A RECENTLY released State Bank of Pakistan (SBP) report reveals that Pakistan's total debit liability has risen to 15.2 trillion rupees (S$192.5 billion). At 68.4 per cent of Pakistan's gross domestic product (GDP), this is "unsustainable". Two years ago, it was 56.7 per cent. Under the law, the debt should not exceed 60 per cent of GDP.
The debt burden is ballooning due to the uncontrolled federal budget deficit, excessive borrowings, and rupee depreciation. With election year spending, the deficit is set to increase during the current financial year ending June.
The International Monetary Fund (IMF) team that visited Pakistan recently on post programme evaluation considered this deficit level to be "too high", which can only be sustained by countries that enjoy greater access to financial markets and can borrow easily. Pakistan, on the contrary, has been unsuccessfully trying to float US$500 million worth of euro bonds for the last three years.
With foreign exchange reserves at less than US$9 billion and "in the wake of dried up capital inflows and lowest investment"; the government seems to be seeking ways to return to the IMF support facility. The last IMF facility was suspended mid-course in 2010, due to failure to fulfil agreed conditions.