Pakistan has reported a great increase in external debt in the last four years especially in 2016. According to Daily Dunya, Pakistan has to pay 11.5 billion US dollars to various international monetary institutions during the next 18 months, causing a major blow to Pakistani economy.
It has been reported that the country is obliged to pay USD 8.76 billion to IMF, World Bank, and Asian Development Bank. Pakistan also needs to pay back 160 million Saudi Riyals to Islamic Development Bank 1.6 billion dollars to China, 192 billion Yen to Japan, and 625 million Euros Paris Club.
Pakistan has already spent 66pc (Rs414 billion) of the collected tax in the first quarter of the fiscal year 2016-17 in debt servicing during July-September. The loans that already taken by the government are repaid by draining the tax revenue and also by asking for more debt. From June 2013 to June 2016, out of the $25 billion in foreign loans $11.95 billion was spent in repayment of previous loans.
Under the PMLN government, the external debt is reported to have increased by 6.25pc per annum, and the annual rate of increase in domestic debt was 11.5pc. Also, the total debt from $48.1bn in June 2013 to $57bn in June 2016 shows $9.6bn increase in just three years.
While the external debt keeps on soaring, the government expenditure knows no bounds as well. The government expenditure and the debt financing pose a risk of destabilizing external sector. According to a report by Dawn, The public debt is expected to increase exponentially in 2017 where both the federal and provincial governments are expected to borrow from banks, SBP and the market and even IMF.
It is a permanent part of government speeches that the economy is booming and we’re heading towards prosperity but the reality shows a different picture. And, with this rate of borrowing and debt financing, if we don’t put a stop in the near future, we may as well forget about getting a stable economy.