Seeking assistance from international financial institutions to project finance long-term infrastructure industrial projects, and public services has drowned Khyber Pakhtunkhwa (KP) in Rs265 billion worth of loans. The primary lenders in KP’s case are the World Bank (WB) and Asian Development Bank (ADB). Ever since 2014, the KP government has been borrowing money from such financial organisations.
The officials—instead of specifying an amount in the provincial budget for the development of cities—took out loans for the purpose. It comes as a great shock that no one ever objected to this practice of running government affairs through external loans. At the very least, the opposition parties could have pointed this out and should have exerted pressure on the ruling party.
There is a plethora of evidence suggesting an increase in external debt stock reduces the fiscal space to service external debt liabilities. Thus the overall economic growth becomes stagnant. Since the KP government carried out all these infrastructural and human development projects on the back of excessive loans, there are some hard questions that the officials need to address.
Is there any concrete plan regarding the repayment of these loans? Are any of these projects sustainable financially—can they pay for their loans themselves? The accumulated debt is well beyond the province’s capacity of income generation. And the matter gets further complicated when one looks at the scant resources at the province disposal.
Officials need to find a way around the issue of repayment of debts so that the projects function sustainably. They need to find the solution quickly before the burden on the exchequer becomes too great.