Umm-e-Kulsoom Nasir
Every government postulates that the economy will get rid of loans but seems unable to do so but in the meantime, a few days ago the nation was congratulated by the Finance Minister ‘Muhammad Ishaq Dar’ that reserves have increased to more than US$ 23 billion. While the situation seems to be totally different from the reality, like Pakistani exports are becoming less that almost half of imports and due to the deteriorating economic situation in the Gulf States of remittances from overseas Pakistani which have become the big cause of the increase in foreign exchange, the situation is deteriorating. Foreign investment was almost US$ 1 billion.
The curiosity is that how did the foreign exchange reserves increase? It was then revealed that more than US$ 23 billion of foreign exchange inflows, the foreign currency accounts of civilians are also included too. While the remaining parts consists of contributions received from loans. In 2012, the domestic debt of the federal government was recorded at Rs. 7674 billion which was increased to Rs. 9494 billion in 2013 and also included the amount of Rs. 400 billion which is for the payment of circular debt. By the end of fiscal Year 2016, the domestic loans have reached to Rs. 12970 billion with the increase of 69 percent. Similarly the external debt was recorded at US$ 1.55 billion in 2016 as compared with the US$ 4.46 in 2012, According To Pakistan Economic Survey 2015-16. According to the website of State Bank of Pakistan external debt were recorded at US$ 35.61 billion, A 32 percent increase compared to 2012.This increases includes the amount of US$ 64 billion of the Government’s Eurobonds and Sukook bonds. Remember these were purchased almost 2 times higher from the bonds market rate.
The public debt of the government of PML-N has crossed more than US$ 5476 billion which is 68 percent of GDP in 2015-16. The Government of Pakistan has made its own law that loans of more than 60 percent of GDP are not allowed in this way the government is violating its own law.
Pakistan is having a strong defense force in terms of its nuclear capability and a strong army of the strongest armies in the world, but unfortunately the economic conditions are very weak. In this modern era the example of the Russia is front of us despites that much big nuclear atomic power Russia could not sustain herself.
On one hand the budget deficit is not reducing, Last year the assertion of 20 percent in the revenue of Federal Board of Revenue. 17 percent decline in the non-tax revenue and the increase in the revenue was due to the custom duty and sales tax revenue. Increase of general sale tax on petroleum and imposed 1 percent regulatory duty on all imports. To meet its budget deficit, more loans are taken. On other hand due to the continued decline in exports, the trade deficit is continuously increasing also to meet this deficit another loans are taken.
In the near future the installment of debt of IMF and Paris club have to be paid which are more than US$ 5 billion that is why the government has launched a series of Sukook bonds to sell it in the international market. The budget deficit was 6.4 percent of GDP last year (while the target was of 3.4 percent). The target of budget deficit in the current fiscal year is 5.3 percent (which does not appear to be met) According to exports it will be up to 5 percent of GDP. The government has embarked on policy of loans to borrow more loans for pervious debt. The government is reluctant to fundamental tax reform on the basis of political considerations. By stopping refund in the export manufacturers the increase in the tax revenue is displayed reduced business costs and reduced energy costs. Improve the supply and to fix the situation of peace to boost the exports no progress can be seen in the commitments by the government.
Production capacity increased due to investment from abroad, improve quality of Pakistani products and international market in terms of prices requires integrated and effective policy to increase its ability to complete. The economy is sinking or being put in progress of the downward spiral of debt that threatens the territorial integrity.
Writer is a student of B.S in Economics in University of Karachi.
Disclaimer: Views expressed in this article are those of the author and Balochistan Voices not necessarily agrees with them.
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