Pakistan Nearing Default

Imagine Graham Nash vlogging on world economic topics.

Now you don’t have to…

This is a very good summary of the problems that have been growing in Pakistan for 20+ years which have been accelerated by energy price spikes due to the war in Ukraine and the floods in 2022.

  • 5th largest country in the world by population
  • relatively small country by territory
  • not enough natural resources to sustain such a large population
  • negative balance of trade for 20 years
  • war in Ukraine spiked energy prices at same time the rupee was devalued, making energy even MORE expensive
  • inflation within Pakistan jumped from 13% to 23%, compounding all problems
  • within 30 days of exhausting currency reserves to make interest payments on current debts
  • Pakistan is likely having conversations with Saudi Arabia and China for financial relief
  • China has been offering to build roads / bridges for poor countries in exchange for long term relationships / influence
  • If Pakistan obtains relief from the IMF, any conditions to raise tax revenue to ensure repayment, etc. will further impoverish those already struggling to afford food, housing and energy, compounding the economic and political strains in the country

All of those tensions combined with signs Putin intends on continuing / heightening the conflict in Ukraine while many economies may encounter recessions in 2023 makes this a dangerous economic and political problem for the world.