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'THE DEBT VOLCANO' in easy form
A very good article on Public debt
http://epaper.dawn.com/~epaper/Detai...5_2012_007_004 first read the article and then read the bullet of the article , it will be easy for you to understand inshaAllah Pakistan is facing many problems Less growth & Low investment & Inflation And this all is due to accumulation of public debt (public debt means total debt of the country) Total debt obligations of Pakistan are 12.83 tr on Dec 2011 (65 % of the GDP) It was 6.5 tr on June 2008 (means it become almost double) This is inability of government how In not controlling high fiscal deficits and Short maturity domestic borrowing No new investments came in Pakistan No work for energy crisis (result in power sector losses and less investments) It resulted in Government failed to pay demands of budget Fails to pay for social sector expenditures Details of Public Debt (increase in public debt from 2008 to 2011) Exchange rate depreciation 1.5 tr Power sector losses 1.3 tr Debt servicing on incremental borrowing 1.3 tr Legacy expenditures 0.9 tr How exchange rate policy help in increasing public debt Sharp depreciation of rupee (because of the policy of foreign exchange related to stable dollar ) Subsidy to imports and penalty on exports We have less foreign reserves (means no reserve buffer left to mitigate the pressure) How tax policies help in increasing public debt Tax-GDP ratio in 2005 was 13 % , which is 9.8% by 2011 if taxes were collected then there was no need of debt and it would also have been reduced debt by saving not accumulated debts interest Suggestions tax mobilization reform the power sector ceiling and check on government borrowings by strengthening provisions of the FISCAL Responsibility and Debt Limitation Act (FRDL) of 2005 |
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