Pakistan is on the verge of an unprecedented economic catastrophe. In a shocking economic analysis released this week, experts claim the country is saddled with an external debt of more than PKR 6.5 trillion (approximately $23 billion) which is repayable in the next fiscal year. This debt is almost 50% of the federal budget.
This situation is not simply a financial dilemma; it is a catastrophe on a national level.
With foreign reserves at an all-time low, coupled with stagnating exports and a continuously weakening rupee, the country is left with a no-win situation: repay the loans or fund the most basic socioeconomic services such as healthcare, education, and infrastructure. Reports indicate that a significant portion of this debt is owed to international financial institutions such as the IMF, China, and the Gulf. The option of defaulting is no longer a distant concern, it is imminent.
Pakistan’s situation is further accentuated by the fact that the country continually borrows one loan after the other to repay old debts, which subsequently puts the country in a debt trap. The stagnation of public development, coupled with hyper-inflation, is devastatingly eroding middle-class families’ living standards as they struggle with utility and fuel prices.
Experts suggest without immediate action reducing wasteful spending, broadening the taxpayer base, and enhancing fiscal accountability. Pakistan is bound to experience a downward spiral towards economic collapse akin to Sri Lanka’s in 2022.
On the other hand, the silence of the government is worrying. There is no public-facing plan, no defined roadmap on how the debt will be repaid, leaving the public in a state of deepening anxiety.
