Foreign debt is often seen as a way to finance development and growth in low- and middle-income countries. However, a new book by Didac Queralt, a political scientist at the Institute of Political Economy and Governance, challenges this view. In Pawned States, Queralt argues that foreign lending has historically led to economic and political instability in the developing world, as well as reduced state capacity and sovereignty.
Queralt traces the origins and consequences of foreign debt from the 19th century to the present day, covering regions such as Latin America, Africa, and Asia. He shows how foreign creditors have influenced the domestic policies and institutions of debtor countries, often to their detriment. He also explains how foreign debt has affected the international relations and conflicts among creditor and debtor states.
One of the cases that Queralt examines in his book is Pakistan, a country that has been heavily dependent on foreign aid and loans since its independence in 1947. Queralt shows how foreign debt has shaped Pakistan’s economic performance, political stability, and security challenges over the decades. He also reveals how foreign debt has constrained Pakistan’s ability to pursue its own interests and goals, both domestically and internationally.
Queralt’s book resonates with the findings of a recent study by this writer, who conducted an inquiry into the role of foreign assistance to Pakistan and its various aspects. The study, which will be published soon by the Pakistan Institute of Development Economics (PIDE), explores the impact of foreign aid and debt on Pakistan’s economy, society, and governance. It also analyses the challenges and opportunities for Pakistan to reduce its reliance on foreign assistance and achieve self-reliance.
Both Queralt and this writer agree that foreign debt is not a panacea for development, but rather a source of vulnerability and dependency. They also call for a serious reconsideration of the role and effectiveness of foreign lending in the developing world, and suggest ways to improve the management and accountability of foreign debt. Their works are timely and relevant, as the world faces a looming debt crisis amid the Covid-19 pandemic, which has hit the developing countries the hardest.
Their works are also engaging and accessible, as they combine rigorous research with clear and compelling writing. They are recommended for anyone who is interested in learning more about the history and politics of foreign debt, and its implications for the future of development and democracy.