According to a recent Bloomberg survey, Pakistan, which has probably South Asia’s poorest economy, is among the top three nations most susceptible to a debt catastrophe.
Based on a pool of 60 nations, Bloomberg’s debt vulnerability index places Pakistan third, behind Egypt and Ukraine.
To gauge each nation’s degree of debt vulnerability, the ranking disclosed each country’s exposure to public debt, interest rates, and yield on dollar bonds. Greater vulnerability to debt constraints is correlated with higher ranking, whereas greater resilience is correlated with lower rankings.
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The Government of Pakistan’s debt is 73.6 percent of GDP, which is lower than that of the Ukraine (98.3 percent) and Egypt (92.9 percent). The debt-ridden South Asian country spends 6.3 percent of its GDP on interest. Bond yields are currently the fourth highest among the nations most susceptible to a debt crisis.
Notably, the riskier nature of the bond results in higher interest rates the greater the bond yield.
These rankings should be noted in light of the International Monetary Fund’s (IMF) alarming predictions that Pakistan’s external debt will rise to $130.850 billion (37.3 percent of GDP) in 2023–2024. For 2023–2024 and 2024–2025, respectively, the predicted levels of domestic debt are Rs. 43.574 trillion and Rs. 49.803 trillion.
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Given the lack of external funding and the substantial gross financing needs that will continue over the next years, the risks to debt sustainability, which were already high at the time of the previous IMF evaluations, have gotten worse, further obstructing the route to sustainability.
Other Countries
The data also revealed Bahrain to have the greatest debt among countries that are sensitive to debt, at 124.7 percent of its GDP (11th place).
Due to their high economic resilience in terms of bond rates, interest costs, and debt (as a percentage of GDP), Turkey, Honduras, Mexico, and Iraq were placed as the best economies at the green end of the chart.
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