Skip to main content

Increasing Pak debt crisis despite 'very good relations' with richest countries

By Bharat Dogra* 
A recent report states that Pakistan is in talks with banks in the Middle-East to borrow approximately USD 4 billion to meet its external financial commitments for the current fiscal year. For the current fiscal year, Pakistan has pitched about USD 20 billion in foreign borrowings in the budget, besides another USD 3 billion rollover from UAE that was reported separately in the balance of payments. 
The IMF indefinitely postponed the approval of a USD 7 billion Extended Fund Facility, the report said. Pakistan has now increased efforts to secure loans from foreign commercial banks, although high financing costs and a low credit rating remain two big problems.
Earlier a more comprehensive understanding of the debt crisis in Pakistan was provided in a report titled ‘Pakistan’s Existential Economic Crisis’ published on April 6, 2023 by the US Institute for Peace (USIP) and written by a senior Pakistani journalist Shahbaz Rana. This report stated that as of December 2022, Pakistan’s external debts and liabilities amounted to $126 billion.
The report also provided a break-up of to whom this external debt was owed.
Among multilateral institutions, $ 18 billion was owed to the World Bank, $ 15 billion to the Asian Development Bank and $ 7.6 billion to the IMF.
The so-called ‘Paris Club Debt’ of $8.5 billion was owed to about 22 countries, the leading ones being Japan, Germany, France and the USA.
Thirdly, private debt such as in the form of private bonds amounted to $7.8 billion while foreign commercial loans (mostly to China), generally with higher interest rate and payback within 1 to 3 years, amounted to about 7 billion dollars.
Fourthly, Chinese bilateral debt amounted to $ 27 billion.
The USIP report pointed out that in the new fiscal year debt repayment would amount to $ 25 billion. From April 2023 to June 2026, a period of a little more than three years, the external debt payment was projected at $ 77.5 billion.
At the same time the total exports earnings and remittances during the last three years had amounted to $164 billion while imports of goods had amounted to $ 170 billion.
This USIP report issued a clear warning, “There is a real danger that nuclear armed Pakistan with a population of 230 million people may be unable to meet its external debt obligations which will trigger a sovereign default.”
Nearly 10 months after this report was published, another report by an Islamabad based think-tank Tabadlab in February 2024 described the debt crisis of the country as ‘intense blaze’ (report in the Economic Times on February 19, 2024 titled ‘ Pakistan debt unsustainable, headed for inevitable default’).
An even more recent report by ‘The Bretton Woods Project’ titled ‘Pakistan’s debt crisis fueled by more IMF loans’ questioned whether the lender of last resort was becoming a primary lender in Pakistan. The report stated that the external debt situation in Pakistan was very serious, next only to Sri Lanka, Ghana and Nigeria. This report stated, “If secured, the new loan ( from the IMF) would be the 24th IMF loan for Pakistan with the country already owing the IMF $7 billion, further illustrating the failure of IMF reforms to address Pakistan’s long-term economic issues, while subjecting the country to additional surcharge penalties for over-relying on IMF funding.”
One reason why the debt crisis has kept getting worse is that a big share of the loans taken was not spent in productive ways. To give one example of wasteful or even harmful external loan-based spending, there was a massive, very expensive national drainage project in the early years of this century which was very poorly conceived and implemented, leading to worsening of problems in some places. In this and other cases, large-scale corruption also contributed to failure as well as wastage of funds.
More generally, the luxury consumption of the elite class is often sought to be defended even in very difficult times, and this consumption invariably has a high import content.
A surprising part of the debt crisis of Pakistan is that it has been increasing despite Pakistan having enjoyed very good relations with the richest countries for very considerable periods of time—with countries that are supposed to have the most ability to provide easy funds.
Although Pakistan had military dictatorships that were notorious for trampling democracy and for being extremely corrupt, the USA and its allies generally supported them. General Yahya Khan was supported despite being guilty of even genocidal actions. General Zia’s long reign saw massive funds inflow from the USA and Saudi Arabia, related to Pakistan’s strong role in mobilizing mujahideen resistance to the Russian army and Russia-supported regime in Afghanistan.
When the USA is generous to a country, western allies are also expected to be generous, and the international financial institutions dominated by them are also expected to be generous. So it has been in the context of Pakistan too.
Not just Saudi Arabia, other oil rich middle-east countries too have been on very good terms generally with Pakistan and can be expected to be generous to Pakistan.
China has been extremely friendly towards Pakistan and has been eager to provide funds for many big-budget projects in Pakistan.
Hence we must face the strange fact that despite all the big fund providers having good relations with Pakistan and expected to be generous to Pakistan, Pakistan has been experiencing a very serious and steadily worsening debt crisis.
The big lesson emerging from this is that instead of relying too much on the generosity of rich friends, or even agreeing to play very dangerous games for them—as Pakistan did when it became the regional platform for the USA’s aggression against Russia—it would be much more prudent to just concentrate on managing the economy carefully.
In fact the false over-confidence arising from the exceptionally close relationship of dictatorships with the richest countries led successive regimes to postpone, or altogether avoid, making essential economic reforms, while at the same time taking up dangerous activities, including support of several terror and fanatic groups, which later proved self-destructive for the country.
At the same time as the debt crisis worsened, the country was forced to follow IMF conditions as well as conditions imposed by other lenders which led to austerity and anti-poor measures such as withdrawal of subsidies. This made the life of the bottom half of the population more and more difficult and this in turn led to mass protests by people which had to be suppressed and so the military kept looking for pliant political partners who could do the needful. 
All this made the emergence and continuation of genuine democracy difficult in Pakistan and so when military dictators were not ruling directly, a partnership of military leadership and civilian, elected political leaders had to created, with the latter apparently running the government but the military exercising remote control (often not so remote).
Looking ahead, as the possibility of debt payment default continues to exist, this may lead to the non-availability of essential imports and all the problems related to this.
However the solutions cannot be found in the narrow framework of IMF’s or others’ conditions. Pakistan must plan for a wider framework of reforms relating to equality, justice, better economic planning, democracy, moving away from terror-politics and improving relations with neighbors, particularly India.
---
*Honorary convener, Campaign to Save Earth Now. Books:  Protecting Earth for Children, Planet in Peril, Man over Machine and A Day in 2071

Comments

TRENDING

How the slogan Jai Bhim gained momentum as movement of popularity and revolution

By Dr Kapilendra Das*  India is an incomprehensible plural country loaded with diversities of religions, castes, cultures, languages, dialects, tribes, societies, costumes, etc. The Indians have good manners/etiquette (decent social conduct, gesture, courtesy, politeness) that build healthy relationships and take them ahead to life. In many parts of India, in many situations, and on formal occasions, it is common for people of India to express and exchange respect, greetings, and salutation for which we people usually use words and phrases like- Namaskar, Namaste, Pranam, Ram Ram, Jai Ram ji, Jai Sriram, Good morning, shubha sakal, Radhe Radhe, Jai Bajarangabali, Jai Gopal, Jai Jai, Supravat, Good night, Shuvaratri, Jai Bhole, Salaam walekam, Walekam salaam, Radhaswami, Namo Buddhaya, Jai Bhim, Hello, and so on. A soft attitude always creates strong relationships. A relationship should not depend only on spoken words. They should rely on understanding the unspoken feeling too. So w...

राजस्थान, मध्यप्रदेश, पश्चिम बंगाल, झारखंड और केरल फिसड्डी: जल जीवन मिशन के लक्ष्य को पाने समन्वित प्रयास जरूरी

- राज कुमार सिन्हा*  जल संसाधन से जुड़ी स्थायी समिति ने वर्तमान लोकसभा सत्र में पेश रिपोर्ट में बताया है कि "नल से जल" मिशन में राजस्थान, मध्यप्रदेश, पश्चिम बंगाल, झारखंड और केरल फिसड्डी साबित हुए हैं। जबकि देश के 11 राज्यों में शत-प्रतिशत ग्रामीणों को नल से जल आपूर्ति शुरू कर दी गई है। रिपोर्ट में समिति ने केंद्र सरकार को सिफारिश की है कि मिशन पुरा करने में राज्य सरकारों की समस्याओं पर गौर किया जाए। 

Censor Board's bullying delays 'Phule': A blow to India's democratic spirit

By Vidya Bhushan Rawat*  A film based on the life and legacy of Jyotiba Phule and Savitribai Phule was expected to release today. Instead, its release has been pushed to the last week of April. The reason? Protests by self-proclaimed guardians of caste pride—certain Brahmin groups—and forced edits demanded by a thoroughly discredited Censor Board.

PUCL files complaint with SC against Gujarat police, municipal authorities for 'unlawful' demolitions, custodial 'violence'

By A Representative   The People's Union for Civil Liberties (PUCL) has lodged a formal complaint with the Chief Justice of India, urging the Supreme Court to initiate suo-moto contempt proceedings against the police and municipal authorities in Ahmedabad, Gujarat. The complaint alleges that these officials have engaged in unlawful demolitions and custodial violence, in direct violation of a Supreme Court order issued in November 2024.

Aurangzeb’s last will recorded by his Maulvi: Allah shouldn't make anyone emperor

By Mohan Guruswamy  Aurangzeb’s grave is a simple slab open to the sky lying along the roadside at Khuldabad near Aurangabad. I once stopped by to marvel at the tomb of an Emperor of India whose empire was as large as Ashoka the Great's. It was only post 1857 when Victoria's domain exceeded this. The epitaph reads: "Az tila o nuqreh gar saazand gumbad aghniyaa! Bar mazaar e ghareebaan gumbad e gardun bas ast." (The rich may well construct domes of gold and silver on their graves. For the poor folks like me, the sky is enough to shelter my grave) The modest tomb of Aurangzeb is perhaps the least recognised legacies of the Mughal Emperor who ruled the land for fifty eventful years. He was not a builder having expended his long tenure in war and conquest. Towards the end of his reign and life, he realised the futility of it all. He wrote: "Allah should not make anyone an emperor. The most unfortunate person is he who becomes one." Aurangzeb’s last will was re...

Incarcerated for 2,424 days, Sudhir Dhawale combines Ambedkarism with Marxism

By Harsh Thakor   One of those who faced incarceration both under Congress and BJP rule, Sudhir Dhawale was arrested on June 6, 2018, one of the first six among the 16 people held in what became known as the Elgar Parishad case. After spending 2,424 days in incarceration, he became the ninth to be released from jail—alongside Rona Wilson, who walked free with him on January 24. The Bombay High Court granted them bail, citing the prolonged imprisonment without trial as a key factor. I will always remember the moments we spent together in Mumbai between 1998 and 2006, during public meetings and protests across a wide range of issues. Sudhir was unwavering in his commitment to Maoism, upholding the torch of B.R. Ambedkar, and resisting Brahmanical fascism. He sought to bridge the philosophies of Marxism and Ambedkarism. With boundless energy, he waved the banner of liberation, becoming the backbone of the revolutionary democratic centre in Mumbai and Maharashtra. He dedicated himself ...

Why crucifixion is a comprehensive message of political journey for the liberation of the oppressed

By Vijayan MJ  Passion week is that time of the year when Christians all over the world remind themselves about the sufferings, anguish, pain and the bloody crucifixion that Jesus Christ took on himself, as part of his mission of emancipating the people and establishing the kingdom of god. The crucifixion was not just a great symbolism of the personal sacrifice of one person, but it was a comprehensive messaging of a political journey for the liberation of the oppressed; one filled with struggle, militancy, celebration of life, rejection of temptations, betrayals, grief, the long-walk with the cross, crucifixion and ultimately resurrection as a symbol of victory over the oppressors and evil. 

CPM’s evaluation of BJP reflects its political character and its reluctance to take on battle against neo-fascism

By Harsh Thakor*  A controversial debate has emerged in the revolutionary camp regarding the Communist Party of India (Marxist)'s categorization of the Bharatiya Janata Party. Many Communists criticize the CPM’s reluctance to label the BJP as a fascist party and India as a fascist state. Various factors must be considered to arrive at an accurate assessment. Understanding the original meaning and historical development of fascism is essential, as well as analyzing how it manifests in the present global and national context.

Akhilesh Yadav’s boycott of Dainik Jagran: A step towards accountability or political rhetoric?

By Vidya Bhushan Rawat  Akhilesh Yadav has called for a total boycott of Dainik Jagran, a newspaper owned by the Gupta family. He also declared that the Samajwadi Party will no longer participate in any panel discussions organized by a media channel allegedly controlled by the family or relatives of the omnipresent Rajiv Shukla. Akhilesh Yadav and the Samajwadi Party are well aware that Dainik Jagran has long been antagonistic to Dalit-Bahujan interests. The newspaper represents a Bania-Brahmin corporate and ideological enterprise.

How Mumbai University crumbles: Not just its buildings

By Rosamma Thomas*  In recent days, the news from the University of Mumbai has been far from inspiring – clumps of plaster have fallen off the ceiling at the CD Deshmukh Bhavan, and it was good fortune that no one was injured; creepy crawlies were found in the water dispenser that students use to collect drinking water, and timely warning videos circulated by vigilant students have kept people safe so far.