5 reasons that could lead to Pakistan's economic crisis and its impact on India; Know All details

Pakistan's foreign debt has increased to $10.886 billion in the first three quarters of the year 2021-2022.

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Pakistan Economic Crisis: The current situation in Sri Lanka is getting worse day by day. Even the President of the country has been escaping from one country to another. Today Sri Lanka is going through an economic catastrophe, the situation is in front of us.

Looking at the current situation, in one of India’s neighbouring countries stands at par with what modern-day Sri Lanka used to be at a point. Amid this, it is speculated by some of the top experts that Pakistan can be the new Sri Lanka in the region. 

The economic situation in Pakistan has not hidden anymore. The debt-ridden economy, continuous rising inflation in the Islamic state, and loans from China at an exponential rate of promising development are deteriorating the status of the country for the worse. 

Here is an explainer of how is Pakistan moving towards being what Sri Lanka has transformed into. 

Foreign Exchange Reserves:
The status of Sri Lanka’s foreign exchange reserve started to fall around a year ago which never stabilized and the status in the present scenario is such that Sri Lanka is facing an inflation rate of over 64%. The same is the case with Pakistan at present, their forex is depleting rapidly, and besides sanctions owing to the terror factor that has affected Pakistan’s development for decades.

Pakistan's foreign debt has increased to $10.886 billion in the first three quarters of the year 2021-2022. According to reports, the debt stood at $ 1.653 billion in the first quarter of 2022 while it was $3.51 billion in the first quarter of 2020-2021. At the same time, the foreign exchange reserves have gone below $ 10 billion.

The inflation is on a consistent rise - Sideways, the inflation rate in Pakistan has crossed 20%. This rate has increased by 19.8% in urban areas and 23.5% in rural areas. Petrol costs Rs 233.89 per litre, high-speed diesel Rs 263.31 per litre and kerosene Rs 211.47 per litre. Rupee weakening against the dollar- At the same time, the standard of the Pakistan rupee has gradually depleted and crossed Rs 200 mark against the US dollar.

Debt from China is also a big sign- Apart from this, loans from China are also seen as a major problem for Pakistan. Like, China's debt in Sri Lanka had worsened the situation a lot. Moreover, China had given a loan of $ 2.3 billion to Pakistan, which was facing a financial crunch. The economy of Pakistan has also been crippled due to the debt burden, limited earning opportunities and distance from investors.

Due to the reduction of taxes in Sri Lanka, the tourism industry got adversely affected due to Covid-19. With the increasing debt on Sri Lanka and the inefficient measure taken for the agriculture sector, the situation started getting worse. After this Sri Lanka began to face the deepest economic crisis, historical recession and hyperinflation hyped up Sri Lanka’s trouble to where it stands today.

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