The United Nations has said Pakistan is in the eye of a polycrisis as the country’s external debt almost doubled between 2015 and 2020, becoming the main driver of a more widespread economic crisis in 2022.

The United Nations Trade and Development Conference (UNCTAD), in its report titled ‘Trade And Development Report Update April 2023 Global Trends And Prospects’, said despite an increase in its external debt, Pakistan’s export earnings were falling or stagnant during the said period.

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The South Asian country has been in the grip of one of the worst economic crises in history and for the past year, there have been persistent rumours that the country is nearing the brink of default.

With foreign reserves at record low levels, the country has imposed import restrictions that are having an adverse impact on the economy.

The UN report noted that being a net wheat and energy importer, Pakistan’s exposure to rising prices in these markets was a concern even before the war in Ukraine.

“The sharp spike resulting from the conflict led to significant import costs, which persisted through much of 2022,” it said.

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Moreover, a sharp fall in the value of the Pakistani rupee i.e. over 40% against the dollar since the beginning of 2020 has added to inflationary pressures and depleted exchange reserves, said the report.

“Against a worsening economic backdrop, last year’s monsoon rains were an estimated 50% stronger than normal. The loss and damage (LD) from the floods have been estimated by the World Bank to amount to more than $30 billion,” said the report.

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Following the devastation, bilateral and multilateral partners pledged to extend $9 billion of funds to cover slightly more than half of the $16.3 billion reconstruction needs estimated by the World Bank.

“Though extended on favourable terms, these loans will increase Pakistan’s debt burden and weigh negatively on adaptation and other required social and productive investment.

“Unless more LD finance is made available in the form of grants, the risk of a debt spiral will only intensify,” it warned.