Is Pakistan going to default on its loans? Bloomberg sounds alarm bells

ISLAMABAD (News Desk) - While the Pakistan Muslim League-Nawaz's government has postponed the privistisation of Pakistan International Airlines (PIA) for another six months after workers' protests, there is a rising risk that country may fail to make $50 billion loan payments which are due in 2016.

According to Bloomberg, around 42 per cent outstanding debts of Pakistan are due to mature by the end of 2016 and country's current economic situation suggests that it would be unable to make these payments to monetary organisations.

The report said that country's credit swaps, which protect it against non-payment of debts, have jumped up by 56 per cent in the last week. It places Pakistan just after Greece, Portugal and Valenzuela in the list of 35 countries.

However the report quoted Mervyn Tang, the analyst for Pakistan's economy, as saying that there is not much to worry about for Pakistan in the current scenario because the country has highest foreign reserves and the incoming $46 billion Chinese investment is also a reason to be optimistic.

In 2013, the government of Prime Minister Nawaz Sharif managed to win a $6.6 billion loan from International Monetary Fund (IMF) which is mainly used to meet the external debt payments.

The programme is due to expire in 2016, hence the IMF is pushing Pakistan to take extraordinary steps to ensure payments of debts. These steps include privitisation of key corporations and extension of its tax net.