Pakistan’s total public debt and liabilities are anticipated to be over Rs22.978 trillion/US$161 billion as of December 2020, accounting for 98.7% of the country’s GDP.
Who owns Pakistan debt?
Debt currently owed The government owes domestic debtors approximately Rs24.309 trillion, and Public Sector Enterprises owe domestic creditors approximately Rs2.3 trillion (PSEs).
How Pakistan can get rid of debt?
Pakistan’s economy is in shambles, as the entire world is aware. In the last 30 years, Pakistan has had to borrow money from the IMF 16 times! Analysts estimate that Pakistan will require $28 billion in order to meet its financial obligations. The best way to save money is to take out another loan from the International Monetary Fund! Pakistan will face insolvency if it is unable to secure a loan. This is why President Imran Khan has opted Pakistan pursue the IMF loan, despite his personal opposition to receiving the money. But the main question isn’t whether Pakistan will be able to secure loans in the near future. They will probably certainly be able to arrange finances now, one way or another. The repayment, on the other hand, is the more pressing issue.
Pakistan’s government is already in debt to the tune of about $90 billion. The IMF is well aware that it is making dangerous loans. This is why the IMF is considering raising interest rates. Loans to Pakistan were formerly offered at an interest rate of 8.5 percent. The current interest rates are close to 12%, which is a 50% increase over the prior rates. Interest rates and bond yields could climb considerably more if Pakistan does not find a means to get its economic house in line. The eventual outcome of all of this might be a financial disaster.
Stop Going Further Into Debt
In the world of personal finance, there is an ancient adage. “The first thing you should do when you find yourself in a hole is stop digging,” it adds. This is the type of guidance Pakistan needs to take. Pakistan is currently mired in a financial crisis of epic proportions. On the other hand, it appears to be participating in a number of large-scale initiatives. The China Pakistan Economic Corridor has been criticized by many economists. They are convinced that this economic corridor will benefit China more than Pakistan. As a result, Pakistan must at the very least scale down, if not abandon, its investments in the China Pakistan Economic Corridor. These initiatives will add to the country’s debt. Furthermore, the IMF and the US are opposed to loan money to Pakistan if it is to be paid to China.
Peace with Neighbors
Pakistan’s defense spending is disproportionately high. It is the state budget’s second most expensive line item. Other vital services, such as health and education, do not receive nearly as much funding as defense. The Pakistani economy would suffer as a result of this unusually high defense spending. It demonstrates an increase in GDP numbers in the short term. Every bomb, tank, or aircraft created, on the other hand, diverts resources away from those in desperate need. This is why maintaining peace with India’s neighbor is so critical. The main reason Pakistan has to spend so much money on defense is to compete with India, its neighbor.
Expenditure on Education
Pakistan is currently engaged in an unnecessary armaments race with its neighbors. The money spent on developing bombs and other military equipment is simply being squandered. Pakistan’s human resources, on the other hand, do not have many opportunities. Pakistan must spend money in order to improve the country’s educational standards. Pakistan, like its neighbor India, will have an adequate supply of competent people resources once this quality is enhanced. This is how Pakistan’s information technology industry will begin to grow. The Pakistani Prime Minister has already expressed a strong desire to improve the infrastructure of educational institutions on the ground and bring in an IT revolution in Pakistan.
Reducing Corruption
The Pakistani people are tired of corrupt leaders. Any tax money they pay eventually ends up in the hands of a corrupt lawmaker. The problem with corruption in Pakistan is that politicians have spent public funds on unprofitable projects solely to receive kickbacks. The majority of Pakistan’s public works projects are unnecessarily expensive and, in most cases, unnecessary. Pakistan would have to focus its efforts in the future to guarantee that the government funds only the most feasible initiatives. This can be accomplished by waging a war against corruption.
Encouraging Tax Payers
Finally, Pakistan will not be able to climb out of its economic quagmire unless it begins to receive more money in the form of taxes. Because of the concerns listed above, such as corruption, Pakistani taxpayers are hesitant to pay their fair amount. Pakistan must take two steps. To begin, the amount of economic activity must be increased in order for the government to collect more taxes. Second, a tax compliance culture must be established. Only if there is a severe punishment for non-compliance can this culture be instilled.
To summarize, Pakistan’s use of IMF and other loans is simply the beginning of the story. If these loans ever have to be returned, Pakistan would be faced with a monumental undertaking. In order for Pakistan to become self-sufficient, several fundamental changes will have to be made to its economy.
Is Pakistan a poor country?
Pakistan is one of the world’s poorest countries. It is, however, oxymoronically rich in natural resources: “the country boasts the world’s second largest salt mine, the fifth largest gold mine, the seventh largest copper mine, the fifth largest coal reserves, the seventh greatest wheat and rice production capacity…” and so on. But does it really matter when nearly 40% of the population lives in abject poverty? Pakistan is ranked 147th out of 188 countries in the Human Development Index for 2016. According to several reports, there are several reasons why Pakistan is poor, despite its abundant natural resources and growth potential. Why is Pakistan so impoverished? The three most important reasons are discussed below.
Why is Pakistan Poor?
The first is Pakistan’s political system’s inherent weakness. Pakistani politics has traditionally been dominated by the ruling class. Politicians, generals, and bureaucrats make up this group (the ruling oligarchy). Many politicians originate from land-owning families or come from wealthy industrial families. They share important common interests and look out for one another, ignoring the concerns of ordinary people.
Because most people vote according to what these elites perceive convenient, this dynamic has become cyclical. This type of political culture may be changing in recent years as a result of education and rising democratic standards, but it has had a long-term impact on the country.
Corruption is also prevalent among Pakistan’s elites. In July 2017, the current Prime Minister resigned. He did so when the Supreme Court ordered his dismissal due to corruption allegations. Pakistan is also ranked as one of the most corrupt countries by Transparency International.
The absence of true democracy is the second issue. Due to “the lack of proper, meaningful, and non-discriminatory representation for all regions in decision-making,” democracy remains a mirage for many. Pakistan’s lack of democracy and political growth is a result of both direct and indirect military dictatorship.
Because it was the most powerful and structured organization, the military has dominated politics since the country’s independence. In addition, the military portrayed itself as Pakistan’s protector against India, which is seen as an existential threat to the country’s survival. “It is little wonder, then, that Pakistan became a national security state during its early years, subordinating economic and democratic progress to military improvement and tipping the power balance away from civilian authority,” argues one expert.
Why is Pakistan so impoverished? Citizens-oriented development is hampered by a lack of democracy in the country.
Furthermore, the military establishment’s preference for Islam over secular values in a country with a considerably more diversified cultural landscape has not only fostered a fictitious national unity, but has also stifled democratic and economic progress.
Religious proxies were first used against Bengalis in 1971, and subsequently against the Soviets in Afghanistan in the 1980s. Furthermore, their stated involvement in Afghanistan for the purpose of fighting India during the last two decades has only brought turmoil and misery home.
In Pakistan, violent conflicts and widespread poverty are inextricably linked. Unfortunately, extreme poverty pushes Pakistan’s disgruntled youth to join forces with terrorist groups seeking to install Sharia law in the country.
Another solution is to address the dire state of education. Pakistan invests only 2.6 percent of its total GDP on education, the lowest in South Asia as of 2015. It was 3% in 1997, the highest level in the country’s history. As a result of the country’s low overall spending, more than half of the population is illiterate. Hundreds of thousands of children are out of school due to poverty.
The country, on the other hand, spends the majority of its national budget on defense. According to a research published in May 2017, “Pakistan’s defense expenditure in the next financial year (2017-18) will be roughly 7% higher than in the previous year, amounting to Rs920.2 billion (USD$8.65 billion).” For the fiscal year 2016-2017, it was Rs841 billion (USD$7.9 billion).
Why is Pakistan so impoverished? The country invests more in current disputes than in long-term development.
There is, however, some good news. In the last decade, Pakistan’s poverty rate has decreased by 15%, from 54 percent to 39 percent. Terrorist-related deaths have also decreased in recent years. In 1991, only 13% of Pakistani houses had a washing machine. Today, 47% of Pakistani households had a washing machine. Nonetheless, there is more work to be done in the framework of global development to better people’s lives.
What is the total loan amount of Pakistan in 2021?
- This is an increase from the previous figure of 51.470 USD billion in January 2021.
- Pakistan Total Loans data is updated monthly, with 162 observations average 40.792 USD bn from September 2007 to February 2021.
- The statistics peaked at 60.190 USD billion in May 2018 and peaked at 34.697 USD billion in August 2013.
- The data on Pakistan Total Loans is still active in CEIC and is reported by CEIC Data.
- The information is organized in Table: Global Economic Monitor by World Trend Plus. Monthly: Asia: Total Loans: USD
Is Pakistan in financial crisis?
Pakistan is in the midst of a grave economic crisis, and it would require gross external finance of USD 51.6 billion over the next two years (2021-2023) to meet its needs.
How does Pakistan make money?
The economy, which was mostly agricultural when the country gained independence, has since become much more diverse. Agriculture, which is no longer the major sector, accounts for around a fifth of GDP, while manufacturing accounts for about a sixth. Trade and services, which together make up the major part of the economy, have expanded significantly. In terms of economic structure, Pakistan is more like the middle-income countries of East and Southeast Asia than the impoverished Indian subcontinent countries. Pakistan’s economic performance is superior than that of many other developing countries; since independence, the country has maintained a consistent annual growth rate.
Is Pakistan in debt trap of China?
Debt-trap diplomacy has lately been associated with China as a new terminology, which began as a meme by an Indian think tank in 2017 and was furthered by a paper by two Harvard University students in 2018, dubbed “debtbook diplomacy” (Brautigam, 2020). A meme, defined as a fashionable concept that represents collective behavior of a generation, society, community, or group triggered by an impulse (Brautigam, 2020), has a wide range of meanings. This meme about China focuses on assertions that China intentionally traps poor countries in a debt cycle in order to gain strategic advantage or a valuable asset by granting them dangerous loans.
The ramifications of the CPEC project are examined in this article on both an international and domestic level. Essentially, we argue that, while there are concerns about the CPEC’s debt trap, strong local support for the project from influential domestic actors has kept it mostly intact. This does not, however, imply that Pakistan will be condemned by the impending debt trap. Apart from economic rewards, Pakistan is vitally important to China’s geostrategic interests. Although Pakistan’s institutional arrangements are prone to driving the government into debt, it is not in China’s interest for its investments to become a debt trap for the country.
Because the nature of China–Pakistan relations is not just economic but, more crucially, geostrategic, we believe Pakistan will be offered concessions from China for loan repayments. To make our case, we look at the dispute over the effects of FDI on economic development and offer our two-level analytical methodology. Then, at both the international and domestic levels, we look at the CPEC project from a Pakistani perspective. Finally, we present a summary of our findings as well as their ramifications.
How much is India’s external debt?
The overall debt owed by India to foreign creditors is known as its external debt. Debtors can include the Union government, state governments, corporations, and Indian residents. Money due to private commercial banks, foreign governments, and international financial institutions like the International Monetary Fund (IMF) and the World Bank are included in the debt.
India’s external debt data is released on a quarterly basis, with a one-quarter lag. The Reserve Bank of India compiles and publishes statistics for the first two quarters of the calendar year. The Ministry of Finance compiles and publishes data for the previous two quarters. The Indian government also issues an annual debt status report, which includes a full statistical analysis of the country’s external debt situation.
At the end of March 2021, India’s external debt was US$ 570 billion. It increased by $11.6 billion from the end of March 2020 to the end of April 2020. The external debt to GDP ratio climbed from 20.6 percent a year earlier to 21.1 percent at the end of March 2021.
Foreign currency reserves climbed to $579 billion by the end of March 2021, up from $474 billion at the end of March 2020. As a result, the foreign currency reserves as a percentage of external debt increased to 101.1 percent in March 2021, up from 84.9 percent in March 2020.
Why is Pakistan’s debt increasing?
Pakistan’s external debt is projected to rise in the near future, as the country is forced to borrow more and more each year to repay outstanding external debts, fund its current account, and accumulate forex reserves.
The country’s external debt and liabilities have grown at varied rates during the previous 15 years or more, but no effort undertaken during that time has succeeded in curbing the exponential increase in the load, according to Dawn.
