Economic Policy and Business Development has released a report on rising debt. The economic think tank said that bet was rising day by day and every citizen of Pakistan owes Rs. 318,252.
Ten years ago, every citizen of Pakistan owed Rs90,047. During the last 10 years, the debt per citizen has been tripled. The report said Pakistan’s debt burden is increasing at an average of 13 percent annually. The debt burden is doubling every six years. The EPBD said that Pakistan’s debt has reached 70.2 percent of the economy. Pakistan’s debt is much higher than that of Asian countries. Sri Lanka’s debt burden is 96.8 percent of GDP, compared to 57.1 percent for India and 36.4 percent for Bangladesh.
According to the think tank, Pakistan is caught in a dangerous debt trap. Due to high interest rates, interest payments on loans have reached 7.7% of the economy. External debt has increased by 88% in local currency due to a 71% depreciation of the rupee since 2020.
Pakistan’s debt has exceeded the 60 percent limit set by its own Fiscal Responsibility Act by 10 percentage points. Debt servicing has reached almost eight percent of the economy. The think tank has said that imposing more taxes on an already burdened public is not a solution.
There is a need to widen the tax net and reduce interest rates. The policy rate should be reduced from 11% to 9%. The interest cost on government loans could be reduced by Rs 1.2 trillion. This will increase financial capacity and businesses will also be more competitive.
Pakistan must immediately adopt fiscal discipline. The government must reduce the cost of borrowing, otherwise the country will face a more serious crisis. The government does not have the financial capacity for development spending. The financial capacity for infrastructure investment or rehabilitation projects has become almost non-existent.
