Planning Minister Ahsan Iqbal’s bald statement that Pakistan had two choices; export more or resort to the IMF, shows that the present government realizes that the only way out of the debt trap is to export more. This was also an indirect admission that the present IMF Extended Fund Facility would probably need to be succeeded by another, or else Pakistan would once again have to run the risk of default and consequent exclusion from global money markets. It should be remembered that the IMF lends a country foreign exchange when it needs some, not just to pay for imports, but to service its foreign debt too. Pakistan not only has to pay for importing essentials like fuel, edible oil and pharmaceuticals, but it has a large foreign debt to service, including IMF loans. In return for those loans, the IMF demands, and has got from Pakistan, virtually total control over economic policy.
Pakistan has to go regularly cap-in-hand to the IMF because otherwise it would face grave difficulties surviving its debt. The only alternative is to earn enough foreign exchange to pay for imports and still service the debt. Mr Iqbal put some figures on the table, which showed how much Pakistan needed to make sure that it continued to service its debt, which is a whopping $ 134.9 billion. Exports must reach $60 billion in the next four years, and cross $100 billion by 2035, while GDP must reach $1 trillion from its present $600 billion by that time. It might also be noted that the country’s debt could not be managed by obtaining further loans from the IMF, or deposits from friendly countries, which has been the usual method so far.
However, now that Pakistan has been reduced to borrow to pay for debt servicing, it is well and truly in a debt trap, with the only possible exit being by exporting its way out. The government cannot do much to increase demand abroad for its products, and it cannot do all that much about global commodity prices, particularly that of oil, which could derail all calculations. The figures Mr Iqbal shared could also go askew, because they do not include the potential effects of global warming. Global warming is the single biggest threat to the country’s being able to feed itself. The need to import foodgrains will determine Pakistan’s forex needs in the medium term.
