The US-Israel war on Iran could make it harder for Pakistan to refinance its existing debt, as regional tensions threaten to increase the country’s external financing pressures, according to a World Bank report.
Pakistan relies on foreign loans and rollovers to manage its external debt obligations. The report warns that the Middle East crisis could create difficulties in securing debt rollovers.
Pakistan requires external financing equivalent to around 15 percent of its gross domestic product every year, according to the report.
This makes the country vulnerable to disruptions in foreign funding and changes in international financial conditions.
The crisis could also increase Pakistan’s energy import bill by 30 percent.
Higher energy costs would increase the demand for foreign exchange at a time when the country also needs funds to service and refinance its debt.
If regional tensions persist, higher import costs and difficulties securing fresh financing could make managing Pakistan’s external obligations more challenging.
The World Bank expects the Middle East crisis to improve gradually by 2027.
Prolonged disruption could complicate Pakistan’s efforts to maintain financial stability.
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