Rida Hussain |
Pakistan soon would be marking the 70th year of its independence and within these 70 years, Pakistan has gone through a roller coaster ride of economic upheavals and downturns. Amid all these ups and downs, though, we could not understand the meaning of the term “independence”.
The question is, can we really consider ourselves an independent state? It is not hard to understand a basic principle that economic and monetary sustainability is the key to becoming an independent state. The criteria of being called an independent state demand the state to be economically self-sufficient and less dependent on help from external sources.
Since 2008 to 2012, the ratio worsened and reached to 60.1 % by the end of PPP government with horrifying figures of borrowing Rs11,726 billion.
In reality, it is quite hard to say as to what extent Pakistan is an independent country owing to the heaps of foreign debts Pakistan is incurring in each fiscal year with an added inability to repay those debts. Borrowing money to suffice the needs of the establishing economy is not a bad idea, but what the country is doing with this borrowed amount is the real matter of concern. Since 2003 to date, no government has shown any kind of reluctance in borrowing money and loans rather a number of loans have seen an upsurge.
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Though at the start of every year, we are given a narration by the finance minister on the floor of the National Assembly about the planned investments on the page. How much of that planned investment is turned into reality has always been a question.
A brief analysis of the figures of the external borrowing since 2003 shows that though the foreign debt was not decreased, the ratio of a debt-to-GDP ratio (which measures the country’s debt to its economic output and also the country’s ability to pay back without further borrowing) showed improvement by the end of 2007.
At the beginning of 2003, this ratio was at 81.8% and by the end of Musharraf regime, it reached the record low of 57.5% in 2007. Though foreign loans reached around $4o million, this improvement in the ratio was brought by the increased economic productivity.
Every Pakistani owed a debt of Rs 37,120 at the end of the year 2008. This figure, in 7 years, rose to Rs 101,338 by the June of 2015.
However, since 2008 to 2012, the ratio worsened and reached to 60.1 % by the end of PPP government with horrifying figures of borrowing Rs11,726 billion.
PPP government borrowed from eight countries and other international financial institutions also lent Pakistan Rs843 billion during this period. The government was also forced to obtain a further Rs754 billion from the International Monetary Fund (IMF) to pump into the ailing economy.
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In those years, Pakistan bagged $4.39 billion from the Asian Development Bank. The International Development Association gave $3.21 billion. An added amount of $32.2 million and $1 million was collected from other international organizations and banks. China remained the third largest lender, giving loans worth $2.91 billion. Other countries included France, Germany, Italy, and Kuwait. The International Bank for Reconstruction and Development gave $350.7 million and the International Fund for Agricultural Development provided $81 million.
From 2013 to 2016, the PML-N government added $25 billion as fresh foreign loans and with the fresh figures, the external debt in Pakistan increased to 75747 USD Million in the first quarter of 2017 from 74126 USD Million in the fourth quarter of 2016.
Something very interesting to note here are the figures for every Pakistani owing a debt of Rs 37,120 at the end of the year 2008. This figure, in 7 years, rose to Rs 101,338 by the June of 2015.
Outcomes and Conclusions
Keeping in view all these figures, with a lot of question rising, there come a few conclusions too.
Bearing in mind the limitations and complexities that come with foreign borrowing, why, in each fiscal year, there is an increased need to borrow in order to fund the economic development and repay previous debts?
Pakistan’s economic conditions were improving in a military regime as opposed to the worsening conditions in the two consecutive democratic regimes in spite of increased borrowing.
In this whole context of foreign borrowing what was the role of the institutions such as National Accountability Bureau, Judiciary Federal Investigative Agency, the Parliament, and the Opposition to enquire regarding the huge sums of foreign borrowing.
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Also bearing in mind the limitations and complexities that come with foreign borrowing, why, in each fiscal year, there is an increased need to borrow in order to fund the economic development and repay previous debts?
The fact is that the external debts were not used wisely and for the intended purpose as given to the public. There seems to be no sense of direction in the development activities, especially in the last decade.
Relying on foreign loans and altering the fiscal policy to collect taxes to repay previous debts is not the desired course of development to safeguard the independence of Pakistan.
For the general public, it is definitely hard to comprehend the complexities of economic indicators to judge the economic health. Their judgments lie in lower inflation, higher purchasing power, revaluation of Rupees in the international economy, higher exports.
With an increasing debt-to-GDP ratio, the claim of economic stability and improvement is hard to believe since growth in productivity is not sufficient when the country cannot repay its debts.
Relying on foreign loans and altering the fiscal policy to collect taxes to repay previous debts is not the desired course of development to safeguard the independence of Pakistan.
Rida Hussain is a Master’s in Mass Communication from the University of Karachi with a keen interest to write on social and current affairs. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.