There is much ado about piling up circular debts in the country, but debt servicing is another area of concern to deal with as it is becoming a snowball for the fragile economy amid unending quest of the government for more and more loans from international lending agencies. The successive governments in Pakistan have always preferred short term measures to finance persistent budget deficit, ignoring the fact that strings of long term troubles are always attached with ad hoc measures. As a result, consistent borrowings are leading to accumulation of internal and external debts with every passing year. According to newspapers reports, the country has sustained budget deficit of $80 billion between 2008 and 2015, thanks to ill-conceived policies of the previous Pakistan People’s Party government. This situation points out a bitter reality that the country is put to live beyond its means as it has suffered trade deficit of $130 billion during the last seven years. The total public debts have reached $110 billion in 2015 from $6 billion in 2008, indicating that the PML-N government is not different in any way from its predecessors.
Since the current government has assumed the office, the public debt has registered a raise of $2.7 billion from $14 billion in June 2013 to $17 billion in March 2015. So far, remittances sent by Pakistani expatriates are a major source of income to neutralize the effects of trade deficit. Hopefully, the Pakistan Muslim League-Nawaz government will not tax the money otherwise collapse of the economy will be a fait accompli. The government has earned $1.7 billion from the sale of its shares in banks and public sector organizations and received $1.5 billion ‘gift’ from Saudi Arabia to bolster the economy to some extent. However, the domestic debts have been increased by $8.7 billion and foreign debits by $2.2 billion since then.
The country is likely to face the issue of debt servicing in the near future as the exports have slowed down and efforts to increase tax net are backfired. The government is not in a position to pay interest on domestic loans from its tax revenue and has to take more loans to fulfill its obligations regarding the disbursement of profit even on national saving schemes. Another option for the government is to print new currency notes, a step which will increase inflation. The government is looking for bail out packages, one after the other, from the International Monetary Fund and other donor agencies, which not only cost economic development, but also invite more risks to the national security. The government should learn from Bangladesh and Vietnam which rose from ashes and are emerging as economic giants.