In June 2024, Pakistan successfully averted what seemed to be an impending default, silencing speculation and rumors of a financial collapse. Last year, social media was rife with predictions that Pakistan would default on its external debt obligations, with the country needing to meet hefty payments totaling $27 billion in 2024 alone.
However, Pakistan’s economic recovery efforts were stronger than anticipated, tackling each major financial hurdle and managing its resources effectively, which quickly changed the narrative.
Several key factors contributed to this financial turnaround. Firstly, Pakistan recorded an increase in exports and remittances, which provided a boost to the national economy.
The State Bank of Pakistan (SBP) also took proactive measures, purchasing approximately $8 billion in excess from the open market to stabilize the currency and ensure adequate foreign reserves. Additionally, there was careful management of the balance of payments, especially with imports, which helped streamline expenditures.
Perhaps the most crucial development was the rollover of $15 billion in loans by friendly nations, allowing Pakistan to restructure its debt obligations more comfortably.
These efforts collectively allowed the country to retire about $9 billion of its debt by the middle of 2024, and SBP reserves nearly doubled from $5 billion in June 2023 to $11 billion by October 2024.
Another positive outcome was the reduction in interest rates, from 22.5% to 15%, driven by a steady decline in inflation. This decrease in interest rates was a relief for businesses and consumers alike, encouraging further economic activity.
The Special Investment Facilitation Council (SIFC) played a significant role, creating an environment conducive to foreign direct investment (FDI), with new investments expected in the near future.
Despite these achievements, the narrative of Pakistan’s economic stability has received limited public attention. With the successful mitigation of a default risk, the country has moved from a precarious financial situation towards a path of recovery and stability.
Continued prudent financial management and strategic investments remain essential, but the progress made so far stands as a testament to the resilience and adaptability of Pakistan’s economic policies and partnerships.
