Pakistan is one of the fifty-two countries that are facing a severe debt crisis, with debt repayment and servicing among the country’s most serious issues.
Islam Khabar contends that persistent borrowing leads to an economic crisis through a spiral of more borrowing.
The evidence indicates that a large portion of the government debt has a negative impact on economic growth potential; the impact gets worse with increasing debt.
According to reports, Pakistan’s high level of indebtedness has made it more vulnerable to economic shocks and weaken it politically in relation to external lenders.
Pakistan is clearly on the verge of economic disaster with an external public debt of more than USD 90 billion.
The Islama Khabar reported that Pakistan added USD 4.77 billion to its external public debt during the first half of the current fiscal year (July-December 2021).
The State Bank of Pakistan (SBP) saw its reserves plunge by USD 190 million to USD 10.308 billion. External debt repayments triggered the rapid decline in reserves.
According to official figures, the SBP’s current reserves can cover imports for only about 1.54 months.
Additionally, the decline of foreign exchange reserves is due to Pakistan’s twin deficits, a shortage of foreign currency inflows, and a sharp increase in foreign debt servicing obligations, Islam Khabar reported.
Shehbaz Sharif’s government has increased petrol and diesel prices by PKR 30 per liter, causing a spike in production costs.
In Doha, the Pakistan government and IMF discussed this price hike. At the conclusion of the IMF’s seventh review of its USD 6 billion programmes for Pakistan, which has been stalled since early April, these discussions aimed to reach an agreement on policies.
The IMF had refused to revive the USD 6 billion programme if Pakistan fails to remove the fiscally unsustainable fuel and electricity subsidies. To continue talks, Islamabad had been given two days to lift the cap. Due to ‘deep debt’, the country’s economic condition continues to deteriorate.