Big businesses almost always use borrowed capital in their projects. If the project is based on a proper feasibility, there will be a mixture of debt and equity both. Borrowing is also done by the state, if it is for development such as construction of essential roads, schools and health centers providing electricity, gas, water supply which normally is a responsibility of the state.
Borrowing is also done by individuals for the purpose of acquiring cars and houses on installment. They increase productivity and provide employment opportunities. One other kind is when borrowers are forced to borrow in order to pay installments. Let us examine our situation: a month ago, our foreign exchange reserves went down by US $4 Billion and we obtained $10.6 Billion loan during the same year. Pakistan bears a total debt of $60 Billion, declining exports and the level of reserves as low as $20 Billion. What is going to happen?
Lahore, September 2.