Inappropriate use of debt money is reason for economic crisis in Pakistan – Atif Mian

  •  Inappropriate use of debt money is the basic problem of Pakistan.
  • Pakistan’s economic model is largely based on foreign income sources.
  • The problem with Pakistan is that foreign money is not used to generate the production capacity.
  • The development of a country depends upon the nation’s own capacity.
  • To add debts to the economy is likely to mortgage the future of the next generations.
  • The development of a country depends upon the nation’s own capacity.


Pakistani-American economist Atif Rehman Mian in an interview with BBC Urdu proposed several reforms and changes to improve the economic conditions of Pakistan alongside highlighting the flaws in the economic model of the country. According to him the inappropriate use of debt money is the basic problem of Pakistan why the country is at the helm of the worst economic crisis.

Why Pakistan needs to go to IMF every four or five years?

According to Atif Mian, the basic reason why Pakistan needs to go to an international monetary body is that the model that we as a country has adopted has some flaws in it and this is why the economic situation of the country gets collapsed after every four to five years.

Pakistan’s economic model is largely based on foreign income sources

The economic model which provides the basis for policy building in Pakistan is based on foreign sources of income. As long as you are dependent on the foreign powers for the growth of the economy you are on the path of unsustainable economic growth.

The problem with aid or borrowed money is that you see the economic activity as long as the money is in the transaction but this accounts for timely and artificial development because as the inflow of money stops it begins the count down on the economy.

In an answer to a question regarding capital, Atif Mian said that if the capital increases the domestic capacity (production capacity) of the country then you can increase the capability to generate income sources to return the debt money and to generate the productivity but the problem with Pakistan is that the foreign money is not used to generate the production capacity.

When a country takes debt over debts then it slows down the economy and causes the balance of payment crisis as well. Also, when the inflow of money isn’t used to enhance the production capacity then it does not increase the country’s export.

There are no two opinions regarding the fact that corruption damages the economy of the country but the basic problem lies with the growth model of Pakistan which is unsustainable fundamentally.


Almost all the developed countries including China, Korea, and East Asian countries have economic productivity growth behind their growth which aims at increasing exports, increasing global competence (i.e., competence in value-added products).

The development of a country depends upon the nation’s own capacity.

It is the right time for Pakistan to adopt the path of increasing productive capacity and this includes education, abidance by the rule of law and capacity building among the people so that they shall be able to compete globally.

Every country has its resources at its disposal and what is needed is the right exploration of resources, for instance, there is a need to improve the education system and need to build up a favorable environment.

Also See: Economist Atif Mian Proposes Solution For Ongoing Economic Crisis

About rapid increase in GDP

The increase in the GDP from 10 to 14 percent within the tenure of the incumbent government is difficult but if this happens then it would be for the very first time for the country to adopt such a remarkable change and this kind of positive outcome is not likely to occur if they(government) follow the footsteps of previous governments, he said.

Only a radical change in the system can help the government to meet such a huge and undoable target. For example, radical changes in the financial and taxation system are needed and you need to adopt digitization and formal economy and further need a proper record keeping as well. Many countries of the world have adopted even greater tax to GDP ration and this is possible only through adopting certain international standards.

The actual problem lies within the system if one tries to find out.

Pakistan needs a capacity buildup

For a country like Pakistan, said Atif Mian, which already suffers issues at multiple fronts, it is necessary to build up the internal capacity for delivery of services and to develop the administrative capacity in itself. No country can run without taxes because revenue generation enables further investment and social spending.

Capacity building in the institutions is provident and brings about competent leadership to run the country. The roots to improve the growth systems lies in the improvement of the taxation and for this, the state needs to develop the administrative capacity and digitization of payment systems.

How to address the balance of payment crisis?

Pakistan is not the only country to suffer the balance of payment crisis as this happens in many other countries as well. The very first thing that is required when you undertake the very issue is the restructuring of the economy and bring the situation under control.

And the crisis situation for Pakistan was clearly evident even in the last year of Nawaz Sharif Government and responsibility also lies on their part because they should have realized the solution of the economic issues but they opted to delay it instead might be due to the coming elections as no party wants to compromise on its popularity graph near the times of election.

There is a dire need to pinpoint the exact reasons behind such drastic conditions of the economy and to bring such reforms that lead to the longterm and everlasting sustainable growth probably not dependent on the debts.

To add debts to the economy is likely to mortgage the future of the next generations.

Systematic reforms and situation for Pakistan

Two things are crucial for the systematic reforms: one is the kind of leadership that is working to run the system either the people who are running the system have that competence or not and if the caliber of team is not world-class than the positive outcome is very unlikely and the second thing is the need of the right environment, the environment that revives the confidence of people and other countries.

Unless the elements that promote the violence and extremism within the country are curbed, one can’t improve the country’s situation and without improving the law and order situation no economy can work proficiently. Internal harmony and tolerance are needed for Pakistan to go to the next level. The extremism outflows the investment so the selection of competent people and the suitable environment is mandatory to bring the country on the rails.

About the Housing policy by the incumbent government

The housing policy can’t increase the growth of the country like that of Pakistan because Pakistan is in crisis as it lacks revenue and exports. Housing perhaps is the only sector which is non-exportable and is exactly against what is required to increase the exports of the country.

50 million houses are one of the biggest development for Pakistan and it will involve huge labor and massive investment but all the labor and invested capital will add nothing to the export sector rather it will do another damage to the economy by increasing imports as various things are to be imported from foreign sources. Mian Atif also added the example of Brazil which started a similar housing policy in their country and suffered huge losses.

What solution do you suggest to improve the economic situation of Pakistan without causing less harm to the people of the country? Let us know in the comment section below

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