It is difficult to predict whether Pakistan will default on its debt with certainty. The country’s economy has been struggling in recent years, with high levels of inflation, a large current account deficit, and a shortage of foreign currency. However, the government has been taking steps to address these issues, such as securing loans from international organizations like the IMF and implementing economic reforms. Additionally, Pakistan has a relatively low level of external debt compared to other developing countries.
One of the main challenges facing Pakistan’s economy is its large current account deficit, which is the difference between the value of a country’s imports and exports. This deficit has been driven in part by the country’s high import bills for items like oil and gas, as well as a decline in exports due to global economic conditions. To address this issue, the government has been taking steps to reduce imports and increase exports, such as by implementing import tariffs and offering incentives for exporting companies.
Another challenge facing Pakistan’s economy is its high inflation rate, which has been driven in part by rising food and fuel prices. The government has been taking steps to address this issue by implementing monetary and fiscal policies to control inflation, such as by raising interest rates and increasing government spending. Additionally, the government has been taking steps to increase agricultural production and improve the supply of essential goods.
Despite these challenges, Pakistan has a relatively low level of external debt compared to other developing countries. As of 2021, the country’s external debt-to-GDP ratio is around 40%, which is lower than the average for developing countries. Additionally, the country has been able to secure loans from international organizations like the IMF to help address its economic challenges.
However, in recent years, Pakistan’s economy has been under pressure due to the COVID-19 pandemic and the resulting economic downturn. The pandemic has caused a decrease in exports, remittances, and tourism, which have hit the country’s economy hard. Additionally, the government has had to spend more on social protection programs to support those affected by the pandemic. This has led to an increase in the fiscal deficit and a decrease in the foreign exchange reserves.
The government has taken steps to address these issues, such as securing loans from international organizations like the IMF and implementing economic reforms. The government has also implemented policies to increase exports and reduce imports, such as by implementing import tariffs and offering incentives for exporting companies.
In conclusion, whether or not Pakistan will default on its debt will depend on a variety of factors, including global economic conditions, the effectiveness of the government’s economic policies, and the ability of the country to secure loans from international organizations like the IMF. While the country’s economy has been struggling in recent years due to high levels of inflation, a large current account deficit, and a shortage of foreign currency, it has a relatively low level of external debt compared to other developing countries, and the government is taking steps to address these challenges.