Pakistan’s debt profile is “alarming,” according to a report by the think tank Tabadlab, which is located in Islamabad. The report also called the nation’s borrowing and spending patterns “unsustainable.”
“A raging fire: Pakistan’s debt crisis” is the title of the 68-page report that was made public on Sunday. It stated that the nation owed a total of Rs77.66 trillion, or $271.2 billion, in debt and liabilities, including both external and internal debt.
According to the report, the Paris Club (6.3%), multilaterals (30.1%), other bilateral (19.1%), commercial banks and T-bills (4.9%), Eurobonds (6.3%), the International Monetary Fund (5.7%), banks (5.1%), and private sector liabilities (12.7%) were the main sources of Pakistan’s external debt.
It also mentioned Pakistan’s debt per person, which increased by 36% in just 12 years, from $823 in 2011 to $1,122 in 2023. Concurrently, the nation’s GDP per person had a 6 percent fall, from $1,295 in 2011 to $1,223 in 2023. This indicates that the nation’s debt is increasing “far faster than its income, creating financing gaps and requiring additional borrowing,” according to the statement.
According to the analysis, since 2011, Pakistan’s domestic debt has climbed six times while its external debt has nearly doubled. The nation will have to repay an estimated $49.5 billion in debt maturities, of which 30% is interest.
Based on the data, Pakistan’s external debt has almost doubled while its internal debt has increased six times since 2011. Approximately $49.5 billion in debt, of which 30% is interest, is due from the country.
This, it said, raises concerns about the nation’s debt profile and its “unsustainable” borrowing and spending patterns.
It mentioned the need for “adaptation techniques and a switch to green energy” in response to climate change-related disasters and the rising demands of increasing numbers of people, including social safety, education, and health.
The paper stated that Pakistan’s climate and debt susceptibility are interdependent, making the nation susceptible to macroeconomic fluctuations and highly dependent on external assistance, which in turn intensifies the debt cycle.
According to the report, it had serious domestic consequences, including decreased spending on social services, political and social unrest, and a reduction of the government’s authority to set policies.
Seven strategies for containing the escalating crisis were outlined in the report. These included de-risking the business environment, enforcing fiscal discipline and effective management of spending, boosting foreign currency inflows for capital growth by forming special funds and partnerships to raise money for significant projects, making internal adjustments through state-owned entity management and expanding the ecosystem of public-private partnerships, broadening the taxation net, building an export-oriented industrial policy, and reconsidering climate finance by utilizing debt-for-nature swaps.
SOURCE: DAWN NEWS
