Pakistani officials and a visiting International Monetary Fund delegation are holding tough negotiations this week in search of a deal by Thursday on loans to bail out the financially strapped country and avoid a default.
Analysts say the financial crisis, coupled with political instability and a mounting terrorist threat, are creating the sort of conditions that have repeatedly led in the past to military takeovers.
The IMF delegation has been in Islamabad since January 31 but still is unable to agree with Pakistani officials on how much money the country needs to avoid defaulting on external payment obligations, the Reuters news agency reported Monday.
Pakistan has only $3.5 billion in reserves but owes more than $9 billion in principal and interest payments in the next few months. Inflation has exceeded 25% in recent months and the country’s currency has plummeted to a historic low in value. Pakistan’s staggering $14.5 billion debt in the energy sector is another contentious issue in the talks with the IMF.
“Pakistan is on the brink of economic collapse,” said John Ciorciari, professor of research and policy engagement at the University of Michigan.