Our total debt and liabilities have gone from Rs16 trillion in June 2013 to Rs22 trillion as of the fourth quarter of fiscal 2016. Lo and behold, Pakistan has taken on an additional debt of $61 billion over the past three years (all debt converted into dollars for ease of understanding). It will be nice to know where we spent it all.
In 2008, every Pakistani man, woman and child was indebted to the tune of Rs40,000. By 2013, five years of the PPP government, our per capita debt had gone from Rs40,000 to Rs80,000. As of the fourth quarter of fiscal 2016, every Pakistani man, woman and child is indebted to the tune of Rs115,000.
In June 2015, our total debt and liabilities stood at Rs19.8 trillion. Over the past year, our total debt and liabilities have gone from Rs19.8 trillion to Rs22.4 trillion. Lo and behold, Pakistan has taken on an additional debt of $26 billion over the past year. It will be nice to know where we spent those billions of rupees and billions of dollars.
Over the past year, our external debt and liabilities have gone from Rs6.6 trillion to Rs7.6 trillion. Lo and behold, Pakistan has taken on an additional external debt of $10 billion in just one year. It will be nice to know where we spent it.
Currency wise distribution of our debt is as follows: Pak Rupee 71.7 percent, US Dollar 10.6 percent, Japanese Yen 5.1 percent and Euro 2.4 percent. What that means is that if the Government of Pakistan were to have any problems in servicing its debt the lenders who would suffer the most are the people who have invested in Defence Savings Certificates, Khaas Deposit Certification, National Deposit Certificates, Special Savings certificates, Bahbood Savings Certificates and National Savings Bonds.
The budgeted amount for public debt servicing now stands at a colossal Rs1.36 trillion. Lo and behold, nearly 50 percent of our government’s expected revenue goes into debt servicing (90 percent of the amount goes into the servicing of domestic debt). By 2018, if our debt continues to grow at the current rate, Pakistan would be indebted to the tune of Rs28 trillion or an equivalent of $280 billion.
We are in a debt-trap whereby we must borrow more just to pay off the debt that falls due. We are also in a growth-trap whereby the GDP is unable to grow beyond four or five percent a year.
To be certain, debt is not a disease, it’s a symptom. The disease is mis-governance. The disease is lack of fiscal consolidation. The disease is lack of structural reforms. We are accumulating debt because we are not undertaking fiscal consolidation. We are accumulating debt because we are not undertaking structural reforms.
The story does not end there. We are now preparing to add an additional $46 billion worth of debt and liabilities in the form of projects under the CPEC. For Pakistan, this rate of debt accumulation is not sustainable. Reducing the debt level would mean much stronger growth and would allow our fiscal managers flexibility of policy. Continuing on the current path would mean enabling our debtors to control every aspect of Pakistani life. Remember, “creditors have better memories than debtors”.
The writer is a columnist based in Islamabad.