THERE are many reasons to be bullish about Pakistan these days, not least the hard-fought stability in the external sector following a few years of near-catastrophic depletion of reserves. But there are now a growing number of reasons to be concerned about the underlying fragility of it all.
The stability is real. There is no doubt about that. A wall of high repayment obligations that first loomed into view back in February 2021 and remained persistently high since then has finally started to come down. They not only met all these obligations and paid down their debt, but also built reserves through it all — organically — and not borrowed reserves.
The return of stability to Pakistan’s external sector after the near catastrophic volatility of 2021-2023 is one for the history books. The most ferocious inflationary fire in our history was doused. The most precarious foreign exchange reserves position was rebuilt. The most runaway fiscal train wreck was returned to surpluses on its primary balance. The state saved itself well.
But in order to do so it wrecked the livelihoods of its own people and nearly choked its own economy to death. Inflows were — in fact still are — diverted ruthlessly to state coffers. Interest rates were hiked to historic highs that were unthinkable even a few years ago.
