Record borrowing

BY EDITORIAL , (LAST UPDATED ABOUT 1 HOUR AGO)

 Crawling out of the perpetual debt trap

With $16 billion in foreign loans taken in 2018-19, the PTI

government has added another record to its ongoing streak of
debilitating firsts in the history of the country’s economy. Apart from
the $2.4 billion that was taken months before the general elections
by the caretaker setup; $13.6 billion was borrowed in the past 11
months by the current government making it the highest ever
external borrowing undertaken by a single government within a
year. $5.5 billion has been disbursed by Saudi Arabia, Qatar and
the UAE, providing crucial support for immediate relief as the
country was on the brink of default, unable to meet foreign debt
obligations. Reportedly, this amount will be moved to the SBP
balancesheet rather than being parked under the foreign debt,
thereby reducing the total debt amount. However, the reduction will
be somewhat offset as $2 billion out of the $6.7 billion of Chinese
debt marked under SAFE deposit, will be part of the federal public
debt due to pressure from the IMF.

A gross requirement for external financing stands at $25.6 billion for

the current financial year as projected by the IMF. With $14.5 billion
public sector debt repayments due this year, a large chunk of the
external financing will be used to retire debt. A sharp depreciation in
the rupee has not helped matters either while sources of foreign
exchange such as exports and FDI are declining. While recent
measure such as a standard 17 percent GST on export-oriented
sectors has resulted in the closing down of many small textile mills,
and even the larger ones are feeling the pinch, resulting in lower
volumes. An unfavorable investment climate is coupled with
reduced ease of doing business due to an over-zealous tax
collection and accountability drive. The country is still entangled in a
vicious debt trap that it is unlikely to crawl out of anytime soon. The
PTI had vowed not to take any loans when it came to power; that
promise went out the window immediately after coming to power
and realizing what it had inherited. One year gone, it is simply not
enough now to continue blaming previous governments for its
economic woes; it is high time this government takes responsibility
for the current mess and starts working towards solving it.
by Taboola
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