Businessmen show concern over rising debt burden

  • August 13, 2010
Businessmen have shown great concerns over the rising public debt of Pakistan, which has reached a critical level of more than US $105-billion by end of Financial Year 2010 out of which external debt is more than $ 55-billion and stressed for developing a viable debt management strategy to reduce country’s over-reliance on external and domestic borrowings.

Chairing the meeting Mr.Zahid Maqbool, President, Islamabad Chamber of Commerce & Industry (ICCI) said that high expenditures of the government are pushing the country into a debt trap as Pakistan’s total debt-to-GDP ratio has crossed 61 percent by the end of fiscal 2010 breaching the 60 percent limit set by the government under the Fiscal Responsibility and Debt Limitation Act.

He said there is an urgent need for a debt management strategy that should reduce government’s over-reliance on borrowings, decrease cost of debt servicing and create substantial space for growth and development. He said that the strategy has to be comprehensive enough to address all the issues that contribute towards accumulation of public debt.

Mr.Zahid Maqbool said most worrying factor is that the mounting debt is causing hefty outflow of foreign exchange as Pakistan has paid a staggering amount of $5.6 billion on debt servicing during the last fiscal year, which was 43 per cent of the official foreign exchange reserves of the country. He said this situation will constrain country’s efforts to improve economic growth as Pakistan will have to spend more on debt servicing in coming years.

Businessmen said that further accumulation in debt would act as a discouraging factor for investment and would increase the vulnerability of economy to shocks as growth outlook would depend on resource mobilization and expenditure management.

Mr.Zahid Maqbool said that the only suitable option for the government to reduce its reliance on foreign debt is to mobilise the domestic resources through National Savings Schemes, bank deposits, stock markets and tax revenue. He said that the mobilization of domestic resources would bring down the inflation rate and boost production.

It was stressed that the privatization process should also be expedited along with creating a favourable atmosphere for foreign investors. He said that these measures will enable the country to reduce its reliance on foreign inflows, which are not reliable. He said that Pakistan should depend on its internal resources for sustainable economic growth and development.