Economists have drawn stark contrasts between Pakistan’s economic crisis and the debt challenges faced by advanced nations like the U.S. and Japan. While these countries benefit from stable inflation, robust monetary policy, and global currency advantages, Pakistan struggles under crushing debt, a failing economy, and leadership focused more on politics than economic reform.

International experts warn that the country is at a tipping point, and only swift, decisive action can prevent further deterioration. Analysts pinpoint three key “doom loops” at the core of Pakistan’s escalating economic crisis. The first, a fiscal loop, sees the government trapped in an endless cycle of borrowing to cover the interest on debt, unfunded pensions, and the costs of both civilian and military operations. This unceasing borrowing perpetuates the nation’s financial struggles.

The second loop is external, severely impairing Pakistan’s trade balance. With imports towering at twice the value of exports, and heavy dependence on remittances, there’s little room for the country to foster long-term growth or develop a sustainable economy. The most perilous of these cycles, however, is the confidence crisis. As disillusionment spreads, a growing number of Pakistan’s youth—the very individuals poised to lead future growth—are choosing to leave the country. This exodus not only further weakens investor confidence but also deepens the fiscal and financial crisis.

These interconnected challenges are driving Pakistan deeper into an economic quagmire, with public dissatisfaction fueling political instability. Analysts observe that Imran Khan’s popularity stems less from his policies and more from being a symbol of public frustration. Under current circumstances, political volatility will likely persist, regardless of leadership changes.

In an alarming evaluation, Princeton economist Atif Mian has warned that Pakistan’s financial turmoil is unlike anything the country has ever faced. Mian, a Pakistani-American scholar, attributes the crisis to a confluence of unsustainable debts, ballooning pension liabilities, and a crippled power sector—factors that are dragging the nation into a fiscal abyss. His sobering remarks frame Pakistan’s economic distress as an unprecedented example of fiscal mismanagement.

“Pakistan’s domestic and external debt burdens, combined with its unfunded pension liabilities and the crippled power sector, have driven the country into an unparalleled fiscal crisis. There are few, if any, nations facing such severe economic dysfunction,” Mian wrote on his official X account.

In response to Mian’s dire warning, Asad Rizvi, former Treasury Head at Chase Manhattan Bank, called for actionable solutions. Rizvi urged Mian to elaborate on how developed nations with similarly high debt-to-GDP ratios manage their situations, and what specific steps Pakistan might take to reverse its downward spiral. Rizvi emphasized that without critical reforms—including documenting the economy to improve the tax-to-GDP ratio, addressing the gap between bank advances and deposits, and curbing open market operation (OMO) injections, which currently stand at Rs 11.974 trillion—economic recovery remains a distant hope. He also pointed to the urgency of stabilizing currency circulation, which is at Rs 9.12 trillion, and resolving the Rs 2.5 trillion circular debt.

Another commentator highlighted Pakistan’s heavy reliance on external aid, noting the government’s reluctance to implement difficult, yet necessary, reforms to rebuild the economy.

Addressing these concerns, Atif Mian explained that the debt-to-GDP challenges faced by advanced economies like the United States and Japan are fundamentally different from those afflicting Pakistan. “These countries benefit from well-anchored inflation, a long history of credible monetary policy, and a strong, productive economy, which bolsters their currency strength and fiscal space,” Mian said. He added that their well-run taxation systems allow them to manage higher debt levels, making markets more forgiving toward them.

Mian also referenced a statement by former French president Charles de Gaulle from the 1960s, who criticized the unique advantages the U.S. enjoys due to the dollar’s role as the world’s primary reserve currency. De Gaulle famously called this an “exorbitant privilege,” noting that it allows the U.S. to borrow at lower costs and run trade deficits, placing economic burdens on other nations. Mian and other economists now warn that Pakistan’s economic future is bleak unless urgent corrective measures are taken.

Despite these warnings, critics argue that Pakistan’s leadership remains too focused on domestic politics rather than addressing the deepening economic crisis. “The powers that be may hold immediate control, but they are grasping at sand—the more they squeeze, the more it slips through their fingers. The country is slipping away,” one commentator noted.

Mian and other experts insist that solutions do exist, but they question whether Pakistan’s leadership is willing to prioritize the people’s welfare over political interests. “I have never seen rulers or politicians who care so little for the welfare of their citizens and so much for themselves,” one analyst lamented.

The analysis highlights the critical need for Pakistan’s leadership to shift its focus from political maneuvering to economic reform. While solutions exist, the question remains whether the country’s rulers are willing to prioritize the long-term welfare of the people over immediate political gain. Without urgent action, Pakistan risks sinking deeper into a crisis that could have been avoided with foresight and responsibility.