By: Imrana Komal
COVID-19 has crushed our econony we need resources for health sector. Economic and socail experts suggests that Debt cancellation is crucial for Pakistan’s survival. Health and economic challenges posed by COVID-19 are unprecedented in Pakistan’s history. Prior to the COVID, Pakistan economy was not in good shape with rising current account and fiscal deficit. Due to lock-down and global economic slowdown, economic Growth in Pakistan is projected to be in minus, -2.2 to -1.2 in 2020, 0.3 to 0.9 in 2021 and 3.2 to 3.3 in 2022 This will lead to increasing poverty, joblessness and inequality.
While COVID-19 has put pressure on meagre revenue to increase spending to strengthen health system and provide support to vulnerable people and small business who are badly affected. With lower historical spending on health and social protection, both the sectors need a big investment to cope with the challenge.
There is an immediate need of additional investment in health system and social protection, Government of Pakistan may not be capable to mobilize the revenue. Therefore, World Bank, IMF, Asian Development, all bilateral donors and Private lenders must cancel Pakistan’s debt payable in 2020-21, This will free up additional resources for the government of Pakistan to address COVID-19 challenge.
Some key facts about poverty and debt in Pakistan. The overall multi-dimensional poverty rate was 38.8 percent in the year 2015, over half of rural population 54.6 percent were poor.
In the year 2015-16 the ratio of total income between top quintile and bottom quintile was 5.1, means top 20% people were taking five times more of national income than bottom 20%.
By end of 3rd quarter of the fiscal year 2019-20 at March 2020 Pakistan’s total external debt andq liabilities were US $ 109.95 billion. Out of this, total public sector and publicly guaranteed debt and liabilities stood US $ 86.369 billion
By the end of 2018, Pakistan total external debt stood US $ 90.957 billion which has increased to US $ 109.949 billion by 31st March 2020. 34.64% (over one-third) of total Pakistan’s external debt is owed to multi-lateral lenders
Till March 2020 (at the start of pandemic) Pakistan has paid total US $ 9.713 billion ($ 7.3 billion principal and $ 2.4 billion interest).
Government of Pakistan spent 6% of revenue on health while paid 26.5% in debt servicing in the year 2019.
United Nations University estimates that there will be 10.4 million additional poor at $1.90 a day at the 20% reduction in income or consumption due to COVID.
One-year foreign debt cancellation will free up approximately Rs.1800 billion, enough to provide free COVID vaccine to entire population