Pakistan: Among the Highest IMF Loan Recipients but with the Lowest Debt-to-GDP Ratio

Pakistan is among the highest recipients of IMF loans. However, it is important to note that Pakistan's IMF debt as a percentage of its GDP is the lowest among comparable countries.

The top three recipients all have larger economies than Pakistan and a debt-to-GDP ratio of more than 3%, whereas Pakistan's ratio is less than 2%.

Debt-to-GDP ratio is a measure used to assess a country's ability to pay back its debt relative to the size of its economy. A lower ratio generally indicates that a country is managing its debt more effectively compared to its economic output.

For a broader meaningful comparison, it is essential to exclude Argentina and Ukraine, as they are special cases due to their unique economic and political circumstances. Additionally, smaller African countries should be left out of the comparison because their economic contexts differ significantly. (IMF data)

This leaves Egypt as the most relevant country for comparison. Egypt, like Pakistan, has a geopolitically strategic location and a large, growing population. Both countries have histories of hybrid or dictatorial regimes, face perennial foreign exchange issues, experience significant income disparity, and have large public sectors. These similarities provide a useful basis for understanding Pakistan's economic situation in relation to other nations that receive substantial IMF assistance.

Additionally, Pakistan's actual GDP may be larger than officially reported. A substantial portion of the economy operates in the informal sector, which is not captured in official statistics. Estimates suggest that the undocumented economy could account for over 35% of Pakistan’s total GDP​ (Informal Economy Accounts for Over 35% of Pakistan’s GDP, NA Informed)​. This unrecorded economic activity implies that the real debt-to-GDP ratio could be even lower, further emphasizing Pakistan's fiscal resilience and potential for sustainable debt management.

See the Frequently Asked Questions on Pakistan (IMF)