With a few exceptions, Pakistan’s rulers, lawmakers, and policymakers have all struggled to manage the country’s balance of payments since its formation, and as a result, Pakistan was forced to turn to international lenders for financial assistance. Since the initial loan application, which was made in 1958, only a few years after the country’s 1950 IMF membership, this process has been in place. Additionally, this was the start of a practice that has never ended
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With a $7.85 billion total outstanding debt, Pakistan is currently the fourth-largest IMF debtor. The IMF recently approved 1.1 billion to address these devastations and prevent yet another impending default. This is to address the economic contraction and global inflation in the wake of the Covid and further fuelled by the Ukraine-Russia war.
By borrowing money at an 8.7% rate as of 2021, which is substantially higher than other countries in the same socioeconomic group, Pakistan is servicing its debt. For instance, Bangladesh is paying off its debt at a rate of 7.3%, which is around 16% less than Pakistan.
This demonstrates unequivocally that Pakistan is paying millions of dollars in debt service alone, independent of any payments made to lower the principal amount borrowed. Everyone accuses others of being the cause of this enduring parasitic disease, but no one seems to have the political will or the bravery to implement effective economic, investment or industrial strategies to remedy the situation.
As Bangladesh, Vietnam, Malaysia, Indonesia, and other nations have successfully demonstrated, the lender agencies periodically offer free, unbiased advice after conducting their due diligence. If the recommendations had been followed, Pakistan would have been free of its economic woes in ten years.
Fast forward to the time of the COVID pandemic, when Pakistan and every other nation—regardless of social or economic standing—suffered from economic contractions brought on by the closure of their entire economies.
