Why Crisis-Hit Pakistan Won't Go The Lanka Way

World doesn’t want a nation with nukes to collapse & Islamabad’s Middle East friends will step in

- Anupam Manur

Our neighbour in the north-west is experiencing economic turmoil. Yet again. Last month, Pakistan’s planning and development minister Ahsan Iqbal appealed to citizens to reduce their daily consumption of tea

to two cups, in an effort to preserve dwindling foreign exchange reserves. Pakistan imports around $600 million worth of tea each year and with its foreign exchange reserves depleting at an alarming rate, from $20 billion in August 2021 to $9.7 billion in the beginning of July 2022, the government is feeling the pinch of each teacup.

Anatomy of the crisis: Pakistan’s economy was tottering down the path of economic crisis for a while, but the deadly combination of the pandemic and the Russia-Ukraine war have caused it to hurtle towards a disaster.

Low investment and productivity, poor governance, mismanagement and corruption, outsized military spending and deep structural malaise have resulted in middling economic growth for many years. Juxtapose this with a huge import bill, a weakening currency, and an insatiable appetite for foreign debt and all the ingredients for an economic crisis are present.

● By March 2022, Pakistan’s total external debt touched $128 billion, up from $86 billion in June 2021.