Naseebullah Khan
Sri Lanka has defaulted. Will severe economic crisis in Pakistan lead the country towards default too? Both countries have facing many common issues such as political instability, dearth of long term planning for fiscl policies, economic mismanagement, relying on foreign essential items, devaluation of currencies, dependence on debt, low tax revenue, and ignoring agriculture sector. How Srilanka defaulted and how it Srilankan economy can be compared with Pakistan,s economy. Let’s have a look. 1. Srilanka had no enough foreign exchange to buy Fuel. In April 2022, the government announced that it would default on its $51 billion external debt. By February, Sri Lanka’s central bank said foreign currency reserves dropped to $2.31 billion. On the other side, Pakistan,s liquid foreign exchange reserves were still 10.1 billion USD. 2. Srilanka approached the IMF very late, but Pakistan rushed on due time. 3. Political instability is common in both countries. In Srilanka, it decreased 80 percent the FDI while food inflation raised to 57 percent. 4. Sri lanka foreign debt was 135 billion USD. Repayment in 12 months was 12 billion USD. While, our external debt services are 23 billion USD by 2022_2023. According to Zahid Hussai the country has to repay on account of amortisation and the mark up ammount own3d by public sector a sum of 49.23 billion USD in next 5 years. 5. Covid_19 badly hit Tourism, the main source and the jugular vein of the Sri Lankan economy whose estimated revenue was around $4 billion annually. 6. Populist tax cut of value added tax from 15 to 8 percent by Sri lankan PM and President, with no alternate revenue generation though won them election but it deteriorated its economy. In Pakistan, elite privileges are around 17.1 billion USD that is destroying the very fundamentals of the economy. 7. The Srilankan government also banned the imports of chemical fertilizers that hugely affected crop production, such as rice and tea, which were the main contributors to Sri Lankan exports. While, a huge trade gap of around 35 billion USD has been proving to be venom for the economy. The storm of default in Pakistan has passed but its jolts are felt yet and the situation is still alarming. If the government of Pakistan had not ended subsidies on fuel, the chances of defulat were on the way. The reduction of Rs 72 billion in Armed Forces Development Program (AFDP) is undoubtedly welcome. But still a long way to go and the government has to take tough decisions such as it took on the implementation of 10 percent of super tax. Ending political turmoil, cessation elite privileges, and continuation of the economic policies based on a new charter of economy are urgently needed. Will Sanity prevail?