Former Governor of State Bank of Pakistan (SBP) Dr Murtaza Syed raised alarm bells on Saturday, saying that Pakistan is engulfed in “one of the deadliest debt traps in the world”.
In a series of tweets on Saturday, Dr Syed, who also served as the acting governor of the SBP in 2022, highlighted the South Asian country’s current debt situation calling for a “far more prudent route” to reprofile Pakistan’s debt.
“Pakistan is in one of the deadliest debt traps in the world,” he said.
“Our governments have accumulated too much debt and wasted it on unproductive spending like consumption. Remaining current on past debt is forcing us to default on our development and climate needs.”
Dr Syed said the Pakistani government is paying more to service debt than any other country in the world and will continue to do so for the next several years.
“This necessitates punitive and unrealistic taxes to pay for old debt and leaves no real resources to invest in Pakistan,” he said.
“As seen in Kenya recently, this is putting Pakistan on a dangerous path toward social discontent,” warned the policymaker.
Citing data from UN Trade and Development (UNCTAD) debt dashboard, Dr Syed said that at 6%, “Pakistan’s government pays more on interest as a share of the economy than any other country in the developing world”.
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Whereas, at 65%, Pakistan’s government has the second-highest interest payments to government revenue ratio in the world, after Sri Lanka, he said.
“As a result of this heavy interest rate burden, the government has no resources left for social spending. This is terrible as social spending is critical for upgrading the skillset of our population and boosting the quality of jobs, exports and foreign investment in the economy.”
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