EDITORIAL: Yet another Pakistani prime minister hit the nail on the head – caretaker PM Kakar this time – as he called on the world to find a “durable solution” to debt problems of dozens of countries. Former PM Imran Khan made a similar suggestion when Covid shut down the global economy and ravaged smaller and weaker states. In fact, he went a step further and demanded complete or partial debt write-off for the worst affected countries; something the G20 considered for a while before offering only a one-year moratorium on debt repayment.
The caretaker PM made a lot of sense, speaking at the Leaders’ Dialogue on Sustainable Development Goals (SDGs) at the UN, by reminding world leaders that implementation of the global development agenda will not be possible when close to 60 countries are in deep debt distress. Pakistan provides the perfect example. The 5th largest population in the world, ranked among the top-10 poor countries as well, which is simply unable to provide any relief to its people, much less implement any sort of development agenda, because its debt problems require it to stick to an IMF bailout program with very harsh conditions.
Now, just meeting the debt, which has become the country’s number-one priority in order to avoid sovereign default, the quality of ordinary people’s lives is becoming incrementally worse. Yet it’s also understandable that not many lender countries are willing to lend much of an ear to such concerns. They know only too well that the rapacious elite of most of these heavily indebted countries is responsible for their state of affairs. And simply writing off their debt, other things remaining the same, only amounts to bailing out all the “looters and plunders”, as they are referred to in our social and political circles.
Yet the fact remains that those people get to enjoy their spoils regardless, and it is the majority of citizens in those countries that bear the brunt of the debt. Needless to say, of course, that the old debt requires new debt to meet payments on interest and principal, and the vicious circle compounds till it eventually implodes. That is bad news for everybody, especially in today’s connected markets, because such events then reverberate through large and sensitive commercial and banking channels across the globe.
Everybody knows that much of the third world debt will never be paid back. It’s only a matter of deciding how much fiscal pain will be inflicted on the most indebted countries before creditors will agree to some form of compromise. Mentioning China’s help when it comes to erecting infrastructure and employing locals to boost production and purchasing power might not have been politically correct in today’s America, but the caretaker PM did give much food for thought to everybody present.
For, instead of trying to squeeze debt payments out of economies ready to go under, it’s much wiser to engage them in productive enterprises that enable them to raise funds, on a slower time scale, to pay back in chunks. Both sides have valid points and, one way or the other, they will have to come to some sort of agreement about managing this debt, which runs into trillions of dollars. PM Kakar and his colleagues from the global South can at best raise the alarm while there is still time. It’s for those with their finger on the trigger to decide how much further to push the present arrangement, which is already dragging the entire global economy down.
Copyright Business Recorder, 2023
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