What will be the likely scenario if Pakistan defaults?
Source : Express.pk

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.