Pakistan must maintain financial discipline, avoid extravagance on defence, and reject the remaining projects of the CPEC
Ashwani Mahajan
Mental health of Indian children and youth has been deteriorating, if ever increasing number of their suicides is of any indication. Girls below the age of 18 are more vulnerable than boys, while boys between 18-30 are more prone to fall in the trap. Since the entire future of individuals, societies, and the nations depend on the healthy growth of individuals below 30 years of age, the issue must not be allowed to deteriorate further.
Pakistan is facing its worst economic crisis ever. In the last 25 years, the debt on Pakistan has increased from Rs 3 lakh crore (Pakistani rupees) to Rs 62.5 lakh crore (2022). In the last 25 years, whereas the government's debt has increased by 14 per cent annually, Pakistan's GDP increased at the rate of only 3 per cent annually. Due to this, the government debt has become unsustainable.
Its servicing is beyond Pakistan's capacity, because the debt service liability has reached Rs 5.2 lakh crores, which is much more than the total revenue of the government. Although Imran Khan's government fell due to this crisis, the current administration has also failed miserably to handle the situation.
On February 18, 2023, Pakistan's Defense Minister Khwaja Mohammad Asif gave a statement that the Government of Pakistan has already defaulted in servicing its debt. Economic experts are of the opinion that none but the rulers of Pakistan are responsible for the economic crisis of Pakistan.
Most of the big companies in Pakistan have announced their closure, including Pak Suzuki Motors, Millat Tractors, Indus Motor Company, Kandhara Tyre and Rubber Company, Nishat Chunian and Fauji Fertilizer Bin Qasim. Sixteen hundred textile mills closed down by 2022, due to which 50 lakh people lost their jobs. The remaining companies are also restrained to utilise only 50 per cent of their capacity.
Under these compulsions, Pakistan has approached the International Monetary Fund (IMF) several times for assistance. The IMF says that it can give help to Pakistan if it accepts its conditions. The IMF's condition is that Pakistan should make provisions for additional taxation of Rs 17,000 crore, including an additional levy on diesel. Experts believe that with the help of the IMF, Pakistan may be saved from defaulting in debt servicing for some time, but it will continue to be haunted by the economic crisis in the long run.
Economists have been critical about Pakistan's policies, both long-term and short-term, and hold them responsible for their current plight. From excessive expenditure on defence to giving “freebies” and an unstable political environment, many issues have remained subjects of sharp criticism. Talking about the decisions of the rulers of Pakistan, it comes to mind that many policy decisions were taken by them which were in the political interest of Pakistani leaders, but not in the economic interest of Pakistan.
Governments took the path of freebies just to please the people. Populist measures were used to keep the prices of commodities low, which increased the burden on the exchequer. It is observed that despite the fall in international oil prices, the prices of petrol and diesel were not much reduced in India but the Government of Pakistan tried to keep the price of petrol and diesel low. Ultimately, we see that India has emerged the fifth largest economy in the world and Pakistan has become a pauper. The Indian Government used the revenue, raised through petroleum products, to build infrastructure, while Pakistan borrowed heavily in the name of building infrastructure.
Moreover, due to paucity of funds, Pakistan's infrastructure building was not according to its needs but to suit the requirements of a foreign power, China, due to which it is getting less benefit. The debt burden, though, has increased, much beyond the capacity of Pakistan to repay the same. The China-Pakistan Economic Corridor (CPEC) is an example of this. It is part of China's Belt and Road Initiative (BRI).
Some power plants are also part of this project. Pakistan's problem is that it took heavy loans to build such infrastructure, which was of no use to the Pakistani people. The reality is that Pakistan does not have adequate grid connectivity, so CPEC power projects are of no use to Pakistan per se.
This loan only created balance of payments problems for Pakistan and led to an unprecedented depreciation of the Pakistani currency. Today, the exchange rate for Pakistan is 261.7 Pakistani rupees an American dollar. Pakistan is so deeply indebted to China that out of the bilateral debt of $27 billion, about $23 billion is Chinese debt. Pakistan's total external debt is a whopping $126.3 billion. Total public debt and liabilities of Pakistan are estimated to be about $222 billion, which is 393.7 per cent of the GDP of Pakistan.
The people of Pakistan have to understand that nothing is going to be achieved by changing governments. The only way to save Pakistan is to fix its policies, maintain financial discipline, avoid extravagance on defence, focus on saving industries, and come out of China's clutches as soon as possible and reject the remaining projects of the CPEC.
(The author is
Professor, PGDAV College, University of Delhi)
