The debt burden is piling up at a rapid pace as the federal government domestic debt has increased to 15.4 trillion by the end of July and half of it comprised short term loans. A net increase of 1.534 trillion was recorded in the domestic debt in the past one year which is 11 percent higher than the fiscal year of 2015-16. The double digit increase in domestic debt is the result of deviation from the path of fiscal discipline and failure to adhere to the principle of prudent debt management which was suggested by the International Monetary Fund (IMF).The steep rise in non-productive expenditures and the rampant corruption in the mega projects of Motorways and Meteor Buses are the contributory factors for high debt-GDP ratio.
Another big challenge to the economy is the constant decrease in exports and rising imports. The foreign exchange reserve has been depleted by 4.4 billion in just one year, which compelled the government to obtain short term foreign loans to prop up sliding foreign exchange reserves. It acquired $ 450 million short term commercial loans from Credit Suisse led Consortium of Banks. The Consortium consists of Credit Suisse, United and Allied Bank Limited. The Ministry of Finance has confirmed the acquisition of loans but did not disclose the rate of interest accrued there on. It is the third loan agreement that the federal government signed with Credit Suisse during the past five months. This indicates growing dependence on high interest bearing short term loans to shore up foreign exchange reserve instead of taking concrete measures for the revival of exports. The total commercial loans that government obtained in just three months are 1100 million. The loan agreements have been signed when independent economists and even Chief of Army Staff expressed concern over the “Sky-high debt”.
After assuming power in June 2013, the PML N government adopted a disastrous strategy of building foreign exchange reserves by loans from IMF, European, American and Chinese Banks and did not frame a comprehensive long term trade policy to boost exports. Taxation system was not reformed by raising tax to GDP ratio by way of direct taxes. Revenue generation by jacking up sale tax, turn over tax and petroleum levy proved to be bomb shell. The steep rise in production cost evaporated the competitive edge of exports. New export markets were not explored and agreements for removing the tariff and non-tariff barrier were utterly ignored,
Monetary incentives are restricted to the export of sugar. Subsidy is not provided for the export of rice, light engineering products, ready made garments, sports and surgical goods. These products contribute a line share in the composition of exports. Pakistan has a great potential of exporting gem stones. They are exports of different types of gem stones are stagnant at $ 10 million because mostly these stones are exported in raw form. On the other hand India earns $ 3 billion foreign exchange from export of properly cut and polished gem stones. Raw gem stones are smuggled into India from Afghanistan and Pakistan. The export of marble products can also fetch high value in the international market. An incentive based trade policy will boost exports in a big way for which the input of all stakeholders is inevitable.
