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A brass plaque of the State Bank of Pakistan in Karachi.

REUTERS/Akhtar Soomro

Even if Pakistan defaults, its larger challenges remain

Pakistan is facing default on its sovereign debt.

After Sri Lanka, it’s the latest emerging economy to falter in the wake of COVID, the war in Ukraine, and skyrocketing inflation. But the stakes are higher: Pakistan borders China, India, Iran, and Afghanistan, and it sits at the crossroads of the Persian Gulf and the Indian Ocean. It’s embroiled in a battle against rising terrorism, and it has nuclear weapons.

But the world’s fifth-most populous country — where 220 million live under a political system plagued by corruption and extremism ± isn’t just broke. Polarized and isolated, it’s going through a period of instability not seen since its civil war in 1971, when it lost a majority of its population as East Pakistan seceded to become Bangladesh.

A serious rethink is needed about the way Pakistan manages itself and its diplomacy. So, are its rulers making the right adjustments?

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