The
country went gaga over the announcement of the Prime Minister that after
putting focus of the government to stabilize the economy he is all set to go
after those who are responsible of leaving the country massively indebted. The
nation felt the heat of Prime Minister’s ambition for the across the board
accountability when he said he could not be blackmailed with protests.
He further showed his determination by saying even if my life goes, I will not
leave these thieves alone - I had prayed to God to give me one chance. The Prime Minister told the nation that he is going to form a high-powered
inquiry commission with a one point agenda to diagnose how did the
previous governments increase the debt by Rs.24,000 billion to Rs.30,000 billion from Rs.6,000 billion merely in
10 years? The Prime Minister further unleashed his game plan by
elaborating the possible formation of the commission 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). The Prime Minister further said that commission will
investigate all those in power and
will prepare a
report so that no one dare to damage the country ever
again.
Source : www.News10.pk
It
was felt that at one side people of Pakistan were jubilant with the
announcement made by the Prime Minister but on the other hand, the media reports,
views and analysis of various political analysts kept the nation confused.
During past one week since the day of Prime Minister’s speech tons of opinions
have been made by renowned media personalities of print & electronic media.
This compelled me to look at the past ten years debt accumulated by the two
previous governments to figure out why is the Prime Minister Imran Khan so
obsessed with the recent past decade
only instead initiating the inquiry from government of General Ayub Khan when
Pakistan took its first-ever loan from International Monetary Fund (IMF) back
in 1965?. It was difficult to choose a right starting point for the analysis, however,
I decided to refer Economic Survey of Pakistan 2008-09 to see what was the
situation of external debts by then. It left me in shock when I read the
following lines under the heading of External and domestic debt section where
it is stated that “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. In
relative terms, EDL as percentage of GDP increased from 28.1 percent at
end-June 2008 to 30.2 percent by end-March 2009— an increase of 2.1 percentage
points”. Then I thought to compare the same with Economic Survey of 2019-20 and
found the public debt quoted as “Total public debt stood at Rs 28,607 billion
at end March 2019”.
Now there is a an answer available for the question
that why only debt accumulated by the two previous governments was inevitable
to investigate? To elaborate it further, that why Prime Minister interested to investigate
public debt during taken during past couple of tenures, a table covering
Pakistan’s total public debt from 1971 to 2019 published in Economic Survey of
2019-20 seems to be the best source of information one can refer to in order to
understand how Pakistan accumulated massive debt over the years and also justifies
the reason why the Prime Minister Imran Khan is all focused on the having investigated
the loans obtained during the 10 years.
Source: Economic Survey of Pakistan 2019-20
The
table above reveals that Pakistan’s total debt which was just Rs.30 billion in
1971 reached to Rs.6,127 billion in 37 years till 2008. There is a strong
argument comes from the government officials in the justification of investigation
of just ten years but not going beyond that. The respective Ministers and the
advisors to the Prime Minister have said that it is visible that during period
from 1971 to 2008 a dozens of mega projects were initiated and completed with
total debt of Rs.6,127 billion which includes 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 of
the life for the both urban and rural citizens but it is a complete mystery
that where did all the debt of approximately Rs. 22,480 billion go which was
accumulated during past ten years.
It
is pertinent to mention that citizens across the board are curious to know that
what will be the outcome of the investigations and the future course of the
action of the government. No one can predict whether it will be a fruitful
exercise in terms or recovery of the allegedly stolen money by the movers and
shakers of the previous governments or proves to be another failed venture of
the current government. However, this is encouraging to see that people have
shown a strong faith in Prime Minister’s promised investigations. On the other
side, opposition parties who have apparently rejected Prime Minister’s decision
of investigation of the debt unfortunately do not have a strong argument to
oppose the proposed investigations. The opposition however for the face saving demanded
Prime minister to expand the horizon of investigation back to 1965 when General
Ayub took the first ever loan from International Monetary Fund.
It
has been observed that whenever external debt and the painful interest payments
on it are discussed on media by the government officials, people tend to be
interested in knowing how much the country owes and to who? The below given
table reveals the detail of the external loans and lenders since Fiscal Year
2010:
Source:
SBP, IMF, ADB, WB, Club de Paris and Bloomberg
Pakistan’s
total external loan was US$61.56 billion during the FY10 which has reached to
US$95.34 billion by the end of FY18 which shows an increase of US$33.78 billion
just in 9 years from Fiscal year 2010 to 2018. During these 9 nine years Pakistan
has excessively borrowed from International financial institutions which
includes IMF, Paris Club, Multilateral borrowing, issuance of Euro bonds and
Sukuks (Islamic Bonds) and some other debt classes. On the other hand, mega
projects including metro bus, power plants, and infrastructure related projects
in additional to impact of Rupee devaluation altogether do not justify the
borrowing. Probably that is reason Prime Minister Imran Khan wants only 10
years loans investigated. As we know, that not only the current Prime Minister
Mr. Imran Khan but all the former heads of the states and their respective
cabinet members have been criticizing and blaming each other for the excessive
borrowing of the country which led to over 50% of the national revenue to go in
payment of 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 which makes merely 9.3 percent of GDP makes it 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 by investigating mounting
loans taken by the two previous governments and on other hand 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 of these two major drives being personally led by the
Prime Minister but optimistic assumptions do indicate Pakistan will be in much
better shape in five years down the road if Prime Minister succeeds in his
quest of achieving the unachievable.
By
Muhammad Sarfaraz Abbasi : Twitter
: ImSarfrazAbbasi :
Profile: The author is a Karachi based
Investment Management Professional and a lecturer of Economics and Finance. He
tweets @imsarfrazabbasi
InshaAllah, he will achieve the unachievable.
ReplyDelete