India-Pakistan Conflict: Islamabad Says 'Loan SOS Hacked', But Its Financial Crisis Is REAL Here's How

2025-05-09 07:00:51

(MENAFN- Live Mint) Pakistan has denied as "fake" a request made by its Ministry of Economic Affairs to global partners for more loans, citing economic losses and a stock market crash. The appeal, posted from a now-deleted and allegedly hacked X account, also called for international help to de-escalate tensions with India. Despite this denial, Pakistan faces a real financial crisis, with over $100 billion in external debt, low foreign reserves, and reliance on IMF support.

List of factors that plague Pakistan's economy

According to Pakistan' s central bank, the country's foreign reserves declined by more than $150 million in the first week of March this year.

2. Its interest payments are now taking up nearly two-thirds of public revenue, leaving limited funds available for essential government services. The living standard has become better, but far more gradually than in the rest of South Asia.

3. Pakistan experienced an economic crisis as part of the 2022 political unrest. It caused extreme economic challenges for months, causing food, gas and oil prices to soar.

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4. Over the past 25 years, Pakistan has approximately doubled its national debt every five years, according to Indian strategic affairs specialist Sushant Sareen. Beginning with around ₹3.06 trillion (US$11 billion) at the start of General Pervez Musharraf's regime in 1999, the debt had surged to ₹62.5 trillion (US$220 billion) by the end of Imran Khan's government in 2022.

5. According to CEIC data, Pakistan is currently experiencing a severe cash crunch, with its external debt reaching $131.1 billion as of December 2024. As reported by PTI last year, Pakistani authorities were grappling with the immense challenge of repaying a staggering $100 billion in external debt over the next four years, as of September.

6. "Pakistan's external debt repayments for four years are $100 billion," Minister of State for Finance Ali Pervaiz Malik had stated at a meeting of the National Assembly Standing Committee in September 2024.

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7. In September last year, the IMF approved a $7 billion loan package for Pakistan, which was facing severe economic challenges. According to an AP report, the loan was structured to be disbursed in 37 instalments. This agreement followed months of negotiations led by Prime Minister Shehbaz Sharif, who had been in talks with the IMF since June.

8. According to a report by the Economic Times, Pakistan's foreign exchange reserves stand at $15 billion, a stark contrast to India's reserves at $688 billion.

9. After the April 22 Pahalgam terror attack, the gap between Pakistan's and US debt interest rates soared by about 200 basis points, now topping 850. This means it has become much more expensive for Pakistan to borrow money, Reuters reported.

10. One of the initial actions taken by the Donald Trump administration in the US was to suspend foreign aid provided through the State Department and the US Agency for International Development (USAID). This dealt a significant blow to Pakistan, which had been receiving support under the programme and was already grappling with an unstable economy.

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