Finance: Pakistan’s debt — a losing battle

The objective of incurring sovereign debt is to extricate a nation from existing crises and fund investments for growth and development. However, reliance on debt should be prudent and not excessive. When a nation fails to manage its debts effectively, it can enter a state of debt distress — a challenging and painful process. In such cases, the debt itself becomes a crisis, often exacerbating the initial problems that prompted the borrowing. As of 2023, the total debt and liabilities-to-GDP ratio stood at 89.9 per cent, accompanied by an annual deficit exceeding 6.9pc of GDP. Should this trend persist, what fiscal challenges will Pakistan face in the short and long term, and how might these be overcome?