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In the intricate web of Pakistan’s economic challenges, debt restructuring stands out as a crucial test of political will. With ballooning obligations suffocating fiscal space, the need for both domestic and external restructuring has become inescapable. Yet resistance to this vital reform does not stem from economic impracticality— it is rooted in the entrenched interests of the elite who dominate the country’s financial and political systems.

The reluctance to tackle domestic debt is particularly revealing. Restructuring threatens to upend the privileged status quo, dismantling rent-seeking arrangements that have enriched a select few at the expense of national economic vitality. As a result, the topic remains taboo, cloaked in alarmist narratives.

For decades, Pakistan has relied on debt to paper over structural inefficiencies, funding politically expedient but unproductive expenditures. The consequences are now clear: debt service obligations are crowding out critical public investments in education, health care, and infrastructure.

Domestic debt, which accounts for more than two-thirds of public debt, is held primarily by commercial banks. These institutions earn risk-free returns on government securities, diverting credit away from the private sector and stifling economic dynamism. Any suggestion to extend maturities or impose haircuts is met with fierce resistance, as they threaten the lucrative arrangements that sustain elite power. Financial institutions, heavily influenced or controlled by........

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