Karachi stock exchange amid economic uncertainty
The International Monetary Fund has issued a stark warning about Pakistan's economic stability, flagging serious concerns about the country's ability to service its external debt as foreign exchange reserves fell to a critical low of $3.2 billion — barely enough to cover three weeks of imports.
In its latest Article IV consultation report, the IMF projected Pakistan's debt-to-GDP ratio to reach 87% by the end of the fiscal year, calling for "immediate and decisive" fiscal consolidation measures to avert a sovereign default.
Pakistan's caretaker government has been in talks with the IMF for a new $6-8 billion Extended Fund Facility after the previous $3 billion Stand-By Arrangement expired. Negotiations have stalled over Pakistan's reluctance to implement subsidy cuts and tax reforms demanded by the Fund.
The Pakistani rupee has depreciated 45% against the dollar over the past 18 months, driving inflation above 35% and causing severe hardship for ordinary citizens. Power outages lasting up to 12 hours a day have crippled industrial production.
Geopolitical analysts note that the crisis has significant implications for India, as a destabilized Pakistan increases security risks along the LoC. India's Ministry of External Affairs declined to comment officially on the IMF report.
