PAKISTAN DEFAULT RISK RISES TO 79.33 PERCENT CAUSING DELAY IN IMF TALKS.

Default means broken promises or a breach of contract. According to IMF (International Monetary Fund), a country as in default when its government is unable or unwilling to repay its creditors. We have examples of Sri Lanka, Ukraine, Argentina etc. that have defaulted on their debt in recent times.


Pakistan has a track record of not paying its debts on time. The nation has often missed payments on its external debt, most recently in 2020 when it ran out of foreign exchange reserves and was unable to make a payment. Pakistan has previously requested financial aid from foreign institutions like the World Bank and the International Monetary Fund (IMF) to manage its debt and prevent default. Although the public may not always support them, these programmes frequently include stringent requirements, such as the need for the government to enact economic reforms and fiscal austerity measures. Pakistan's persistent conflicts with its neighbors, as well as its political and social unrest, greatly increase the danger that the nation faces. The country's risk of default is further influenced by Pakistan's political and social unrest, ongoing conflicts with its neighbors, and other factors.

Pakistan had roughly $11.5 billion in foreign currency reserves as of January 2021. However, the present level of Pakistan's foreign reserves has decreased to 5.7 billion dollars, the lowest level in the previous eight years. It hardly covers a month's worth of exports for the nation. Pakistan has a current account deficit of 10 billion dollars and 23 billion dollars in debt repayment.

Pakistan had roughly 11.5 billion dollars in foreign currency reserves as of January 2021. However, the present level of Pakistan's foreign reserves has decreased to 5.7 billion dollars, the lowest level in the previous eight years. It hardly covers a month's worth of exports for the nation. Pakistan has a current account deficit of 10 billion dollars and 23 billion dollars in debt repayment.

The fragile political climate is one of the causes of this default. The Pakistani rupee is steadily depreciating while the exchange rate to the dollar has climbed. The government's exchange rate has changed recently, and the dollar now costs 230 rupees instead of 187. The biggest inflation that country has ever experienced as a result of rising fuel prices. The political climate is deteriorating daily, which will raise the default risk more.

On Tuesday, a leading rapid commerce start-up in Pakistan announced that it was ceasing operations due to the recent spike in fuel prices and the unsteady state of the economy.

Similar to how mobility firm "SWVL" stopped operating in Pakistan, many other businesses are probably going to follow suit.

Is Pakistan going to default?
  • First off, Pakistan's international allies would not permit Pakistan to default due to threats to its internal and external security.
  • Donors on a bilateral and international scale are optimistic about the economy.
  • The current administration would employ all available means to prevent default.