Pakistan’s economy is now run almost entirely on borrowed money. Even as Pakistan last week managed to secure new financial assistance of around $4 billion from Saudi Arabia and the United Arab Emirates, which will help Islamabad avoid debt default, the money comes in the form of renewing a existing loan. The additional loans will only increase Pakistan’s debt burden. The country has to make a repayment of $73 billion by 2025.
“It may now have a breather, but the country needs to revive the economy, or else it has to keep borrowing from one to pay another, that is exactly the situation now,” an analyst told India Narrative on condition of anonymity.
As of January 6, its foreign exchange reserves amounted to 4.340 million dollars; most of it came from loans from other countries. The lifeline provided by Saudi Arabia and the United Arab Emirates will go some way to help increase reserves and allow Islamabad to resume talks with the International Monetary Fund.
Political uncertainty has intensified following the ouster of former Prime Minister Imran Khan. The Pakistani Tehreek-e-Insaaf leader, since his departure from government, has organized rallies and protest rallies against the PMN-L government headed by Prime Minister Shehbaz Sharif, brother of party supremo Nawaz Sharif, and has even called for early elections. To the embarrassment of the Sharif government, Khan’s party even won the elections held in July and October.
A Brookings study has said the country’s economic crisis has been brewing even before the catastrophic floods. “Every few years there is an economic crisis in Pakistan, stemming from an economy that does not produce enough and spends too much, and is therefore dependent on external debt. Each successive crisis is worse as the debt bill rises and payments are due,” he said, adding that Islamabad may be forced to restructure its loans.
Sharif, at the dismissal ceremony for Pakistan Administrative Service (PAS) probationary officers, said yesterday that it is shameful to seek more loans. Other than that, the financial assistance will only increase Pakistan’s debt burden as the country will also have to repay the loans at a specified time.
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