Pakistan is currently in economic turmoil, with widespread speculation of a de facto sovereign default. Even though there is many a slip between the cup and the lip, the latest news from the Geneva conference about generous pledges worth US $9.7 billion for flood recovery provides little hope.
Genuine relief is contingent upon the actual realization of these pledges and the amount of cash transferred in the form of foreign currency over the next six to twelve months. Similarly, the UAE has agreed to roll over US $2 billion of existing loans as well as an additional loan of a billion dollars, which is also a positive portent.
Commitments, rollover financing, and loans can help Pakistan improve its financial position and avert the immediate risk of default in the short term, but long-term reforms must be introduced to structurally transform the economy in order to achieve sustainable and resilient economic growth. Otherwise, we will face a similar threat of default within six to eighteen months.
Very insightful and informative.