WEB DESK: Former SBP Governor Dr. Murtaza Syed warns Pakistan of severe debt trap, urges prudent debt reprofiling
On Saturday, Dr. Murtaza Syed, former Governor of the State Bank of Pakistan (SBP), raised alarming concerns about Pakistan’s current debt crisis, labeling it as “one of the deadliest debt traps in the world.”
Dr. Syed, who also served as the acting governor of SBP in 2022, highlighted the urgent need for a more cautious approach to managing Pakistan’s debt in a series of tweets.
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In addition, Dr. Syed stated the detrimental impact of excessive debt accumulation and its diversion towards non-productive expenditures. He underscored that servicing past debts has severely constrained Pakistan’s ability to invest in crucial developmental and climate initiatives.
According to Dr. Syed, Pakistan’s debt burden has resulted in exorbitant interest payments, surpassing those of any other developing country as a percentage of its economy. He cited data from the UNCTAD debt dashboard, revealing that Pakistan allocates a significant portion of its government revenue to servicing debts, leaving minimal resources for essential social expenditures such as education and healthcare.
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The policymaker warned that Pakistan’s high debt servicing costs could lead to widespread social discontent, drawing parallels with recent developments in Kenya. He urged policymakers to consider restructuring Pakistan’s debt to alleviate the strain on public finances and redirect funds towards sustainable economic growth.
“Repaying interest on debt is crowding out public spending on critical sectors like education and health,” Dr. Syed noted, highlighting Pakistan’s disproportionately low investment in these areas compared to its debt obligations.
Dr. Syed’s remarks come amid growing concerns over Pakistan’s economic stability, exacerbated by high debt levels and limited fiscal space. His call for prudent debt management resonates at a time when the country faces mounting challenges in balancing debt repayment with essential social and developmental needs.
