ISLAMABAD: If you look at The News’s report, it says that Pakistan’s debt to GDP ratio was 86 percent in 2019, and it’s expected to rise even more to 88 percent in 2020 because of the Asian Development Bank (ADB).
“Pakistan has the third largest debt service, at $15 billion, or approximately 7% of the overall debt payment for the CAREC (Central Asia Regional Economic Cooperation) area in 2020,” according to an ADB analysis titled “COVID-19 and Economic Recovery Potential in the CAREC region.”
Except for Mongolia, all other nations have debt payment obligations of less than $5 billion in 2020.
In its “baseline” debt buildup scenario, the ADB thinks the primary balance will be close to zero and the real interest rate will be 2.7 percent, which is about what it was in the past.
According to these assumptions, the ADB anticipated that the debt-to-GDP ratio would decline to 64% by 2030 if the government successfully maintained a primary balance close to zero. If GDP growth exceeded 4.5 percent a year and the real interest rate did not go above its historical value, this could happen.
A negative primary balance would result in an increase in the debt-to-GDP ratio if the historical primary balance was 3.5 percent of GDP and the historical real interest rate was 2.7 percent.
In this case, 10% GDP growth was necessary to maintain the present debt-to-GDP ratio.
With 10% GDP growth, the Fiscal Responsibility and Debt Limitation Act (FRDL) goal of 60% debt reduction by 2030 would be reached. In addition, the research said that Pakistan had to pay more than $10 billion in extra debt because of the epidemic.
The report lauded the State Bank of Pakistan’s (SBP) policy responses to COVID-19’s economic challenges, including monetary easing, facilitation of new investment, macroprudential policy measures, loan extension and restructuring, wage and salary support to the private sector, assistance to the health sector, promotion of digital payments, and strengthening of Roshan Digital Accounts.
It discovered that Pakistan’s direct health costs were the greatest (about $2,019 million) and Kazakhstan’s were the lowest (approximately $900 million), compared to other nations.
When direct health expenditures are weighed against the benefits of increased wellbeing, it seems that rapid adoption of information technology might effectively cover the direct economic cost of COVID-19 in the near term. In the long run, it was important to spend more money in the health sector in order to make sure that vaccine infrastructure was available at the micro level.
The simulation findings indicated that China and Pakistan benefited the most from regional and global trade, with the former’s trade balance increasing by around $118 billion and Pakistan’s trade balance increasing by approximately $4 billion. Several CAREC nations have previously undergone waves of debt buildup before to the present crisis.
