International: Pakistan’s Economic Woes Deepen Amid Debt and Misallocation
Pakistan’s economy teeters on the brink, grappling with a severe financial crisis that shows no signs of abating. Dependent on international loans, the nation struggles to sustain basic governance. Yet, funds intended for development are frequently diverted, exacerbating systemic issues.
Escalating Debt Burden
Pakistan‘s external debt has reached unsustainable levels, with the country owing $44.7 billion to the International Monetary Fund alone. Additional obligations include $38.8 billion to multilateral institutions like the World Bank and Asian Development Bank, $25 billion to Chinese lenders, and $7.8 billion in Eurobonds and Sukuks.
Repayment capacity remains critically limited, with national revenue dwarfed by these liabilities. Creditors, aware of Pakistan’s precarious fiscal state, continue to extend loans, signaling strategic geopolitical considerations over economic pragmatism.
Misallocation of Resources
A significant portion of borrowed funds is channeled toward military expenditure and, controversially, support for militant groups, according to regional concerns. In 2024, defense spending consumed 14% of Pakistan’s budget, diverting resources from critical public welfare and infrastructure needs.
This misallocation has drawn international scrutiny, with critics arguing that loans meant for economic stabilization are instead propping up militarism. Such practices undermine efforts to address the root causes of Pakistan’s financial distress.
Rising Poverty Levels
The economic fallout has hit Pakistan’s population hard, with poverty rates soaring. World Bank data indicates extreme poverty rose from 4.9% before 2017 to 16.5% by 2021, a staggering 12% increase in just five years.
As India reduces poverty, Pakistan’s trajectory moves in the opposite direction, leaving millions mired in destitution. The lack of investment in social programs further entrenches inequality and stifles human development.
International Concerns and Geopolitical Dynamics
India has repeatedly voiced apprehension about the misuse of international loans, with officials like Defence Minister Rajnath Singh urging the IMF to reconsider its lending policies. Fears persist that funds are bolstering terrorist infrastructure rather than fostering stability.
Despite these concerns, institutions like the IMF and World Bank continue to provide financial lifelines, often with stringent conditions such as tax reforms and military spending curbs. Compliance with these terms remains inconsistent.
Debt Dependency and Future Prospects
Pakistan’s economy is almost entirely loan-dependent, with little domestic revenue to offset its obligations. The nation awaits new bailout packages, even as existing debts remain unpaid, raising questions about long-term sustainability.
Without structural reforms and a shift in spending priorities, Pakistan risks further economic collapse. The international community faces a delicate balancing act: supporting a struggling nation while ensuring funds are not misused.