Pakistan will struggle to break out of a cycle of ongoing debt repayments without reform, former prime minister Imran Khan told the Financial Times in an interview.
He told the publication that the government needed to break out of borrowing cycles that have held back developing economies.
Fiscal Monitor: IMF projects fall in govt gross debt to 73.6pc of GDP
He, however, ruled out a default if his party returned to power, saying it would prioritise domestic reforms over seeking debt relief.
We have to conduct surgery in Pakistan in the way we run our government: Former PM Imran Khan
“Is the answer getting more loans, or is the answer to restructure the way we run the country?” he was quoted as saying by FT. “We have to conduct surgery in Pakistan in the way we run our government.
“Whatever we do, when we look ahead, the debt is growing, our economy is slowly shrinking. From my party’s point of view, we’ve started thinking that we’re stuck,” he stated.
According to the former PM, his team is developing a strategy to turn the country around if he returned to power. The strategy will focus on loan repayments and domestic spending.
“We’re sitting with our economists and discussing how to come up with a plan with which we can sit with the IMF and give them a viable way of being able to pay our debts,” Khan said.
“But at the same time, our economy should not be choked so that our ability to pay debt goes down.”
Pakistan among record number of developing countries facing a debt crisis
Campaign group Debt Justice warned this week that poor countries were facing their highest bills for debt servicing in 25 years. Pakistan’s scheduled repayments on foreign public debts are equivalent to 47% of government revenues in 2023, the group said.
“It’s not just Pakistan,” Khan said. “Once you start borrowing in dollars and you have to service your debt in dollars, if your dollar income doesn’t improve or increase, how are you going to then pay your debts?”
He held the view that Pakistan needed to increase its dollar earnings through exports else there was no way to service any debts.
Pakistan has been in a grip of one of the worst economic crises in history and for the past one year, there have been persistent rumours that the country is nearing the brink of default.
With foreign reserves at record low levels, the country has imposed import restrictions that are having adverse impact on the economy.
Even if Khan returns to power, economic experts doubt he will have the political strength to overhaul Pakistan’s flagging economy.
“We have an economic structure which is globally uncompetitive,” said Abid Hasan, a former World Bank economist. “Some of it will have to be dismantled . . . You will require huge consensus. The PTI alone will not be able to do it.”
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