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Pakistan's Economy Survives on Bailouts, Avoids Real Reform: Report

Pakistan's economy persists through external financial support rather than substantive reform, according to a report. The country relies on IMF bailouts, debt rollovers from creditors, and favorable global conditions like lower oil prices to avoid collapse. A key structural flaw is the artificial support of the rupee to keep imports cheap, which undermines export competitiveness and drains foreign reserves. While temporary stability has been achieved, the fundamental debt burden remains unresolved, perpetuating a cycle of crisis.

Key Points: Pakistan Economy Relies on Bailouts, Not Reform: Analysis

  • Relies on IMF bailouts & foreign borrowing
  • Artificially supports rupee, hurting exports
  • Debt consumes 2/3 of government revenue
  • 2023 reserves fell below $4 billion, near default
2 min read

Pakistan survives on bailouts and strategic support, reforms still elusive: Report

Report says Pakistan's economy survives on IMF bailouts and debt rollovers, avoiding structural reforms needed for long-term stability.

"survival without reform - Asian Lite report"

New Delhi, Jan 26

Pakistan's economy continues to survive on external support rather than real reform, as policymakers rely on foreign borrowing and strategic alliances to avoid repeated financial collapse, a report has said.

For decades, Pakistan has faced recurring economic crises, only to be rescued each time by foreign creditors, the International Monetary Fund (IMF), or friendly nations, according to an analysis by Sakariya Kareem.

Instead of building a competitive export-driven economy, the country has depended on rolling over debt and securing bailouts.

This pattern has created what analysts describe as "survival without reform," where the system stays afloat but never fundamentally improves, as per report by Asian Lite.

A key issue is Pakistan's currency policy. The government continues to artificially support the rupee to keep imports cheap, especially fuel and essential goods.

This approach requires borrowing foreign exchange rather than earning it through exports. As a result, the economy remains weak and unproductive.

Interest payments on public debt now consume nearly two-thirds of government revenue, leaving very little money for education, healthcare, or infrastructure.

Whenever oil prices rise or foreign funding slows, foreign exchange reserves fall sharply and the economy slips back into crisis.

The depth of the problem became clear in mid-2023, when Pakistan's foreign exchange reserves dropped below $4 billion, barely enough to cover two weeks of imports.

The country needed around $30 billion in financing that year, while facing annual debt repayments of $15-20 billion for the next five years.

Inflation surged to 38 per cent, and fears of default grew. By late 2024, however, the situation appeared to improve.

Reserves rose to about $14.5 billion, inflation eased to just over 4 per cent, and economic pressure temporarily reduced.

This stability, however, was not driven by reform. Most of Pakistan's creditors agreed to roll over debt repayments, delaying the crisis rather than resolving it.

Global oil prices also fell, reducing the import bill. In addition, Pakistan secured its 24th IMF bailout in September 2024.

While these steps provided breathing space, the underlying debt burden remains, according to the report.

- IANS

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Reader Comments

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Priya S
Very detailed analysis. The part about interest payments consuming 2/3rd of revenue is shocking! That leaves nothing for development. It's a vicious cycle of debt. Meanwhile, we see constant tension at the border which diverts resources for both nations. Peace and economic cooperation could benefit everyone, but the political will seems absent. 🤔
R
Rohit P
24th IMF bailout?! That's not an economy, that's a charity case propped up by geopolitics. The report is correct - it's survival without reform. As an Indian, I believe our focus should remain on strengthening our own economy and not get drawn into their perpetual crises.
S
Sarah B
Living and working in Delhi, I see the contrast every day. Our economy has its challenges, but there's a clear direction and reform agenda. This report shows what happens when that's missing. The artificial support for the currency is a short-term fix with long-term pain. Feel for the ordinary citizens there.
K
Karthik V
While the analysis is sharp, I respectfully think it oversimplifies. No country's economy exists in a vacuum. Global factors, historical baggage, and yes, strategic alliances play a role everywhere, including in India's growth story. The focus should be on the human cost—38% inflation is devastating for families.
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Nisha Z
It's a cautionary tale for all developing nations. Building a resilient economy is hard work. You can't just keep taking loans. India learned this lesson in 1991 and initiated reforms. Hope stability returns across the border, for the sake of the common people. Jai Hind.

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