Explainer: What will happen to Pakistan if it goes bankrupt, what is the difficult situation of the neighboring country

In the economic condition of Pakistan, it seems that this neighboring country is also reaching towards financial bankruptcy. The economic condition of Pakistan has been shaky for the last 02-03 years. Its entire economy rests on the loan obtained from the loan, due to which this country is running, but whenever the time comes for the payment of the loan, there is a stir in the whole country. The rulers of Pakistan immediately go from Saudi Arabia to China seeking help. Financial help is also available, but they will have to pay this loan as well. Recently many such incidents have happened, which are enough to tell the pathetic economic condition of Pakistan. The question arises that when any country becomes bankrupt then what happens to it, what condition does it have to go through.

The flour crisis has deepened in Balochistan for the last two weeks. Because of this, the cost of a 20 kg bag of flour has increased to 2800 Pakistani rupees in the capital Quetta. At the same time, its price has reached the highest level of Rs 3,200 in other areas of the state.

In Pakistan, the price of one dollar has become 240 rupees. The prices of everything are increasing. Somehow Pakistan has recently repaid the loan installment of $ 01 billion to two commercial banks, but the real test is ahead. In 03 months, he has to pay another installment of 08 billion dollars.

Foreign exchange reserves in Pakistan’s central bank SBP have reduced to $4.5 billion. This amount is enough to pay the import bill for less than four weeks. Pakistan urgently needs dollars. Pakistan has been assured to give 8.7 billion dollars from other agencies of the world in the next three years. It is not yet clear whether this amount will be received as a loan or as a grant.

Question – What will happen if Pakistan is not able to repay the next installment of 08 billion dollars loan in 03 months?
Pakistan is in a really difficult situation at the moment. As a help to Pakistan, some countries and agencies have promised to give help of about 08.7 billion dollars, this help will be in the form of loan as well as in the form of easy loan. Some part can also be in the form of help. But their meeting is not yet fixed. Even if you get it, you will get it late. Pakistan’s monthly bill from oil to exports is only 05-06 billion dollars. If Pakistan is unable to repay the loan, then it will have to declare itself bankrupt.

Question – On the one hand, Pakistan is facing huge loan repayment installment and on the other hand, the bill of expenses which goes continuously every month. What will happen if the expense bill is stopped?
The oil and goods that Pakistan buys from outside will stop coming. Due to which his life will be disturbed. It will affect everywhere. Production will stop. The supply of goods will be badly affected. Power generation will be affected. There will be a situation of stoppage of work from hospitals to transportation. People will stop getting petrol or diesel. As we have seen in Sri Lanka a few months ago. Sri Lanka had to declare itself bankrupt amidst these circumstances. He had to declare that his financial condition was not such that he could repay the loan. This is called being a financial defaulter of a country.

Question – What is a defaulter of a country and what is its impact?
It is normal for any country to default. Such a situation comes in front of all the countries at one time or the other. Many countries have gone bankrupt and they don’t even know. Most countries have gone bankrupt at least once or twice. This is because the lender does not close business with that country. A country on which the debt keeps on increasing, does not stop the business like a person. He continues the business by paying something or the other. Yes, whatever loan you get after being a defaulter, it has strict conditions and those conditions also involve radical changes in the economic system of the country.

The Latin American country Argentina has defaulted twice between 2000 and 2020. Greece became the defaulter in 2012. Russia in 1998, Uruguay in 2003, Dominican Republic in 2005 and Ecuador in 2001.

Question – When does any country declare itself a defaulter?
– When he does not have any money to repay the loan or pay the import bill and there is no way left.

Question – Does being declared a defaulter have any effect on the credit of the country?
– Absolutely. Even today investors hesitate to go to Argentina and Greece. Presently this is the situation of Sri Lanka. In case of bankruptcy, the biggest loss with the country is that its reputation in the market is lost. Any country is afraid to invest money in the name of development in his country. Even international banks also do many types of investigation before lending. The time period for returning the money is also reduced because there is a fear that once the country has reached poverty, it may run out of money again.

Pakistan’s Prime Minister Shahbaz Sharif is constantly trying to solve the country’s economic crisis. (AP file photo)

Question – If Pakistan declares itself bankrupt then what will happen in the country?
People’s life will surely become difficult. Many types of economic burden will increase on the people for at least two to three years. Inflation is in its place, along with subsidy will end, electricity, gas, oil bills will increase. There will be reduction in the welfare works of the government. Overall, the life of the public will be difficult.
Have to export. Oil consumption will also have to be reduced. The domestic economy has to be strengthened. Corruption will have to be attacked in a forceful way.

Question – Will this have an impact on the expenses of the army as well as the government?
– Of course, if there is a cut in the budget of the army, then the purchase of weapons will be affected due to the reduction in the defense budget. Hardly any country gives weapons to Pakistan on a large scale on loan. Unaccountable expenses of the government and extravagance of leaders and officers will have to be stopped. Its image will be of a weak and hollow country.

Question – Why are some people in Pakistan saying that the deteriorating economic condition of the country is right to improve the country in a way?

Actually, when a country is a defaulter or comes in a worse condition economically, then it gets a chance to completely overhaul or clean its economic system. He can implement reforms by formulating economic policies in a new way. However, their results come out in the long term, about a decade.

These days Sri Lanka is going through these things after being a defaulter. At present, the report says that after implementing the strict loan conditions of the World Bank and the International Monetary Fund, taxes have increased in Sri Lanka, all kinds of expenses have decreased, attention is being paid to the stability of the micro-economy. Attention is being paid to improve the balance of payments and subsidies are being reduced. Experts say that when these tough measures continue continuously for two to three years, then the public itself starts to understand that the economic conditions are getting better. Many times the country emerges stronger from these situations. The same situation had come in Indonesia in 1999. After that it took a decade to recover from it, but now Indonesia has emerged as a money powerhouse in its region.

Question – Who is responsible for this condition of Pakistan?
While its rulers, their short-sighted policies and weak governments are responsible for this condition of Pakistan, the Pakistan Army is most responsible for this. Corruption along with whose huge expenses and large scale arms purchases has brought this country to this condition.

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Tags: Pakistan, Pakistan’s Economy, Pakistani currency, Pakistani funding