Review of external debt.

Byline: S. Kamal Hayder Kazmi

International researchers identified that the problem of external borrowing as a strategy to enhance economic growth creates serious debate among policy makers, researchers as well as economists. Currently, external (foreign) debt is a worldwide problem for the present and future development of most countries in the world. Presently the researchers analyzed that Pakistan is among the top 10 states that possess the largest external debt stocks and became eligible for the Debt Service Suspension Initiative (DSSI) in the aftermath of the Covid-19 pandemic. As per the International Debt Statistics in 2022, issued through the World Bank, there was a broad divergence in the rate at which external debt accumulated in individual DSSI-eligible states, counting the group's largest borrowers. The combined external debt stock of the 10 largest DSSI-eligible borrowers (Angola, Bangladesh, Ethiopia, Ghana, Kenya, Mongolia, Nigeria, Pakistan, Uzbekistan, and Zambia) was recorded $509 billion at end-2020, 12 percent higher than the comparable figure at end-2019 and equivalent to 59 percent of the external debt obligations of all DSSI-eligible states combined. They also accounted for 65 percent of the end-2020 private non-guaranteed external debt of DSSI-eligible states. The rate at which debt accumulated in individual states varied significantly. For Pakistan, statistics showed that 8.0 percent rise in external debt stocks reflected the inflow of budgetary support from official bilateral and multilateral creditors and rollover and new credit lines from commercial banks.

Statistics also showed that net inflows from other private creditors increased 15 percent in 2020 to $14 billion but were highly concentrated and also reflected rollovers and extension of new credits through commercial bank loans to Pakistan in the context of the IMF program. The Foreign Direct Investment (FDI) inflows to Pakistan declined moderately to $1.9 billion, 5 percent below the 2019 level, cushioned through continued investment in power generation and the telecom sector from British and Chinese investors. In South Asia, debt to China has increased, from $4.7 billion in 2011 to $36.3 billion in 2020, and China is now the largest bilateral creditor to the Maldives, Pakistan, and Sri Lanka. No doubt, economic growth is a main goal of most developing countries; hence resources are mobilized from many sources counting external borrowing for investment into...