Is The Fuse on Pakistan’s Hidden Debt Bomb Getting Shorter?

Ever since Pakistan’s so-called economic rebound took shape under the Gotham-inspired Special Investment Facilitation Council (SIFC) in June, there has been speculation over whether the cash-strapped country will be able to repay its debts and loans.

As per the latest IMF’s Country Report on Pakistan, Islamabad’s external debt is projected to cross $130 billion in the current financial year. As of November 17, Pakistan’s net foreign exchange reserves (with SBP) were around $7.18 billion, with the country expected to unlock $2.2 billion in the coming months from IMF and other lending partners.

The Economic Whirlwind and Underlying Trust Issues

This writer, with his limited understanding of the current state of miraculous affairs, has failed to feel at ease with SBP Governor Jameel Ahmad’s remarks (which he made in August) that the central bank is in a “very comfortable position to meet our debt obligation”.

Meanwhile, his counterpart in the Finance Division has estimated Rs. 7.3 trillion ($25.6 billion at Rs. 285/$) for the current fiscal year, with most of it maturing in the coming few months.

The central bank governor mentioned that around $11.3 billion of the debt maturing in FY24 will be rolled over. You can’t simply write it off.

The majority of analysts and people on market watch see Pakistan’s financial situation improving after the country’s successful review of its bailout deal last week. They assess the current situation as a gateway for billions of dollars in further financing support from countries like Saudi Arabia and the United Arab Emirates. It bears mentioning that Gulf countries and China have agreed to prolong debt payments on earlier loans to Pakistan, but that doesn’t help address the mounting debt burden projected for the next three years.

Another thing that doesn’t justify the current sentiments on expected foreign inflows is how FDIs continue to fall. In October 2023, the country attracted foreign direct investment of $122 million, down 13 percent from an investment of $140 million in October 2022 and down 29 percent compared to the investment of $173 million in September 2023.

The underlying data shows that state dignitaries are simply against allowing the idea of a debt-servicing crisis in free-float. It’s not surprising that Pakistan’s economic numbers sometimes be a little… off. Particularly when it comes to politically sensitive topics like debt servicing.

Lies and Distortions

An independent economist said in a note that observers shouldn’t place too much faith in the current economic data.

“Pakistan’s economic statistics are a collection of lies and distortions it seems,” he wrote. “They are meant to convince people like us that the economy is chugging along despite the political turmoil and global issues such as Israel genociding Palestine, and therefore the practice should be revisited in the interest of the country. Many economists, including official brokerage agents, have bought into this type of propaganda”.

He added, “Our debt profile is unsustainable. It is like a trap where the entity that raises the debt is hiding in plain sight. A focus on political realignment and willingness to work towards resiliency will help the country avert terminal decline”.

Pakistan’s economic trajectory has shifted from default anxiety to mitigation mode for much of 2023. Political insecurity, rising global commodity prices, and tightening external and domestic financing conditions have resulted in less-than-optimistic macroeconomic projections for 2024, with the Asian Development Bank predicting 1.9 percent GDP growth, the World Bank predicting 1.7 percent, and the IMF predicting 2.5 percent growth.

Silver Lining?

Is there a silver lining? Absolutely. Pakistan’s economy is becoming drastically primitive as its debt profile piles on while the state pushes overly optimistic projections, and the repercussions could push it down the same path the Sri Lankans endured a year ago.

The caretaker government seems to be operating under the assumption that the current idea of Pakistan can sustain the country as it decouples from public perception and fast-tracks anti-socialism. There is little reason to believe that is true.

Never in the past seven and a half decades has Pakistan witnessed such an economic reversal as seen since April last year, and the gravity of the problem is perhaps yet to sink into the minds of decision-makers. For starters, the best way forward is to prioritize more jobs instead of economic growth, not the other way around, and to restore the idea of free and fair elections. This would help aspirants in terms of voter turnouts. Resultantly, more employment will enhance home income, encourage taxes, and help the economy by GDP.

The views expressed here do not necessarily reflect ProPakistani or its owners.


  • Pakistanis are obsessed with foreign products. Pakistani government officers also make sure to buy everything foreign. From our president to Army Chief all travel in German cars and reject Pakistani cars and products. Import obsessed countries have no future.

  • The caretaker setup is taking care of its own ‘chair’ and that is all.

    Have you seen anywhere in the world bodies like SIFC?

    Could someone summarise SIFC’s achievements since its formation?


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