Imran Khan has mentioned Pakistan will battle to interrupt out of a cycle of debilitating debt repayments with out reform, because the nation’s opposition chief and former prime minister warns the debt burden on low- and middle-income economies is changing into unmanageable.

“No matter we do, after we look forward, the debt is rising, our financial system is slowly shrinking,” Khan, whose Pakistan Tehreek-e-Insaf (PTI) get together is favoured to win nationwide elections this yr, informed the Monetary Occasions. “From my get together’s standpoint, we’ve began considering that we’re caught.”

Pakistan is in the midst of one in all its worst financial crises. Analysts have mentioned the nation, which is struggling to revive a roughly $7bn IMF lending programme, is vulnerable to defaulting, whereas its overseas reserves have fallen to $4.2bn, lower than sufficient for one month’s value of imports.

Khan mentioned the federal government wanted to interrupt out of borrowing cycles which have held again creating economies however dominated out a default if his get together returned to energy, saying it could prioritise home reforms over looking for debt reduction.

“Is the reply getting extra loans, or is the reply to restructure the way in which we run the nation?” he mentioned. “We have now to conduct surgical procedure in Pakistan in the way in which we run our authorities.”

Khan mentioned his staff was creating a technique if he returned to energy in Pakistan to juggle mortgage repayments and home spending.

“We’re sitting with our economists [on] easy methods to give you a plan with which we will sit with the IMF and provides them a viable approach of with the ability to pay our money owed,” Khan mentioned. “However on the similar time, our financial system shouldn’t be choked in order that our means to pay debt goes down.”

Khan, nonetheless, faces a barrage of authorized challenges that might stop him from working for workplace if convicted, together with allegations that he unlawfully bought presents he obtained whereas serving as prime minister.

Pakistan is an excessive instance of the debt burden saddling low- and middle-income international locations. Marketing campaign group Debt Justice warned this week that poor international locations have been dealing with their highest payments for debt servicing in 25 years. Pakistan’s scheduled repayments on overseas public money owed are equal to 47 per cent of presidency revenues in 2023, the group mentioned.

“It’s not simply Pakistan,” Khan mentioned. “When you begin borrowing in {dollars} and you need to service your debt in {dollars}, in case your greenback earnings doesn’t enhance or improve, how are you going to then pay your money owed?

“Until we improve our greenback earnings to exports, I don’t see how we might have the ability to service any money owed in Pakistan, whether or not it’s Chinese language or Paris Membership or industrial money owed.”

Khan, who served as prime minister from 2018 till he was ousted in a no-confidence vote final yr, mentioned his plans included restructuring lossmaking state-owned enterprises and boosting the tax base.

A lot of Pakistan’s financial pressures began throughout his time in workplace however have worsened dramatically in latest months. Inflation rose to a historic excessive of 35 per cent in March, and the dwindling overseas reserves have created shortages of important items together with medication.

Although Khan took some steps in direction of reforms whereas in energy, many mentioned his financial agenda failed because of mismanagement, erratic decision-making and pandemic disruption. The previous cricketer, who as soon as mentioned he would quite die than “beg” a superpower for cash, agreed a cope with the IMF in 2019, just for the programme to stall after his authorities backtracked on reducing vitality subsidies.

Khan is engaged in a bitter stand-off with arch-rival Prime Minister Shehbaz Sharif, whose authorities has been unable to agree a reform plan with the IMF. Whereas the fund argues that measures similar to eradicating subsidies are essential to stabilise the financial system, Sharif’s authorities fears they might harm the poor and bolster help for the populist Khan forward of elections.

Even when Khan prevails, many analysts are sceptical he could have the political power to overtake Pakistan’s flagging financial system.

“We have now an financial construction which is globally uncompetitive,” mentioned Abid Hasan, a former World Financial institution economist. “A few of it must be dismantled . . . You’ll require enormous consensus. The PTI alone won’t be able to do it.”