Dr Murtaza Syed, former Governor of the State Bank of Pakistan, has raised significant concerns about Pakistan’s alarming debt situation, describing it as one of the most severe debt traps globally.
In a series of tweets, he highlighted the country’s excessive borrowing and criticized the misuse of funds on non-productive expenses, leading to a situation where servicing the debt takes precedence over crucial developmental and climate-related investments.
According to Dr Syed, Pakistan currently spends more on servicing its debt than any other country globally, a burden that is expected to persist for years. This high debt servicing obligation has necessitated heavy taxation and severely limited resources for essential social expenditures, such as education and health.
He pointed out that Pakistan’s spending on interest payments vastly exceeds allocations for education and health, indicating a prioritization that hampers human capital development and public health.
Citing data from the UNCTAD, Dr Syed highlighted that Pakistan’s government spends a disproportionate amount of its revenue on interest payments, second only to Sri Lanka. This financial strain not only constrains immediate social spending but also impedes long-term economic growth by limiting investments in infrastructure and other critical sectors.
Despite fluctuations in global interest rates, Dr Syed emphasized that Pakistan’s debt burden remains among the highest globally, indicating a systemic issue rather than a temporary financial challenge.
He cautioned that even with potential increases in government revenue, a significant portion would still be consumed by interest payments, further squeezing resources available for developmental initiatives.
In conclusion, Dr Syed proposed a strategic restructuring of Pakistan’s debt to alleviate the fiscal pressure and redirect funds towards sustainable development and climate resilience.
This, he argued, would require a balanced approach, avoiding over-reliance on taxation and instead focusing on optimizing debt management strategies to foster economic stability and social progress in Pakistan.
