Karachi: Pakistan’s debt is a “raging fire” that has become unsustainable, a local think tank has warned, in a graver assessment than the International Monetary Fund (IMF) which had found the country’s dues to be “borderline” manageable.
The debt profile is “alarming,” Islamabad-based think tank and advisory firm Tabadlab said in a 68-page report on the nation’s borrowings and liabilities. Pakistan is headed for an “inevitable default”, which will start a “spiral”, it said.
Economic pessimism among Pakistan’s voters is at a record high, according to a Gallup poll before the nation’s inconclusive and contentious election on Feb 8, which has added to uncertainties and triggered a slide in the country’s stock market.
Shehbaz Sharif, the favourite to become the next prime minister, said last week Pakistan needs to secure a fresh IMF bailout as soon as possible. The current nine-month programme ends in April.
Pakistan’s external debt and liabilities have almost doubled to US$125bil and its domestic debt has increased sixfold in nominal terms since 2011, according to the Tabadlab report’s authors Zeeshan Salahuddin and Ammar Habib Khan.
Interest payments as a share of gross domestic product are at an all-time high, said the firm that advises governments, development institutions and businesses.
One way to mitigate the debt issue may be to use so-called debt-for-nature swaps, in which parts of a country’s debt is exchanged for commitments to environmental conservation projects, Tabadlab said in the report.
Pakistan is prone to climate disasters. The economy suffered a contraction last fiscal year after floods inundated about a third of the country and caused about US$30bil in damage and losses. — Bloomberg
