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Pakistan: Bonds Drop, Default Fears Amid Flooding

Facts

  • On Friday, Pakistan's bonds dropped to half of their value after the UN reportedly urged the cash-deficient country to restructure its debt following fears of the economic impacts of recent flooding. Both the UN and Pakistan have blamed the flooding and subsequent economic crisis on climate change.[1]
  • After floods devastated large swathes of the country this month, killing more than 1.5k people and causing damage estimated at $30B, worries grew over whether Pakistan would be able to repay its debts.[2]

Sources

Spin

Pro-establishment narrative

Pakistan, which has one of the smallest carbon footprints, is being devastated by climate change. Recent floods have seen millions of people affected and billions of dollars lost, trapping the South Asian country in economic turmoil. Pakistan is literally paying the price for others' emissions.

Establishment-critical narrative

Pakistan's economy is just one of the government's many failings amid the political turmoil that has paralyzed its governance. The South Asian country — which has a faltering tax regime, a weakening middle-class, and a shrinking education rate, to name a few — has abandoned all economic reforms and foolishly relied on bailouts, which will now do very little to solve this crisis.