- Pakistan’s economy has been in crisis for months, and an economic crisis comes around every few years in Pakistan.
- Every successive crisis is worse as the debt bill gets larger and payments become due.
- Pakistan keeps going to the IMF again and again. A whopping number of 23 programmes clearly suggests that Pakistan is addicted to the Fund`s tough love.
- In contrast India has only been to the IMF seven times.
- Pakistan has less than $3 billion and India has around $600 billion in foreign exchange reserves today.
- Experts remark “Pakistan will struggle to get through this year. A default looks likely but it is not a given. Pakistan could still take measures to resolve the situation.”
Pakistan`s economy has been in crisis for months, predating the summer’s disastrous floods. Inflation is backbreaking, the rupee’s value has fallen sharply, and its foreign reserves have now dropped raising the possibility of default.
An economic crisis comes around every few years in Pakistan, borne out of an economy that doesn’t produce enough and spends too much, and is thus reliant on external debt. Every successive crisis is worse as the debt bill gets larger and payments become due. This year, internal political instability and the flooding catastrophe have worsened it. There is a significant external element to the crisis as well, with rising global food and fuel prices in the wake of Russia`s war in Ukraine. The combination of all these factors has spelled perhaps the greatest economic challenge Pakistan has ever seen, experts say.
In the meantime, the former Deputy Governor of the State Bank of Pakistan has criticized Pakistan citing it the ‘most loyal customer’ of the International Monetary Fund (IMF). ‘Pakistan keeps going to the IMF again and again. A whopping number of 23 programmes clearly suggests that Pakistan is addicted to the Fund`s tough love. Argentina, with 21 programmes, comes second. He said. ‘In contrast India has only been to the IMF seven times’ He added.
The channel reported quoting the expert that “Pakistan has less than $3 billion in foreign exchange reserves today. The reserves have never exceeded $21 billion in its history. Bangladesh has around $35 billion, India has around $600 billion and China has around $4 trillion. Since the early 1990s, Pakistan has had 11 IMF programmes. Bangladesh has had three. India and China have had none,” it said.
Pakistan must repay $73 billion by 2025, according to a Pakistani stockbroker, as per a report in the Wall Street Journal (WSJ). Experts say it cannot meet that obligation, meaning that even if it gets back into the IMF programme, it will still need to negotiate a debt restructuring further down the line.
Elections have to be held by October, according to Pakistan’s constitution, so any debt restructuring would be likely to be undertaken by the next government . Charles Robertson, the global chief economist at Renaissance Capital, an emerging markets investment bank, said that Pakistan’s debt servicing burden put it in the same category as some developing countries which have already defaulted, such as Sri Lanka. “Pakistan will struggle to get through this year. A default looks likely but it is not a given,” said Robertson, adding, “Pakistan could still take measures to resolve the situation.”
