Avoiding default

A doom’s day scenario for Pakistan is in the making as its economy is constantly strangulating. Risk of a possible default is now imminent, and reliable statistics are pointing a finger at it. Even the Ministry of Finance and the huddles that the coalition government is making to pick up threads of the economy indicate a pessimist equation.

The PM’s visits to Saudi Arabia and China are also meant for ushering a semblance, and to ensure that balance of payments do not come to a grinding halt. The risk of default has spiked to a 13-year high of 52.8%, and the credit rating agencies have come up with a deadly blow by downgrading Pakistan to new lows. This will certainly act as a detriment for foreign investors and further squeeze inflow of capital. The risk of default measured by the 5-year credit default swap hinted at an inflated 3.07 percentage points in a day early last week, suggesting a crisis of confidence in the economy.

Though most of the economies in the region are impacted, it seems political instability is taking a toll in Pakistan. The problem is that the economy is not picking up despite the IMF programme revival, and release of $1.27 billion tranche. The question being asked is whether the country will be able to repay the maturing debt or not. A staggering $1 billion is set to be returned against the maturing of the 5-year Sukuk on December 5. Pakistan is eyeing a special gesture of $6.3 billion rollover from Chinese credentials, and it is hoped that it would serve the purpose of staying afloat, accordingly.

But in the long run, the need is to foment a strategy wherein indigenous resources are mobilised for growth and exports. It is a catalyst to keep the wheel of the economy turning, and no amount of aid and assistance can buoy credentials. An out-of-the-box solution is desired, and coming out of dependence is a must. Being an agrarian economy with a miniature industrial base, Pakistan must focus on information technology strides and exporting it to create a market for itself. This will surely bulldoze fears of marginalization and default.