In an already fragile situation of the economy, the growing loans are not only squeezing fiscal space to attract investment in human development and infrastructure sectors, but also bringing the biggest challenge of debt servicing for the nation in the near future. Instead of developing resources to generate money through trade and industry, the government has found an easy way to fill the gap by taking loans from international donor agencies. The exports of the country have been continuously declining, but imports are increasing as a result of which the country is facing huge trade deficit. The exports have now shrunk to $22 billion against $43 billion imports, leaving a huge deficit of $21 billion. The tax to GDP ratio is already low in the country and instead of enhancing the next net, the government is putting all its pressure on the already registered taxpayers. The tax and non-tax collections of the country stand at Rs 3,900 billion against expenditure of over Rs 4,900 billion. This not only affects cost of production, but also causes extra burden on common man. So far, the remittances sent by expatriate Pakistanis play a vital role in stabilizing the fiscal situation. However, due to crisis in various host countries, repatriation of Pakistanis has started. This will also lower the volume of remittances in coming years.
The external debts remained static at $39billion until 2008, but increased by $16 billion during the five years tenure of the Pakistan People’s Party. Another $15 billion are added to the debt burden by the current Pakistan Muslim League-Nawaz government during the last three years. The government is still running from pillar to post for more loans. At least 60 percent of the total revenues are allocated for debt servicing alone, squeezing fiscal space for the government to invest in social, industrial and infrastructural sectors. The volume of loans which the country took in 60 years has been doubled just in eight years. Afull stop to foreign loans is still not in sight which currently stand at $72 billion. The internal debts which currently stand at Rs 17 trillion are another story of pathetic financial mismanagement. The total public debt stood at Rs 6.3 trillion in 2008, but swelled more than double in eight years. How the government will stabilize the economy in this situation is a big question before independent economists. The world agencies are warning against rising debt volume, but the ruling elite still has no hesitation to depict a rosy picture of the economy.
The government must looks into developing solid industrial base by attracting local and foreign investment. Trying to stabilize economy on the basis of loans will end in fiasco at the end of the day.
