WASHINGTON: A Washington-based think tank, the United States Institute of Peace (USIP), has warned that there is “a real danger that Pakistan could default on debt”, which might further intensify political turmoil amid already surging terrorism.
The author of the analysis published on Thursday warned that amid skyrocketing inflation, political conflicts, and rising terrorism, the country is fac-ing the risk of a default due to its massive external debt obligations. The cash-strapped nation is reeling with the repercussions of a deepening political crisis — which initially began in April last year when former prime minister Imran Khan was ousted through a vote of no-confidence motion — and the de-railment of the $6.5 billion International Monetary Fund (IMF) programme.
Islamabad has been hosting an IMF mission since late January to negotiate a series of policy measures to secure $1.1 billion in funding for the cash-strapped economy, which is on the verge of collapse.
The funds are part of a $6.5 billion bailout package the IMF approved in 2019, which analysts say is critical for Pakistan to avert defaulting on ex-ternal payment obligations.
The deal will also unlock other bilateral and multilateral financing avenues for Pakistan to shore up its foreign exchange reserves, which have fallen to four weeks’ worth of import cover, and help it steer out of a balance of payment crisis.
The USIP report highlighted four factors that are important to consider if authorities want to pull Pakistan out of the economic abyss; these include: Composition of Pakistan’s overall external debt, Repayment pressure on the debt in both short- and medium-term, Potential inflows that can offset debt outflows, Pakistan’s external debt management strategy. –Agencies
