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Pakistan's Debt Trap Deepens as Short-Term Borrowing Keeps Economy on Edge

Pakistan's economic stability is undermined by a fragile external financing framework heavily dependent on short-term foreign loans, despite recent reserve improvements. With external debt at roughly $134.5 billion, significant near-term repayments pose a persistent threat of balance-of-payments emergencies. Business and economic experts argue that temporary inflows and diplomatic engagements cannot substitute for internal strength through competitiveness and productivity. They urge immediate reforms in taxation, energy, and industrial policy to build credible buffers and attract sustainable investment.

Key Points: Pakistan's Debt Crisis: Short-Term Loans Threaten Economic Stability

  • $134.5B external debt burden
  • Heavy reliance on short-term loans & rollovers
  • Reserves bolstered by temporary inflows
  • Urgent need for structural reforms
  • Narrow export base weakens economic leverage
2 min read

Debt trap deepens as short-term borrowing keeps Pakistan's economy on edge

Pakistan's $134.5B external debt, skewed to short maturities, creates a recurring crisis despite rising reserves. Experts warn of structural weaknesses.

"Without lengthening repayment timelines, the threat of repeated balance-of-payments emergencies will remain ever-present. - Raja Waseem Hassan"

Lahore Februar, y 14

Pakistan's fragile external financing framework continues to undermine economic stability, with policymakers stating that dependence on foreign loans leaves the country exposed to recurring crises. Business representatives and economists argue that recent improvements in reserves do not resolve the structural weaknesses embedded in the repayment schedule, as reported by The Express Tribune.

According to The Express Tribune, much of the debt portfolio is skewed toward short maturities, sharply limiting the government's ability to absorb shocks. Pakistan Industrial and Traders Associations Front Vice Chairman Raja Waseem Hassan pressed authorities to urgently seek extensions from friendly capitals. Without lengthening repayment timelines, he stated that the threat of repeated balance-of-payments emergencies will remain ever-present. Data shows the country's external debt and liabilities stood at roughly $134.5 billion by September 2025, with sizable repayments due in the near term. Although reserves crossed $21 billion in January 2026, analysts caution that a large part of this cushion comes from multilateral flows and temporary bilateral help, while obligations through 2026 and later years remain formidable.

Hassan described renewed diplomatic engagement with Gulf partners, talk of investment from Saudi Arabia and the UAE, and a thaw with Washington as encouraging. Yet he stressed that geopolitical alignments are fluid and cannot substitute for internal strength. Sustainable security, he argued, must rest on competitiveness, higher productivity and credible buffers. Drawing comparisons with neighbouring economies that managed to bargain effectively during global trade tensions, he said Pakistan's narrow export base and slow growth have weakened its leverage. Exports hovered near $32 billion in FY25, still failing to match import demand even after restrictions, as cited by The Express Tribune.

Senior economist Saleem Ahmed echoed those concerns, too. He said rollovers and deposits cannot remain a permanent lifeline. Loan maturity management, he argued, should accompany reforms in taxation, energy pricing and industrial output. With growth projected below five per cent and credit conditions tight, businesses remain cautious. Both experts urged immediate planning to broaden the tax base, cut losses in the power sector, promote value-added exports and attract stronger foreign investment, as reported by The Express Tribune.

- ANI

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Reader Comments

P
Priya S
It's a sad situation for the common people there. High debt means less money for education and healthcare. The experts are right – they need to fix their tax system and power sector first. Many states in India have faced similar issues, but fiscal discipline is key. Hope they find a sustainable path forward.
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Rohit P
$134.5 billion in external debt! 😳 That's a staggering number for their economy. The comparison with neighbours who managed trade tensions better is telling. It highlights how crucial a diverse export basket is. You can't just rely on textiles and remittances forever.
S
Sarah B
While the economic challenges are clear, I think the article could have explored the human impact more. What does this debt trap mean for inflation, unemployment, and poverty levels for ordinary Pakistanis? Stability for citizens should be the ultimate goal, not just reserve numbers.
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Vikram M
Geopolitical alignments are indeed fluid. Today's friend can be tomorrow's creditor demanding repayment. The only permanent solution is what Saleem Ahmed said: reforms in taxation and energy. Subsidies and a narrow tax base will bleed any economy dry. A lesson for all South Asian nations.
K
Karthik V
The part about the power sector losses rings very true. We've seen in India how DISCOM losses can cripple state finances. Until they fix the fundamental issues of governance and productivity, these bailouts and loan rollovers are just delaying an inevitable, bigger crisis. Wishing stability for the region.

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