By Ishfaq A Mughal
Increasing foreign debt and debt servicing are adding more problems to Pakistani national economy which was already suffering with the lowest growth rate in the region. Pakistan is forced to allocate Rs 700 billion on debt servicing during the current fiscal year. The amount is one fourth part of the faderal outlay of the current fiscal year and more thab half of the revenues of the Federal Board of Revenue. Currently, government's foreign debt of $54 billion, which is countinue to increase that's why the debt servicing is growing by the same ratio.
The external debt was a heavy burden on the country and in 2009, the country owed $50 billion and the government consumed a third of its budget revenues to honor only interest payments of the country, where 60% of people live below the poverty line.
Economic situation is getting worse as Pakistan’s total debt-to-GDP ratio has crossed 61 percent this ongoing fiscal year, breaching the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act.
It is suggested that Pakistan can create a safe exit of debt trap by increasing her indigenous resources, for which there exist huge potential in shape of its human capital, unexploited mineral deposits, hydel power resources, and huge agricultural and industrial potentials.
External debt will keep rising unless we don’t go for economic rival through monetary management because slow economic growth coupled with non-development expenditures and monetary mismanagement were pushing Pakistan deeper into the debt-trap. External debt could be avoided through development of new dynamic exports along with a modern industrial sector, domestic savings, self reliance and balanced macro policies.
It is my opinion that the government should finance fiscal deficit through creation of money rather than borrowing from abroad. Government should enhance some fiscal and monetary policies to overcome the external debt repayment for the upcoming years which was hampering economic development of Pakistan.
The external debt was a heavy burden on the country and in 2009, the country owed $50 billion and the government consumed a third of its budget revenues to honor only interest payments of the country, where 60% of people live below the poverty line.
Economic situation is getting worse as Pakistan’s total debt-to-GDP ratio has crossed 61 percent this ongoing fiscal year, breaching the 60 percent limit set under the Fiscal Responsibility and Debt Limitation Act.
It is suggested that Pakistan can create a safe exit of debt trap by increasing her indigenous resources, for which there exist huge potential in shape of its human capital, unexploited mineral deposits, hydel power resources, and huge agricultural and industrial potentials.
External debt will keep rising unless we don’t go for economic rival through monetary management because slow economic growth coupled with non-development expenditures and monetary mismanagement were pushing Pakistan deeper into the debt-trap. External debt could be avoided through development of new dynamic exports along with a modern industrial sector, domestic savings, self reliance and balanced macro policies.
It is my opinion that the government should finance fiscal deficit through creation of money rather than borrowing from abroad. Government should enhance some fiscal and monetary policies to overcome the external debt repayment for the upcoming years which was hampering economic development of Pakistan.
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