Fiscal Sustainability: A Historical Analysis of Pakistan’s Debt Conundrum

Abstract

Fiscal sustainability is an issue of worldwide concern, but it rings particularly true in the case of Pakistan’s present debt trajectory. A shrinking fiscal space and an over-reliance on external debt financing has put immense pressure on the Pakistani economy and state; and as the urgency of the problem grows, so too does the degree of its politicization. With that in mind, this working paper offers a historical view of the salient aspects of Pakistan’s fiscal profile over an extended time horizon in order to deliver a comprehensive picture of the obligations, maturities, liabilities, and fiscal consequences of an ever-growing dependency on external borrowings that undermine long-term economic autonomy and sustainability. The findings of the paper are that the current fiscal trajectory is increasingly untenable, but that the responsibility for this is shared across successive governments and not squarely shouldered by any incumbent.

Keywords: Debt, Emerging Markets, Fiscal Policy, IMF, Bailout, Balance Sheet, Liabilities, Pakistan