While all predictions and analyses suggest that it is unlikely that Pakistan will default on repayment of external debt, one can still try to assess what a post-default Pakistan will likely be.
Some of the possible economic consequences of this include conscious inflation, a huge increase in poverty, devaluation of the rupee, withdrawal of capital, closure of industries, large-scale unemployment, brain drain and the stoppage of the wheel of economic development.
However, in any such scenario, the country will have to pay the biggest price in the form of social unrest in the context of inequality of income and wealth.
Almost all economists agree that there is apparently no possibility that Pakistan will default on its loans, and the reason for this coincidence or belief is not due to Pakistan’s economic health, but because of the expected social and strategic response, which is related to the relevant stakeholders because these stakeholders cannot afford these possible effects.
In the event of a default, its economic cost will be quite significant, but with the right economic policies and recovery mechanism, we can see some hope or light at the end of the tunnel to return to normalcy in a few years, however, it is certain that the biggest cost or loss to the country in the event of a default will arise in the context of the current inequality of income and wealth. There will be social unrest. This issue can lead to a serious situation and also create an internal security crisis.
The situation on our borders is worrisome and extremist forces are already operating inside the country, so in the event of default, the country can be more chaotic than is expected.
So it is not just the economic cost of default that we need to pay attention to, but also the cost of social and internal security, for which we have to be prepared. Moreover, it will not be a short-term trend, but it will be quite long-term and it will be deep-rooted, it can be assumed that the recovery process will be slow and painful.
In this context, analysts still believe that it is unlikely that Pakistan will default. The social impact of a possible default, security costs, economic costs will be so high that all internal and external stakeholders will try their best to avoid such a scenario.
Exports have also been hurt by a lack of dollars, and some foreign shipping companies are thinking about stopping their business in Pakistan.
According to news reports, shipping companies are contemplating suspending services due to unpaid freight charges and a significant drop in cargo volume. The Pakistan Shipping Agents Association has notified the government of a potential situation.
The Shipping Agents Association stated in a letter sent to the relevant ministries and the State Bank that Pakistan’s exports cannot continue due to the suspension of services by foreign shipping companies. The Pakistan Shipping Agents Association has appealed in a letter to Commerce Minister Naveed Qamar, Ports and Shipping Minister Faisal Sabzwari, and State Bank Governor to ensure payment of freight charges to the relevant ministries and State Bank shipping firms. If you do not play your part, there is a risk that the economic situation will worsen due to a halt in exports.
Almost all international logistics from Pakistan are sent by sea, except for the border countries. If the flow of international trade from Pakistan stops, the economic situation will worsen. It should be noted that 5 billion dollars are paid annually to foreign shipping companies in terms of freight.
This is video explains the current situation of Pakistan’s economy.
If you watch the video patiently you will come to what caused the crisis we are in.
The Karachi Chamber of Commerce and Industry submitted details for the immediate clearance of 2,500 containers out of the total 5,700 stuck at the Karachi port. Chairman Zubair Motiwala asked the State Bank Governor again to take action right away because the business was in a very bad situation.
A meeting will be held on January 23 to discuss the facilitation of importers and the clearance of other levies and charges. Riazuddin, president of the Site Association of Industry, criticized the federation and said that the government is not able to handle the situation well because of the foreign exchange crisis.
The Pakistan Yarn Merchant Association has urged the State Bank of Pakistan to provide special loans with a repayment period of 5 years at zero interest to meet the needs of the industries. The association cited difficulties in the clearance of imported textile raw materials as the cause of concern.
. The letter of credit must be reinstated in order to secure the imported raw materials and resume production. Sohail Nassar, Senior Vice Chairman of the Pakistan Yarn Merchant Association, wrote to Governor State Ninq that polyester filament yarn is an important raw material for textiles and that the manufacturing sector can’t work without it.