As details of the new financial bailout agreement with the International Monetary Fund (IMF) trickle in, it is becoming apparent that as a country, we have now been firmly in the debt trap. Even the loans obtained by us on ‘soft’ conditions from friendly countries are after all loans that need to be paid back. According to senior government officials, Pakistan is all set to receive the first tranche of its $6 billion loan facility from the IMF. The tranche is said to be worth $1 billion. The country will keep receiving payments under the IMF bailout programme over the next three years ending in the fiscal year 2021-22. However, much of this money will be consumed in repaying the past debts. Let’s see how.
The major chunk of the new IMF loan will go towards repaying it $4.35 billion — an amount that is due as part of the $6.4 billion loan which the country had obtained when the PML-N had been in the saddle. After repaying this amount, Pakistan will be left with a balance of $1.65 billion from the current loan. This money, though, will be used to pay off other loans such as those for infrastructure projects from the World Bank and the ADB. Then there will be the matter of paying off loans from Saudi Arabia, the UAE, Qatar and China, besides the Islamic Development Bank and any other creditors. By then, it will be the time to pay back the freshly-sanctioned IMF loan.
Prime Minister Imran Khan was right in saying that Pakistan is tremendously burdened with debt. The new IMF programme is meant to focus on economy stability, but it does not take a genius to see the writing on the wall. The country must exponentially increase its revenues and lower its liabilities to even stand a chance at paying off the debt it owes even in the next 20 years. Prime Minister Imran has time and again pointed out Malaysia as the example of a country which has beaten the great debt game. It’s time for us to learn from the experience of the brotherly country.
Published in The Express Tribune, July 10th, 2019.