Why did Pakistan incur the highest debt in the history of the country?

In the first two years of the PTI government in Pakistan, burdened with internal and external debts, an increase of 11.35 trillion has been made.

As a result of borrowing from internal and external sources in these two years, the total debt owed by Pakistan has exceeded 36.3 trillion rupees.

In addition to external borrowings, there are also internally borrowed loans that the government has been borrowing from the central bank and commercial banks to cover the fiscal deficit.

 Due to this huge burden of internal and external debt on Pakistan, experts are expressing concern that the amount of debt owed by the country is affecting Pakistan's ability to repay its loans.

According to him, in addition to the country's growing fiscal deficit, the rupee's depreciation against the dollar and rising interest rates also contributed to the growing debt burden on Pakistan, which led to a sharp rise in external and internal debt. 

 A spokesman for the Ministry of Finance said that with the rise in interest rates and the value of the dollar, the Corona virus and the state of lockdown across the country have caused damage to the national economy, reduction in tax collection and various sectors by the government.  He also blamed the aid and incentive package for the deficit, which led to an increase in debt.

How much did the debt increase in two years?

 According to Pakistan's Ministry of Finance, the country's total debt is currently more than 36,000 billion, which is 87% of the country's GDP.

 The volume of this debt which was 36,000 billion at the end of the last financial year was about 25,000 billion rupees at the end of the financial year ending June 30, 2018 which was 72.5% of the GDP.

 Mohsin Chandana, a spokesman for the finance ministry, told the BBC that more than 11,000 billion rupees had been borrowed in two years.

It may be recalled that the total debt of the country in 2008 was Rs. 6,500 billion which reached Rs. 13,000 billion in the last financial year of the PPP federal government.

 In the last financial year of the PML-N government, the total debt reached Rs 25,000 billion, which has exceeded Rs 36,000 billion in the first two years of the present government.

 This includes loans from external sources such as the IMF, the World Bank, the Asian Development Bank and other financial institutions, and from domestic and central and commercial banks.

Why did the debt increase in two years?

 Talking about the increase of more than Rs 11,000 billion in debt incurred by the country in two years, the spokesperson of the Ministry of Finance said that there were two major reasons for this.

One is the depreciation of the national currency against the dollar and the other is the high interest rates in Pakistan.

 According to the spokesperson, due to high interest rates in Pakistan, the debt has increased by more than four and a half thousand billion rupees in these two years.

 Before the outbreak of the corona virus, the interest rate in Pakistan was 13 percent, but it was reduced to 7 percent to offset the slowdown in the country's economy caused by the corona.

A spokesman for the finance ministry said that the second biggest reason for the increase in loans was the devaluation of the Pakistani rupee in two years, which led to an increase of 3.5 billion rupees in aggregate debt.

 The two years of the present government have seen the rupee depreciate sharply against the dollar.

 The value of a dollar, which was Rs 120 two years ago, is now more than Rs 165, which has greatly increased the country's external debt.

Economist Dr Ashfaq Hassan Khan also blamed the rupee's depreciation against the dollar and high interest rates for increasing the country's debt burden.

 He told theviewes that the rise in the value of the dollar and high interest rates have led to an alarming increase in the volume of Pakistan's debt.

Who is responsible for the huge increase in debt in two years?

 Talking about the responsibility of the country's 11,000 billion new loans over a period of two years, Dr. Ashfaq said that it is the responsibility of the IMF and the people who implement the given policy in the country. 

 He said that the condition of keeping the interest rate high in the country was the condition of the IMF which was fulfilled by the SBP and similarly the devaluation of the rupee was a basic condition of the International Monetary Fund which was accepted without any resistance.  The country's currency was drastically reduced.

He blamed the IMF program for the whole situation and said that the way economic policies are being implemented in the country, it seems that it has paved the way for a new IMF program is going. 

 Economist Saeem Ali, while talking about the responsibility of the debt burden on the country, said that this debt burden has become extremely worrying at the moment and he cited the country's fiscal deficit as the biggest reason.

 Saeem Ali said that when a country is constantly running a deficit, this trend cannot continue for long, so then you have to borrow.

Due to the gap between the country's gross national income and expenditure, the government has to borrow money from domestic and foreign sources.

 According to him, foreign loans include loans from IMF, World Bank, Asian Development Bank and other countries.

 Internally, governments have been covering the fiscal deficit by borrowing money from central and commercial banks.

Is the government's debt management policy right?

 Talking about the burden of debt on the country and the government's policy to reduce it, the Finance Ministry spokesman said that various measures have been taken to control the debts under the government policy, which includes increasing the repayment period.  For example, for internal loans, this period has been increased from one and a half years to more than four years.

Similarly, the cost of obtaining loans has also been reduced.

 On the other hand, Dr. Ashfaq criticized the policy of the government and said that this government has no integrated policy and his policy is only the implementation of the policy given by the IMF.

 He said that every government sees its policy as a piece of the moon no matter how bad it is.  He said that this is a policy which has further increased the debt burden on the country.

Is the growing debt burden reducing the repayment capacity?

 Economists, speaking of the reduction in its repayment capacity due to the growing debt burden, said it was undoubtedly a worrying situation.

 According to experts, the government has to borrow money to cover this fiscal deficit, but its ability to repay it is constantly weakening.

 It is necessary to take out a new loan to repay the old one, which is increasing the total debt volume.

 "The rapid increase in the volume of debt is more than our gross national product, which the government should be concerned about," Ali said. 

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