External debt: a lot of challenges ahead.

Byline: S. Kamal Hayder Kazmi

In the shaping of economic growth of any country, researchers revealed that external debt plays both an optimistic as well as pessimistic role mainly in the developing countries. It is useful when any government uses external debt for investment-oriented projects like infrastructure, energy, and agricultural sector. Furthermore, external debt would affect negatively when it is utilized for private and public consumption purposes, which do not bring any return. Moreover, a low level of external debt impacts economic growth positively, but this relationship becomes negative at a higher level.

Pakistan is also in one of those developing countries which have a higher debt rate burden. According to theInternational Monetary Fund (IMF), $27 billion worth of Pakistan's external debt will mature in 2-year - the mounting repayment burden that carries grave implications for bailout package. Ministry of Information, Government of Pakistan also recorded that Pakistan's foreign debt from 2008 to 2018 increased substantially by $60 billion, reaching $97 billion from $37 billion. The several mega projects were executed until 2008, which included development of Islamabad and construction of Tarbela and Mangla dams, naval bases, Gwadar and motorway besides equipping the armed forces with modern weapons.

The Ministry also recorded that the money was sent abroad unlawfully by Hundi and Hawala means and fake accounts were also used for the purpose. Sources mentioned that the $27 billion maturing external debt is equal to 27 percent of Pakistan's total external debt and liabilities as of end February. After counting financing requirements of the current account deficit, the country will need $46 billion to $50 billion in the upcoming 2-year to remain afloat, according to assessments of the government and some private sector experts. Overall statistics mentioned in the IMF's report showed that the country's debt-to-GDP ratio is predicted to remain high, at 77 percent of GDP by June this year.

Pakistan's External Debt and Liabilities - Outstanding In 2018 (Mn US$)

Item###Mar###Jun###Sep###Dec

1. Public external debt###73,024###75,357###76,340###78,464

   1. Government external debt###62,937###64,142###65,382###65,574

   2. From IMF###6,343###6,095###5,962###5,901

   3. Foreign exchange liabilities###3,744###5,121###4,996###6,989

2. Public sector enterprises (PSEs)###2,758###2,671###2,846###2,681

3. Banks###4,626###4,416###4,452###4,790

4. Private...