Pakistan is on the verge of economic collapse and is surviving on IMF loans, with its forex reserves down to $15 billion…reports Asian Lite News
While Pakistan has threatened to respond forcefully to India’s attack on terrorist infrastructure in the neighbouring country, the stark economic contrast between the two countries also bears testimony to the disparate paths that the two neighbours have been pursuing since they became independent from British rule.
India has emerged as the world’s fastest-growing economy, with World Bank figures for 2024 showing that the country’s GDP is close to $3.88 trillion, which is more than 10 times the size of Pakistan’s economy at a mere $0.37 trillion.
India is poised to become the world’s fourth-largest economy in 2025, with the country’s nominal GDP rising to $4.187 billion during the year to surpass Japan, according to the IMF’s World Economic Outlook report. India has a massive forex kitty of $688 billion.
Pakistan is on the verge of economic collapse and is surviving on IMF loans, with its forex reserves down to $15 billion.
Interestingly, Pakistan’s economy, in the initial years after independence, grew at the same pace as India’s, backed by US aid and donations from the oil-rich Islamic nations.
However, while democratic India kept its focus on economic development and lifting its masses out of poverty, Pakistan has been rocked by bloody coups and military dictatorships, with the army Generals still calling the shots and fuelling hostility against its more prosperous neighbour. The training and financing of terrorism by Pakistan forms a key element of this plot.
Pakistan now faces an economic freefall – crippled by political chaos and the long-term cost of harbouring terrorism which has boomeranged at the country as well leading to bloody violence in Balochistan and the North West Frontier Province.
Pakistan is confronted by a precarious situation on the economic front. The country was on the brink of sovereign default in 2023 and had to be bailed out by a $3 billion IMF loan. The country is still critically dependent on this financial lifeline and is desperately trying to raise another $1.3 billion climate resilience loan.
Meanwhile, global ratings agency Moody’s on Monday said it sees India’s macroeconomic conditions as remaining stable even if tensions with Pakistan rise after the horrific terror attack at Pahalgam in which 26 tourists were shot dead.
However, sustained escalation in tensions with India would likely hit Pakistan’s economy and hamper its ongoing fiscal consolidation goals, the Moody’s report said.
The report also pointed out that amid heightened geopolitical posturing, further flare-ups could impair access to external financing and put additional pressure on Pakistan’s foreign-exchange reserves, which, at just over $15 billion, remain far below what is required to meet external debt obligations in the coming years.
The macroeconomic conditions in India, Moody’s noted, remain stable due to strong public investment and resilient private consumption, despite the possibility of higher defence spending slowing its fiscal consolidation.
According to the report, comparatively, the macroeconomic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption.
“In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India’s economic activity because it has minimal economic relations with Pakistan (less than 0.5 per cent of India’s total exports in 2024).
