Drowning in Debt

To manage growing financial-burden, KP must reassess its dependence on external loans, target revenue-generating sectors, enhance financial oversight, boost internal revenue, and explore debt restructuring options.

Shabbir Hussain Imam

The facts are harsh. Unfolding over a decade and a half, this is a tale woven with complexity and urgency. Khyber Pakhtunkhwa (KP), with its untapped mineral wealth, dangles on the brink of monetary disintegration. Economic opportunities languish in dormancy, while the impending crisis grows ever more acute, darkening the horizon of KP’s future.

With each passing day, a multitude of pressing questions emerges: What strategies are required to unlock this vast potential?

Can the province adeptly navigate this tumultuous landscape before the moment slips away?

As opportunities remain dormant, the looming crisis intensifies, casting a shadow over KP’s future. Each passing day raises critical questions: What will it take to harness these resources?

Can the province navigate this turbulent path before it’s too late?

By 2030, KP’s debt may reach an astronomical Rs. 2,555 billion, with a staggering Rs. 355 billion earmarked entirely for interest payments. This amount mirrors an entire annual development budget.

According to Wadan News, loans from international financial institutions have become a lifeline, yet this dependence raises urgent questions. How sustainable is this approach? The implications are far-reaching, affecting not just the present but the very fabric of KP's economic stability for years to come. The Asian Development Bank (ADB) stands at the forefront of this economic net. By 2030, KP’s debt may reach an astronomical Rs. 2,555 billion, with a staggering Rs. 355 billion earmarked entirely for interest payments. This amount mirrors an entire annual development budget.

As of now, KP’s debt is Rs. 632 billion. But this is just the tip of the iceberg. Projections indicate it may swell to Rs. 725 billion by December 2024, driven by an additional Rs. 93 billion in loans. The following years paint a grim picture. In 2025, KP may borrow Rs. 215 billion, and in 2026, that figure could rise to Rs. 284 billion. By the end of 2026, total debt could reach Rs. 1,224 billion. Fast forward to 2028, and the cumulative debt might skyrocket to Rs. 2,032 billion. Further loans—Rs. 353 billion in 2027 and Rs. 455 billion in 2028—will fuel this alarming increase.

In the final years of this decade, even more debt looms. Agreements from the PTI era will push KP to incur Rs. 346 billion in 2029 and Rs. 177 billion in 2030. Ultimately, this could culminate in a staggering Rs. 2,555 billion. The depreciating rupee against the dollar exacerbates the situation, further inflating the debt.

Debt Accumulation in Recent Months

In just six months, KP has added Rs. 101.72 billion to its debt, bringing the total to Rs. 632.44 billion. A substantial portion—approximately Rs. 310.90 billion—has come from the ADB for development projects. Other lenders include the International Development Association (IDA), the Japan International Cooperation Agency (JICA), and the French Development Agency (AFD).

Interestingly, the largest allocation—Rs. 215.55 billion—has gone to the Department of Transport and Communication. Yet, other critical sectors like health, education, agriculture, and infrastructure also receive significant funding.

Strategies for Sustainable Debt Management

1. Reassessing Loan Reliance: KP should reconsider its heavy dependence on external loans. Exploring alternatives like public-private partnerships could reduce this dependency.
2. Strategic Loan Deployment: Loans should target sectors with revenue-generating potential. Infrastructure projects must be evaluated for long-term economic benefits.
3. Enhancing Financial Oversight: Establishing stringent financial oversight is crucial. This ensures that borrowed funds are utilized effectively to promote economic growth.
4. Boosting Revenue Generation: KP must enhance its internal revenue generation. This includes improving tax collection and fostering industrial growth.
5. Debt Restructuring Opportunities: The provincial government should actively seek debt restructuring or renegotiation with international creditors to ease the burden of interest payments.

KP need to chart a path toward a sustainable economic future. Addressing its escalating debt is imperative and the challenges are significant, but with a focused approach, the province can navigate this turbulent financial landscape.

For more visit Finance Department Government of Khyber Pakhtunkhwa

Ends.