Pragmatic approach required... By Sajawal
11 January, 2013
It is no denying that a developing country has to rely on borrowings in order to achieve economic stability and national development. Proper debt management is the prerequisite for the sustainable economic growth of a country. There must be equilibrium in exports and imports so as to minimize the need for borrowing and overcome fiscal deficit. Unfortunately, ever increasing foreign debt is one of the major problems besetting Pakistan's deflating economy. Pakistan is the third largest debt recipient country in the region. Pakistan's external debts have been reported to reach 33 percent of GDP as compared to India's 15 percent and China's 7 percent. There are several factors including domestic problems as well as international economic recession behind this debt dynamics.
The increasing debt to GDP ratio is mainly due to declining tax to GDP ratio as out of 180 million populations only 1.8 million people pay tax. Rampant corruption is another major factor; Pakistan is at 34th position among the most corrupt countries of the world according to Transparency International's annual report. Apart from this, the ongoing energy crisis including erratic power supply, crippling inflation, growing security spending and low productive capacity have led to fiscal deficit, which in turn, increases foreign debt. Pakistan is not in any position to formulate an independent fiscal policy due to these external debts and its struggling economy is at the mercy of leading lenders like IMF, World Bank etc. In a nutshell, Pakistan's economy is at a critical juncture and there is dire need of pragmatic approach regarding fiscal management and independent decision making as it is the only sine qua non for the economic development.
SAJAWAL MUSHTAQ GHUMMAN