Dual Currency System, An Idea to Devolve the Import Current Account Problem of Pakistan

[Communism]

I propose that Pakistan change to a Dual Currency system, where individuals must procure their own USD to pay for USD imports, and then can only sell the portion of USD imports to the next person in USD for the portion of USD they paid for the import, all the way down the line.

Say that you want to buy gasoline from a fuel station.

The importer of the crude oil would need to pay for the import in USD, and then charge USD for the portion of the import component of the finished product to every intermediary at every step of the way down to the consumer level.

The importer of finished gasoline and diesel would do the same thing, but the import component would be larger, which would mean that the intermediary steps would also have to transact a larger portion of the value of the transaction in USD.

This kind of system effectively devolves the job of maintaining a current account and foreign currency reserves from the government level to the individual level, which is necessary as the Pakistani government has shown zero capability of doing it properly at the governmental level, and shows zero signs of being capable of doing it in the future either.

This would also discourage import inflation disguised as growth, as the accounting metric for the imports would be in the USD instead of directly government manipulated currencies.

 

[my2cents]

I propose that Pakistan change to a Dual Currency system, where individuals must procure their own USD to pay for USD imports, and then can only sell the portion of USD imports to the next person in USD for the portion of USD they paid for the import, all the way down the line.

Say that you want to buy gasoline from a fuel station.

The importer of the crude oil would need to pay for the import in USD, and then charge USD for the portion of the import component of the finished product to every intermediary at every step of the way down to the consumer level.

The importer of finished gasoline and diesel would do the same thing, but the import component would be larger, which would mean that the intermediary steps would also have to transact a larger portion of the value of the transaction in USD.

This kind of system effectively devolves the job of maintaining a current account and foreign currency reserves from the government level to the individual level, which is necessary as the Pakistani government has shown zero capability of doing it properly at the governmental level, and shows zero signs of being capable of doing it in the future either.

This would also discourage import inflation disguised as growth, as the accounting metric for the imports would be in the USD instead of directly government manipulated currencies.

As it is, a common person in Pakistan is well off because he hardly pays any tax. That makes your govt. poor and your awaam rich. What you are proposing will reduce the coffers of your country from foreign exchange. How will they buy military equipment without dollars ?

 

[Communism]

As it is, a common person in Pakistan is well off because he hardly pays any tax. That makes your govt. poor and your awaam rich. What you are proposing will reduce the coffers of your country from foreign exchange. How will they buy military equipment without dollars ?

It will still be taxed, it will simply implement fiscal discipline in a backhanded way, by devolving import bill to the individual, and individuals do not have the option to just print PKR to buy USD or get IMF or Chinese loans to subsidize imports.

This is basically all the benefits of a full USD standard, but without the downside to domestic growth.

This simply limits import growth without limiting domestic growth.

 

[Super Falcon]

As it is, a common person in Pakistan is well off because he hardly pays any tax. That makes your govt. poor and your awaam rich. What you are proposing will reduce the coffers of your country from foreign exchange. How will they buy military equipment without dollars ?

When you go to super market just check hoy much sales tax we pay but problem is govt and establishment miss use those funds richer gets rich as simple as that

 

[Rollno21]

It will still be taxed, it will simply implement fiscal discipline in a backhanded way, by devolving import bill to the individual, and individuals do not have the option to just print PKR to buy USD or get IMF or Chinese loans to subsidize imports.

This is basically all the benefits of a full USD standard, but without the downside to domestic growth.

This simply limits import growth without limiting domestic growth.

Where will the people buy the dollars from in the country?. It's not going to help.

Exports and remittance is the only way.

There are no other ways in the long run.

 

[Communism]

Where will the people buy the dollars from in the country?. It's not going to help.

Exports and remittance is the only way.

There are no other ways in the long run.

They will buy it from the government, but they will not be able to get more USD than the government is willing to sell, therefore the Current Account will not be allowed to go negative.

Exports can go up infinite percent.

It doesn't matter if imports go up infinite x 150%.

This is a structural problem with the way the pakistani government is designed where they are willing to run current account deficits to win elections.

 

[my2cents]

Where will the people buy the dollars from in the country?. It's not going to help.

Exports and remittance is the only way.

There are no other ways in the long run.

All the remittances can go directly to individuals and it gets circulated.

 

[Crimson Blue]

I propose that Pakistan change to a Dual Currency system, where individuals must procure their own USD to pay for USD imports, and then can only sell the portion of USD imports to the next person in USD for the portion of USD they paid for the import, all the way down the line.

Its already happening in some countries and its not pretty. If you rproposed system is applied then PKR will lose all value and GoP would not have any ability to make & implement an independent fiscal policy (interest rates etc).

 

[jamahir]

I propose that Pakistan change to a Dual Currency system, where individuals must procure their own USD to pay for USD imports, and then can only sell the portion of USD imports to the next person in USD for the portion of USD they paid for the import, all the way down the line.

Say that you want to buy gasoline from a fuel station.

The importer of the crude oil would need to pay for the import in USD, and then charge USD for the portion of the import component of the finished product to every intermediary at every step of the way down to the consumer level.

The importer of finished gasoline and diesel would do the same thing, but the import component would be larger, which would mean that the intermediary steps would also have to transact a larger portion of the value of the transaction in USD.

This kind of system effectively devolves the job of maintaining a current account and foreign currency reserves from the government level to the individual level, which is necessary as the Pakistani government has shown zero capability of doing it properly at the governmental level, and shows zero signs of being capable of doing it in the future either.

This would also discourage import inflation disguised as growth, as the accounting metric for the imports would be in the USD instead of directly government manipulated currencies.

It will still be taxed, it will simply implement fiscal discipline in a backhanded way, by devolving import bill to the individual, and individuals do not have the option to just print PKR to buy USD or get IMF or Chinese loans to subsidize imports.

This is basically all the benefits of a full USD standard, but without the downside to domestic growth.

This simply limits import growth without limiting domestic growth.

What is this nonsense, complicated language ? Are you really a Communist ? Please speak plainly.

 

[VCheng]

GoP would not have any ability to make & implement an independent fiscal policy (interest rates etc).

You say that as if this would be a bad thing.

 

[Communism]

Its already happening in some countries and its not pretty. If you rproposed system is applied then PKR will lose all value and GoP would not have any ability to make & implement an independent fiscal policy (interest rates etc).

You are thinking of countries that implemented a simple peg or a currency board system.

The system I am proposing is strictly to be used on the specific import value of goods.

It solves the problem of a simple peg or currency board system by specifically subdividing the use of USD to import value of goods.

This system would still allow the government to do whatever they want with the domestic value portion of the goods.

 

[Wood]

I propose that Pakistan change to a Dual Currency system, where individuals must procure their own USD to pay for USD imports, and then can only sell the portion of USD imports to the next person in USD for the portion of USD they paid for the import, all the way down the line.

Say that you want to buy gasoline from a fuel station.

The importer of the crude oil would need to pay for the import in USD, and then charge USD for the portion of the import component of the finished product to every intermediary at every step of the way down to the consumer level.

The importer of finished gasoline and diesel would do the same thing, but the import component would be larger, which would mean that the intermediary steps would also have to transact a larger portion of the value of the transaction in USD.

This kind of system effectively devolves the job of maintaining a current account and foreign currency reserves from the government level to the individual level, which is necessary as the Pakistani government has shown zero capability of doing it properly at the governmental level, and shows zero signs of being capable of doing it in the future either.

This would also discourage import inflation disguised as growth, as the accounting metric for the imports would be in the USD instead of directly government manipulated currencies.

Enemies of Pakistani state and people should cheer for this idea. It will crash the economy and drive the remaining writ of the state to ground.

 

[Communism]

Enemies of Pakistani state and people should cheer for this idea. It will crash the economy and drive the remaining writ of the state to ground.

Imagine thinking this when "crashing the economy and driving the remaining writ of the state to ground" is literally what is happening right now, and for exactly the traditional reason, every single pakistani government being unwilling to run a current account that is neutral or positive.

You apparently think that the ability to print PKR to buy USD and to subsidize imports with IMF and Chinese loans is the only "writ of the state" that matters.

Since those are the only two things that this proposal fixes.

 

[Wood]

Imagine thinking this when "crashing the economy and driving the remaining writ of the state to ground" is literally what is happening right now, and for exactly the traditional reason, every single pakistani government being unwilling to run a current account that is neutral or positive.

You apparently think that the ability to print PKR to buy USD and to subsidize imports with IMF and Chinese loans is the only "writ of the state" that matters.

Since those are the only two things that this proposal fixes.

You are proposing that a foreign currency be used for domestic commerce. The lunacy in proposing that everyone in the country should have two independent currencies for almost every commercial activity is preposterous.

Of all the gobbledygook proposals to fix Pakistani economy that I've read here, this one takes the cake.

 

[Communism]

You are proposing that a foreign currency be used for domestic commerce. The lunacy in proposing that everyone in the country should have two independent currencies for almost every commercial activity is preposterous.

Of all the gobbledygook proposals to fix Pakistani economy that I've read here, this one takes the cake.

I'm proposing a foreign currency be used for foreign imports and resulting foreign import value.

If you cannot distinguish the difference then you do not grasp what I am proposing.

The reason why Lebanon and Sri Lanka failed and the way Pakistan would fail if the international players would let it fail is due to using a domestic non-reserve currency to pay for the import of foreign goods which leads to running out of foreign currency as you are essentially running a crude fractional reserve system of foreign currency.

What I am proposing is a 100% reserve system of foreign currency with an effective psychological regulatory system.