New Delhi, May 7 -- Pakistan was close to bankruptcy in 2023. Bailout by International Monetary Fund (IMF) and the World Bank pulled it back from the brink. As tensions rise on the Western front, Mint takes a look at Pakistan's financial situation today and its ability to escalate tensions against India.

In 2023, Pakistan was almost bankrupt and close to defaulting on its debt obligations. Pakistan's economy suffered from political instability, poor governance, a lack of fiscal prudence, and excessive external borrowing. When Russia invaded Ukraine, the geopolitical shock, in terms of higher oil and other commodity prices, sent Pakistan's economy spiralling into a crisis.

Economic growth contracted, inflation shot up to 38.5%, interest ...