In a concerning turn, Pakistan Democratic Movement (PDM) government amassed a public debt of Rs18.5 trillion within 15 months. This surpassed the debt its rival, Pakistan Tehreek-e-Insaf, accrued over its 42-month rule. As per the State Bank of Pakistan (SBP), the gross public debt soared from Rs44.4 trillion in March 2022 to Rs62.9 trillion by the end of the 2022-23 fiscal year. This surge in debt, without any concrete strategy to curtail it, led the federal government’s debt to Rs60.8 trillion by June 2023.
Comparison with Previous Administrations
The Imran Khan-led government added Rs18.1 trillion to the public debt in its 44-month tenure. In contrast, under PM Shehbaz Sharif, the PDM administration eclipsed this in a mere 15 months. Historically, the Pakistan Peoples Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N) collectively contributed Rs18 trillion to the debt from 2008 to 2018. By comparison, the PDM government’s daily average debt addition stood at Rs41 billion, markedly higher than the PTI government’s Rs14.5 billion daily average.
Impact of External Debt and Currency Depreciation
The federal government’s external debt surged by 48% to Rs22 trillion within 15 months, largely driven by currency devaluation. As of March 2022, external debt rested at Rs14.9 trillion. The exchange rate also fluctuated significantly, from Rs183.5 to a dollar in March 2022 to Rs295 in the current scenario. Such rapid depreciation has also intensified inflation. Pakistan’s overall debt has risen to Rs77.1 trillion, representing 91.1% of the national economy. Any ratio beyond 50% is deemed unsustainable for a developing nation like Pakistan.
Fiscal Mismanagement and Reckless Borrowing
Despite being on the International Monetary Fund’s (IMF) agenda, Pakistan failed to elevate its tax-to-GDP ratio over the past four years. This underscores the flawed strategy of obtaining international loans under the guise of tax reforms. Furthermore, the Shehbaz Sharif administration, much like its forerunners, continued to invest in provincial projects, further exacerbating the financial strain.
