Pakistan needs to repay massive external debt, faces real risk of default, says US think tank

Islamabad: Even as it struggles with a spiralling economic crisis, Pakistan needs to repay external debt amounting to a whopping $77.5 billion between April 2023 and June 2026. In its analysis, US think tank United States Institute of Peace (USIP) has warned that the massive external debt may cause the Pakistan economy to default which will cause “disruptive effects”. The USIP analysis, which was published on Thursday, warned that Pakistan is facing the risk of a default amid spiralling inflation, internal political conflict, increasing militant attacks and massive external debt. Pakistan, currently tackling a major economic crisis, is grappling with high external debt, a weak local currency and dwindling foreign exchange reserves. The USIP research referred to Pakistan’s $77.5 billion external debt repayment obligation from April 2023 to June 2026 as a “hefty amount” and said that there would be a “cascade of disruptive impacts” if Pakistan ultimately defaulted. Already struggling under massive debt, Pakistan will have to make significant repayments to Saudi Arabia, private creditors, and Chinese financial institutions over the course of the next three years. According to the USIP, Pakistan will be under pressure to pay back its debt between April and June 2023 since it must service USD 4.5 billion in external debt. In June, when a $1 billion Chinese SAFE deposit and a roughly $1.4 billion Chinese commercial loan will mature, significant repayments are reportedly expected. The Pakistan government hopes to persuade China to refinance and roll over both obligations, noting that the Chinese government and commercial banks have already done so. Even if Pakistan is able to fulfil these commitments, the next fiscal year would be harder because the cost of paying the debt will increase to around $25 billion, according to the USIP. The International Monetary Fund (IMF), which has its headquarters in Washington, has yet to send Pakistan a much-needed $1.1 billion tranche of cash that was originally scheduled to be distributed in November of 2022. According to analysts, the funds are a crucial component of a $6.5 billion bailout package that the IMF authorised in 2019 if Pakistan is to avoid defaulting on its responsibilities under external debt. The IMF programme, which was signed in 2019, will finish on June 30, 2023, and it cannot be extended past that date in accordance with the established rules. Months of discussions between Pakistan and the IMF have resulted in no agreement over the restart of the programme. There is no quick remedy for Pakistan’s failing economy, and the administration believes they have made all the difficult choices necessary to restart the IMF programme that has stopped. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.