Total Budget volume has been
announced as Rs. 3.936 Trillion ($39.4 billion). This budget includes the huge
amount of Rs.1.325 trillion, which will be consumed for debt servicing. It means
that 33% of the budget will goes to paying interest on debt and remaining 67%
will be used for economic reforms. It is not refusing the fact that a developing
country has to rely on borrowings in order to achieve its overarching goals of
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
overcoming fiscal deficit. Unfortunately, the ever increasing foreign debt is
one of the major problems besetting Pakistan’s lingering economy.
Pakistan is the third largest debt recipient country in the region. Its external
debts have been reported to reach 33 % of the GDP as compared to India’s 15 %
and China’s 7 %. There are several factors, including domestic problems and
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 190
million only 1.8 million people pay tax. Rampant corruption is the key factor in
this regard. According to the Transparency International annual report, Pakistan
is at 34th position among the most corrupt countries of the world. Apart from
this energy crisis, including the 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 a position to
formulate an independent fiscal policy due to these external debts and its
struggling economy is at the mercy of leading lenders like the IMF and World
Bank.
In a nutshell, Pakistan’s economy is at a critical juncture and there is a dire
need for taking a pragmatic approach regarding fiscal management and independent
decision-making. The pressure of foreign debt can be released by introducing
reforms in our taxation structure and by attracting the foreign investment as it
is the only way for economic development.