The quantum of debt Pakistan requires is growing at a faster rate than the net output of the economy (GDP), according to a report by Tabadlab, an Islamabad think tank. The report warns that unless there are sweeping reforms and dramatic changes to the status quo, Pakistan will continue to sink deeper into debt, heading towards an inevitable default.
Tabadlab’s analysis, titled ‘A Raging Fire’, reveals the gravity of Pakistan’s debt crisis, highlighting the lack of financial resources and the urgent need for structural changes. The report points out that since 2011, Pakistan’s external debt has nearly doubled in nominal terms, while domestic debt has increased by sixfold.
In the fiscal year 2024, Pakistan will need to pay back an estimated USD 49.5 billion in debt maturities, with 30% of that amount being interest. The report emphasizes that Pakistan’s debt accumulation has been used to fuel a consumption-focused, import-dependent economy, without investment in productive sectors or industry.
Furthermore, the report highlights the alarming debt profile of Pakistan and its unsustainable borrowing and spending habits. It also points out the increasing demands of a growing population for social protection, health, education, and climate change-related adaptation strategies.
The report urges for immediate and strategic interventions to address Pakistan’s formidable debt challenge and calls for the prioritization of crucial sectors such as education, health, and climate change. It warns that the country’s climate and debt vulnerabilities exacerbate each other but also presents an opportunity to synergize and mitigate both crises at the same time.
In conclusion, the report by Tabadlab paints a grim picture of Pakistan’s debt situation, emphasizing the urgent need for transformational change to avert an inevitable default and address the country’s growing needs.
The report’s findings shed light on the severity of Pakistan’s debt crisis and the pressing need for strategic interventions to prevent further economic deterioration. It underscores the importance of prioritizing crucial sectors and implementing structural changes to ensure Pakistan’s long-term financial stability and sustainability. The report serves as a wake-up call for policymakers and stakeholders to take immediate action to address Pakistan’s growing debt challenge.
