ISLAMABAD: Civil society organizations have demanded of the lender agencies to cancel the debt repayment due to Pakistan in the financial year 2020-2021 to revamp the social protection and healthcare infrastructure to fight the COVID-19, in a struggling economy, where debt and liabilities are 106 percent of a dwindling GDP.
The demand "drop debt not health" was made by TheNetwork for Consumer Protection, saying that as per last year's calculation, the annual debt repayment amount is a whopping Rs1,799.31 billion (the US $ 10.7 billion). If canceled, it will give much-needed financial cushion to the Pakistani economy to mitigate lingering COVID-19 effects on the poor persons' lives.
TheNetwork is part of Oxfam supported Tax Justice Coalition comprising more than 50 rights based organizations spread all over Pakistan. The seminar was organized at the Riphah Institute of Public Policy, Riphah International University.
Pakistan's economy has been badly hit due to lock-down and global economic slowdown. Economic growth in Pakistan is projected to be minus -2.2 to -1.2 in 2020, 0.3 to 0.9 in 2021, and 3.2 to 3.3 in 2022. This will further affect overall government performance and poverty alleviation.
The government's reports show that at the close of the fiscal year 2019-20, Pakistan's total debt and liabilities stood at Rs44,563.9 billion (US $265 billion). While the GDP was Rs41,726.7 billion (the US $248.1 billion), which means the debt and liabilities were 106.8 percent of GDP.
Nadeem Iqbal, TheNetwork CEO said, "when COVID crisis hit in early March, it was obvious that given its fiscal constraints Pakistan will not be able to protect the health of its citizens as well as livelihood. Many million people were unemployed due to lock down and the health system faced a chronic financing gap. Due to these reasons, the prime minister of Pakistan since the very start of the pandemic related crisis appealed for debt relief. However, this went on deaf ears. If total external debt liabilities in December 2019 are divided by a population of 211.17 million, per capita debt is the US $ 524.31 or Rs. 88,172."
Iqbal added that all these macro-economic challenges have consumed political energies to point-scoring and wrangling rather than providing a progressive vision with better future opportunities for its majority young population. Wasted talent is leading to crimes, chaos, and restlessness. Poverty is on the rise, so does inequality. Many million children are missing schools, and diminishing their chance to get out of poverty. "Gender-based violence, disparities, and discrimination are another development challenge. This fundamental social challenge has not gained due attention except for smokescreen. Lower education among women, leading them to end up on low paid jobs or just engage in household chores.
A new World Bank report suggests that learning poverty in Pakistan will go up to 79 percent as a result of school closure during the Covid-19 pandemic," Nadeem cautioned. According to official statistics, a large chunk of the total debt has been borrowed from domestic sources, however still external and liabilities also have a large share in the overall debt profile of Pakistan. Out of 44,563.9 billion (the US $265 billion) at the close of the 2019-20 fiscal year, external debt and liabilities stood at Rs18,979 billion (the US $112.86 billion), which is 43 percent of total debt and liabilities. Gross public debt was Rs36,397 billion (the US $ 216.4 billion), this is 82 percent of the total debt and liabilities.
Further analysis of total public debt shows that US $78 billion out of US $216.4 billion is external debt including US $7.7 billion from IMF. External debt and liabilities were 45.5 percent of GDP at the close of June 2020.
Given the inadequate data and measurement issues inequality measured through Gini-coefficient remained stable, however, if measured through the share of national income among different income quintiles then the top 20 percent taking five times more of national income than the bottom quintile.
Member faculty Riphah Institute of Public Policy, Kashif Zaheer said, Pakistan's economy faced multiple macroeconomic and structural challenges in the last decade. Low economic growth is affecting job creation, high inflation causing food price increases, the serious balance of payment problems due to rising import and stagnant export, weak rupee rising debt liabilities, mounting external debt, and repayment. On top of this corruption, misuse and lower revenue collection are major challenges. The government must introduce structural policy measures to control rising debt in the future by reducing non-essential expenditure. "The country must significantly improve its domestic tax revenue mobilization to reduce the fiscal deficit," he added.
Tax Justice Coalition Pakistan warned that the country cannot meet all its challenges of strengthening the health system and protecting vulnerable people and small businesses with limited fiscal space. Due to economic slowdown, the revenue mobilization will be reduced while the spending needs have already increased. With lower revenue mobilization, the only other option is to borrow more which will have long-term consequences on the debt profile.
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