Many of the particular root causes of Pakistan’s situation are different than in Sri Lanka — they didn’t ban synthetic fertilizer or engage in sweeping tax cuts. The political situations of the two countries, though both dysfunctional, are also different (here is a primer on Pakistan’s troubles). But there are enough similarities at the macroeconomic level that I think it’s worth comparing and contrasting the two.
In my post about Sri Lanka, I made a checklist of eight features that made that country’s crisis so “textbook”:
- An import-dependent country
- A persistent trade deficit
- A pegged exchange rate
- Lots of foreign-currency borrowing
- Capital flight
- An exchange rate crash (balance-of-payments crisis)
- A sovereign default
- Accelerating inflation
https://noahpinion.substack.com/p/pakistan-is-in-big-trouble
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