Successive governments—civil and military alike—have pushed the entire nation into a debt prison, with absolutely no remorse for it. On the contrary, they take pride whenever the IMF, World Bank or any other multilateral agency or bilateral partner approve a fresh loan or an existing one stands renegotiated or rolled over.
The SBA was negotiated after the $6.5 billion Extended Fund Facility (EFF) program, initially signed by the Pakistan Tehreek-e-Insaaf (PTI) government in 2019, and extended by the Pakistan Democratic Movement (PDM) coalition, expired unsuccessfully, before its stipulated time on June 30, 2023. It is now claimed by the IMF that the fresh short-term financing SBA would “help Pakistan in addressing its external financing requirements and streamlining adjustment policies.”
This is the 23rd time that Pakistan has taken funding from the IMF since 1958, and the 14th bailout since 1988. We have already availed 12 SBAs since 1958 - our history of IMF’s engagements has been elaborated at length. With the present SBA approval, Pakistan has become the 4th largest borrower from the IMF. With this despicable history of approaching IMF for frequent bailouts, the vital question remains unanswered: how long will our rulers continue to beg for bailouts? Given their past track record, there is a consensus that after nine months, we will be begging for an even bigger and tougher IMF program. The story of our “chronic debt dependence” is both painful and loathsome.
The press release issued by the IMF at the time of approval of SBA says: “…. the severe impact of the floods, the commodity shock from the war in Ukraine, and the tightening of external and domestic financing conditions together with policy backsliding aggravated economic conditions and halted the post-pandemic recovery. Growth stalled, inflation surged, international reserves dropped to very low levels…. the difficult economic, social, and political environment as well as insufficient external financing, have prevented sufficient progress in completing the Extended Fund Facility (EFF) which expired on June 30. To address the challenges and sustain macroeconomic stability, the authorities have renewed their policy efforts, and are seeking support under a new Stand-By Arrangement.”
The IMF’s Country Report, No. 2033/260 published on July 18, 2023, observes: “Measures undertaken under the EFF to reduce the fiscal deficit through tax hikes (especially on consumption), cutbacks in public expenditure (particularly on development and social services) and the phasing out of food subsidies (for example, on wheat) pronounced impact on the poor. The depreciation in the exchange rate and swift increase in tariffs have also burdened the poor disproportionally. All these adjustments reduce economic opportunities and increase the cost of living, which further lower the living standards of poor people.”
Our rulers were “extremely happy” to inform the IMF Board about their eagerness to further burden the poor with taxes and heavy electricity and gas bills, making the life of a common citizen miserable.
The Report by way of concluding remarks noted: “We believe that the delays and gaps in the area of program implementation under the 2019-23 EFF, should be assessed in the context of shocks that Pakistan has experienced since 2020. Despite all these shocks from the pandemic to surge in commodity prices to floods to political uncertainties, the country has shown considerable resilience. We believe that the proposed SBA will help neutralize the risks highlighted by staff, and henceforth request its approval by the Executive Board…. In conclusion, the Pakistan authorities wish to reiterate their ownership and unflinching commitment to macroeconomic stability and reforms in the context of the SBA against the backdrop of a complex global environment and socio-political challenges at home. The Pakistani authorities express their appreciation to Executive Board, management, and staff for their continued support.”
As evident from above, our rulers were “extremely happy” to inform the IMF Board about their eagerness to further burden the poor with taxes and heavy electricity and gas bills, making the life of a common citizen miserable. The IMF Board reciprocally appreciated their “obedience” by approving an amount of SDR 2,250 million, about US$3 billion, or 111 percent of the quota, “to support the authorities’ economic stabilization program.” It also immediately disbursed the first tranche of SDR894 million (or about US$1.2 billion) with “the remaining amount will be phased over the program's duration, subject to two quarterly reviews.”
With the above tranches, our total external debt will reach $134.7 billion by the end of the next fiscal year. Total external debt will go to nearly $143 billion in 2025. The lingering and deepening economic crisis, especially the bourgeoning fiscal deficit, has been eroding Pakistan’s capacity to repay huge external loans of over $125 billion, with fast diminishing meagre foreign reserves. As of March 31, 2023, the total external debt and liabilities of Pakistan stood at $ 125.72 billion, and the total liquid foreign exchange reserves as of the weekend ending June 30, 2023 stood at $9.745 billion.
Our total external debt will reach $134.7 billion by the end of the next fiscal year. Total external debt will go to nearly $143 billion in 2025.
The above clearly establishes that Pakistan is caught in a deadly debt trap—burgeoning external loans of US$ 125 billion and domestic debt of over Rs. 55 trillion. In the face of this bitter reality, our rulers are begging for more and more money, not to invest it for the future betterment of the country and its people but to live a life of luxury for themselves while the country burns. The most disturbing and painful reality is unabated and shameless indulgence of rulers and bureaucrats in wasteful expenditures.
Look at the lifestyle of the state oligarchy, the riyasati ashrafiya, when the vast majority of the people are starving. The grim truth of Pakistan is the rulers’ and their lackeys’ habit to indulge in deception and self-adulation at the time of crises, without realizing how disastrous these acts can be. All governments, including the present one, pretend that serious economic problems can easily be disguised via statistical sleight of hand. This might be understandable from the political point of view aimed at cheating voters, but it is certainly a disastrous and suicidal act. We cannot escape the subjugation of debt enslavement unless we become an economically self-reliant nation. For this, the rulers will have to take the first step by starting living at the modest level and then mobilize the masses for common struggle to take a great leap forward.
Today’s Pakistan represents a state where a trio of corrupt civil-military bureaucrats, crooked politicians and profit-hungry businessmen is very affluent, but the government is on the brink of bankruptcy. This state of affairs is the direct outcome of state’s policies, allowing a free hand to forces of loot, corruption and nepotism. No other state in the world has undergone such a horrible experience. Clearly, Pakistani rulers have destroyed the country through corruption and incompetence. Unfortunately, foreign-trained Pakistani economists are merely engaged in defending and serving their masters, instead of advising the concerned quarters to enforce financial discipline and better financial management.
We cannot escape the subjugation of debt enslavement unless we become an economically self-reliant nation.
We are victim of multi-faced subjugation—political, economic and intellectual. Our subjugation is a self-inflicted phenomenon. The leadership—military and civilian alike—has surrendered completely to the foreign lenders. Though the moral degeneracy of the leadership is becoming deeper and deeper every day, yet the people of Pakistan has not surrendered and are showing resilience, even in times of extreme hardship, when basic necessities are denied to them. The economic subjugation, dictates of IMF and other lenders, the wrongdoing of the people at the helm of affairs, unprecedented luxuries enjoyed by the rulers at taxpayers’ expense—all accumulatively —has culminated to a point where a nuclear-state has been totally muzzled.
For resisting and fighting subjugation, we need to pay immediate attention to a number of pressing issues: the rising wave of attacks on armed forces and other law enforcement agencies by militants, widening political polarization, horrifying debt burden, worsening balance of payment position, rising inflationary pressure, increase in wasteful expenditure of billions, which include heavy cost of tax-free perks and perquisites of rulers, growing unemployment, social unrest, worrisome trade and fiscal deficits, rising cost of doing business, burden of new taxes, increases in utility bills, economic stagnation, failure of revenue authorities to tap actual revenue potential of Rs.16 trillion and industrial melt down—just to mention a few.
The economy is spiraling out of control, and the worst might not be over yet if curative measures are not taken on a war footing. Investors are shy and afraid, mainly due to the perpetuation of political instability and economic uncertainty. Life for the common man on the streets is becoming miserable, leading to social restlessness. Although we claim to be an agricultural economy, yet a vast majority of the people do not have enough to eat.
Today’s Pakistan represents a state where a trio of corrupt civil-military bureaucrats, crooked politicians and profit-hungry businessmen is very affluent, but the government is on the brink of bankruptcy.
It is tragic that we import even agricultural products and have miserably failed to develop any worthwhile agri-based industry in the last 76 years. What a decline from the times when this region - United Punjab before partition - had the undisputed position of being the granary of the entire Subcontinent.
The most worrisome sector of economy in Pakistan is agriculture. The rural population is constantly being pushed below the poverty line, making all targets of growth unachievable. If we have to develop economically, agriculture will have to play a critical role in the fight against poverty. Vital areas like mechanization, irrigation, plant protection and improved seeds have not been given proper attention, although on paper there are many departments, including agricultural universities, spending millions and millions and claiming to have achieved wonders. In reality, even the issue of loans to small farmers is nothing but just another scandalous affair where a few are making huge money in the name of poor farmers.
Industries are already over-taxed, but instead of getting any relief, these are being asked to pay exorbitant taxes like 18% sales tax or 22% in case of unregistered suppliers, and also act as withholding agents for the state. All the fiscal laws now impose a number of obligations on them to file periodic reconciliation statements of taxes withheld and deposited in the government treasury. This work is to be done without any reimbursement of cost for the withholding agents. On top of this, a draconian sword hangs for any default not committed willfully.
There is no political will to tax the mighty sections of the society and the entire tax burden is being shifted on the poor through indirect taxes either in the form of sales tax, federal excise duty or presumptive taxes or minimum taxes in the so-called direct taxes.
The fiscal deficit of Rs. 5.9 trillion during fiscal year 2022-23 may touch the figure of Rs 8 trillion at the end of this fiscal year (2023-24), as debt servicing alone is budgeted at Rs. 7.3 trillion against the total net income of Rs. 6.9 trillion of the federal government. It testifies to the bankruptcy of our political leadership that keeps on relying on an incompetent and corrupt bureaucracy. The policy of appeasement towards the corrupt, tax evaders, money launderers and plunderers of national wealth is showing its impacts in all spheres of governance.
The nation is in high despair, as all sectors of the economy are showing horrible indicators. In this bleak scenario, there are no definitive plans for general elections. Elections are not only mandated by the supreme law of the land - the 1973 Constitution of the Islamic Republic of Pakistan - but also necessary for the revival of economy and future of the country. It is time that people must raise their voice against non-democratic attitudes, unconstitutional acts, socio-economic injustices and blatant violations of human rights. They must resolve to remove the corrupt and elect future representatives with responsibility. A true democratic dispensation, with a responsible government, both participatory and open, and caring for the masses is the only answer to the present crises faced by us.