Can Pakistan deflect the nosedive to default now?

This is serious. Pakistan’s economy is on ventilator. Unfortunately, the energy of everyone has been diverted to road blocks, road blocks and more road blocks leading to more and more political uncertainty, more political uncertainty and more political uncertainty. This has led to the economic detriment of the economy.

Here are the facts. A report by an independent brokerage house places risk of Pakistan defaulting to 79.33 percent. Here’s more: Remittances flowing in has fallen sharply to 9,900.5 million dollars from period of July-October 2022 as opposed to 10,827.2 million dollars to same period for year 2021. Reportedly it is due to difference between bank rates and the open market data remittances are crashing faster; 10% in October this year as compared with 20% in November.  An insider shares that banks have been instructed to open LC only to the extent of export receipts.

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Investors do not see Pakistan as a safe investment opportunity; therefore, they are not willing to buy bonds floated by our local economy. In this terrible economic freefall situation, the IMF team’s visit for the ninth review of Pakistan’s economy has been delayed. The devastating floods that rocked the economy literally with a reported loss of $30 billions was an unexpected catastrophe Pakistan could have been done without.

On November 15th, Moody’s stated high cost of food and energy rates will lead to at least 13 nations being unable to sustain economic growth.

‘The policy dilemma between servicing creditors and meeting populations’ demands for social and economic developments will intensify as governments dedicate a growing share of their revenue to interest payments.’ [Moody]

The total debt servicing payment for Pakistan for fiscal year 2022-23 is estimated to be 3.95 trillion Pakistani rupees ($17.9 billion). Public debt (as of March 2022) was 4.44 trillion rupees this is a whopping 72.5% of the GDP.

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Take a look at the exports table. Pakistan is down to its worst production of cotton this year largely owing to floods and heatwaves. The textile exports sector including bales, yarns, fabrics, linen and other related products has taken a bad hit. Textile Commissioner’s Organization of Pakistan confirms that 60% of exports by the country are cotton and textile related products.

World Bank is projecting 2% growth for year 2023 for Pakistan. Mainly owing to havoc created by floods, inflation, high energy costs taxed and over taxed making production non-viable in many cases. A tighter monetary stance is also quoted as a reason.

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Economists place Pakistan’s current account deficit to be around $10 billion. Roughly $24 billion is stated as being the principal repayments on its external debt. So basically, what it means it, this whole sordid, pathetic picture that is the result of decades of mismagement – we are mostly using our debts taken to service existing external debts, this means a hunk of funds taken by IMF cannot be used for infrastructure or developmental projects. Its just being recycled for debt servicing which keeps ballooning with more debts to pay more debts.

No economist, but as a person studying economics as a major subject for 4 years, this is mind-blowing economic catastrophe. We are descending fast, nose down. There is hardly a chance we will avoid a crash. The question is not ‘if’. The question is ‘when’. By a sensible analysis, the land is rearing up into our faces very fast!

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The writer is a lawyer, academic and political analyst. She has authored a book titled ‘A Comparative Analysis of Media & Media Laws in Pakistan.’ She can be contacted at: yasmeenali62@gmail.com and tweets at @yasmeen_9

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