‘World Can’t Afford a Bankrupt Pak’: Experts Say Nuclear Power May be the Bargaining Chip Out of Crisis

Is Pakistan running by Sri Lanka? Extensive macroeconomic indicators for the two countries show similarities in the economic prospects of the two countries in the sub-euan.

Mental in the political crisis, Sri Lanka also faced a large -qualified external debt crisis. Need loans to accelerate the infrastructure and energy sector, but failed to get a return of investment. According to Sri Lanka’s central bank data, for debt and external obligations of $ 51 billion, he must pay around $ 4.5 billion per year to 2025 as a debt service (principal + interest) from his foreign exchange reserves.

The island nation is also very dependent on imports, with about 40% of the difference between import and export rates. This basically means that the state needs additional foreign exchange reserves to ensure the supply of important goods from abroad.

With the increase in debt service every year, coupled with a decrease in large foreign currency recipients, tourism and money sending, Sri Lanka has less than $ 2 billion in foreign currency reserves. In May, the country only had $ 50 million foreign currency reserves that could be used which was not even enough to regulate imports for a day. The rapid decline in the economy saw Sri Lanka failed to pay on external debt in May.

Pakistan faces the same crisis. The country has a large external debt of around $ 130 billion. In FY21, according to the state bank of Pakistan (SBP), the country paid $ 13.424 billion in debt service. For three fiscal quarters in 2022, the number has crossed $ 10,885 billion and is expected to reach more than $ 14 billion.

Like Sri Lanka, Pakistan is also an economy that depends on imports but to add problems, export-import gaps are very large and the condition becomes more dangerous when there is a crisis that will soon occur in the foreign exchange reserve front front. The country’s forex reserves have been reduced to only around $ 9 billion, enough for only six to seven weeks of imports.

In the fiscal year 2021, in accordance with the number of Pakistani state banks, the country’s exports were worth $ 25.639 billion while imports were much higher at $ 54,273 billion, a large gap of almost $ 30 billion. For the fiscal year 2022, even higher at $ 40 billion dollars, with imports at $ 72,048 billion and exports at $ 32,450 millons. In June 2022, the country’s imports were worth $ 7.038 billion against $ 3,118 billion export figures.

The next quarter will be important for the country with the economic calculation piled on it, especially after the decision to raise the prohibition of unnecessary and luxurious items under the pressure of several political elites and importer lobbies. Import rates can rise, increase pressure on the decline in foreign currency reserves.

The only solution to this problem is to take more loans and efforts to restructure the existing debt payment options.

Pushan Dutt, Professor of Economics and Political Sciences in Insead, Singapore thinks that even though the current economic crisis in Pakistan is truly in a difficult condition, this country can avoid the fate of Sri Lanka, thanks to the geopolitical reasons, India -Chinese and Pakistan -ti -TI -competition China Connect.

“While the level of debt in absolute terms is the same as Sri Lanka, the Pakistani economy is greater, so that the ratio of debt to GDP is smaller. At the same time, this country has a lot of foreign currency loans and we have seen examples of previous capital flights. Now a lot of debt is held by China so that it might get debt assistance due to geopolitical reasons, “he said.

GDP 2021 Pakistan, according to the World Bank Dataset, is $ 339.4 billion at US $ 2015, almost four times higher than Sri Lanka’s GDP of $ 92.1 billion. The debt ratio to Pakistani GDP is still below 100%. That was 84% ​​in 2021, the appropriate data from the trade economy said, while the IMF analysis said the ratio of debt to Sri Lanka GDP reached 119% in 2021.

Support from Islamic and Chinese countries

Pakistan can also get support from other Islamic countries, said Jawad Nayyar, an economist, industrialist, and techpreneur based in Pakistan, while emphasizing that the country will not go by Sri Lanka. “Pakistan has a certain geopolitical advantage that is only enjoyed by a few people. This includes friendly relations with most of Mena, North Africa and the Asian and Far Eastern economies. “

Pakistan is a member of the founder of the Islamic cooperation organization. Oki has 57 countries when members are scattered in four continents. Pakistan became the second largest country in the organization and, in fact, the only Islamic state with nuclear power, could find support from within.

On May 1, Saudi Arabia agreed to save Pakistan with financial assistance worth $ 8 billion. Oil facilities (oil in a suspended payment) from Saudi Arabia doubled to $ 2.4 billion. Saudi deposits worth $ 3 billion were rolled up until June 2023 and Pakistan was also expected to get an additional deposit of more than $ 2 billion.

On June 22, Pakistan signed a loan agreement with a Chinese bank consortium of $ 2.3 billion. In addition, Beijing has launched a debt of $ 7 billion so far to help Pakistan manage the economic crisis.

Pakistan also hopes to get $ 1.2 billion from the IMF in August from his bailout package. The Head of the Pakistani Army General Qamar Javed Bajwa, in fact, has asked the US to pressure the IMF for the disbursement of initial loans, a report said from Nikkei Asia. The country also hopes that the IMF can open more funds with claims that they have met the requirements set by the IMF that meet the requirements for further bailout assistance.

According to Mr. Dutt, while things that look bad for Pakistan, it will not be as hard as Sri Lanka where the standard currency crisis has turned into a political upheaval. Pakistan has a floating exchange rate so there will be no sharp correction. But like Sri Lanka, he carried out a large trade deficit that worsened because the price of fuel had surged and had borrowed in the dollar. Inflation jumped so that the overall fundamental looks bad.

Another Pakistan, who is now based in America, thinks the opposite. Dr. Fida Mohammad, a professor of sociology at New York State University, said Pakistan was in the trap of debt and the Pakistani currency lost value every day. According to him, Pakistan is more likely to default and, if things that are revealed are the same, will go bankrupt.

What causes this Pakistan?

Dr. Fida Mohammad’s reaction showed a global opinion about Pakistan that it was a country that was managed by military with deep corruption and a lot of economic damage was produced by itself. “Yes, the whole country is unstable. The military behind the scene controls everything, including justice. The judiciary legitimizes the corruption of the state of the state (military establishment). Socio-political chaos gives more political influence to the military, and they are beneficiaries of anarchy. “

A case example is a step to raise the prohibition imposed on imports of goods that are not important and luxurious even though the country lacks foreign currencies. Hurriedly to create a newer economic path through loans when the country imports more than twice its exports also become a burden when the total reserve data does not exceed $ 20 billion in the current US $ requirements in accordance with the World Bank Dataset.

Pakistani external debt rates have doubled in the last 10 years. The game-Changer project, China Pakistan Economic Corridor (CPEC), $ 62 billion infrastructure and energy roadmap, looks good in the data but raises questions when we see that it is once again built on Chinese loans.

Corruption is also a deep obstacle and has not even left the CPEC project, according to a report from the panel formed by the Pakistani government. Pakistan crossed the ranking of -100 in 2004 concerning the Transparency International Corruption Perception Index and had seen a consistent setback after that. It was in 140 in the list of 180 countries in 2021. Higher absolute number means a more corrupt country.

Nuclear power of one -is Rahmat who saves?

Pakistan is a nuclear capable country that might also come as a protection for that, said Jawad Nayyar. “Pakistan is a nuclear power and the world is unable to buy a bankrupt Pakistan because a few hundred million dollars of debt cannot be repayed again.”

Richard Gardner, CEO of Modulus, a high -performance company based in the US for Fin and AI technology solutions, and a financial analyst who is known globally, said that nuclear power can finally save Pakistan from becoming the next economic economic country in Asia. “While Pakistan, of course, in a dangerous position, this country has a big advantage over Sri Lanka. The advantage, of course, is that it is the power of atoms, and, until it is proven otherwise, I think we must assume that the IMF and other international entities will take significant efforts to ensure that the country is not default for its debt. “

Former Pakistani Prime Minister, Imran Khan admitted in 2019 that his country still had around 30,000 to 40,000 terrorists and 40 terrorist groups operating in the border and no country wanted nuclear -armed terrorist groups in Pakistan in the future. The question of the safety of nuclear weapons is the most important thing in Pakistan which is not politically stable, which is then default in its economic debt.