Muhammad Sarfaraz Abbasi |
The country went gaga over the announcement of Prime Minister Imran Khan when he promised the nation that, after putting the government’s focus on re-stabilizing the economy, he is all set to go after those who are responsible for leaving Pakistan in shambles and massively indebted.
The nation felt PM Khan’s heat of ambition when he stated that he could not be blackmailed by protests and further showed his determination by saying that even if his life is threatened, he will not leave these thieves alone – “I had prayed to God to give me one chance.”
Khan’s Game plan
The Prime Minister told his nation that he is going to form a high-powered enquiry commission with a one-point agenda; to diagnose how the previous governments increased the debt by Rs.24,000 billion from Rs.6,000 billion, in just 10 years?
The loan repayment and interest payments on these loans, from a negligible national revenue of Rs.3,583.7 billion, makes 9.3 percent of the GDP, it is almost impossible for the government to function.
The premier unleashed his game plan by elaborating the formation of a task-force which shall consist of the Federal Investigation Agency (FIA), Intelligence Bureau (IB), the Inter-services Intelligence Directorate (ISI), Federal Board of Revenue (FBR) and Securities and Exchange Commission of Pakistan (SECP). He further emphasized how it will investigate all those in power and prepare a report, so no one dares to damage the country ever again.
Past one week since PM Khan’s speech, tons of opinions have been made by renowned personalities of print & electronic media. This compelled me to look at the debt accumulated over the past ten years by the two previous governments and figure out why Prime Minister Imran Khan is so obsessed with the previous decade.
Read more: Increasing foreign debts: When will Pakistan be truly ‘independent’?
Through the Eyes of the Economic Survey
It is difficult to choose the right starting point for this analysis; however, I decided to refer to the Economic Survey of Pakistan 2008-09 to see what the situation of external debts by then was. It left me flabbergasted when I read the following lines under the heading of External and domestic debt section, it stated: “External debt and liabilities (EDL) Pakistan’s total external debt increased from US$ 46.3 billion at end-June 2008 to US$ 50.1 billion by end March 2009 — an increase of US $ 3.8 billion or 8.2 percent.
Past one week since PM Khan’s speech, tons of opinions have been made by renowned personalities of print & electronic media.
In relative terms, EDL as a percentage of GDP, it increased from 28.1 percent at end-June 2008 to 30.2 percent by end-March 2009— an increase of 2.1 percentage points”. I then decided to do the same with the Economic Survey of 2019-20 and found the public debt quoted as “Rs 28,607 billion at end of March 2019”. Now an answer is available for the question, why only investigate the debt accumulated by the two previous governments?
A table covering Pakistan’s total public debt from 1971 to 2019 published in the Economic Survey of 2019-20 seems to be the best source of information one can refer to, in order to understand how Pakistan accumulated such massive debt over the years. It also justifies the reason why Prime Minister Imran Khan is all focused on investigating loans obtained during the last 10 years.
Read more: Concerns and predictions on Pakistan’s debt situation
What Does the Survey Indicate?
The table above reveals that Pakistan’s total debt, which was just Rs.30 billion in 1971, reached Rs.6,127 billion in just 37 years till 2008. The respective Ministers and the advisors to the Prime Minister have declared that it is visible how during the period from 1971 to 2008, dozens of mega projects were initiated and completed with a total debt of Rs.6,127 billion, this included several large-sized dams, building and expansion of airports and industries, in addition to providing regularly upgraded healthcare and education, electricity to millions of new consumers, water and other necessities. However, it is a complete mystery where all the debt of approximately Rs.22,480 billion, accumulated over the past ten years, go?
Read more: Debt free Pakistan – Dr. Farid A Malik
PM Khan’s Investigation and to whom do we Owe?
It is pertinent to mention that citizens across the country are curious to know what will be the outcome of the investigations and the future course of action by the government. No one can predict whether it will be a fruitful exercise in terms of recovery of the allegedly stolen money or will this prove to be another failed venture by the current government. However, it is encouraging to see that people have shown strong faith in Prime Minister Khan’s promised investigations.
On the other side opposition parties, who have apparently rejected Prime Minister’s decision of investigation, unfortunately, do not have a strong argument to oppose the proposed decision. It has been observed that whenever external debt and the painful interest payments are discussed on media by government officials, people tend to be interested in knowing how much the country owes and to whom? The below-given table reveals the detail of the external loans and lenders since Fiscal Year 2010:
Pakistan’s total external loan was US$61.56 billion during the FY10, which has now reached US$95.34 billion by the end of FY18; this shows an increase of US$33.78 billion in just 9 years. During these 9 nine years, Pakistan has excessively borrowed from the International financial institutions, which includes IMF, Paris Club, Multilateral borrowing, issuance of Euro bonds and Sukuks (Islamic Bonds) and some other debt classes.
Read more: How Pakistan went from being the Best in region to a debt laden country?
Do Projects Carried by the Former Governments Justify the Loans?
Furthermore, megaprojects, including metro bus, power plants, and infrastructure related projects, in addition to the impact of Rupee devaluation, altogether do not justify the borrowing. As we know, not only the current Prime Minister but all the former heads of states, and their respective cabinet members, have been criticizing and blaming each other for the excessive borrowing of the country, this led to over 50% of the national revenue to go in payment for the interest on these mounting loans.
The loan repayment and interest payments on these loans, from a negligible national revenue of Rs.3,583.7 billion, makes 9.3 percent of the GDP, it is almost impossible for the government to function. Thus, it seems that the Prime Minister at one hand intends to fix the external accounts of the country and on other; he aims to fix the national revenue by enhancing tax to GDP through a little longer and untried route of increasing the tax base.
Albeit, at this point in time, no one knows what will the outcome be of these two major drives being personally led by the Prime Minister, however, optimistic assumptions does indicate that Pakistan will be in much better shape in the next five years down the road if Prime Minister Khan succeeds in his quest of achieving the unachievable.
Sarfaraz Abbasi is a Karachi based Investment Management Professional and a lecturer of Economics and Finance. He tweets @imsarfrazabbasi. The views expressed in this article are author’s own and do not necessarily reflect the editorial policy of Global Village Space.