Pakistan Requires External Debt Restructuring with No Further Delay
Pakistan's external debt is too large, and it is unstable. At some point, Pakistan will be required to restructure Pakistan's external debt. However, to do that, Pakistan would also require restructuring domestic debt as well. Pakistan has been stuck in the external debt repayment issue since the year 2018, where Pakistan has to pay massive interest rate payments on its debts. Pakistan's debts are mostly due to the current account deficit and financing imports as well as development projects like power plants, motorways, etc. Taking on debts is not a bad idea; however, unstable external debt will never allow Pakistan to prosper. For example, look at Sri Lanka; it has defaulted, but its economic progress is better thanan's, and even the growth rate is better than Pakistan's because it has restructured its debt.
For Pakistan, going towards the route of debt restructuring will require an IMF blessing as well as multiple international lenders like the World Bank, Asian Development Bank, Paris Club, etc., to get the desired endorsement to restructure Pakistan's debt. It is a long process, and Pakistan will be required to hire a law firm to make legal conditions and agreements like Sri Lanka did. Now Sri Lanka, for a specific time period, does not require its external debts, as it will first add forex reserves and will do much-needed reforms before starting to pay back external debt loans. Pakistan cannot pay 25 billion annually to the lenders, as Pakistan would again require the IMF to pay its external debt because Pakistan's export figures are not good enough to sustain import figures. Therefore, Pakistan requires remittance inflow figures as well to compensate for the import figures. Therefore, Pakistan would not have extra financing unless Pakistan again approached to get a loan, which would be a disaster, and it would increase Pakistan's external debt further.
