Pakistan is undergoing the worst economical phase that any country could go through at the moment. Under the current economic situation, if the government can save the country from default for the next three years, it will be a considered a major achievement. Both external and internal debt have crossed all limits. The amount of external debt is USD 135 billion, which translates into PKR 38 trillion according to the current exchange rate. On the other hand, the internal debt has crossed PKR 44 trillion. PKR 82 trillion debt for a country with PKR 98 trillion GDP is no less than an apocalypse. Yes you read that right.  The current GDP growth rate in Pakistan is less than 2%. This situation has been brought about in just three years, after the military’s experiment of a hybrid government raised the size of the total debt from 45% to 85%. The pressure of external debts has also become a direct reason for the budget deficit, which has crossed PKR 9 trillion. The reason for this is the increasing installments of loan repayment. One must not forget that currency devaluation is also a major reason for the increase in external debt. The internal and external debt ratio is never allowed to go beyond 70-30 for this very reason. But now in Pakistan the ratio has become 50-50. If things were prevailing at the same rate as they were in 2017, (before Imran Khan came into power), the external debt of Pakistan would have been PKR 16 trillion, but at this point in time, it has reached PKR 38 trillion due to the current internal and external debt ratio.

An increase in internal debt has a direct effect on the daily life of a normal citizen. In simple words, when the government takes loans, the money circulating in the economy increases and when money increases, the demand for goods increases. This becomes the reason for inflation.

There could be some kind souls who might think, why can’t the country focus on foreign direct investment? The reality is, no one will invest in a country without any stability, security, infrastructure, and no skilled labour.  The other argument of why locals with a lot of money cannot invest gets countered by the fact that there is no electricity to run any production plant.

The Pakistan government will not be able to reduce the budget deficit for the next three years. Not only that, it will be under the compulsion to take more loans so it can meet this deficit. Therefore, expecting a reduction in inflation would be like living in a fools paradise. Not to forget that the government has to repay loans worth $78 billion in the next three years, which works out to $26 billion per annum. Due to this situation, the current account deficit will continue to increase, and to meet the requirement, more loans will be taken.  Additionally, the Pakistan government will be forced to ban imports for the next three years. Businesses will come to a standstill due to this ban, because hardly anything is produced locally. Small industries will be closed and unemployment will increase. On top of that, the continuous increase in inflation will bring more doom for the unemployed. There will be an increase in crimes and those who can leave the country, will do so as and when they gets passage to safer countries.

Those who get left behind in Pakistan should sit tight and be prepared for the upcoming bad times, which will be far worse than they are currently.

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