According to news reports, the debt volume is piling up and has reached an alarming stage. The government has already added new debt of $796.8 million to its portfolio during the first quarter of the current fiscal year while it is ready to borrow another $2 billion to finance the development projects.The government is planning to generate this money by floating Euro and Sukuk bonds in the international capital markets and the official policymakers are looking for loans and grants from every possible external source without realizing that the coming generations will have to reap what they are sowing. Ironically, the borrowings are made for short-term economic gains rather than devising long term policies for the development of industry and trade. At least $458 million, out of the $796.8 million,had been acquired from a consortium of both foreign and domestic commercial banks for budgetary support. The rest of the money was committed by the International Islamic Trade Finance Corporation under the Islamic finance system. The total external debt has swelled to 67.2 percent of the gross domestic product and no one knows when the government will apply brakes and will stops obtaining further loans.
As a result of the falling exports, the trade deficit has reached $32.4 billion, and the government has recently imposed duty on hundreds of ‘luxury goods’ to arrest the imports in the country. Experts believe the local industry has been burdened with unreasonable taxes which has increased the cost of production and curtailed the ability of the local manufacturers to compete in the international market. The government will have to give tax holidays to local and foreign investors and create a business friendly environment to stimulate the industrial sector.The more business opportunities meant more revenues for the government coffers. The government needs a heavy amount to finance and maintain the administrative affairs and instead of generating income by boosting economic activities, it wants to acquire it through duties and taxes. A report issued by the World Bank puts Pakistan at 144 among 190 countries of the world in terms of institutional support to do business. It also reveals the fact that the government needs to revise its policies to create conducive environment for the development of business in the country. So far, the government should shun its habit of turning toward international financial institutions for obtaining loans on heavy markup rates.
