Ishaq Dar and the economic specialists of PML-N have proved that they have a singular ability when it comes to raising funds. Getting gifts of $1.5 billion from mysterious friends, the procurement of the IMF loan that requires raising foreign reserves, making the World Bank commit to injecting $10 billion for development and now raising $2 billion through Eurobonds; it seems that Dar and his economist friends mean business.
Arguments for the IMF loan and the ‘gift’ having been refuted on various occasions, it is prudent now to look at the new fund-raising scheme: the eurobonds worth $2 billion. The government seems intently focused on increasing the debt of the country. Has nobody asked what will happen to debt following this sale? After five or ten years, depending on which bond is bought, the government will have to pay the money back in addition to the interest stated initially. The money raised through selling bonds is usually used for investment which justifies the interest paid out. But what will this investment be? What if the returns on the investments are too low? Its easy to raise debt, but it is a question of servicing that debt. It seems Pakistan is more concerned with increasing its foreign reserves, and the money is more likely to just sit inside an account. The bonds sold are also in USD and have an increased interest rate (higher than rates to Sri Lanka). Based on experience, it is very likely that the rupee will only devalue five or ten years down the line, which, added to the interest will make it all the more expensive to pay back this debt.
The government’s willingness to increase reserves is commendable, but completely misguided. There are other, cheaper alternatives to raise funds (multilateral loans), and paying exorbitant interests in the long run for short run stability is why our economy is crippled in the first place. It gives us a false sense of comfort in the short run, and delays much needed reform. Raising the level of foreign reserves by hook or by crook has been Ishaq Dar’s prime obsession, taking away from the other priorities that Pakistan needs to focus on: industrial growth, attempting to make Pakistan as self-sustainable as possible and decreasing dependence on imports and focusing on increasing exports should be the priority. Instead, we will remain sitting on vast sums of money that are not being used for any practical purpose.