Pakistanis Struggle With Expenses: 60% Cut Back On Groceries, 10% Take Two Jobs

New Delhi: Pakistan is facing a deepening financial crisis with 74 percent of its urban population now unable to cover their monthly expenses with their current income, as reported by local media. This alarming figure shows a sharp rise from May 2023 when 60 percent of households struggling financially.

A recent study by Pulse Consultant reveals that the financial strain on Pakistan’s urban population is forcing many to make tough choices. Of those struggling to make ends meet, 60 percent have had to reduce essential expenses, such as groceries, while 40 percent have turned to borrowing money from friends and family, according to ARY News.

In a survey conducted between July and August by an Islamabad-based news outlet, it was revealed that 10 percent of struggling urban dwellers in Pakistan have taken on part-time jobs to supplement their income. The survey, which included over 1,110 respondents from the country’s 11 largest cities also found that more than half (56 percent) of those barely managing to meet their expenses were unable to save any money.

Participants in the survey ranged from 18 to 55 years. As per estimates, the national debt in Pakistan is forecast to continuously increase between 2024 and 2029 by in total 170.3 billion US dollars (+61.62 per cent). After the tenth consecutive increasing year, the national debt is estimated to reach 446.61 billion US dollars and therefore a new peak in 2029. Notably, the country's national debt has continuously increased over the past years.

According to the International Monetary Fund, the general government gross debt consists of all liabilities that require payment or payments of interest and/or principal by the debtor to the creditor at a date or dates in the future. In recent years, Pakistan has witnessed exponential growth in its debt stock, accompanied by an alarming increase in debt payments, exerting immense pressure on the national budget.

 As per the Dawn news outlet, the government has been grappling with an unsustainably high fiscal deficit, averaging 7.3 per cent of economic output over the past five years, leading to a staggering national debt of PKR 78.9 trillion. This includes domestic debt of PKR 43.4 trillion and external loans amounting to PKR 32.9 trillion.

The country finds itself ensnared in a debt trap, compelled to borrow more to service its existing debt, both domestic and external. Consequently, annual debt payments have seen a significant surge. The Mid-Year Budget Review Report from the finance ministry for the outgoing fiscal year validates these concerns. The report reveals a staggering 64 per cent increase in the nation's debt payments, reaching PKR 4.2 trillion during the first six months up to December.

This surge is attributed not only to the mounting debt stock used to finance the fiscal deficit but also to the spike in domestic debt costs, fueled by record-high interest rates of 22 per cent. Consequently, expenditure on debt servicing has outpaced the growth in tax revenue, resulting in a halt to spending on development initiatives. Recently Pakistan Finance Minister Muhammad Aurangzeb on a China visit met with his Chinese counterpart and held talks seeking relief for the country from power sector debts.

 The Pakistan ministers requested an eight-year extension for repaying energy debt, converting US dollar-based interest payments to the Chinese currency, and reducing overall interest rates for both CPEC and non-CPEC Chinese-funded projects, ministry officials said according to the Islamabad-based newspaper.

They formally requested China to reschedule its debts, with outstanding dues for China-Pakistan Economic Corridor (CPEC) power projects increasing by 44 per cent to Pakistan Rs401 billion by the end of the last fiscal year.

These measures aim to lower energy costs and secure International Monetary Fund (IMF) approval for a USD 7 billion bailout package. Unpaid debts by Pakistan violate the CPEC Energy Framework Agreement signed in the year 2015 between China and Pakistan and hinder further financial and commercial relations between the two countries. Pakistan recently secured a staff-level agreement with the IMF.

In response to a request by the Pakistani authorities, an International Monetary Fund (IMF) team led by Nathan Porter, IMF's Mission Chief to Pakistan, held discussions during the May 13-23, 2024 staff visit to Islamabad and virtually thereafter on IMF support for the authorities' medium-term policy and reform plans.

 "The Pakistani authorities and the IMF team have reached a staff-level agreement on a comprehensive program endorsed by the federal and provincial governments, that could be supported by a 37-month Extended Fund Arrangement (EFF) in the amount equivalent to SDR 5,320 million (or about USD7 billion at current exchange rates). This agreement is subject to approval by the IMF's Executive Board and the timely confirmation of necessary financing assurances from Pakistan's development and bilateral partners," a statement by the IMF on July 12, 2004 read. (ANI)