According to a state Bank of Pakistan report, the total external debt and liabilities has reached to the historic high levels $96.7 billion.This could reach to $100 billion in next few months as Pakistan expecting to receive $ 3 billion from Saudi Arabia to boost its foreign reserves. The figures in this report reflect the loans and liabilities till September 2018.
The successive governments over the years failed to introduce reforms in tax system and economy to lessen the dependence on foreign loans. The failure of governments to substantially increase the domestic revenues and tax collections forced them to take more loans.
The PTI government too does not have any other option in the short term except for taking more loans to meet Pakistan’s international debt obligations.If the PTI government failed to implement the much needed reforms in the tax system and economy in the long run then it will pile more debt both internal and external to meet the rising needs of money.
There is no other option but to reform the economy and depend more on domestic resources then to look for easy loans from friendly countries, international commercial banks and IMF. In the last decade, Pakistan has mostly taken new loans to payback the matured loans. Pakistan is taking more loans to repay the already taken loans. This vicious cycle should end.
The International Monetary Fund (IMF)’s first post-programme monitoring report shows Pakistan’s gross external debt in terms of exports was 193.2% in 2013, which deteriorated to an alarming 411% by June this year.During this period, Pakistan’s gross external financing requirements swelled from $17.2 billion to over $28 billion.
If the government is unable to have a concrete back-up plan to handle its external account, the situation may deteriorate. There are apprehensions that the country may not survive financially for long without IMF support.
Pakistan’s continued huge domestic and foreign borrowings; debt servicing is now the single largest expenditure in the federal budget, estimated at Rs1.84 trillion or 34.7% for fiscal year 2018-19. A sum of $2.5 billion was spent on servicing the outstanding stock of external debt during first quarter of this fiscal year, according to the SBP.
Pakistan paid $1.9 billion in principal loans and $522 million in interest on outstanding loans in just three months.
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