Pakistan has been facing a debt crisis for several years and now the odds of falling back on its debt are intensifying with each passing day. It has been heavily dependent on borrowing for a long time to fulfil its financial responsibilities instead of generating enough income or reducing expenditures to pay its existing debts. As a result, this has caused a pattern of borrowing and amassing debt, posing a challenge for Pakistan to achieve long-term financial stability. According to the SBP estimates, Pakistan’s total debt-to-GDP ratio was hovering around 85 per cent by the end of December 2022, all due to a lack of fiscal discipline, low tax revenues, and an over-reliance on both domestic and foreign borrowing. This dependence on borrowing has led to a large amount of external and domestic debt being accumulated, which has become increasingly difficult to service due to the country’s low foreign exchange reserves (which were around $4.3 Billion with the SBP by the 10th of March,2023). Pakistan’s total debt increased from Rs56.7 trillion to Rs60.7 trillion from June ’22 to December’22 (an accumulation of Rs4.7 trillion within a span of 6 months). The public debt, which is the sum of government domestic debt, government external debt and debt from IMF, increased by 23.4 % on a year-on-year basis from Dec’21 (42.7 trillion rupees) to Dec’22 (52.7 trillion rupees). The major contributor to this rise was the government’s domestic debt which increased by Rs6.4 trillion within a year. The government’s total debt-to-GDP ratio was 62.3% by the end of Q2FY23. We need a sound rationale to procure new debt or go for debt rescheduling. Similarly, Pakistan’s external debt servicing was only 20% of exports in 2013. Pakistan currently has one of the world’s highest external debt servicing burdens as a percentage of exports and remittances. From FY13 to FY23, Pakistan’s external debt servicing surged from $6.5 billion to nearly $26 billion. This translates to approximately 65% of the country’s exports, which are estimated at $40 billion in FY23, and 37% of both exports and remittances (as reported by the experts). There was an approximal 2.7% increase in the level of external debt of Pakistan as a percentage of GDP in FY22 as compared to FY21. Due to this surging debt crisis, Pakistan was downgraded to a risk of default last month, by international rating agencies such as Fitch, to CCC- from CCC+. Both CCC- and CCC+ ratings indicate that a country’s ability to meet its financial obligations is heavily reliant on favourable economic and business conditions, with CCC- implying a slightly higher likelihood of default compared to CCC+ and investing in a country with either of these ratings considered to carry a high level of credit risk. Despite all this, still, there is a lack of a concrete plan to address Pakistan’s rising debt-to-GDP ratio and the absence of any clear objectives is putting the country at risk of sinking deeper into debt-like quicksand, threatening its survival. Even if Pakistan manages to secure the payment of $1.1 billion from the IMF, it will be a minuscule contribution. There are more huge debt payments coming up in the next 12-18 months. And for that Pakistan will either be procuring more debt or requesting for restructuring of the existing debt, since the experts suggest that the only viable option left is debt restructuring. But before opting for debt restructuring, regulators need to define the type of relief they want, such as extending the repayment period, lowering interest rates, converting debt to equity, deferring oil and gas payments, or offering debt forgiveness in exchange for implementing an austerity plan. This homework must be done beforehand, keeping in mind the clear objectives of debt restructuring. Pakistan has consistently struggled with managing its debt effectively this is one of the reasons for economic and financial problems in Pakistan, including high borrowing costs, reduced access to credit, inflation, and currency devaluation. To avoid the previous mistakes, a sound debt management strategy is required which aims to achieve debt sustainability while promoting economic growth and development. Maintaining debt sustainability requires a combination of sound fiscal management, effective debt management, and a commitment to promoting economic growth and stability. Mismanagement of debt is one of the reasons for economic and financial problems in Pakistan, including high borrowing costs, reduced access to credit, inflation, and currency devaluation. Similarly, the debt management board needs to be strengthened to ensure effective coordination among various entities engaged in debt management, such as the Debt Management Office of the Ministry of Finance, the State bank, and other relevant bodies. This can help ensure that debt management policies are cohesive and consistent and that the goals of all key stakeholders are aligned. If strengthened and utilized properly, it will help improve communication between the government and the public by ensuring that information on debt management policies and strategies is communicated clearly and effectively. Pakistan’s persistent political instability has contributed significantly to the country’s economic instability. This instability has created a high level of uncertainty in the market, which has discouraged both foreign and domestic investors from investing, as they wait for a more certain and profitable investment climate. The resulting trust deficit forces investors to demand higher interest rates to compensate for the added risk, which makes government borrowing more expensive. This can lead to a situation where a country must borrow more and more money to repay existing debts, further exacerbating the debt burden. Therefore, political stability is crucial in restoring investor confidence and managing the debt crisis. Also, Pakistan needs to work hard to generate revenue to address its debt crisis by introducing policies and practices that result in a fair and efficient tax system. The focus should be on increasing tax collection from individuals and businesses in higher income brackets while providing relief to low-income groups. The government needs to make sure that everyone pays their fair share of taxes, and that tax revenues are used effectively to manage the debt crisis sustainably. Hence as a country, this time we need a sound rationale to procure new debt or go for debt rescheduling. For that, there is initially a need to strengthen the country’s fiscal policy. In terms of debt sustainability, we must come up with sound debt management policies. Last but not the least, there must be an implementation of the progressive taxation structure to maximize government revenue and minimize its dependence on domestic and foreign loans. The writer is a freelance columnist.