Pakistan Economy: A Look at India’s Neighbouring Country’s Debt and Economic Meltdown

Pakistan Economy:  Pakistan’s overall debt currently stands at roughly 75 lakh crore Pakistani rupees, corresponding to a per capita debt of around Rs 3 lakh. According to CIC data, Pakistan will have borrowed around 131 billion dollars from foreign sources by December 2024, with China the largest creditor at over 29 billion dollars. Significant financing has also been received from institutions such as the World Bank, Asian Development Bank, and International Monetary Fund (IMF), with Saudi Arabia remaining a key lender. The strong reliance on external borrowing has had a significant influence on major sectors in Pakistan.

Pakistan’s Economy in 2024

Agriculture and income tax continue to be the principal sources of national revenue, although about half of Pakistan’s yearly budget is dedicated to debt servicing, followed by significant defense spending. Pakistan’s defense budget for fiscal year 2024-2025 was 2,122 billion rupees, an increase of 17.6% over the previous year. Salaries, pensions, and grants consume a major percentage of the budget, leaving little money for development efforts. Pakistan also relies significantly on imported commodities, resulting in a 35% trade deficit as of December 2024. The country’s foreign exchange reserves were 11.098 billion dollars in December, but had dropped to 11.250 billion dollars by February 28, representing a 152 million dollar fall in a single week.