Pakistan’s debt is eating up its vitals. Owing to depreciation of the rupee on a regular basis, the proportion of borrowed money has surged to dangerous levels. It is now officially acknowledged that debt has touched a staggering Rs64 trillion by the end of August 2023, indicating an increase of 29% in twelve months. This has compounded not only the money equation but has also brought pressure on debt-servicing. Moreover, the concerns exhibited by the World Bank in terms of sustainability of the economy, and the fears of an imminent default, are more than enough to keep policymakers on the tenterhooks as it poses grave risks to macroeconomic frameworks. The fact that the debt trap has widened by Rs14.5 trillion in just one year and is unstoppable is a dilemma fraught with consequences.
Some of the aspects and statistics are worth considering. Pakistan cannot keep on devaluing its currency, and secondly a budget deficit of 7.7% of the GDP is quite worrisome, as it is above the anticipated benchmark of Rs1.3 trillion. It is a faux pas for the government, and this accumulation is having an adverse impact on the psyche of big businesses, and investors alike. Pakistan needs strong growth, and one that is coupled with an export-laden mechanism. Going back to incentivise the textile sector, promoting information technology and harnessing the automobile industry at home are some of the out of the box options that are inevitable in order to stay afloat.
The options at hand are to ensure that the dollar-rupee parity is set on market inertia, and unnecessarily the fiat is not downgraded. Likewise, seeking investment in food and agriculture, as well as erecting a sound industrial base are foregone conclusions. The least that is essential is a curb on auxiliary imports and a new paradigm of lifestyle on austerity. Doing away with the prevalent culture of perks and privileges, and ushering in savings can inject new life in currency. But the point is that there are no takers, as we are accustomed to live on with a dilapidated tender at the peril of our future.
Published in The Express Tribune, October 7th, 2023.
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