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Pakistan Urged to Lead Global Debt Reform as World Debt Hits a Record $348 Trillion

November 9, 2026 Faizan Altaf

Pakistan has been urged to take a leading role in fixing the world’s broken system for handling country debt — and it will soon hold a powerful platform to do it. When Pakistan takes over as chair of the IMF and World Bank Boards of Governors in 2027, it will have a rare chance to push for changes that could help dozens of struggling countries, including itself.

The call comes in an analysis published by The Express Tribune, and it follows two big global meetings: the United Nations’ Fourth Financing for Development Conference in Seville in July 2025, and the IMF and World Bank annual meetings in Bangkok last month. At the Sustainable Development Policy Institute’s 29th Sustainable Development Conference in Islamabad, Planning Minister Ahsan Iqbal also called for a fundamental overhaul of the international financial system.

The timing is hard to ignore. Global debt has reached a record $348 trillion, according to the Institute of International Finance. Nearly half of all low-income countries are either already in debt distress or at high risk of it — meaning they are struggling, or close to struggling, to pay back what they owe. For Pakistan, this is not an abstract debate. It is a crisis the country has lived through itself.

Why Pakistan, and why now?

Pakistan’s turn as chair of the IMF and World Bank Boards of Governors in 2027 gives it an unusual opportunity. The chairmanship is a chance to set the agenda and shape what gets discussed at the world’s two most important financial institutions.

The idea is simple: a country that has itself been through a debt crisis is in a strong position to argue that the system needs to change. Pakistan knows what it feels like when lenders move slowly, when borrowing costs spike, and when a natural disaster hits while debt payments are still due.

That message was at the heart of Ahsan Iqbal’s address at the SDPI conference, where he said the financial system built after the Second World War was no longer able to deal with today’s problems — rising debt, climate disasters and rapid technological change. The conference, held at Allama Iqbal Open University in Islamabad under the theme “Rethinking Development in an Age of Disruption”, brought together policymakers, researchers and officials to discuss exactly these questions.

The minister also set out Pakistan’s long-term ambitions: to become a $1 trillion economy by 2035 and a $3 trillion economy by 2047, when the country marks 100 years of independence. Those targets will be impossible to reach if the country keeps spending most of its money just paying off old loans.

A world drowning in debt

The numbers behind the reform call are stark. Global debt — everything owed by governments, businesses and households around the world — reached a record $348 trillion by the end of 2025, according to the Institute of International Finance.

Developing countries are the most exposed. They collect far less money in taxes than rich countries, they pay more to borrow, and they are more likely to be hit by shocks outside their control, from wars and trade disruptions to floods and droughts.

The World Bank has found that low-income countries raise only about 12 per cent of their national income in government revenue, compared with about 26 per cent in rich countries. That gap matters: when a government collects less, it has less room to pay its debts and still fund schools, hospitals and roads.

Nearly half of low-income countries are now in debt distress or at high risk of it. That means they are either missing payments, restructuring their loans, or one bad shock away from doing so.

Pakistan knows this crisis first-hand

Pakistan’s own recent history shows why the system needs fixing. In 2023, the country narrowly avoided a default — the moment when a country cannot pay its debts. Foreign exchange reserves had fallen to about $3 billion, enough to cover less than three weeks of imports. Inflation hit 38 per cent in May that year. The State Bank of Pakistan raised its key interest rate to 22 per cent as the crisis deepened.

The country eventually steadied itself with help from the IMF and friendly countries, but the underlying problem has not gone away. Pakistan’s external debt has nearly doubled in a decade to $135.1 billion, according to World Bank figures reported earlier this month. About $21.5 billion falls due this year — roughly the same amount as the country’s foreign exchange reserves.

The six reforms on the table

The Express Tribune analysis, written by Dr Sajid Amin Javed, sets out six reforms that Pakistan could champion from its 2027 chairmanship. Each one is aimed at a specific weakness in the current system.

1. A predictable way to restructure debt

When a country cannot pay, restructuring its debt — changing the terms so payments become manageable — should be fast and fair. Today it is neither. Talks drag on for years while the country involved sinks deeper. The proposal is for a clear, predictable mechanism with fixed timelines, so countries in trouble get relief before the damage becomes irreversible.

2. Automatic pauses after natural disasters

When a flood or earthquake strikes, a country should not have to keep paying its foreign lenders while it is digging out of the rubble. The proposal calls for automatic standstills — temporary suspensions of debt payments — triggered by predefined events such as a major natural disaster. Pakistan has a direct interest here: the catastrophic floods of 2022 caused damage worth tens of billions of dollars while debt payments continued.

3. Bringing private lenders to the table

A large share of developing-country debt is now owed to private bondholders, not governments. But when restructuring talks begin, private creditors often hold out for full payment while official lenders take losses. The reform would require stronger participation from private creditors, so the burden is shared fairly.

4. Bigger, stronger development banks

Institutions like the World Bank and the Asian Development Bank lend to developing countries on better terms than private markets. The proposal calls for increasing their financing capacity, so they can lend more — and lend more cheaply — to countries that need it most.

5. More transparency in borrowing

Countries and lenders should be open about how much is borrowed, from whom, and on what terms. Hidden loans and unclear terms have made several debt crises worse, because nobody knew the true size of the problem until it was too late. Greater transparency in public borrowing would help prevent that.

6. Climate-aware debt assessments

The current system judges whether a country’s debt is sustainable without properly accounting for climate risk. A country facing repeated floods or droughts needs a different assessment from one that is not. The proposal calls for debt sustainability assessments that factor in climate vulnerability — a change that would matter greatly for countries like Pakistan.

What the 2027 chairmanship can — and cannot — do

It is important to be realistic about what Pakistan can achieve. Chairing the IMF and World Bank Boards of Governors is mainly an agenda-setting role, not a decision-making one. Pakistan will be able to decide what gets discussed and push issues up the agenda, but it cannot force creditor countries to agree.

That distinction matters. No timeline has yet been set out for the 2027 chairmanship agenda, and there is no public sign yet that major creditor governments support the most ambitious proposal — automatic debt standstills. That is the practical obstacle the reform push will have to overcome.

There is also an awkward fact: Pakistan will be arguing for reform of the system while itself seeking rollovers — extensions — of its own loans. Critics may ask whether the country is in a position to lead. Supporters would answer that first-hand experience is exactly what makes its voice credible.

Why the current system is failing

The analysis argues that existing debt-relief arrangements have failed to deliver timely and effective solutions. The G20 Common Framework — the main system set up in 2020 to help poor countries restructure their debts — has been slow and unreliable. Countries that applied for help waited years, and some are still waiting.

Part of the problem is coordination. A country’s creditors now include traditional lenders like the Paris Club of rich nations, newer lenders like China, and thousands of private bondholders. Getting them all to agree takes time, and while they argue, the country in crisis keeps paying — or falls further behind.

The result is that debt crises last longer, cost more, and do more damage than they should. Schools close, hospitals run out of medicine, and investment dries up, all while negotiations crawl along.

What happens next?

The call for reform is the easy part. The hard part begins now: turning six proposals into a concrete agenda for 2027, and building support among the countries whose agreement will be needed.

For Pakistan, the next steps are clear. The government will need to decide which of the six reforms to prioritise, start talking to other developing countries to build a coalition, and use the months before the chairmanship begins to prepare its case.

The stakes go beyond Pakistan. If the system can be fixed, dozens of countries struggling with debt could get relief faster and more fairly. If it cannot, the $348 trillion debt mountain will keep growing — and the next crisis will be harder to manage than the last.

Pakistan has been given a platform. What it does with it will be watched closely, at home and around the world.

Frequently asked questions

What is debt distress?

Debt distress means a country is struggling to pay back what it owes. It can mean missing payments, asking lenders to change the terms, or being close to doing either. Nearly half of low-income countries are in this situation or at high risk of it.

What is the IMF-World Bank Boards of Governors?

The Boards of Governors are the highest decision-making bodies of the IMF and the World Bank. Each member country appoints a governor, usually its finance minister or central bank chief. The chair leads meetings and helps set the agenda.

What is a debt standstill?

A standstill is a temporary pause on debt payments. The proposal discussed here would make standstills automatic after a predefined event, such as a major natural disaster, so a country hit by a flood or earthquake does not have to keep paying foreign lenders while it recovers.

Why does global debt matter to ordinary people?

When a government spends most of its money repaying debt, there is less left for schools, hospitals, roads and jobs. High debt also pushes up interest rates and prices, which hits households directly.

Has Pakistan faced a debt crisis before?

Yes. In 2023, Pakistan narrowly avoided defaulting on its debts when reserves fell to about $3 billion and inflation reached 38 per cent. The country was rescued by an IMF programme and support from friendly countries, but its external debt has since grown to $135.1 billion.

Conclusion

Global debt has reached a record $348 trillion, and the system for dealing with it is not working. Pakistan — a country that has lived through a debt crisis itself — has been urged to lead the push for reform, and its chairmanship of the IMF and World Bank Boards of Governors in 2027 gives it the platform to try.

The six proposed reforms, from automatic payment pauses after disasters to fairer treatment by private lenders, are practical and specific. Whether they become reality will depend on whether Pakistan can turn a good argument into a coalition — and whether the world’s richest countries are willing to listen.

For millions of people in developing countries, the answer matters. A fairer debt system would mean more money for schools, hospitals and climate protection, and less money spent just keeping up with old loans. That is what is at stake.

Sources

This article is for general information and education only. It is not legal or financial advice.

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