Daily Times

In the midst of the escalating debt crises across the Asia-Pacific, Pakistan stands out as a sobering example of how unsustainable debt burdens threaten the very foundations of social stability and development.

As of 2024, Pakistan’s external debt has swelled to staggering levels, contributing to the region’s projected total of 21.1 trillion USD in commercial, bilateral, and multilateral debt. Pakistan, like many countries in the Global South, is caught in a vicious cycle of debt servicing that drains national budgets and leaves little room for investment in critical public services, including social protection.

The debt-to-GDP ratio in Pakistan has soared, further straining the country’s ability to respond to the needs of its people. The debt situation is not just an economic burden – it is a human rights crisis that disproportionately affects the poorest and most vulnerable segments of society.

For years, Pakistan has struggled under the weight of its external debt, forced to adopt austerity measures that prioritize debt repayment over essential public services. These measures, often imposed by international financial institutions (IFIs), have resulted in severe cuts to health, education, and social protection programs. In a country where millions already live below the poverty line, this lack of social safety net exacerbates inequality and deepens the socio-economic divide.

In 2023, as Pakistan’s debt burden escalated, the Federal Minister of Planning, Development, and Special Initiatives, Mr Ahsan Iqbal, sounded the alarm on the heavy debt burdens facing Global South countries in the Asia-Pacific. His call to achieve debt sustainability without worsening existing social and economic hardships resonates deeply with Pakistan’s own experience. For Pakistan, like many countries in the region, the debt crisis has left virtually no fiscal space to prioritize development, address climate challenges, or invest in the social welfare of its citizens.

At the heart of Pakistan’s struggle with debt is the need to invest in robust social protection systems. As the country grapples with the economic fallout of unsustainable debt, the importance of universal social protection becomes ever more apparent. Social protection provides a lifeline to the most vulnerable – low-wage earners, informal workers, women, and rural communities – ensuring they have access to basic services, including healthcare, pensions, unemployment benefits, and food security.

Pakistan’s lack of comprehensive social protection programs has left millions exposed to financial shocks, especially during crises like the COVID-19 pandemic and the ongoing climate disasters that have hit the country. Without adequate safety nets, the country’s most vulnerable are pushed further into poverty, increasing social unrest and weakening the country’s economic resilience.

At the heart of Pakistan’s struggle with debt is the need to invest in robust social protection systems.

Rechanneling Resources for People, Not Creditors

Pakistan’s debt situation highlights the need for a radical shift in how public resources are allocated. Rather than directing scarce resources towards debt servicing, Pakistan – and countries in similar situations – must prioritize investments in social protection systems that protect and empower their citizens.

Debt cancellation for unsustainable and illegitimate debts is a necessary first step. Pakistan, like other countries in the region, should not have to sacrifice the well-being of its people to satisfy wealthy creditors. The imposition of harmful austerity measures must end, and instead, public finance should be rechanneled towards creating well-resourced social protection systems that are binding and enforceable by law.

A Human-Centered Debt Approach for Pakistan

Addressing Pakistan’s debt crisis requires a human rights-based approach to debt sustainability. Debt workout mechanisms must be transparent, inclusive, and participatory, ensuring that all stakeholders – bilateral, multilateral, and private creditors – are part of the solution. Any debt sustainability framework must take into account the human rights implications of austerity measures, as well as the gendered and climate-related impacts of debt.

Pakistan, which is already grappling with severe climate vulnerability, should not be further burdened by debt that stifles its ability to invest in climate adaptation and mitigation efforts. Climate finance for countries like Pakistan must be non-debt-creating, separate from traditional Official Development Assistance (ODA), and designed to address both the immediate and long-term impacts of climate change.

The Path Forward for Pakistan and the Global South

To address Pakistan’s debt crisis and protect its people, the following steps must be prioritized:

Immediate cancellation of unsustainable and illegitimate debts, with reparations for the historical injustices that have contributed to Pakistan’s current economic struggles.

An end to IFI-imposed austerity measures, with public finance, reallocated to well-resourced, enforceable social protection systems that meet the needs of all citizens.

A transparent and binding multilateral debt workout mechanism under the UN ensures that Pakistan and other Global South countries have a fair say in how their debts are managed.

A debt sustainability framework that aligns with human rights, climate, and gender equality objectives, ensuring that Pakistan’s development trajectory is not further derailed by debt crises.

The separation of climate finance from debt relief, ensuring non-debt-creating financial support for Pakistan’s climate resilience efforts.

Pakistan’s debt crisis is not just an economic issue; it is a fundamental human rights challenge. The time has come to rethink how debt is managed and to prioritize the well-being of people over the profits of creditors. By investing in social protection, Pakistan can build a more resilient, just, and sustainable future – one that protects its people and empowers them to thrive.

The writer can be reached at lailazharali@gmail.com