According to the latest World Bank report, Pakistan is the largest borrower of China and IMF loans. The report shows Pakistan to be the largest borrower from China and the International Monetary Fund, pointing fingers at its weak fiscal position: “The debt-to-export and debt-to-revenue ratios are extremely high in Pakistan.”.
As per 2023 statistics, the total external debt of Pakistan is $130.85 billion, which means 352% of the total exports and 39% of the GNI. At the same time, this report shows that the servicing of the given debt in a foreign country accounts for 43% of the exports and 5% of the GNI.
Major Lenders
China has remained the largest lender to Pakistan, which sums up to $28.786 billion, or 22% of total debt.
World Bank has contributed with a sum of $23.55 billion, amounting to 18% of the total debt.
Asian Development Bank has provided a sum of $19.63 billion, amounting to 15% of the total debt.
Other Lenders
Saudi Arabia has remained the second-largest bilateral lender, which sums up to $9.16 billion, or 7% of the total debt.
Total bilateral lenders sum up to $58.88 billion (45%) of Pakistan’s external debt, and multilateral lenders total $60.2 billion (46%). Private lenders, who are mainly bondholders, make up 9% of the debt.
Debt Repayments
In 2023, Pakistan borrowed $12.945 billion but repaid $14 billion with interest of $4.33 billion.
Global Debt Crisis
Developed countries are also not immune to the global debt crisis. It is now that these developing nations have to service their debt with a record $1.4 trillion. Interest payments for such countries reached a 20-year high, squeezing out budgets for critical sectors such as health, education, and the environment.
Among the most affected countries are those eligible for loans from the World Bank’s International Development Association (IDA). These countries paid a record $96.2 billion in debt servicing in 2023, with interest costs surging to $34.6 billion, four times higher than a decade ago.
Pakistan’s Debt Burden
For Pakistan, the interest payment forms 43 percent of its export earnings, putting a severe strain on the economy. That would rank among the highest interest payment ratios in the region. The country is strongly under pressure from debt obligations.
South Asia, in a number. of countries, which includes Pakistan, faced an increase of 62% interest. payments in 2023. Among the top countries, where the interest payments were higher in South Asia, were Bangladesh and India; Bangladesh and India posted a growth of more than 90% in interest payments.
Low and middle-income countries, such as Pakistan, find themselves in tight fiscal situations since high interest rates force significant debt repayments. To most countries, their cost of servicing interest has become burdensome with some countries being obligated to pay up to 38% of their earnings.
In 2023, Pakistan also experienced heavy IMF repurchases alongside countries like Egypt and Ukraine. At the same time, Pakistan is one of the top five remittance recipients, receiving $26.6 billion in 2023.
Conclusion
The World Bank report gives a worrying picture for Pakistan in the heavy financial burden it faces with loans from China, IMF, and other lenders. Pakistan’s high debt-to-export ratio makes it important to carry out urgent fiscal reforms and strategies of debt management to avoid any further strain on the economy.
