https://sputniknews.in/20240808/pakistan-grapples-with-12-billion-debt-interest-payments-as-china-and-uae-offer-lifeline-7981838.html
Pakistan Grapples With $12 Billion Debt Interest Payments as China and UAE Offer Lifeline
Pakistan Grapples With $12 Billion Debt Interest Payments as China and UAE Offer Lifeline
Sputnik India
The country's economic challenges include a hefty debt of $131 billion. Amid this financial strain, is there a glimmer of hope for Islamabad? 08.08.2024, Sputnik India
2024-08-08T18:21+0530
2024-08-08T18:21+0530
2024-08-08T18:21+0530
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pakistan
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Pakistan's economic landscape has been marred by a series of financial crises over the past few decades. The country’s debt has ballooned due to various factors, including persistent budget deficits, low tax revenues, and high levels of public spending amid political instability.In 2024, Pakistan's total external debt reached $131 billion, with an annual $12 billion in bilateral debt maintenance looming large.In this light, former regional head of the Pakistan Council of Scientific and Industrial Research (PCSIR) and political analyst, Shahid Abdul, told Sputnik India, that the government has been grappling with the challenge of managing its debt obligations while simultaneously striving to implement structural reforms to stabilize the economy.China has been a significant economic partner of Pakistan, particularly through the China-Pakistan Economic Corridor (CPEC) initiative, which aims to enhance connectivity and infrastructure development in the country. Saudi Arabia and the UAE have also been crucial allies, offering financial assistance and investments in various sectors.In addition to the debt extension assurances, at the end of August, Islamabad is anticipating a $7 billion loan from the International Monetary Fund (IMF) which seeks to aid the economy, but is also pushing the country further into debt. Meanwhile, the loan is part of a broader economic reform program aimed at stabilizing Pakistan's economy, addressing structural imbalances, and fostering sustainable growth.These reforms look to address the root causes of Pakistan's economic vulnerabilities and create a more sustainable fiscal framework, but in the short term they impact the masses negatively as they put further pressure on the public budget.Moreover, the strengthened reserves will enhance the country's ability to meet its international obligations and stabilize the Pakistani rupee, which has faced devaluation pressures due to dwindling reserves.The analyst pointed out that although these reforms are essential for long-term economic stability, they involve serious issues for the people, which are already struggling economically.Consumer prices have risen by 28% since January 2023, which has made it hard for many Pakistanis, especially poorer households, to make ends meet. According to the analyst, Pakistan also imports a lot of its food and fuel for its 240 million population, which means it constantly records trade deficits; coupled with high prices, that result in foreign currency reserves dwindling, which directly affects the population with rising prices of fuel, food and other basic necessities.Hence, the debt extension assurances from China and the UAE, along with the anticipated IMF loan, provide a much-needed lifeline for Pakistan's struggling economy, but it fails to bring the economic stability that millions of Pakistanis urgently require, the analyst concluded.
https://sputniknews.in/20240322/why-imf-deal-is-a-double-edged-sword-for-pakistans-economy-6904303.html
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pakistan, china, islamabad, debt restructuring, imf loan, economic crisis, economics, economic challenges, inflation
pakistan, china, islamabad, debt restructuring, imf loan, economic crisis, economics, economic challenges, inflation
Pakistan Grapples With $12 Billion Debt Interest Payments as China and UAE Offer Lifeline
The country's economic challenges include a hefty debt of $131 billion. Amid this financial strain, is there a glimmer of hope for Islamabad?
Pakistan's economic landscape has been marred by a series of financial crises over the past few decades. The country’s debt has ballooned due to various factors, including persistent budget deficits, low tax revenues, and high levels of public spending amid political instability.
In 2024, Pakistan's total external debt reached $131 billion, with an annual $12 billion in bilateral debt maintenance looming large.
In this light, former regional head of the
Pakistan Council of Scientific and Industrial Research (PCSIR) and political analyst,
Shahid Abdul, told
Sputnik India, that the government has been grappling with the challenge of managing its debt obligations while simultaneously striving to implement structural reforms to stabilize the
economy.
"The debt burden has put pressure on Pakistan's foreign exchange reserves, diminished the value of Pakistani rupee, and created serious fiscal pressures. But recently in a critical development, Pakistan has secured debt extension assurances from its key allies, China, Saudi Arabia and the UAE. These assurances provide Islamabad with some breathing room to manage its immediate debt obligations, but it doesn't excuse Islamabad from paying at all, it is just extending the payback time," Abdul stated.
China has been a significant economic partner of Pakistan, particularly through the
China-Pakistan Economic Corridor (CPEC) initiative, which aims to enhance connectivity and infrastructure development in the country. Saudi Arabia and the UAE have also been crucial allies, offering financial assistance and investments in various sectors.
In addition to the debt extension assurances, at the end of August, Islamabad is anticipating a $7 billion loan from the
International Monetary Fund (IMF) which seeks to aid the economy, but is also pushing the country further into debt. Meanwhile, the loan is part of a broader
economic reform program aimed at stabilizing Pakistan's economy, addressing structural imbalances, and fostering sustainable growth.
According to the analyst, the IMF loan, however, comes with stringent conditions. "Pakistan needs to apply a series of economic reforms, including reduction of debt stock accumulation, improvements in tax collection, lessening subsidies, and structural adjustments to improve economic efficiency," he stated.
These reforms look to address the root causes of Pakistan's economic vulnerabilities and create a more sustainable fiscal framework, but in the short term they impact the masses negatively as they put further pressure on the public budget.
"The most immediate impact of the debt extension assurances is the relief from the urgent need to repay $12 billion in bilateral debt this year. This alleviation provides Pakistan with some fiscal space to manage its resources more effectively and prioritize essential expenditures without the imminent pressure of large debt repayments," Abdul stated.
Moreover, the strengthened reserves will enhance the country's ability to meet its international obligations and stabilize the Pakistani rupee, which has faced devaluation pressures due to dwindling reserves.
The analyst pointed out that although these reforms are essential for long-term economic stability, they involve serious issues for the people, which are already struggling economically.
"Measures such as reducing subsidies and increasing taxes could face resistance from the public, but are crucial for addressing structural imbalances and creating a sustainable fiscal framework," the analyst said. "The economic reforms required by the IMF usually have a negative social impact, particularly on poorer segments of the population, which is millions of Pakistanis. To limit this, the government should provide social safety nets and support measures to lessen the impact on the most affected groups."
Consumer prices have risen by 28% since January 2023, which has made it hard for many Pakistanis, especially poorer households, to make ends meet.
According to the analyst, Pakistan also imports a lot of its food and fuel for its 240 million population, which means it constantly records trade deficits; coupled with high prices, that result in foreign currency reserves dwindling, which directly affects the population with rising prices of fuel, food and other basic necessities.
Hence, the debt extension assurances from China and the UAE, along with the anticipated IMF loan, provide a much-needed lifeline for Pakistan's struggling economy, but it fails to bring the economic stability that millions of Pakistanis urgently require, the analyst concluded.
