The Pakistani economy, marred with political instability and corruption, has been in trouble for quite some time. Covid-19 has made the situation worse and thrown up new challenges. This will make Pakistan’s recovery take longer. Data by State Bank of Pakistan showed that the country’s total debt and liabilities in the third quarter of fiscal year 2020 touched Rs (PKR) 42.8 trillion.
Pakistan’s total gross domestic product (GDP) is about $320 billion, which is less than India's foreign exchange reserve worth $485 billion
What is worrisome is that Pakistan’s debt is over 95 per cent of its GDP.
“Pakistan’s debt and liabilities have teetered dangerously close to the overtaking the size of the actual economy. At the end of the second quarter and first quarter of FY20, total debt and liabilities stood at 93.9pc and 95.3pc of Pakistan’s GDP, respectively,” Pakistan Today Profit said.
The International Monetary Fund (IMF) pointed that country’s key bilateral creditors, including China, Saudi Arabia and other Gulf countries agreeing to rollover the maturing obligations, will help in supporting Pakistan’s debt sustainability.
The public debt-to-GDP ratio is expected to increase and remain elevated over the medium term, with Pakistan’s exposure to debt-related shocks remaining high, a World Bank report said.
The report noted that the spread of Covid-19 has led to a huge drop in domestic and global demand. What is worrisome is that the country’s main industrial sector—textiles and apparel—is highly exposed to Covid-19-related disruptions due to its labor-intensity, the report has highlighted.
The multilateral agency added that the spread of the disease will impact economic growth beyond current financial year. “Under the baseline scenario, growth will remain muted in FY21 before reaching 3.2 per cent in FY22,” the report said.
The report also said that remittances into the country, a large part of which come from the Gulf countries, will contract in FY20 and FY21. However, multilateral and bilateral funding to the country will increase and is expected to be the main financing sources over the medium-term, the World Bank added.
Amid this economic turmoil, it is critical for Pakistan to focus on measures to strengthen its economy and bring in political stability instead of exporting terror..