If recent economic data are any indicator, Pakistan is close to sinking like the Titanic. The Pakistan economy was already sinking when a desperate Imran Khan caved into the IMF demands in exchange for a breather of $6 billion. The IMF, which promises to shore up the failing economy, has set up some of the most difficult and challenging targets. Getting close to these targets alone could prove to be
Pakistan’s last straw.
A look at some of the figures can show how long could Pakistan sustain itself. In the last year, the public debt and liabilities have shot upfrom Rs 30 trillion to Rs 40 trillion, an increase of Rs 10 trillion in one year. Compare this figure to another data—in the first 71 years of Pakistan, total debt and liabilities totalled
Rs 30 trillion. In the last year alone, there was a one-third increase in that figure.
On top of it, there is no explanation for this massive upsurge in debt.The secondnoteworthy statistics is from the industry. The industry has been for months struggling to come out of collapsing demand and rising cost of doing
business in Pakistan. There has been, for instance, 30 per cent decline in sales in
several manufacturing sectors. This has followed a contraction of 54 per cent in
large-scale manufacturing sector which has been reeling under heavy pile-up of
inventory and massive lay-offs. There are equally dismal reports of slow-down
from key sectors like cement, steel and automobiles.
So far Pakistan has managed to keep its economy floating mostly by borrowing
from a large number of countries in western Europe and the Middle East. China is largest creditor. Besides these countries, Pakistan has sought help from a host of international institutions. In May when it sought out the IMF for help, it was the 23rd time it had gone begging at the IMF doorstep. As a result, today
Pakistan’s debts are over $85 billion.
The IMF bail-out has only added to this burden in many other ways. For instance, Pakistan must increase its revenues by about 40 per cent to meet the IMF conditions for the loan. In other words, Pakistan will have to increase its
taxation and its foreign exchange reserves to repay its debts. With global slowdown worsening and Pakistan’s manufacturing sector falling behind, it would require a miracle to keep up with the IMF conditions.
Other conditions are almost equally impossible to meet. Pakistan must pay back $37.359 billion in external debt within the duration of the IMF bailout deal. Ofthis, $14.682 billion is owed to China alone as part of the China-Pakistan
Economic Corridor (CPEC) project.
Although there is no plan in sight to raise the external reserves, what is going to hit the ordinary citizens is the need to hike revenue collection to an additional 1.5 trillion rupee and 1.31 trillion rupee in the next two years. It would mean a heavy tax burden, an overbearing tax regime and no hope for any miracle to
save the country from the impending doom.