Pakistan is in the midst of a severe debt trap that is threatening the very fabric of the nation. With debt growing from China and the IMF and Pakistan’s resentment over the China–Pakistan Economic Corridor (CPEC) projects, the Imran Khan-led Pakistani Tehreek-i-Insaf government is striving to escape from the clutches of a vicious debt trap. The Financial Action Task Force (FATF) has threatened Pakistan of blacklisting it. So the million-dollar question is if Imran Khan can save Pakistan from the debt situation.
As per local media reports, Pakistan accumulated a record public debt of $47.5 billion during one year of Imran Khan’s rule. Geo News reported that the foreign debt incurred by Pakistan’s Tehreek-e-Insaf (PTI) is PKR 2,804 billion ($81.4 billion) from August 2018 to August 2019, while the internally accumulated figure stood at PKR 4,705 billion. The State Bank of Pakistan reported that at the end of June 2019, the total public debt stood at PKR 31.786 trillion (0.20 trillion dollars). Additionally, the government projected that public debt is likely to increase by 47 percent and reach PKR 45.57 trillion ($0.29 trillion) in the next five years (2022-23).
The International Monetary Fund (IMF) has pointed out that despite repayment of $48 billion during the tenure of the Pakistan Tehreek-e-Insaf (PTI) government, Pakistan’s external debt will reach $130 billion by the end of the fiscal year 2022-23 under the government of Prime Minister Imran Khan. This means that the PTI government will borrow a gigantic $83 billion in the next five years to finance the current account deficit, service the old debt, and build foreign exchange reserves.
The growing debt has set alarm bells ringing compelling the Pakistani finance minister Asad Umar to say that Pakistan’s basic debts have reached alarmingly high levels, and the threat of bankruptcy looms large over Pakistan. Worried over the dangerous economic condition, the business community led by 25 prominent business tycoons of the nation met with the Army Chief General Qamar Jawed Bajwa in Rawalpindi and sought his help to solve their problems with the Khan-led government.
According to political observers, the Imran Khan government’s decision to put an end to fuel subsidies, increase gas and electricity prices, salary cuts, and the International Monetary Fund-led $6 billion bailout conditions are forcing the government to slash spending and increase revenues. All these have compounded the problems of people and the business community in the country. According to the business community, high-interest rates, ruthless tax targets, cuts in development spending have brought the economy to a standstill. They had no option but to meet the army chief as the Imran Khan government simply kept listening to their grievances and failed to address the issue effectively.
Economic analysts opined that the slowdown in the growth rate of the Chinese economy is likely to further aggravate Pakistan’s financial crisis, as the integrated value chains spread across East Asian and South-East Asian economies would be disrupted.
With immense pressure from the opposition parties to bail out Pakistan from the precarious situation and growing demand from the people to relieve them from skyrocketing prices of food & non-alcoholic beverages, transport, clothing & footwear, and miscellaneous goods & services, Prime Minister Imran Khan is facing a herculean task to save the economy and at the same time earn laurels of the masses. Prime Minister Imran Khan is in a catch 22 position; he was elected on an anti-corruption plank with a promise to end austerity measures. Khan had vowed to improve the economic situation of the cash-strapped country. In reality, prices of essential commodities have risen significantly, burning a hole in the common man’s pocket.
If he implements populist policies like fuel and electricity subsidies, bailout packages from IMF and others will end. And if the current situation persists, opposition parties will intensify their stir against the Khan-led government, thus paving the way for a more significant say of Pakistan army in the day-to-day governance. It remains to be seen how well Imran Khan fights the war on economic and opposition frontiers and bails out Pakistan from the financial mess.