Pakistan has the third highest debt service in the CAREC region: ADB

 Pakistan has the third highest debt service in the CAREC region: ADB

According to the Asian Development Bank (ADB) in its latest report, Pakistan has the third highest debt service, at $ 15 billion, or almost 7 percent of the total regional economic cooperation (CAREC) region by 2020. "COVID-19 and the potential economic recovery of the CAREC region.

Among the CAREC countries, Pakistan is one of the members that has recently experienced a current account deficit through International Monetary Fund (IMF) lending programs. Pakistan's debt-to-GDP ratio rose from 67 percent to 86 percent between 2017 and 2019.

Pakistan's debt-to-GDP ratio is highest in the region, at 86 percent in 2019, and up 88 percent in 2020.

CAREC countries need more financial resources to address financial constraints during COVID-19. Governments provide fiscal packages to individuals and businesses to combat the economic turmoil caused by COVID-19, he added.

The report states that in the baseline scenario, the bank assumes that: (i) the principal balance is close to zero and (ii) the historical real interest rate is 2.7 percent. With these assumptions, the bank plans a debt-to-GDP ratio by 2030. The ratio will decline from 86 percent to 64 percent in 2030 if the government smoothly keeps the core balance close to zero.

Sustainable debt levels can be achieved if GDP growth is higher than 4.5 percent per year and the real interest rate does not exceed the historical real interest rate. The debt sustainability analysis for the CAREC region suggests that the overall debt crisis risk for Pakistan, Afghanistan and Tajikistan is high, while the overall debt crisis risk in the Kyrgyz Republic is moderate and according to the latest data in Uzbekistan. . .

In recent decades, Pakistan, the People's Republic of China (PRC), Tajikistan and the Kyrgyz Republic have had negative values ​​for the overall primary historical balance and the overall fiscal balance. To reduce financial imbalances, governments have accumulated a lot of debt, which has had repercussions on financial markets.

A high fiscal deficit will affect the allocation of funds in both the private and public sectors. In Pakistan, government loans from banks account for more than 90 percent of total loans, the report said. This reduces resources for the private sector and creates a barrier to private sector development.

CAREC economies also spend on low-yield, low-income public sector projects, such as the food, fertilizer and oil sectors. It covers a large part of government spending and ensures fiscal deficits. Pakistan has amassed more than $ 10 billion in new debt during the pandemic, the report said.

The report states that pandemic loans (February 2020 - August 2021) were obtained in all CAREC countries, mostly in Pakistan (24 percent), Uzbekistan (23 percent), the People's Republic of China (PRC) (20 percent). percent) and Kazakhstan (13 percent). The amount of the pandemic loan was even higher in April-August 2020. Almost all of these loans (90 percent) were provided by governments. The report states that the direct medical costs of COVID-19 are highest in Pakistan (approximately $ 2.019 million) and Kazakhstan (approximately $ 900 million).

Finally, more investment will be needed in health to ensure the availability of the necessary micro-level infrastructure.

The simulation results show that the People's Republic of China and Pakistan benefit the most from regional and global trade, as the trade balance initially increases to almost $ 118 billion and the trade balance later increases to almost $ 118 billion. $ 4 billion. Tariff cuts in these countries will boost trade in the region as business costs are reduced. These rates may be reduced by at least five percent for CAREC countries during a pandemic and, if necessary, may be restored to the original level once the necessary improvements for trade have been obtained.