10/01/2022, 12.00
PAKISTAN
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Islamabad drowning in debt (not just floods)

In addition to more than 1,500 deaths, floods have left billion in damage. Foreign loans are needed to meet energy needs and import food. The problem of billion in debts owed to China. Imran Khan's shadow over Shehbaz Sharif's government.

Islamabad (AsiaNews/Agencies) - The recent floods that have killed more than 1,500 people and devastated entire areas of the country will overwhelm Pakistan even more with debt. Along with paying for imports of raw materials and food, meeting debt deadlines with foreign creditors is the government's main problem.

The national executive is facing the perfect storm. The local economy has been struggling for years, often rescued by international multilateral institutions. The pandemic, the Ukraine war, and energy supply shocks have aggravated an already dire situation: the floods seem to have delivered the final blow.

Pakistan finds itself with foreign exchange reserves at rock bottom, the local currency in free fall, and galloping inflation. Before the August floods, .5 billion in foreign borrowing was needed, according to the Central Bank. More will be needed: early calculations say the floods caused more than billion in damage.

Despite aid provided by the International Monetary Fund, the country has foreign exchange reserves that cover only one month's worth of imports. Analysts note that Shehbaz Sharif's weak government will first have to negotiate agreements to restructure its foreign debt.

One problem will be dealing with the Chinese, who have billion in claims against Islamabad. All this while Sharif is being pressed politically by his predecessor Imran Khan, who remains popular in the country.

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