(Bloomberg) -- Pakistan's debt is a “raging fire” that has become unsustainable, a local think tank warned, in a graver assessment than the International Monetary Fund which had found the country's dues to be “borderline” manageable.
The debt profile is “alarming,” Islamabad-based think tank and advisory firm Tabadlab said in a 68-page report on the nation's borrowings and liabilities. Pakistan is headed for an “inevitable default,” which will start a “spiral,” it said.
Economic pessimism among Pakistan's voters is at a record high, according to a Gallup poll before the nation's inconclusive and contentious election on Feb. 8, which has added to uncertainties and triggered a slide in the country's stock market. Shehbaz Sharif, the favorite to become the next prime minister, said last week Pakistan needs to secure a fresh IMF bailout as soon as possible. The current nine-month program ends in April.
Pakistan's external debt and liabilities have almost doubled to $125 billion and its domestic debt has increased sixfold in nominal terms since 2011, according to the Tabadlab report's authors Zeeshan Salahuddin and Ammar Habib Khan. Interest payments as a share of gross domestic product are at an all-time high, said the firm that advises governments, development institutions and businesses.
One way to mitigate the debt issue may be to use so-called debt-for-nature swaps, in which parts of a country's debt are exchanged for commitments to environmental conservation projects, Tabadlab said in the report. Pakistan is prone to climate disasters. The economy suffered a contraction last fiscal year after floods inundated about a third of the country and caused about $30 billion in damages and losses.
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