CHITRAL: Pakistan’s economic outlook seems precarious, with mounting external loans threatening to push the nation deeper into insolvency. The rising graph of loans taken from the IMF and other international sources is in direct proportion to the ever rising non developmental and overhead expenses of the government, most of which are avoidable.

Pakistan’s reliance on external borrowing to finance its budget deficit is well documented. While loans provide temporary relief, they accrue interest, creating a snowball effect. Each new loan is used to pay off old debts, leaving fewer resources for vital investments in infrastructure, health, and education.

This situation is further compounded by global economic headwinds. Rising interest rates make servicing these loans even more expensive. Additionally, currency depreciation weakens Pakistan’s ability to repay debts denominated in foreign currencies.

The consequences of this debt trap are dire. Social spending is squeezed, hindering poverty reduction efforts. The tax burden on citizens increases, dampening economic activity. This, in turn, reduces government revenue, making it even harder to repay existing loans.

Breaking free from this cycle requires a multi-pronged approach. Fiscal discipline is paramount. Reducing non-essential expenditures and broadening the tax base can generate domestic revenue, lessening dependence on borrowing. Additionally, pursuing economic growth through pro-business policies and export diversification is essential.

Pakistan’s situation is critical. Deft maneuvering and a commitment to long-term economic health are necessary to navigate away from the perilous depths of insolvency. .. CN report, 05 Mar 2024