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Updated June 23rd, 2022 at 12:09 IST

Pakistan stuck in 'vicious circle' of taking loans to pay back previous debts: Report

Amid the political and economic turmoil in Pakistan, a Pakistani columnist has posed several questions to the "incompetent and failed rulers" of the nation.

Reported by: Anwesha Majumdar
Pakistan
Image: AP/Pixabay | Image:self
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Amid the ongoing political and economic turmoil in Pakistan, a Pakistani columnist has recently posed several questions to the "incompetent and failed rulers" of the nation, asking them how they would address the economic issues when the nation is stuck in a vicious loop of borrowing loans to pay back the previous debts, ANI reported.

Ayaz Amir, who wrote this for the local newspaper Dunya Daily in Pakistan, stated, “We have seen the rules of Ayub Khan (Former President of Pakistan), Yahiya Khan, Zulfikar Ali Bhutto and Muhammad Zia-ul-Haq. We have seen the governments of dictators and they all had one thing in common, take loans to solve the problems and then take more loans to pay back the previous loan.” 

Ayaz Amir further highlighted that the vicious cycle has still been in effect and that Pakistan has reached a point where no one is currently ready to continue lending money to the nation. In his column piece, he questioned what has been reported in the local media: “We could not solve the economic problems of our country when the population was 11 crores during the regime of Zia ul Haq. How our incompetent and failed rulers are going to improve the economy when the population has doubled to 22 crores?”

Pakistan economic crisis

In the meantime, Pakistan signed a $2.3 billion loan facility accord on Tuesday in an effort to revive its crisis-affected economy. Following the depletion of foreign reserves as well as the currency plunge, an agreement was reached with a group of Chinese banks. The loan is anticipated to help the cash-strapped economy and allow Islamabad to pay for necessary imports, as per media reports. 

According to Pakistan's Finance Minister Miftah Ismail, the "inflow" is scheduled to come in a few days. He also expressed his gratitude to the Beijing administration under Chinese President Xi Jinping for enabling the deal. Ismail provided a thorough report in which he stated, "Chinese consortium of banks has today (Wednesday) signed the RMB 15 billion ($2.3 billion) loan facility agreement after it was signed by the Pakistani side yesterday (Tuesday)." 

Furthermore, the financing agreement only somewhat relieves the crumbly Pakistani economy. During the fiscal year 2021–2022, the value of the Pakistani Rupee fell by 34%. On Monday, the dollar exchange rate was 210 Pakistani rupees. Additionally, as of June 10, the State Bank of Pakistan's (SBP) foreign exchange reserves were below $9 billion. For some weeks now, the reserves have been much below the import cover threshold. The Dawn newspaper estimates that Pakistan would require at least $37 billion to cover its debt payments and other expenses for the upcoming year. 

As per media reports, experts, however, stated that the agreement merely serves to strengthen Pakistan's risky Chinese borrowing behaviour. China is Pakistan's largest bilateral creditor, with $14.5 billion in outstanding loans, the 2021–22 Economic Survey revealed. Three commercial banks in China and three state-owned banks are owed a combined total of $8.77 billion by Pakistan.  

(Image: AP/Pixabay)

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Published June 23rd, 2022 at 12:08 IST

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