Pakistan’s economy is facing significant challenges exacerbated by external shocks from the West Asia crisis. The country is grappling with a substantial amount of foreign debt, weak GDP growth, declining investment, and rising inflation. Public debt has surged from about Rs 43 trillion in 2018 to Rs 80.52 trillion by the end of fiscal year 2025, while external debt and liabilities have reached $138 billion, highlighting Pakistan’s increasing reliance on foreign financing.
The article points out that Pakistan is encountering substantial external financing pressures, with demands from the UAE for the return of $3.5 billion and China seeking repayment of $220 million owed to United Energy Petroleum. These financial strains come at a time when Pakistan is struggling to repay existing loans and is seeking additional financial assistance to manage its economic challenges.
The situation has worsened due to disruptions in oil and gas supplies triggered by the West Asia crisis. This has led to a surge in domestic energy prices, with petrol prices reaching around Rs 458 per litre after a petroleum levy increase, a 38% rise in LNG costs, and higher electricity tariffs. Consequently, inflation has accelerated, increasing the cost of living for the population.
Pakistan’s economic growth has been modest, averaging only 1.7% between 2022 and 2025. This low growth rate has resulted in limited employment opportunities and a rise in poverty levels. Unemployment is estimated between 22% and 24%, while poverty rates stand at around 29% or higher based on assessments linked to the World Bank.
The country’s investment levels remain low, further exacerbated by the departure of multinational corporations in recent years. Companies like Procter & Gamble have closed manufacturing operations, while others like Shell, Telenor, Uber, Yamaha, Eni, foreign banks, and pharmaceutical firms have reduced their presence or exited the market. These exits reflect deeper concerns about the business environment, regulatory consistency, and long-term profitability in Pakistan.
