Pakistan’s debt burden also hurting global economy

Pakistan’s struggle to service its debt is a disaster for the country, but it’s not very good for the rest of the world either, says economist Michael Pettis. Mr Pettis, a senior fellow at Carnegie Endowment, Washington, and a professor of finance at Guanghua School of Management at Peking University in Beijing, made this argument while responding to a series of tweets by Atif Mian, a professor of economics, public policy and finance at Princeton University, on Pakistan’s debt position and its consequences for the economy. Mr Mian warned in his tweets that the Pakistani economy was near collapse and needed/immediate course correction. “To thump your chest and say, ‘see we have not defaulted’ means nothing if you continue to ignore the underlying crisis,” he wrote. “The only thing worse than indecisiveness in the face of a crisis is incompetence.” Mr Pettis, however, urged the creditors to review their policies as well because the debt burden was suppressing Pakistan’s contribution to global demand by effectively converting its demand into unwanted global savings. “Instead of recycling them in the form of imports, Pakistan’s export earnings must be recycled in the form of debt repayments,” he wrote.