Debt Crisis: Pakistan ranked among 3 worst countries of world as per Bloomberg
According to a recent survey conducted by Bloomberg, Pakistan, often regarded as South Asia's economically fragile nation, has found itself among the top three countries facing the highest susceptibility to a looming debt crisis. Bloomberg's comprehensive debt vulnerability index, encompassing a pool of 60 countries, has unveiled that Pakistan secured the third position in this ranking, trailing behind Egypt, ranked second, and Ukraine, which held the top position.
The index compiled by Bloomberg delves into the distinct aspects of individual countries' exposure to public debt, interest expenses, and yields on dollar-denominated bonds, all designed to assess the degree of vulnerability each nation possesses in the face of mounting debt burdens. A higher ranking in this index signifies a greater susceptibility to debt-related pressures, while lower values indicate a more robust resilience against such financial challenges.
Comparatively, Pakistan's government debt stands at 73.6 percent of its Gross Domestic Product (GDP), a figure lower than that of Ukraine (98.3 percent) and Egypt (92.9 percent). Nevertheless, the South Asian nation remains shackled by high interest expenses, accounting for 6.3 percent of its GDP.
Adding to its precarious situation, Pakistan's bond yields are ranked fourth highest among countries confronting the imminent threat of a debt crisis. This elevated bond yield reflects a greater risk of default associated with the country's bonds.
It is worth noting that these rankings are in alignment with the International Monetary Fund's (IMF) alarming forecasts regarding Pakistan's external debt, expected to soar to $130.850 billion by 2023-24, equivalent to 37.3 percent of its GDP. Furthermore, projections for domestic debt have been set at Rs. 43.574 trillion for 2023-24 and Rs. 49.803 trillion for 2024-25.
The risks pertaining to debt sustainability, which were already elevated during prior IMF assessments, have become increasingly acute. This situation is exacerbated by the dearth of external financing and the substantial gross financing requirements anticipated in the years ahead, thus narrowing the path to achieving fiscal sustainability for Pakistan