In a way, every baby born in Pakistan has over Rs200,000 debt on her head.

Debt per person is calculated as Pakistan’s total debt and liabilities divided by the total population. Since 1958, the country has kept going to the IMF for more loans, which come with strings attached.

Turning to domestic banks for funds leaves the industry high and dry. When industries don’t have access to enough credit, they struggle to expand, invest, and create jobs. In a chain reaction, lack of credit availability trickles down to the people, hitting them where it hurts the most: their livelihoods.

Interest payments on these loans eat up a significant portion of the government’s budget. It is like trying to fill a leaking bucket. The government keeps pouring money into servicing the debt instead of investing in crucial sectors like education, healthcare, and infrastructure.

Pakistan’s huge informal economy allows a lot of sectors to escape their share of taxes. When tax collection needs to increase to bridge deficits, or more likely to pacify the Fund, the heavily taxed are taxed more.

The country’s consumption-led growth causes the never-ending current account deficits. Pakistan has this love affair with spending. Imports keep shooting through the roof while exports are struggling to keep up.

There seems to be no end to the path that leads deeper and deeper into loans. So the children of the babies born today will most likely face more substantial amounts of debt, perpetuating the cycle.

Published in Dawn, The Business and Finance Weekly, July 10th, 2023