Sri Lanka-style collapse? Ex-Sindh CM adviser warns Pakistan is burning reserves for 'stability'
Pakistan's $14.5 billion reserves are entirely debt-based, underpinned by $16 billion in estimated rollovers.
- Jul 29, 2025,
- Updated Jul 29, 2025 1:40 PM IST
Pakistan's foreign exchange reserves may have crossed the IMF's benchmark of $14 billion, but senior chartered accountant and public policy advisor Asad Ali Shah warns that the apparent economic stability is deeply misleading and entirely debt-driven.
In a post citing Business Recorder's recent analysis, Shah declared: "Pakistan is buying economic stability on borrowed dollars — and borrowed time." He added, "This is not recovery — it's repackaged collapse. We're following the Sri Lanka playbook: burning reserves, blocking adjustment, and calling it stability."
According to the Business Recorder, Pakistan's $14.5 billion reserves are entirely debt-based, underpinned by $16 billion in estimated rollovers. The report also noted that the State Bank has purchased $8 billion from the open market, causing a severe dollar crunch and a weakening rupee - despite the country running a current account surplus.
The report pointed to a fundamental contradiction in Pakistan's foreign exchange policy: large-scale dollar purchases by the central bank to maintain artificial stability while enforcing exchange controls. This strategy, it said, mimics Sri Lanka's failed attempt to delay reform through managed rates and depleted reserves.
Highlighting macroeconomic stress indicators, the analysis noted: Large-scale manufacturing: -1.52%, unemployment: 22%, and poverty: 44.2%.
Shah supported the view that continued reliance on the IMF is counterproductive in the long run. "It is better to default, face the hardship and change — become productive to survive rather than remaining permanently in an IMF program." he said.
In June this year, Reuters reported that China rolled over $3.4 billion in loans to Pakistan - $2.1 billion already held by the central bank and $1.3 billion in fresh refinancing - to help Islamabad meet the IMF's requirement of $14 billion in foreign reserves. Additional inflows of $1 billion from Middle Eastern banks and $500 million in multilateral financing also contributed to reaching the IMF-mandated threshold.
While officials have presented these inflows as signs of stabilisation, Shah argued the foundation is unsustainable. "The IMF has documented how economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its economic policies," the analysis noted.
Shah is Senior Partner at Deloitte Yousuf Adil, Pakistan, and has advised the Sindh government and the federal public sector for nearly three decades on governance and financial management.
Pakistan's foreign exchange reserves may have crossed the IMF's benchmark of $14 billion, but senior chartered accountant and public policy advisor Asad Ali Shah warns that the apparent economic stability is deeply misleading and entirely debt-driven.
In a post citing Business Recorder's recent analysis, Shah declared: "Pakistan is buying economic stability on borrowed dollars — and borrowed time." He added, "This is not recovery — it's repackaged collapse. We're following the Sri Lanka playbook: burning reserves, blocking adjustment, and calling it stability."
According to the Business Recorder, Pakistan's $14.5 billion reserves are entirely debt-based, underpinned by $16 billion in estimated rollovers. The report also noted that the State Bank has purchased $8 billion from the open market, causing a severe dollar crunch and a weakening rupee - despite the country running a current account surplus.
The report pointed to a fundamental contradiction in Pakistan's foreign exchange policy: large-scale dollar purchases by the central bank to maintain artificial stability while enforcing exchange controls. This strategy, it said, mimics Sri Lanka's failed attempt to delay reform through managed rates and depleted reserves.
Highlighting macroeconomic stress indicators, the analysis noted: Large-scale manufacturing: -1.52%, unemployment: 22%, and poverty: 44.2%.
Shah supported the view that continued reliance on the IMF is counterproductive in the long run. "It is better to default, face the hardship and change — become productive to survive rather than remaining permanently in an IMF program." he said.
In June this year, Reuters reported that China rolled over $3.4 billion in loans to Pakistan - $2.1 billion already held by the central bank and $1.3 billion in fresh refinancing - to help Islamabad meet the IMF's requirement of $14 billion in foreign reserves. Additional inflows of $1 billion from Middle Eastern banks and $500 million in multilateral financing also contributed to reaching the IMF-mandated threshold.
While officials have presented these inflows as signs of stabilisation, Shah argued the foundation is unsustainable. "The IMF has documented how economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its economic policies," the analysis noted.
Shah is Senior Partner at Deloitte Yousuf Adil, Pakistan, and has advised the Sindh government and the federal public sector for nearly three decades on governance and financial management.