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Record burden of loans

Record burden of loans

According to newspaper reports, the next government will have to borrow $13 billion during the fiscal year 2018-19, to repay previously obtained loans and stabilize the foreign currency reserves. The estimated foreign borrowing will be nearly 63 percent more than the outgoing fiscal year’s original estimates and the highest in the history of the country. The former finance minister had presented a foreign borrowing plan of $8 billion in parliament for the outgoing fiscal year, but the government already borrowed $7.3 billion in eight months and took the total foreign loans of $10.4 billion in fiscal year 2016-17. The government is going to unveil provisional estimate on April 27 to borrow $13 billion for 2018-19 but will not seek another bailout package from the International Monetary Fund. The constant inflow of remittances sent by the expatriate Pakistanis have propped up the foreign exchange reserves and health of the economy to some extent, but the outgoing government has failed to ensure comfortable inflow of foreign direct investment. As was expected, the debt servicing is appearing as the biggest challenge for the coming government.

If the government avoids seeking a bailout package from the IMF, it will be a good service to the nation. But relying heavily on foreign loans is also not a good idea, specifically for Pakistan where political instability is keeping the potential investors away from the promising projects. The government of the Pakistan Muslim League-Nawaz has already obtained $40 billion in foreign loans during its first four and a half years, creating Pakistan a heavily debt economy in the region. The fund has already projected that Pakistan’s external debt and liabilities will be close to $93.2 billion by June this year. The total debt and liabilities on the nation were nearly $61 billion when the PML-N took over in 2013. Experts believe the government will add more than $45 billion to the borrowing basket of the country. Unfortunately, the policymakers have left no international institution from where they have not received loans. Still experts expect the next government would seek an estimated $4.7 billion from three multilateral donor agencies, the World Bank, the Asian Development Bank and the Islamic Development Bank. The ADB loans are estimated at $1.1 billion for next fiscal year. Pakistan will seek nearly $3 billion from the Chinese banks alone, and if this speed continues, every individual in this country will be mortgaged to foreign lending agencies in the near future.