New Delhi, Feb 8 (NationPress) Pakistan is grappling with a prolonged economic crisis that has worsened over the years, characterized by escalating external debt burdens, stagnant economic growth, and significant structural weaknesses stemming from decades of inadequate governance and excessive dependence on foreign financing, as highlighted in a recent report.

As of late 2025, Pakistan's total external debt is estimated to be around $134 billion, which poses a considerable burden in relation to its GDP, according to an article from One World Outlook.

The nation is facing daunting external debt repayment obligations, amounting to an astonishing $23-26 billion in total servicing needs (including both principal and interest) for the fiscal year 2025-26, as noted in the article.

A recent development involved the United Arab Emirates (UAE) agreeing to roll over $2 billion of Pakistan's debt, highlighting the fragile state of Islamabad's financial management. This temporary measure emphasizes Pakistan's continued reliance on bilateral rollovers from allies such as the UAE, Saudi Arabia, and China to mitigate immediate default risks.

While the country’s foreign exchange reserves have shown some signs of recovery, with total liquid reserves reaching $21.29 billion as of late January 2026, they remain susceptible to maturities and import demands. The IMF’s $7 billion Extended Fund Facility (EFF), which was approved in September 2024 alongside the Resilience and Sustainability Facility, has been vital for maintaining stability. The second review was completed in December 2025, unlocking further disbursements, but progress is contingent on reforms such as fiscal discipline and restructuring of state-owned enterprises (SOEs), according to the article.

This year, bilateral commitments amount to around $12 billion in rollovers, yet the UAE’s cautious one-month extension suggests shifting dynamics, potentially influenced by increased risk perceptions or geopolitical factors, transitioning from concessional ‘brotherly’ aid to more commercial terms, the article indicates.

The debt burden is exacerbated by repeated engagements with the IMF. Pakistan has repeatedly undergone various programs, with the latest EFF focusing on macroeconomic stability, rebuilding reserves, broadening the tax base, and reforming SOEs. Although fiscal performance has improved (e.g., primary surplus targets met), inflation remains persistent, partly due to energy prices and external shocks. The economy has seen approximately 3% growth in recent periods, with modest projections ahead; however, this growth is insufficient to accommodate a rapidly growing population that requires millions of new jobs each year, as the article points out.

Employment trends reflect a stark human cost. Official unemployment has risen, with the rate reaching about 6.9% in 2024-25 (up from 6.3% previously), indicating increases across various demographics. The number of unemployed individuals surged by 1.4 million (31%) from 2020-21 to 2024-25. In recent years, hundreds of thousands of Pakistanis have sought employment abroad, driven by stagnant wages, limited opportunities, and rising costs. The economy struggles to generate 1.5 million jobs annually, a challenge exacerbated by IMF-mandated austerity measures (higher taxes, energy tariffs) and disruptions such as previous floods affecting agriculture and industry, the article states.