When in a debt hole, stop digging

Claims belied by realities

When Prime Minister Imran Khan was sworn in, he had no idea whatsoever about how the market economy works. Those around him who were comparatively better informed dared not disabuse the party chief of his primitive notions that included opposition to loans from friendly countries, international institutions or going to the IMF. None were prepared to tell Mr Khan that jobs could not be generated in a country of over 220 million by distributing a small number of hens, goats or cattle. Now that Mr Khan is boasting about a 3.94 per cent GDP growth rate, rising exports, and four bumper crops, none is willing to tell him that it will be years before the benefits reach the common man and that too if the government is careful in the management of funds.

Wary of the dissenting voices in his own party and with an eye on the next elections, Mr Khan has already announced a grant of Rs500 million development funds for each PTI MNA and MPA. The National Economic Council has okayed Rs2.1 trillion for national development outlay in the new budget. The PM has promised maximum relief to the common man. But where are the funds to materialize these plans? Despite facilities that included subsidized bank loans for export-oriented industries, Pakistan’s trade balance from July-February FY 2020’s -$15,850,122 further deteriorated in July-February FY2021 to -$17,573,098. Pakistan has managed to remain afloat on account of the 24 percent growth in home remittances in the first seven months of the ongoing fiscal year to January.

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When a country earns less than it spends, it has to go around with a begging bowl. With the NEC approving a 40 percent hike in development spending for FY2022, the funds required will come from loans. The new budget envisages borrowing $16 billion, mostly to retire debts in FY2022, but also to maintain SBP reserves and partly finance the hefty Federal budget deficit, estimated at over Rs4 trillion– the highest ever. The govt cannot manage to acquire the big loans from international financing institutions without continuation of the IMF programme. The government plans to take this year foreign commercial loans worth $4.7 billion, also the highest so far. By the time the PTI’s tenure comes to an end, the country would be groaning under the weight of debts acquired by a party which was opposed to seeking loans.

Editorial
The Editorial Department of Pakistan Today can be contacted at: [email protected]

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