Qais Gulzar
The disastrous floods of the summer did not cause Pakistan’s economy’s problem, which had been going on for months. The danger of default is increased by crippling inflation, a dramatic decline in the value of the rupee, and the country’s precariously low level of $4.3 billion in foreign reserves, which can barely cover one month’s worth of imports. Pakistan has economic crises every few years as a result of its economy’s imbalance between production and consumption, which makes it dependent on external debt. As the debt bill grows and payments become due, each situation gets worse. Internal political unrest and the flooding disaster have made it worse this year. The crisis also has a substantial external component, as evidenced by the significant increase in global food and gasoline costs following Russia’s war in Ukraine. The combined effect of all these elements may have created Pakistan’s biggest economic crisis ever. However, the administration has been bogged down in partisan politics, and the International Monetary Fund’s (IMF) $1.1 billion loan tranche has yet to be released since Islamabad has resisted the IMF’s requirements. The government has now turned to small-scale solutions that fall short of solving the issue, like banning imports and early mall and wedding hall closures. With assistance from the IMF and loans from friendly states, particularly Saudi Arabia and other Gulf countries, Pakistan may be able to temporarily escape default. These, however, won’t address the economy’s obvious underlying problems or the fact that, in order to prevent a future default, a fundamental shift in the economy’s production and consumption patterns is required. However, none of Pakistan’s political parties appear to have the ability or political inclination to effect such a transformation.According to reports, Pakistan must repay $73 billion by 2025; without debt restructuring, it won’t be able to do so.
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