Rising debt and debt servicing burden on the Pakistan economy has squeezed out economic development.

It is imperative to devise and implement a debt management strategy which should provide framework and guidelines for utilization and retirement of expensive debt, Mahfooz Elahi, President Islamabad Chamber of Commerce & Industry (ICCI) has said, addressing the business community.

He said that the burden of both domestic and external debts was pushing the economy back. Step should be taken for the recognition and neutralization of the basic roots of the growing debt burden of the country, he added.

Saving-Investment gap was one reason for accumulating debt because savings rate in Pakistan has remained low as compared to China, Korea and other East Asian economies, Elahi opinioned.

He said that Pakistan’s present foreign debt of $54 billion was increasing rapidly and it was paying about $3 billion on debt servicing annually, Pakistan has to agree upon many unfavorable conditions posed by IMF and World Bank. Economy of Pakistan could still overcome its external debt problems by developing a forward looking debt management strategy, he maintained.

He said that there is an urgent need to reduce government’s over-reliance on borrowings, decrease cost of debt servicing and create substantial space for growth and development. ICCI President further said that the mobilization of domestic resources would bring down the inflation rate and boost production.

ICCI President was of the view that a major portion of the government’s tax revenue was used for debt servicing. Urgent measures are required to cope with the rising debt burden which would ease borrowing pressure on the banking system, he said.

In order to control the hazard of debt, an appropriate debt management plan should be maintained by giving priority to repayment of expensive debts for managing the overall burden, ICCI President emphasized.