities shot up to Rs 53.5 trillion, this includes the debt of Rs 23.7 trillion under Khan’s government. The SBP report stated that the last PTI government was responsible for adding to the public debt basket a sum of Rs 19.5 trillion during its years of power. This liability is more than any government in power managed to bury the country under in 75 years.
This does not mean Khan’s predecessors were better. The PPP added Rs8 trillion to the debt, PML-N added give or take Rs10 trillion during their combined years of governance. However, innings went to PTI.
To be fair, PTI was faced with challenging economic situation upon assuming power. It had to depend upon China, United Arab Emirates and Saudi Arabia for aid. IMF agreed to an Extended Fund Facility worth $6 billion. Rupee was devalued. Imports fell, but on the other side inflation galloped. In December 2020, Pakistan’s foreign reserves hit $13 billion, the highest in three years. This was largely due to the cascading effect of devaluation of rupee leading to fall in imports and coupled with $23.12 billion in remittances from overseas workers. This did not take away the dependency of Pakistan on foreign loans. It comparative terms, Pakistan lacked the reserves to be self-reliant.
A brief look at Sri Lankan’s borrowing history shows that 70% of the country’s infrastructure projects owed their presence to Chinese loans. This amount to $5 billion to loans from China, some sources state its much more. $3.5 billion is owed to Japan and $1 billion due to assorted nation, not to forget India to whom Sri Lanka owns $3.8 billion. Heavy borrowing led to default to the tune of $51 billion on international debt.
Economists in Pakistan state that Pakistan is not Sri Lanka, it shall not go under. Though one sincerely hopes that is true, acting like an ostrich does not pay. I am reminded of a pithy quote by Erik Pevernagie, “In the land of the ostriches, the blind are king. When politicians bury their head in the sand, ignorance rules the country. (“High noon.”)” International relations are based on national interests. There are no permanent friends or permanent enemies. One only needs to look at Afghanistan to realize the truth of this statement. We supported US against Russia yet today our relationship with latter is good. Better than good.
China is very exacting and specific when it comes to loan recovery from Pakistan and so it should be. One example alone is that owing to a circular debt of USD 14 million in the energy sector alone, some Chinese companies are facing difficulties availing insurance for loans in China that they wish to invest in Pakistan. Pakistan reportedly needs to pay off USD 4.2 billion in debt payments of which a very small sum has so far been paid. The IMF expects increasing of petroleum and energy costs. Whichever government is in power by then, will have a tough time justifying it to its people. The smart move for the coalition is to go for early elections instead of being labelled as a spoilt sport and accused of further raising costs of energy and petroleum that in turn will lead to hike in price of commodities.
Irrespective of banning nonessential imports the external debt will not come down astronomically. More rigorous steps are required. These include above all cutting through corruption and reforms in power sector. Extravagant living also must be cut back by those in position. Should Mr Khan return as Prime Minister, he must lead by example. Living in PM House cuts back on security and related costs than living in Bani gala. One example is cost of use of the helicopter from Bani gala to the PM secretariat and back cost 550 million Pakistani rupees for the time he spent in the position.
Nations are connected at multi levels economically, geographically, regionally and internationally. There are alliances at one level and distance at other levels between same nations. Countries like Pakistan which has to answer to many masters, need to traipse delicately on the rope.
The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: [email protected] and tweets at @yasmeen_9.