Amidst debt-trap

Pakistan's economy faces a severe debt crisis, with over $131 billion owed, and mounting debt-servicing challenges

Pakistan's economy is in a debt quagmire. Fresh borrowings are not helping the objective of making ends meet, and are now coming to haunt the credibility of repaying sovereign debts. The country owes more than $131 billion, according to the International Debt Report 2024, with the external debt-servicing amounting to 43% of total exports. To avoid an eminent default, Islamabad has been running from pillar to post seeking largesse of friendly states in either restructuring the loans or offering a roll-over. This hide and seek policy has compounded the debt enigma, coupled with an increase in debt stock and constantly growing interest payments.

There is, however, a flip side too. The government is obsessed with the mantra of 'all is well' and its financial gurus continue to paint a rosy picture of growth and recovery for reasons of political exigency. To supplement its claim, the beleaguered dispensation projects the bullish trend often witnessed at bourses on the national index, apparently owing to the euphoria of forward selling.

Inflation climbing down the ladder is cited as an achievement, with claims that the purchasing power of the commoners is on the rise, which is not the case, per se. Though remittances and exports have started increasing, the country is still embroiled in a crisis of balance of payments as it has to pay back more than $28 billion this fiscal year. The benevolence of Riyadh was tapped this week once again seeking a roll-over for the maturing $3 billion, as another $2 billion cash deposit hangs in the balance by June next year.

It would be futile in such a scenario to dream of recovery miracles, and so is the uphill task of procuring investments. The economy is in need of a paradigm shift and the least that should be done is to do away with non-developmental expenses, slash ministerial and bureaucratic hangovers, and learn to live within means. Harnessing an export-driven economy and generating wealth is the way to go for retiring debts.