Resolving Pakistan's Debt Problems

Aasim M. Husain

No 2408, FDL Policy Notes from CEPREMAP

Abstract: Pakistan's latest economic crisis saw a further widening of already large fiscal and external deficits. With reserves falling to about two weeks' worth of imports and the interest bill on public debt eating up 60 percent of government revenue, default appeared imminent. However, the favorable debt structure, where most of the external obligations are to official creditors, combined with the adoption of corrective policy measures, has stabilized the economy for now. Looking ahead, sustained fiscal adjustment along with growth-enhancing investment and structural reforms are needed to strengthen debt sustainability. These steps will only be feasible if they are backed by sizable, coordinated liquidity support from bilateral and multilateral creditors at concessional interest rates. Inadequate official financing threatens to derail the ambitious reform plans agreed under the recently approved IMF program. A mechanism to increase transparency and thus facilitate the provision of the needed liquidity relief is put forward in this note . Its success could serve as a model for other nations facing similar debt challenges.

Keywords: Sovereign Debt; Sovereign Default; Pakistan (search for similar items in EconPapers)
Pages: 18 pages
Date: 2024-10
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Persistent link: https://EconPapers.repec.org/RePEc:cpm:notfdl:2408

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