Pakistan’s economy is sustained by external aid rather than genuine reform, with policymakers resorting to foreign borrowing and alliances to prevent financial collapse, a report highlighted. Over the years, Pakistan has grappled with economic turmoil, repeatedly rescued by international lenders like the IMF or friendly nations, as per an analysis by Sakariya Kareem. Instead of fostering a competitive export-oriented economy, Pakistan has relied on debt rollovers and bailouts, leading to a cycle of “survival without reform,” analysts noted.
A critical concern lies in Pakistan’s currency policy, where the government artificially bolsters the rupee to keep imports inexpensive, particularly fuel and essential goods. This strategy necessitates foreign exchange borrowing rather than earning through exports, resulting in a stagnant and unproductive economy. Interest payments on public debt now consume a significant portion of government revenue, limiting allocations for crucial sectors like education, healthcare, and infrastructure.
The country faces recurring challenges when oil prices escalate or foreign funding diminishes, causing a rapid depletion of foreign exchange reserves and triggering economic crises. In mid-2023, Pakistan encountered a severe setback as its foreign exchange reserves plummeted below $4 billion, barely sufficient for a fortnight of imports. Requiring approximately $30 billion in financing that year and facing substantial debt repayments of $15–20 billion annually for the next five years, Pakistan grappled with soaring inflation reaching 38%, alongside mounting default concerns.
By late 2024, there was a semblance of improvement as reserves climbed to around $14.5 billion, inflation moderated to slightly over 4%, and economic strains temporarily alleviated. However, this stability did not stem from reform efforts but rather from creditors agreeing to defer debt repayments, essentially postponing the crisis. Furthermore, the decline in global oil prices curbed the import bill, and Pakistan secured its 24th IMF bailout in September 2024. Despite these measures offering a respite, the fundamental debt burden persists, underscoring the challenges ahead for Pakistan’s economy.
