Pakistan’s escalating debt crisis, a stark example of broader challenges facing the Asia-Pacific region, underscores the pressing need for a reimagined approach to debt management that prioritizes human well-being over creditor interests. As of 2024, Pakistan’s external debt has reached unprecedented levels, contributing to the global debt burden, which is projected to exceed 21 trillion USD for countries in the Global South. This unsustainable debt cycle is straining national resources, limiting the government’s ability to invest in essential public services such as healthcare, education, and social protection. The situation has dire human rights implications, exacerbating inequality, increasing poverty, and deepening social unrest. For years, Pakistan has been trapped in a cycle of austerity measures dictated by international financial institutions (IFIs), which prioritize debt repayment at the expense of public welfare. These austerity policies have resulted in severe cuts to social safety nets, worsening the already fragile condition of millions living below the poverty line. Pakistan’s already high debt-to-GDP ratio only worsens the situation, leaving little room for development or tackling pressing issues such as climate change. Pakistan’s struggle underscores the critical need for robust social protection systems. The absence of comprehensive social safety nets has left millions vulnerable to financial shocks, as evidenced during the COVID-19 pandemic and the devastating climate disasters in recent years. Low-wage earners, informal workers, women, and rural communities are particularly at risk. To build resilience and reduce poverty, Pakistan must invest in universal social protection programs that ensure access to healthcare, pensions, unemployment benefits, and food security. A crucial step toward addressing Pakistan’s debt crisis involves shifting resources away from creditors and towards people-centered investments in social welfare. This requires the immediate cancellation of unsustainable debts and the end of harmful austerity measures. Public resources should be redirected to create robust and enforceable social protection systems, which can help mitigate the human impact of future crises and support the country’s long-term development goals. Furthermore, a human rights-based approach to debt sustainability must be adopted. Pakistan’s debt management should be transparent, inclusive, and participatory, with all stakeholders including bilateral, multilateral, and private creditors engaged in finding equitable solutions. Debt frameworks must consider the gendered and climate-related impacts of austerity policies. Given Pakistan’s vulnerability to climate change, it is imperative that climate finance be decoupled from traditional debt mechanisms, providing non-debt-creating resources to bolster climate adaptation and resilience. To move forward, Pakistan and other countries in the Global South must advocate for the following actions. Debt cancellation is necessary. For debts that are unsustainable and illegitimate, along with reparations for the historical factors contributing to the economic challenges. Ending austerity measures is also very important. An immediate halt to IFI-imposed austerity and a shift in public finance toward strengthening social protection systems. We must maintain multilateral debt workout mechanism. A binding, transparent, and inclusive framework to ensure fair debt management, with input from all affected parties. We also need human rights-focused debt framework. Aligning debt management with human rights, gender equality, and climate objectives, ensuring that economic and social development is not undermined by excessive debt burdens. Climate finance separation must be kept in mind. Ensuring that climate-related financial support is non-debt-creating and separate from traditional development assistance, allowing for real progress in mitigating and adapting to climate change. Pakistan’s debt crisis is a stark reminder that economic stability and human rights are inextricably linked. Addressing this crisis requires a fundamental shift in how the global financial system operates, with a focus on equitable development and the protection of the most vulnerable. By prioritizing investments in social protection and aligning debt policies with human rights and climate resilience, Pakistan can build a more just, sustainable, and resilient future for its people.
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