The debt burden on Pakistan may have doubled by the end of his tenure, given the debt-ridden Imran Khan government for the past 10 months.
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Is Pakistan an economically viable nation in the current scenario? Can it survive without huge foreign aid? In other words, the real question is whether Pakistan will live on its own economic strength or need the money of others.
The economic crisis that Pakistan is facing today is nothing new. This is a cycle. After a certain period of time, Pakistan has to face such a crisis again and again. Each new economic crisis puts Pakistan on the brink of financial bankruptcy. The current economic crisis in Pakistan is worse than ever. It is not only about financial matters but also about the systemic and economic structure. A temporary bandage may alleviate the problem for a while, but it is unable to solve the fundamental problems of the swampy Pakistani economy.
In such a case, any financial assistance given to Pakistan would be temporarily useful, but it would invite a new crisis. Moreover, the situation will become more difficult to handle. This is because the improvements made on the strength of this help are unwilling, incomplete and hesitant. The only purpose behind this is to get out of the immediate crisis. In such a scenario, according to the Pakistani finance minister and Pakistani experts, imported and imposed by the International Monetary Fund, the country will continue to go bankrupt and the way out will be closed until the imbalance in the economy is removed. This situation will be worse than it looks today.
A closer look at Pakistan's latest budget reveals that the Pakistani economy is entering a black hole from which there is no way out. The budget figures are so far from reality that no one is willing to take them seriously. Most worryingly, even if Pakistan achieves the objectives set in the 2019-20 budget, it is unable to pull the country out of the economic crisis. The reason is quite simple. Pakistan's economic arithmetic is a far cry from the basic criteria of economics and its economic balance sheet does not fit within the framework of the economy.
The government of Pakistan has set a target of collecting 5550 billion Pakistani rupees in taxes in the 2019-20 budget. This is an increase of 1450 billion Pakistani rupees (approximately 35%) over the 4150 billion Pakistani rupees collected from revised taxes in the previous financial year. The revised tax collection figures are so inflated that it is difficult for it to cross Rs 3950 billion by the end of the fiscal year ending June 30. This is 285 billion Pakistani rupees less than the provision made in the 2018-19 budget. The biggest surprise is that the revenue from these inflated revised taxes is the same as the revised taxes received in the financial year 2017-18. In other words, even though there is no actual increase, the budget for 2019-20 has shown a total increase of 35%.
In 2018-19, assuming a growth rate of 3.3% in GDP and 7% in inflation (according to economists, this growth was 40% growth in the power generation, distribution and gas distribution sectors and 1% inflation). It was expected to grow by 11 per cent. But nothing like that happened. Assuming a 2.4% increase in gross domestic product and an inflation rate of 11 to 13% in the next financial year, tax revenue is expected to increase by 15%. However, it is unrealistic to expect an increase of 35%.
This ambitious record in the Pakistani economy can only be supported on the basis of a World Bank report. According to the report, the Pakistani government could significantly increase its annual revenue by radically changing the tax structure, removing unnecessary concessions and trapping more people. On the same basis, the World Bank had in the past helped projects that could add to the revenue. However, even the minimum expectations from these projects could not be met.
Pakistan's population growth rate is 2.4 percent per year. If the GDP growth rate remains the same in the previous and current financial year, there will be no increase in income. (According to economists, rising tax rates, the devaluation of the Pakistani rupee and rising inflation will push inflation beyond the percentage set by the Pakistani government.) So, of course, unemployment and the population below the poverty line will increase. The above conditions are complementary to the objectives set by the Government of Pakistan in the budget.
Even if Pakistan achieves its goal of collecting Rs 5550 billion in revenue by making the impossible possible, it is difficult to get the country out of the quagmire. Because Pakistan's economic mathematics is completely inconsistent with the rules of economics. Pakistan's net revenue is only 3450 billion Pakistani rupees and the repayment of debt (2890 billion Pakistani rupees) as well as expenditure on defense forces (2890 billion Pakistani rupees) is 500 billion Pakistani rupees more than the total revenue income (which the Pakistani government has highly set). In other words, Pakistan does everything else on loan. In fact, Pakistan's total revenue expenditure (PKR 7,020 billion) will be double the total revenue collected.
According to the government's own calculations, the fiscal deficit for the fiscal year 2019-20 will be 7.2% of GDP. This figure was the same as in the previous financial year. However, due to inflated income figures in 2018-19, the deficit is likely to go up to 8% to 9% or even higher. According to economists, the expected fiscal deficit of 423 billion Pakistani rupees is unlikely to increase to more than eight per cent. In addition, a sudden increase in defense spending or a rise in interest rates on loans (according to some experts, the exchange rate of the Pakistani rupee is likely to touch 180 to 200 against the dollar by December). On the other hand, even if all goes well, the total debt burden on Pakistan will be out of control.
The debt burden on Pakistan has doubled every five years since former Pakistani President General Pervez Musharraf. Moreover, the debt burden on Pakistan may have doubled by the end of his tenure, given the last 10 months of the Imran Khan government's crackdown on debt.
Pakistan appears to have presented its budget with the sole intention of seeking funding from the International Monetary Fund. This is because once you get a loan from the International Monetary Fund, the way is open to get multipurpose loans from the global market and from various financial institutions. But the unrealistic budget objectives and statistics have brought Pakistan into disrepute. In the last 60 years, Pakistan has reached out to the International Monetary Fund 21 times for help. Now Imran Khan's government is preparing to seek international help for the 22nd time. So far, only in 2013, Pakistan has met the conditions imposed on loans. Other times Pakistan has not been able to do that. This means that Pakistan has never been able to make the structural reforms in the economy that the IMF intended.
As a result, every three to four years, Pakistan has to go to the IMF for financial assistance. Only two things have happened during all this time. The first is that the US has stopped pampering Pakistan. So far, the conditions, concessions and exemptions that have been relaxed for Pakistan while providing financial assistance are now closed. The IMF has also insisted on fulfilling the conditions and recommendations while giving loans. To this day, Pakistan used to borrow from the IMF and forget the terms. Therefore, the IMF has taken the role of forcing economic discipline before helping Pakistan.
At present, Pakistan seems to be relying on traditional methods, following the same path as before. The only thing to pay attention to was the immediate crisis that befell the body. He would do whatever he could to alleviate the crisis and then put his hands together and hope for improvement. So that the time has not come for us to fulfill our promises. Given the strategic location of Pakistan, its rulers have used Pakistan as a hospice to this day. His strategy was also successful.
Who to go to in the future America may need Pakistan to pursue its political interests. Perhaps expansionist China will shower money on Pakistan to achieve its goals. Saudi Arabia and the UAE will also open their coffers to Pakistan in exchange for help in the military conflict in the Middle East. If none of this happens, then Pakistan is a dangerous country. But despite all this, if no one helps Pakistan, no one will be able to stop the country's economic bankruptcy.
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