Pakistan's Financial Abyss: A Stark Reminder of Fiscal Mismanagement

Cash-strapped Pakistan is battling an unprecedented financial crisis driven by domestic and external debts, unsustainable pension liabilities, and a failing power sector. Economist Atif Mian and former Treasury Head Asad Rizvi call for practical solutions, but political distractions and unwillingness to make tough decisions worsen the situation.

Pakistan's financial crisis has reached unprecedented depths, warns prominent Pakistani-American economist Atif Mian. Addressing the issues in a comment on his official X account, Mian explained that skyrocketing domestic and external debts, unsustainable pension liabilities, and the failing power sector are exacerbating Pakistan's economic woes.

Former Treasury Head at Chase Manhattan Bank, Asad Rizvi, responded by urging Mian to offer practical solutions for these challenges. He also emphasized the need for Pakistan to address its tax-to-GDP ratio, bank advances-to-deposit ratio, and substantial OMO injections, which are stunting economic recovery. Rizvi highlighted the urgency of stabilizing the currency in circulation and tackling the significant circular debt.

The crisis manifests in three critical loops: the fiscal loop, external loop, and a downward confidence spiral. Political distractions, compounded by public discontent, inhibit meaningful reform efforts. Mian and others warn that without prioritizing the welfare of the people, Pakistan's leaders will struggle to navigate the country out of this fiscal quagmire.

(With inputs from agencies.)