Under pressure

This refers to the news report ‘Govt ought to repay $ 1 bln on Eurobond maturity in May, June’ (Apr 12). In this regard, the government is reported to be seeking fresh loan from other sources as the country’s reserves is not being considered a feasible option. The reserves have declined from the peak of $ 24.5 billion in early October 2016 to $ 21.5 billion as of now owing to fall in exports, increase in imports and a resultant  enlarged current account deficit arising from the massive trade imbalance, expected at $ 30 billion plus this year. Further erosion in reserves in the following months looks certain as there is no improvement in the external trade.

The above scenario demonstrates that the country is into a serious debt trap. Debt trap is a situation in which a debt is difficult or impossible to repay. The borrower is sucked into obtaining fresh debt to pay old debt and a vicious circle is created from which there is no exit. Pakistan’s external debt stands at $ 75 billion while its exports at $ 20 billion. This means its external debt is almost four times that of exports. Bangladesh external debt is just 1.2 times its exports. The bottom line is that the nation is close to financial insolvency.

Erum A Baig

Karachi