According to a recent survey conducted by Bloomberg, Pakistan, oftenregarded as South Asia’s economically fragile nation, has found itselfamong the top three countries facing the highest susceptibility to alooming debt crisis. Bloomberg’s comprehensive debt vulnerability index,encompassing a pool of 60 countries, has unveiled that Pakistan secured thethird position in this ranking, trailing behind Egypt, ranked second, andUkraine, which held the top position.
The index compiled by Bloomberg delves into the distinct aspects ofindividual countries’ exposure to public debt, interest expenses, andyields on dollar-denominated bonds, all designed to assess the degree ofvulnerability each nation possesses in the face of mounting debt burdens. Ahigher ranking in this index signifies a greater susceptibility todebt-related pressures, while lower values indicate a more robustresilience against such financial challenges.
Comparatively, Pakistan’s government debt stands at 73.6 percent of itsGross Domestic Product (GDP), a figure lower than that of Ukraine (98.3percent) and Egypt (92.9 percent). Nevertheless, the South Asian nationremains shackled by high interest expenses, accounting for 6.3 percent ofits GDP.
Adding to its precarious situation, Pakistan’s bond yields are rankedfourth highest among countries confronting the imminent threat of a debtcrisis. This elevated bond yield reflects a greater risk of defaultassociated with the country’s bonds.
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It is worth noting that these rankings are in alignment with theInternational Monetary Fund’s (IMF) alarming forecasts regarding Pakistan’sexternal debt, expected to soar to $130.850 billion by 2023-24, equivalentto 37.3 percent of its GDP. Furthermore, projections for domestic debt havebeen set at Rs. 43.574 trillion for 2023-24 and Rs. 49.803 trillion for2024-25.
The risks pertaining to debt sustainability, which were already elevatedduring prior IMF assessments, have become increasingly acute. Thissituation is exacerbated by the dearth of external financing and thesubstantial gross financing requirements anticipated in the years ahead,thus narrowing the path to achieving fiscal sustainability for Pakistan