The highest debt payment-to-exports ratio in Pakistan and Sri Lanka
The World Bank has also upgraded Pakistan’s GDP growth outlook to 4.3% from the previous projection of 3.4% for the current financial year and 4% for the next financial year 2022-23.
“Capacity to pay indicators, such as the ratio of external public debt service to exports and remittances, are highest in Pakistan and Sri Lanka. The situation is particularly worrying in Sri Lanka, where heightened fiscal and external risks have led to a series of sovereign credit rating downgrades, preventing market-based refinancing,” said the World Bank report titled “The South Asia Economic Focus, Reshaping Norms: A New Way Forward’ said which was launched on Wednesday.
Hans Timmer, the World Bank’s chief economist for South Asia, in an online briefing, told reporters that Pakistan would have to reduce its gaping fiscal deficit and current account deficit to achieve consolidation of the economy. Pakistan’s debt service capacity is not vulnerable but in the medium to long term, Islamabad should reduce its twin deficits, Hans Timmer added, The News reported.
While some countries are experiencing a strong rebound in GDP growth, Afghanistan is facing a humanitarian crisis, Pakistan a political crisis and Sri Lanka a balance of payments crisis. While highly skilled workers have kept their jobs during the pandemic or found new opportunities, only some unskilled migrant workers have found jobs in cities. In addition, men were able to find new job opportunities faster than women.
“Energy subsidies as a percentage of GDP are highest in Pakistan, meaning rising prices in international markets potentially pose a tough fiscal challenge,” the World Bank report adds.