Brilliant news. :k:
During 11 years of the Benazir and Nawaz “democractic” governments the vast majority of the over $38 billion foreign debt was built up.
But in just over 4 years of the Musharraf and Jamali governments we have/are managing to pay back $5 billion of that debt, reducing it to just over $33 billion. We need to contiue to pay back more and more debt to be less reliant on foreign donors and powers, and only with President Musharraf at the helm can we ensure that.
Prepayment of loans
In what can be described as a timely move to further reduce the country’s external debt burden, Pakistan on Monday sent notices to the World Bank and the Asian Development Bank informing them that it would prepay their 18 loans worth $1.078 billion during the current financial year. According to the Debt Office, these were identified as expensive loans carrying interest rates between 4.6 to 11 percent. Of the total amount which is proposed to be prepaid, the seven ADB loans of $596.7 million were repayable between 2007 and 2019 while eleven loans of the World Bank worth $481.7 million were repayable between 2005 and 2013. As a result of debt management strategy, the country’s external debt liabilities which had been reduced from $38 billion to $35 billion in the last three years would decline to $33.5 billion this year. Debt servicing would also come down creating fiscal space for infrastructure projects and social sector development.
While all this comes as good news, some deep thought needs to be given as to why such a huge burden of debt, including expensive ones, was created in the past. Though Pakistan had been contracting loans from bilateral donors as well as multilateral institutions, the situation really seems to have exacerbated in the two decades of eighties and nineties. Debt burden had become unsustainable. As successive governments were living beyond means, a situation had been reached where even part of the current expenditure was met through borrowed funds. The enforcement of financial discipline had been long overdue. With massive inflow of home remittances, big increase in exports and build-up of foreign exchange reserves to over $11 billion, the government’s initiative in prepayment of expensive loans clearly shows that the economy is on the road to recovery. It has also been announced that only grants or soft term loans will now be contracted. But, at the same time, it is also necessary to ensure that external assistance is obtained when absolutely necessary.
The question which should be asked and an answer found for it is that why the country’s economy could not acquire the capacity for debt retirement despite quite heavy investment in its various productive sectors. However, presently the situation is that bilateral donors had already rescheduled $12.5 billion of debt earlier and the government had repaid some three billion dollars over the past three years. It will now be prepaying a little over one billion dollars of expensive debt. It has also been trying to reduce the burden of servicing domestic debt. Public debt, which at one point of time, had been reaching a level of being almost equal to the country’s gross domestic product, will come down to around 85 percent of GDP this year, a substantial reduction, indeed. The lesson to be learnt from all this is that the governments cannot afford to live beyond their means.
this is really good news 