An interesting article that highlights the economic mismanagement of Pakistan by the PPP. Each Pakistani owes 80,000 rupees, this is the legacy of the PPP to the people of Pakistan.
Each Pakistani inherits Rs80,000 as loan burden
Tuesday, January 01, 2013 - Islamabad—Pakistan enters 2013 with Rs13trillion public debt, budget deficit of 8.5 percent with dollar touching close to Rs100 and in case economic managers of the government continue to do the business as usual, then by end June 2013 Country’s debt will stand at Rs14.5 trillion to Rs15 trillion, a senior official told Pakistan Observer.
“The country is feared to land close to default like situation in 2013 if massive inflows from abroad are not trickled down. This means that each Pakistani will be having the debt burden of whopping Rs80,000 and this would be quite upsetting.”
And if the country receives no sizeable financial inflows, then exchange rate would continue to be in tremendous pressure and soon be entering into triple digits. This will trigger inflationary pressure contributing substantially to the growth of public debt.
Dr Ashfaque H Khan, eminent economist, principal and dean of NUST Business School said that Pakistan will be facing default like situation which can only be averted if it joins the IMF programme. But the IMF will include Pakistan in its new loan programme only when there will be an elected government in place. The Fund’s top functionaries have clearly communicated that it will neither agree to talk with current government nor with the caretaker setup for the loan programme as both the said governments will not be able to honor the terms and conditions of the new loan agreement. “So the IMF will hold talks for new programme, provided the next elected government aspires for that,” Dr Khan said while quoting the IMF officials.
Dr Khan said that the sitting government has inflicted huge damage to country’s economy through bad governance and the corruption driven initiatives. He said that when Pakistan People’s Party-led coalition came to power, the country’s total debt was at Rs5 trillion that was gathered in 60 years long period, but this debt has increased up to Rs13 trillion up by three times just in five years time and if the things continue to go like this then undoubtedly the public debt of the country would further accelerate up to Rs15 trillion by June 2013.
He said that the GDP growth of the country in the next year will be staying around 3 percent which will not be able to cater to job requirements of the youth. He said about 2.5 million workforce is entering into job market every year and to absorb such a large number of new entrants, the economy must grow by 7-8 percent every year for long period.
Dr Khan said that the macroeconomic policies pursued by the incumbent regime over the last five years have been inappropriate as well as disruptive. These disruptive macroeconomic policies have kept both local and foreign investors at bay. Domestic investment at 12.5 percent of GDP is the lowest in five decades and foreign investment has just evaporated.
If the government is pondering to ask IMF to defer repayments of heavy installments in a bid to avert the further deterioration of balance of payment situation, then, Dr Khan said, the economic managers of the government are at fault as the IMF and the World Bank are preferred creditors; their loans are neither restructured nor are their repayments deferred.
Dr Khan said that after the election, the newly installed government would first have to enter a loan agreement with IMF as it is the only recipe to survive. Then it would have to take the unpopular decisions for improving the revenue outlook of the country by imposing the RGST (reformed general sales tax), and bringing the agrarian economy into the tax net.
The government would also have to bring the services sector into the tax net to increase the revenue of the country. He said that the next elected government would have to enforce in the first two years the strict fiscal discipline and impose the unpopular initiatives to put the country’s economy on right track