The government is considering singing a $600 million loan program with the Asian Development Bank to continue the pace of energy sector reforms and maintain the country’s fast depleting foreign currency reserves to a certain levels.The government had to consult the Manila-based lending agency for the energy sector reforms and maintain the foreign exchange reserves in the wake of growing debt repayment obligations.However, the fresh injection of $600 million loans will add another $1.5 billion to the debt burden during the current fiscal year.The figure is $500 million more than the government’s budgetary estimates.The government is not tired of claiming that it has achieved financial stability during its three years rule, but most of its steps have proved to be utter failure. The government has so far received loans worth billions of dollars from every donor agency, but has failed to improve the financial conditions of its enterprises.The circular debt has crossed Rs400 billion mark and the balance of payment problem is coming as another financial shock for the nation.
The addition of $1.5 billion to the already piling up loans is not a small amount as the government has already obtained $2 billion from China to deal with balance of payment problem. The foreign exchange reserves reach $15.7 billion after the government retired a portion of loans a couple of weeks ago. Unfortunately, the government has maintained had the so-called financial stability on the basis of foreign loans. The exports are declining, imports are increasing and the ensuing trade deficit would create only the worst economic scenario for the country in coming months.
The World Bank has already raised the issue of circular debt but the government has amended the Fiscal Responsibility and Debt Limitation Act, 2005 to change the definition of total public debt. Brushing aside warning from donor agencies, the government believes the payment of external debt will only cause a limited pressure on the financial health as the external debt repayment obligations will not cross an average of $4.3 billion per annum. The country is expected to receive around $6.7 billion annual remittances from expatriate Pakistanis and it is hoped investment in the industrial sector will prove to be a blow of fresh air for the economy.What the government has to do is to avoid obtaining further loans for the sake of the economy.
