Pakistan Teetering on Bankruptcy, IMF Loan Comes with Strings
Islamabad, Pakistan – August 10, 2024 – Pakistan stands on the precipice of economic collapse, burdened by unsustainable levels of debt. The country’s total outstanding debt has soared to $26.2 billion, leaving it unable to meet interest payments. Desperate, the government is begging lenders to extend repayment deadlines and secure new loans. However, international lenders seem hesitant to extend further credit.
The government has recently secured a bailout package from the International Monetary Fund (IMF) but these come with strict conditions. These measures are expected to disproportionately impact the impoverished population, who are forced to bear the burden of their leaders’ mismanagement.
Heavy Debt Burden
According to the State Bank of Pakistan (SBP) Governor Jamil Ahmed, the country’s external debt stands at $26.2 billion for the fiscal year 2025. Despite receiving debt relief from friendly countries, Pakistan still faces a repayment burden of $10 billion by the end of the next fiscal year.
Debt Repayment Efforts
The SBP has already paid $1.5 billion towards external debt this fiscal year, with $8.5 billion remaining. In the previous fiscal year, $12.5 billion was paid towards external debt, which was still not enough to cover the total debt burden of $130 billion.
IMF Loan and Economic Challenges
Pakistan has received its first tranche from the IMF after restructuring $4.4 billion in Chinese commercial loans. Additionally, loan rollovers from Saudi Arabia and the United Arab Emirates have been extended for another year. This will provide some temporary relief but does not address the underlying economic issues.
Inflation and Economic Uncertainty
Controlling inflation, which is expected to reach 13.5%, remains a significant challenge for the Pakistani economy. Rising wheat prices and potential conflicts in the Middle East are further fueling inflationary pressures.