External Debt of Pakistan

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World Finance Reviews

External Debt of Pakistan

Before discussing the External Debt of Pakistan we are briefly understanding External debt, which refers to the loan which Pakistan has borrowed from foreign countries, from international banks, international financial institutions, the external debt is also known the foreign Debt, External borrowings, Foreign loans.  

History of Foreign Loan Taken by Pakistan

The History of external debt is very old almost near to the independence of Pakistan has taken a loan from the United States of America (USA) during 1952 interestingly Pakistan has taken the loan for improving the Railway. this was the first time in the history of Pakistan that Pakistan started to borrow from an Internal Institution.  Pakistan joined the internal Monetary Fund (IMF) just after three years of its independence. Pakistan did not approve IMF for any financial assistance for 8 years but at end of 1958 (8th December) Pakistan approached IMF for Laon and received USD 25,000.

Current Situation of Pakistan

Pakistan is facing very difficult times, due to the external debt burden and its increasing day by day. If we define it in simple words Pakistan is not only unable to pay the previous debt but also Pakistan is taking loans every year.  According to Mr. Farooq Baloch and Anchorperson of Finance, that every new bord child is a debtor of 16,000 Pakistani rupees. Pakistan is facing around a 25 percent of deficit of its budget. It means Pakistan is borrowing 25 percent additional loans every year. Unfortunately, Pakistan is getting a major collection of taxes through indirect taxes.

Pakistan’s National Debt to GDP Ratio.

Unfortunately, every year the GDP ratio is increasing year for example during 2018 it was up to 72.08 %, during 2019 it was up to 85.56 %, during 2020 it was up to 87.02 %.  These figures showing very poor performance.

The Projected Debt on Pakistan

The experts are projecting that the total external debt of Pakistan, during 2019 is projected up to

118500.00 USD Million in 2021. This is a very alarming situation for this country.

How to Get Rid of The Loans

Now it’s time that the government of Pakistan and the technocrats of Pakistan should start making plans for getting rid of these debts. Inversely w
e are planning and thinking that how to get more external debts from all over the world. The Government should have to reduce its expenditure side such as the reduction of unnecessary expenditures such as entertainments, securities of very important persons of the state, Etc. Similarly, the government should focus on improving the revenue side or collection side. There is a need for tax reforms, the focus on exports is required, the business sector of the country should be strengthening, the human development is required for increasing the remittances. There may be a fund generation call from the people of Pakistan specifically for repaying the debt. There are several ways to get rid of this. We should start doing something about this before it’s too late.

Special Thanks to

·         Sama Money.

·         Minister of Finance Government of Pakistan

·         Statista

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