Pakistan’s foreign borrowing surged a jaw-dropping 83 per cent in the first ten months of the current fiscal year, with the government securing nearly $11 billion in external loans – $5 billion more than during the same period last year. The increase is driven almost entirely by the fallout from Donald Trump and Benjamin Netanyahu’s Persian misadventure. In fact, the month of April – coinciding with the start of the war— alone witnessed a nearly sevenfold increase.

But even though the cause may be something beyond the government’s control, resolving the brewing trouble will be impossible without good governance and precision policymaking. The primary driver of borrowing remains debt servicing, with external repayments expected to reach almost $13 billion by the end of the year, compared to about $8 billion last year. There was some optimism that we might be able to break out of the debt refinancing loop – borrowing to service existing obligations – on the back of solid current account surpluses, but the spike in energy prices and its impact on the trade deficit have erased all of our gains. Without getting our accounts in order, it will be impossible for the government to invest the kind of amounts needed to improve socioeconomic conditions. Foreign and domestic debt servicing is devouring more than half of total revenues, strangulating the fiscal space needed for development, education and healthcare. During the first six months of the current fiscal year, just the interest payments on public debt were more than double the combined allocations for defence and PSDP.

If we are to escape the debt cycle, we must pivot towards increasing exports, attracting genuine foreign direct investment and plugging the leaks in the energy sector. Failure to do so will mean that the unsustainable debt pile of today will one day be a ‘good memory’, similar to how many people reminisce about decades past, when our economy was still a basket case, but debt was ‘only’ a few billion dollars, and the dollar was ‘just’ Rs50 or so.