Pakistan economic crisis

Pakistan's Economic Challenges:

Pakistan's stability is at risk due to an escalating economic crisis.
Factors include inflation, political conflicts, terrorism, and the possibility of default due to massive external debt.

Debt Composition and Terms:

Around $45 billion is owed to institutions like the World Bank, Asian Development Bank, and IMF.

Largely concessional loans with repayment spanning 18 to 30 years

2. Paris Club Debt:

$8.5 billion owed to creditor countries like Japan, Germany, France, and the U.S.

Repayment over 40 years with low-interest rates

3 Private Debt and Commercial Loans:

$7.8 billion in private bonds (Eurobonds, Sukuk bonds).
Commercial loans with high-interest rates, including from Chinese financial institutions.

Short- and Medium-Term Repayment Pressure:

From April 2023 to June 2026, Pakistan needs to repay $77.5 billion.
The near-term repayment burden in 2023 includes Chinese deposits and commercial loans.
The repayment burden increases in the following years, posing a substantial challenge.

Inflows and Pakistan's Repayment Challenge:

Exports, foreign direct investment, and remittances are vital to repay debt.
Over the past three years, exports and remittances totaled $164 billion against $170 billion imports.
Import bill and debt repayment pressure likely to exceed inflows in the next few years.

Options for Debt Management:

2. Pre-emptive Debt Restructuring:

Reduces repayment pressure and preserves scarce dollars for the current account deficit.
Considered a painful and lengthy process with potential political backlash.

Impact on Pakistan's Stability: