Economy

As Pakistan burns, is it heading for a default in replay of the Sri Lankan crisis?

Exactly a year ago, Sri Lanka defaulted for the first time in its history. And now as Pakistan’s economic crisis deepens amid its currency crashing against the US dollar with surging inflation, it almost seems like a replay. 

It is no surprise that the Pakistani rupee crashed today to 288.5 against the US dollar following former Prime Minister Imran Khan’s arrest yesterday. The currency could further lose its sheen as the country’s political and security situation nosedived with widespread violence hitting several parts.

The implications would be severe for the already crumbling economy though Islamabad has assured repayments of $3.7 billion in principal debt in the next couple of months even as talks with the International Monetary Fund (IMF) on a possible bailout package remains inconclusive. Global ratings agency Moody’s warned that Pakistan could default in case it fails to thrash out an agreement with the IMF. The political crisis could delay the IMF deal.

Meanwhile, Pakistan’s stock market took a beating too. The Karachi Stock Exchange lost 298.86 points closing at 41,074.95. The economic crisis is a direct fallout of maladministration and misplaced priorities of the government.

“And now the worry for businesses is that the arrest has added one new dimension to the crises. We are already in the middle of multiple crises and now the arrest and the violence only do more damage to the businesses,” an analyst tracking Afghanistan and Pakistan told India Narrative. The deepening crisis will mean that Pakistan’s political class will have to focus more on dealing with the domestic crises.

Meanwhile, the interior ministry has already authorised deployment of army personnel in Punjab and Khyber Pakhtunkhwa. To arrest the growing tension in the country mobile services have also been suspended. The current situation is likely to push more expatriates to leave the country.

While China has not explicitly made any observation on Pakistan’s situation, it will keep a close watch on the developments. Despite putting up a brave face, China-Pakistan’s largest investor, has expressed concerns over the growing security threats in the country.

Just last week, China’s Foreign Minister, Qin Gang during his visit to Pakistan said that stability is the premise of development and that the South Asian nation must focus on building political consensus and uphold the economy.

“We sincerely hope the political forces in Pakistan will build consensus, uphold stability and more effectively address domestic and external challenges so it can focus on growing the economy,” Qin said at a press briefing. In February, the Chinese embassy announced shutting down its consular section citing “technical reasons.” Though it offered no reason for the closure, sources said that the growing political unrest in the country was a key factor.

Also read: Pakistani cities in flames as Imran Khan’s supporters take on the powerful army in street battles

Mahua Venkatesh

Mahua Venkatesh specialises in covering economic trends related to India and the world along with developments in South Asia.

Recent Posts

VINBAX 2024: Vietnam-India bilateral army exercise concludes at Kaushalya Dam

The fifth edition of the historic Indo-Vietnam Joint Field Training Exercise, VINBAX-2024, successfully concluded its…

14 hours ago

India-Russia strengthen defence ties at 22nd Working Group meeting on military technical cooperation

The 22nd meeting of the India-Russia Working Group on Military technical cooperation and defence industry…

15 hours ago

“I want to have strong representation of India at World Nuclear Exhibition 2025”: Sylvie Bermann

Sylvie Bermann, President of the World Nuclear Exhibition expressed confidence in India's nuclear supply chain…

16 hours ago

PoJK: Joint Awami Action Committee protests against government following new ordinance, many injured

Joint Awami Action Committee core member Shaukat Nawaz Mir has condemned the attack of police…

16 hours ago

PM Modi meets 31 world leaders, heads of organisations during his 3-nation foreign visit

Prime Minister Narendra Modi participated in 31 Bilateral Meetings and informal interactions with global leaders…

18 hours ago

India- Australia conduct 11th Indian Air Force-Royal Australian Air Force Air Staff Talks

India and Australia conducted the 11th edition of the Indian Air Force and Royal Australian…

19 hours ago