A lot of cheer-leading , a lot of wishful thinking in this thread. Before i put my two cents forward , a little preface :
I have just recently interned with an IIM-B prof helping him with a whitepaper on Indian Fiscal deficit situation, so while not an expert in this field , I have gained a fair idea.( The prof. was congress aligned so the paper was quite adversarial in nature) .
I am also very involved with policy work on other fronts (mostly related to parliamentary reforms , if you think your government is fucked up, you will be surprised to learn how much of that is due to the bad policy infrastructure that is available to MP's)
So, with that being said . let's just jump in .....
On a global level three major things are happening :-
- Crude prices are going up due to Iran sanctions, OPEC countries reducing Oil production after Shell got successfully killed .This particularly hits hard on oil dependent countries like India , Pakistan
- US macroeconomic data has been doing well.
- A lot of developing economies are in trouble ( S.A, Brazil, Turkey, Russia).This is resulting in Global Investors pulling out in general from developing countries and reinvesting in U.S .I see @BHarwana posting some odd threads about investors pulling out money from Indian markets, while i suspect his numbers but that phenomena is happening across all developing countries
So, some people here comment about loans from China/Saudi/ . Either they are kids with no knowledge of economics or jingoistic Drum Beaters. It's almost cringey reading their comments.
From DAY - 1 it was clear that Pakistan had no other option other than going to the IMF.Even a second grade economist would have told you that (privately at least).All this bullshit about loans, about getting investment from overseas Pakistani's was just that ...B.S.
So , We got that clear, let me tell you why
IMF is good, a hard sell I know but hear me out :
- IMF provides the loans at the cheapest rates ( STFU, i already knew that , you shout at me, bear with me till the second point please....)
- Government Economic bodies secretly love IMF World Over. IMF suggest or rather forces reforms most which the economic council of Pakistan would have already suggested/pleaded/begged the GOP to implement.Now they have no choice to but implement these policies.
- These policies can be labelled in two buckets :
- Short Term : Slashing developmental budgets, raising taxes, increasing interest rates ( All of these very unpopular with the populace)
- Long Term and Frankly the most important : Introducing frameworks like Congressional Budget Office in USA, setting up fiscal policy institutes ( via legislature) which sets binding fiscal targets/Debt ceiling for government at both state and federal level (All of these are very unpopular with ruling govt. and bureaucracy)
If you want to know why Pakistan in this mess , its because of point number 2.IMF is an enabler for these polity changes in loads of developing countries, which otherwise the rulers will never implement.
So there my
two cents, oh...wait, coming from an Indian that would be my (2/million) cents....coincidentally this also happens to be the probability that Pakistani won't go to IMF to solve it BOP crisis.