Pakistan’s External Debt Unsustainability and the Required Approach

Pakistan’s External Debt Unsustainability and the Required Approach

The paper traces financial and non-financial variables that prompt external debt distress in Pakistan. It explains that the economic vulnerability emanates from macroeconomic imbalances and structural problems. The macroeconomic imbalances deeply connect with global oil crisis, the Russia-Ukraine wa...

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Bibliographic Details
Published in:Policy perspectives (Islamabad) Vol. 20; no. 1; pp. 61 - 76
Main Author: Chaudary, Muhammad Sikandar Ali
Format: Journal Article
Language:English
Published: Islamabad Pluto Journals 30-06-2023
AsiaNet Pakistan (Pvt) Ltd
Subjects:
Borrowing
Commercial credit
Debt cancellation
Debt restructuring
Debt service
Developing countries
Economic conditions
Expenditures
External debt
GDP
Global economy
Gross Domestic Product
Inflation
Khan, Imran
LDCs
Liquidity
Macroeconomics
Politics
Remittances
Research Article
Reserve assets
Solvency
Supply chains
Sustainability
Transnationalism
Pakistan
Ukraine
Russia
India
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Summary:The paper traces financial and non-financial variables that prompt external debt distress in Pakistan. It explains that the economic vulnerability emanates from macroeconomic imbalances and structural problems. The macroeconomic imbalances deeply connect with global oil crisis, the Russia-Ukraine war and non-compliance with mutually agreed International Monetary Fund (IMF) conditionalities in the short run. However, the structural reasons are rising oil expenses, growing domestic political scandals, increasing terrorist attacks, and high spending on military imports. The paper recommends formulating a publicly available blueprint i.e. theory of change to resolve Pakistan’s increased reliance on transnational lenders, including the IMF. It should include innovative policies to initiate the green revolution that could replace intermittent nonrenewable resources to incrementally lower oil imports. Moreover, to increase growth in the non-military sector employing non-kinetic means and engaging transnational governance entities to resolve geopolitical conflicts would reduce reliance on military sector. The paper concludes that undergoing policy innovation for environmental and economic sustainability, is inevitable for gaining benefits from global renewable energy transition and avoiding debt distress.
ISSN:1812-1829
1812-7347
DOI:10.13169/polipers.20.1.ra4