When we start growing up, making sense of things, and trying to understand how our country is run, the first thing they say, Pakistan debt increase is astronomical. Pakistan’s economy is not going to sustain this burden. The Pakistan debt clock is ticking. However, very few media outlets look into the reasons responsible for it. Pakistan total debt has already crossed the mark of PKR 18 trillion.
Pakistan Debt Increase Reasons
So the always severe debt problem remains alive and kicking. The debt to GDP ratio remains high, currently at 66.6 percent. There has been a massive increase in debt to GDP ratio over the years with the lowest ever going to 56.4 percent.
Here are the reasons for Pakistan debt increase.
Inability to Increase Tax Net Ratio
So, what’s the best way for any government to increase tax net? Well, the most creative they can get is by raising the GST. Raising taxes on everything in Pakistan for everyone is like flogging a dead horse. However, a lot of the wealthy get away without paying taxes. Therefore, there is a high need for the government to do more regarding collecting taxes. Just trying to increase GST and tax on luxury or imported items (like they did a few days ago), will not make much of an impact. It will hurt the buying since it would deteriorate purchasing power parity of the end consumers.
Massive Corruption Scandals and No Trickle Down Impact
Every political party that dreams of winning the next election promises in the election campaign that it would stop corruption. However, when it comes to power, it is clueless regarding how to stop corruption in Pakistan. There are some political settlements which make it difficult to punish the corrupt. When institutions are polluted with corruption, they are not able to do their work independently. Whatever money we get in grants from financial institutions like IMF and World Bank, never gets into the economy. Therefore, we are never able to see the trickledown effect, failing the previous policies. Hence we again need more money for infrastructural and other projects, and the vicious circle of taking loans never stops.
Ever Looming Circular Debt
The large institutional buyers of electricity have billions in electricity bills outstanding. However, no one dares to take their name and get the money that they owe to state. However, we need money to buy fossil fuel and keep our thermal power projects running. So, we need to borrow money to overcome the gap. Some estimates suggest that we currently have a circular debt of PKR 800 billion. This amount keeps creeping up, and no one is willing to fix the underlying issues to overcome this serious debt problem.