Pasha warns inflation may increase to 70% if Pakistan defaults

Former finance minister Dr Hafiz Pasha on Tuesday warned that inflation in Pakistan may soar to 70 per cent in the event of a default.

Pasha predicted that Pakistan’s general economy would likely continue to experience severe stagflation in 2023. He was speaking to members of the Pakistan Industrial and Traders Associations Front (PIAF).

Due to the International Monetary Fund (IMF) stringent requirements, inflation will still increase to at least 35 per cent even if the loan from international lender is restored, according to Express Tribune.

 “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,” Pasha 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.”

According to Pasha, Pakistan’s reliance on pricey foreign loans has been disastrous. The nation’s debt in the first 65 years was $65 billion. In the following seven years, as we increased our reliance on costly loans with high interest rates, this amount increased to approximately $130 billion.