It’s no surprise really that Pakistan’s habit of borrowing to survive has got so out of hand that even respected international financial institutions have started sounding the alarm. According to a report titled ‘Developing Infrastructure in Central Asia, impacts and financing mechanisms’ by the Asian Development Bank Institute (ABDI), Pakistan’s external debt has now reached a level where any further borrowing seriously risks destabilising the whole economy. That, of course, is because requirements of debt servicing and interest payments prevent the country from using its resources for development of its infrastructure. And that brings us to the main problem about the debt that is clearly no longer sustainable. For we haven’t just borrowed, and must now pay back, well above a hundred billion dollars just from external sources, but it’s not very easy to see where all that money has gone.

Surely none, or not very much, of it has gone into building any sort of infrastructure at all. With an energy crisis, a water crisis, and an economy in free-fall, Pakistan has the lowest development ranking in the region and stands at 110 out of 137 countries in terms of infrastructure. Over the years, this has led to declining business competitiveness, lower GDP growth and reduced tax revenue. The problem is now made much worse because debt repayment, along with things like defence spending and general administration, take up a lion’s share of the budget and whatever money is urgently needed elsewhere is routinely cut from development spending. To make up for all this the government is forced to increase taxes on business and the general public, because there are always just too many feudal lords and industrial barons in parliament to allow any taxes to rise on the rich; and so we go round in circles.

A depreciated rupee, whose fall was so widely celebrated as liberation of sorts from Ishaq Dar’s tight control at about a hundred to the dollar, has also inflated interest payment in real terms. This is the kind of cocktail that spurs investors, both foreign and domestic one. They, therefore, do not hesitate to make a beeline for the exit lounge, delivering the economy a likely kiss of death because with the government’s spending ability severely compromised, private money is very desperately needed to snap out of this vicious circle that has the country seeking fresh loans not just to stay above water and avoiding default on servicing and repayment of old loans all the time.

This is indeed a very difficult situation to handle because it’s not just a fiscal nightmare but also a national embarrassment that even the prime minister’s kitchen runs on borrowed money, and therefore borrowed time. That brings us back to the question of just what these billions upon billions of dollars have been used for. Sadly, everybody knows that while the country was left locked in a cycle of borrow-to-survive and borrow-to-repay, a lot of people that signed on the dotted line also grew very rich in the years that the debt balloon was inflated. So, to cut a very long and unfortunate story short, the debt piled on, the country grew poorer, a few political families became very rich, and the rest of the people must now pay for it, figuratively as well as literally, for a number of generations.

Sooner or later, the government will be forced to give infrastructure the kind of fiscal attention that it needs even after all the blessings that have come with the China Pakistan Economic Corridor (CPEC). But, again, before that it would have to find ways to create some additional fiscal space. Yet there’s no easy way to expand its list of available options. And just when the good news about the G20 debt moratorium came after the bad news of the pandemic and the lockdowns, some disturbing news also came about some of the world’s top ratings agencies downgrading the sovereign ratings of some of the countries that availed the facility. That is very bad news for Pakistan, of course, since we are also in line for it.

No doubt the government understands very well that the only thing standing between long-term survival and possible sovereign default somewhere down the road is precisely the ability to build enough infrastructure to fuel growth and improve revenue in time. Such things take much time, though, so the sooner the official machinery springs into action the better.