Debt trap deepens as short-term borrowing keeps Pakistan's economy on edge

Lahore [Pakistan] February 14 (ANI): Pakistan's fragile external financing framework continues to undermine economic stability, with policymakers stating that dependence on foreign loans leaves the country exposed to recurring crises. Business representatives and economists argue that recent improvements in reserves do not resolve the structural weaknesses embedded in the repayment schedule, as reported by The Express Tribune.
According to The Express Tribune, much of the debt portfolio is skewed toward short maturities, sharply limiting the government's ability to absorb shocks. Pakistan Industrial and Traders Associations Front Vice Chairman Raja Waseem Hassan pressed authorities to urgently seek extensions from friendly capitals. Without lengthening repayment timelines, he stated that the threat of repeated balance-of-payments emergencies will remain ever-present. Data shows the country's external debt and liabilities stood at roughly $134.5 billion by September 2025, with sizable repayments due in the near term. Although reserves crossed $21 billion in January 2026, analysts caution that a large part of this cushion comes from multilateral flows and temporary bilateral help, while obligations through 2026 and later years remain formidable.
Hassan described renewed diplomatic engagement with Gulf partners, talk of investment from Saudi Arabia and the UAE, and a thaw with Washington as encouraging. Yet he stressed that geopolitical alignments are fluid and cannot substitute for internal strength. Sustainable security, he argued, must rest on competitiveness, higher productivity and credible buffers. Drawing comparisons with neighbouring economies that managed to bargain effectively during global trade tensions, he said Pakistan's narrow export base and slow growth have weakened its leverage. Exports hovered near $32 billion in FY25, still failing to match import demand even after restrictions, as cited by The Express Tribune.
Senior economist Saleem Ahmed echoed those concerns, too. He said rollovers and deposits cannot remain a permanent lifeline. Loan maturity management, he argued, should accompany reforms in taxation, energy pricing and industrial output. With growth projected below five per cent and credit conditions tight, businesses remain cautious. Both experts urged immediate planning to broaden the tax base, cut losses in the power sector, promote value-added exports and attract stronger foreign investment, as reported by The Express Tribune. (ANI)