By Dr. Farrukh Saleem (21 March 2021): Interest payments as a percentage of FBR taxes: In 2017, a mere four years ago, Pakistan’s total debt payment amounted to 39 percent of FBR taxes. Today, our total debt payment consumes 75 percent of FBR taxes.
Red alert: Based on the current trajectory, by 2025, our debt payments will swallow 100 percent of FBR taxes. By 2025, Pakistan will become totally dependent on bank and non-bank borrowing plus foreign aid. By 2025, we will have little or no money for six essential items: Defence (Rs1,300 billion); Development (Rs800 billion); Running of the civil government (Rs500 billion); Pensions (Rs500 billion); Grants (Rs900 billion); Subsidies (Rs200 billion). What about education (Rs900 billion)? What about health (Rs1,300 billion)?
Imagine: by 2025 our defence budget will be totally dependent on foreign aid. To be certain, foreign dependency “fosters underdevelopment in the dependent country; [and] a country’s adoption of policies tailored to the interest” of the lender. Imagine; our debt payments are now three times our defence budget.
Debt service as a percentage of Gross National Income (GNI): GNI is simply “the total amount of money earned by a nation’s people and businesses.” In 2011, our debt servicing as a percentage of our GNI was 1.4 percent. In 2018, when the PTI government took over, we paid 1.9 percent of our GNI in debt servicing. Lo and behold, we now pay over 4 percent of GNI towards our debt servicing.
Debt service as a percentage of exports: In 2011, a mere 10 years ago, our debt servicing as a percentage of our exports was 9 percent. In 2018, when the PTI government took over, we paid 19 percent of our exports in debt servicing. Red alert: We now pay over 35 percent of exports towards our debt servicing.
External debt stock: In 1970, our total external debt stood at $3.5 billion. In 2018, when the PTI government took over, our external debt was $93 billion. Today, our external debt exceeds $110 billion. Debt service on external debt: In 1970, our total payments on account of our external debt was $256 million. In 2018, when the PTI government took over, we paid $6 billion. Today, our debt payments on the country’s external debt exceeds $11 billion a year.
Implosion is “an instance of something collapsing violently inwards (as opposed to explosion)”. Foreign dependency is an “extension of colonial trade patterns.” To be sure, foreign aid shapes both the “economy and politics of the recipient country.” Yes, debt is also used to shape the recipient’s defence policies and thus becomes an instrument of war.
We take on debt to fill the Rs4 trillion budget deficit a year, every year. We take on debt to fill the Rs1 trillion loss in the electricity sector. We take on debt to fill the Rs1 trillion loss in our State Owned Enterprises. We take on debt to fill the Rs200 billion loss in the so-called ‘Commodity Operations’. We take on debt to fill the Rs1 trillion current account deficit. All we need to do is correct our course. Cut losses. Fortunately for us, Pakistan is blessed with resources. Fortunately for us, a whole lot of these resources are like low-hanging fruit. With serious political will we can dodge the impending implosion.