Mounting bad debts

Pakistan's mostly state-owned banking system suffers from several problems. The government's control of 80% of all credit results in endlessly tight credit. Public sector and related banks have acquired 23.47 billion rupees of bad debt, equal to 1% of Pakistan's gross domestic product. Financial inefficiency and inaccurate estimates of credit requisites contributed to this staggering load of bad debt. These problems have caused interest rates to rise, which in turn has destabilized the economy. Privatization has been proposed as a solution.