If defaults, Pakistan's inflation might rise to 70%

Pakistan's former finance minister Hafiz Pasha warned that the counry's inflation can skyrocket to 70 per cent in case of default. Even if the International Monetary Fund’s (IMF) loan is revived, inflation will still rise to at least 35 per cent, owing to the lender’s strict conditions.

Addressing members of the Pakistan Industrial and Traders Associations Front (PIAF) on Tuesday, Pasha forecasted that Pakistan’s overall economy is likely to remain in severe stagflation this year.

“If the government implements the key reforms agreed with the IMF, including a Rs50 levy per litre on POL, an electricity tariff hike of 40 per cent, doubling of the gas tariff, and shift to market-based exchange rate policy, the inflation rate could exceed 35 per cent,” he cautioned. If the government does not implement the agreed reforms, he said, “It will lead to a termination of the IMF programme and will virtually dry-up the country’s capital.”

“Our reliance on expensive foreign loans has proven to be disastrous. In the first 65 years, the country’s debt was $65 billion. This jumped to almost $130 billion in the next seven years as we enhanced our reliance on high interest loans that are difficult to payback,” he highlighted.