Pakistan’s socioeconomic conditions are worsening day by day, with about 45 percent of the population classified as living below the Poverty Line (BPL), while major financial indicators have continued to perform poorly, pushing the country toward a financial precipice. The unemployment rate remains 21-year low, investment at a 50-year low and gross debt-to-GDP ratio at 71.3 percent.  All this deepens stagnation, inequality, fiscal strain, and IMF dependency, complicates reforms even as debt default risk increases.

Food inflation has affected the majority of the population across the country, as the latest official data revealed that the per capita consumption has reduced while food expenditure has increased in the past six years.  According to the latest Household Integrated Economic Survey, the percentage of monthly household expenditure on food increased to 88.07 in 2023–24 from 86.79 in 2018–19 as higher income is allocated to food, even as food consumption declined to 81.47 kg from 86.95 kg during the same period.[1]

“A major share of household income is spent on basic food items. The second largest share of expenditure is on housing, water, electricity, gas and other fuels, reflecting the rising cost of housing and utilities,” reads the survey, published by the Pakistan Bureau of Statistics (PBS).[2] Earlier, the World Bank stated that about 45 percent of the population was living under poverty, which was a sharp increase from about 22 percent in 2018-19.[3][4] It held economic shocks and a lack of structural reforms responsible for the dire situation, saying the poverty reduction trajectory had come to a “troubling halt”.[5]

The USD 1.25 billion financing for mining of critical minerals at Reko Diq in Pakistan’s Balochistan has been portrayed as a major economic opportunity.[6][7] However, the financing from the US Export-Import (EXIM) Bank is not simply free money or unconditional aid. According to the US EXIM Bank’s Country Limitation Schedule, Pakistan’s private sector is eligible for short loan up to one year, while the public sectors remain ineligible, and the public sector does not qualify for any loans.[8] Since Reko Diq needs long-term financing, the USD 1.25 billion loan appears to be an exception but may come with heavy conditionality and strict structuring.

This may lead to strong American control over procurement, governance, and risk mitigation, amounting to a form of soft arm-twisting rather than unconditional assistance.[9]  For Pakistan, the US loan appears risky for the sovereign control over national assets. As per Pakistan’s government’s estimates, extra USD 500 million borrowing causes repayment of USD 180 million in interest cost, which can make repayment of the US Exim Bank loan difficult and prone to default.[10] “Reko Diq brings hard USD. Production starts 2028 at the earliest— zero revenue yet, just more debt and promises,” said Pakistani national Ismail Khan.[11]

Notably, Pakistan’s investment ratio fell to just 13.1 percent of GDP, which is the lowest in 50 years. As the Islamabad government failed to achieve the target of achieving the investment-to-GDP ratio of 15 percent, it has been compelled to seek external loans to meet its development needs.[12][13] The ratio may slip below 13 percent, which will create major problems for the Pakistani economy.

The declining foreign inflow finds an answer in Pakistan’s debt-to-GDP ratio, which has reached 71.4 percent even though the statutory limit set by law is 60 percent. Almost 5-60 percent of Pakistan’s budget goes to debt servicing, forcing international financial institutions to call Pakistan’s debt unsustainable.[14]  “How can any investor commit capital to a nation where deep-rooted uncertainty is the norm, a fact clearly mirrored in the steady decrease of foreign direct investment?” said Aamir Aziz, a textile manufacturer and exporter from Pakistan.[15]

Pakistani people complained of a lack of development despite growing foreign borrowing.[16] Pakistani national Anaya Zehra said the country was pawning its economic sovereignty as the government was bringing a loan disguised as an investment.[17] Another Pakistani national, Ibrahim Arat said “Debt is being weaponised against Pakistan’s future: repayment obligations grow, interest drains public resources, and fiscal space for human development shrinks. Loaning more funds will only perpetuate the same mistakes, enriching a few while the majority struggles.” [18]

The scale of Pakistan’s debt has emerged as the central limitation on both fiscal policy and economic growth, said Yousuf Nazar, former head of Citigroup’s emerging markets investments. “Pakistan’s debt burden has already breached the threshold of sustainability,” he said. “The choice now is stark: summon the political will for reform, or remain trapped in a cycle where yesterday’s borrowing consumes each new budget. Debt service has become not just a fiscal constraint, but a social crisis.”

END.

[1] https://www.pbs.gov.pk/wp-content/uploads/2020/07/HIES-2024-25-Report-Final-1.pdf

[2] https://www.pbs.gov.pk/wp-content/uploads/2020/07/HIES-2024-25-Report-Final-1.pdf

[3] https://www.arabnews.com/node/2603599/pakistan

[4] https://pc.gov.pk/uploads/report/NPI-Report.pdf

[5] https://www.reuters.com/world/asia-pacific/pakistans-poverty-reduction-reversed-by-economic-shocks-weak-reforms-world-bank-2025-09-23/

[6] https://pk.usembassy.gov/4/

[7] https://www.brecorder.com/news/40396728

[8] https://www.exim.gov/resources/country-limitation-schedule

[9] https://www.gfmreview.com/commodities/pakistan-s-copper-reserves-may-offer-bargaining-power-in-us-trade-talks

[10] https://tribune.com.pk/story/2567708/reko-diq-project-cost-raised-to-77b

[11] https://x.com/ismaeyl/status/2007151372538650715

[12] https://www.state.gov/reports/2025-investment-climate-statements/pakistan

[13] https://profit.pakistantoday.com.pk/2024/05/23/pakistans-investment-ratio-hits-50-year-low-at-13-1-of-gdp/

[14] https://www.reuters.com/world/asia-pacific/how-bad-is-pakistans-debt-crisis-can-imf-save-it-2024-02-14/

[15] https://kse.com.pk/pakistans-investment-rate-declines-risks-falling-below-13-of-gdp/

[16] https://x.com/AnayaZehra4/status/2010674477802119473?referrer=grok-com

[17] https://x.com/AnayaZehra4/status/2010674477802119473?referrer=grok-com

[18] https://x.com/IbrahimArat33/status/2009933981421040120?referrer=grok-com