"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.
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.
"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.
"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."