Pakistan and its debt bomb

[blueazure]

the solution is easy don't print money
before covid-19 state bank had no printed any money for 2019-2020 but of course that was under IMF

that's like asking a habitual substance abuser to quit altogether .


govt's are drunk on debt financing and money printing to finance their 'operations'

 

[Pakistan Space Agency]

Incompetent Pakistan Tehrik-e-Insaf's Baby DebtZilla and it's Shaikh Chillian Riasat-e-Madina vision. They don't seem to match.

 

[blueazure]

Dr. Furrukh Saleem is a learned guy and his grip on economics is beyond doubt, period.

Unfortunately rest of the comments in this thread is like a patient having no background of medicine commenting on the prescription of a neurophysician.

Although I have my two cents about economists and their analysis, which seem often narrow and tends to focus at only one aspect. In this case however, I agree totally that regardless of who did what and who is doing what, we as a country are in s***hole of debt, we cannot get rid of defense expenditure due to obvious reasons, PSDP is the lifeline for economy, major problem is non developmental expenses and PSEs.

Frankly the bureaucrats are not only corrupt but incompetent as well give them any department and they ll screw it and make it a burden to the nation. People criticize one political party or the other for these sick parasitic PSEs, what is missing is the performance of bureaucrats appointed to these organizations and their performance. 4 time the required staff is hired in Pak Steel, 10 times the required staff is with PIA, same goes with railways and other PSE. Then there is the political manipulation if Govt is getting rid of those people who are sitting on their butts in PS or for that matter utility stored corp, these good for nothing people will come to protest, media channels will give full coverage make these people as victims and the Govt as villain and some legal pro***** I mean judge will pick it up and a restraining order will be issued, Allah Allah Khair sallah.

Parasites are good for the country, thats the moral.

COVID-19 has added complication to an already sick economy. The situation is further complicated by appointment of incompetents and irrelevant in the cabinet and decision making posts. Its already 22 months down the road, while previous Govts have brought the country to current position but even I am having doubts about the capacity issues of current Govt.

shower thought / simple question,


why cant govt's ask the 'debt' to be wiped out / clean the board

its printed money after all from the central bank
?

 

[Patriot forever]

What's wrong with your demented mindset. Anyone who question PTI is a patwari?. Always stoop low by taking a dig at other members. Everyone has a right to criticize.

There are many valid points to criticize pti. Just giving you one example, they were 2 years late to take steps to control the hemorrhage in Pakistan Steel Mill.
This particular argument about debt doesn't hold much ground as it is a symptom of underlying major macroeconomic instability and classic debt trap they inherited. Every year we have to borrow more not just to pay off the principle amount but also the interest, as well as fund the deficit, its a positive cycle. There is no short term solution to this. No matter whoever you put in charge the result will be same. They are going in the right direction especially in the power sector, their policy and direction is excellent in the medium and short term.
Criticizing on something just by flaunting numbers without basic understanding of the cause is just political masturbation.

 

[Syed1.]

Incompetent Pakistan Tehrik-e-Insaf's Baby DebtZilla and it's Shaikh Chillian Riasat-e-Madina vision. They don't seem to match.

Just regurgitating the same post in every thread for last two years hasn't worked out for you but full marks for your repetitiveness and perseverance.

 

[ps3linux]

shower thought / simple question,

why cant govt's ask the 'debt' to be wiped out / clean the board

its printed money after all from the central bank
?

You hurl tough questions at me..

Printing currency is a tough call, the more you print value of currency in circulation becomes lower. When there is more liquidity in the system, demand for products increases in our case luxury item (read imported items) thus a pressure on forex reserves, while production is fixed thus inflation increases. Economics 101.

One of the core responsibilities of SBP is to control inflation and that is done through GoP paper sales like Treasury Bill, PIB and Ijara Sukuk. Through auction/sales of these instruments SBP sucks liquidity out of the system thus control inflation (theoretically).

Under ideal circumstances and for a strong economy a country's financing should not be deficit financing, mean in order to meet the difference between revenue (taxes) and expenses the Govt must not be printing money. Reasons already mentioned.

If you study Pakistan's history there was a time when currency printing was linked to Gold reserves 33% (as far as I remember) and that was the time PKR exchange rate was stable, our great leader (pun intended) Mr. Phutto abolished the rule and PKR depreciated from 3:1 vs dollar to 10:1 and we know where we stand today.

Let us see how GoP borrows money to finance its expenses.
1) Through sales of GoP Paper
2) Through Commercial loans
3) Through NSS

while the GoP borrows through 1,2,3 the markup is paid through currency printing (usually) and the principal as well.

We can all curse PTI Govt for its incompetence and all, but one thing we must appreciate is that most of the debt they have raised has been used to service older debt, easier way was to print money but unlike all previous Govts they have refrained from doing so and for that they must be given credit.

At one point in time they will print money creating artificial inflation, thus they will end up paying less than they borrowed (principal). Its a quagmire you know to print money and service debt once and for all, problem really is that Govt revenue is not increasing (means taxes) and I blames us Pakistanis for it. We have never been loyal to our country led by equally traitorous politicians, bureaucrats, generals, judges and journalists.

I have suggested it multiple time to people in MoF, SBP that Pakistan seems to be the only country in the world where a AAA rated instrument (GoP paper) has a higher yield than an A rated instrument (bank deposit or TDR or COI), thise who understand finance and risk would understand what I mean.

SBP and Banks are A.holes banks put most of their money in GoP long term paper way beyond their SLR and CRR requirements, deduct all OPEX from it and then offer rates to the depositor this is one of the greatest evil and injustice in our country. Banks spread in Pakistan is among the highest in the world.

My suggestion has been to bar the banks from investing in long term GoP paper beyond their SLR requirement, rather offer the paper from current "lot" investment to Rs.1000x multiple may be Rs.10,000 to individual investors, this will not only help improving secondary debt market, control inflation but force the banks to focus on their core function which is lending to the business.

IMF pet formula copied, pasted and implemented in Pakistan by its agents has always been increase interest rate and control inflation. inflation occurs through two factors liquidity and demand underlying factor is limited production. Remember when IMF formula is used it limits expansion and thus in a way limits taxes.

The other way to control inflation one I have already suggested when banks will not be allowed to invest in GoP long term paper, they will focus on lending make business friendly lending policies, expansion will happen, more industrial units will be setup, while there will be liquidity in the system, there will be increased demand but on the other hand there will be excess production with more production will come more taxes, more opportunities to export. Once Govt will have more income than expenses the debt trap could be avoided, but then again I am just an ordinary person and these are my conclusions, not a decision maker.

Although I am worried about our debt to GDP ratio but its not out of hand, GoP must sell those loss making PSE a constant drain on public money like PSM/PIA/PR and not the profitable ones like NBP, OGDCL,PSO,PPL.

 

[volatile]

shower thought / simple question,


why cant govt's ask the 'debt' to be wiped out / clean the board

its printed money after all from the central bank

Kiya khoob kaha app ne ,but issue is every currency is backed up with some thing when you print money you create unbalance of supply and demand .Irony is people discussing economics have no idea what they talk and propose

There's no debt... it's all conspiracy against Imran Khan.

Yahoodi Sazish to be precise

 

[Zhukov]

Our nation as a whole is not focused on Business and Trade. that is the real problem. be it foreign policy, Public opinion, Writers, Journalists.
We are only focused on National security, war and survival that we have actually ignored how national security is so much dependent on trade and business in post cold war world and still stuck in 70s and 80s.

Make Good relations with neighbors and increase volume of trade and business with them, Get Afghanistan in order and allow your market to reach to central Asia,Make Structural Reforms to Administrative Framework of whole country And Get a stable and powerful government,Make an independent foreign policy instead of being in American Camp or Chinese Camp
Most importantly the point everyone ignores. Give Private sector and Businessmen more influence then Government Officials and Bureaucrats so that our policy structure is more oriented toward business friendly policies.

We should grasp a basic concept.
First of all the corruption should be nullified. But if it is there, Then If a businessman does corruption and makes money. At least he will expand his business and that will indirectly create jobs and expand economy. A Government official making money is a national loss that will only go into real estate and buying Imported goodies.
Adopt the new world. Let Entrepreneurs take over the system. And let go of the Bureaucratic stranglehold.

Or else Go bankrupt and get a fresh start. No matter what anyone is promising to public. This Debt situation is going to explode one day.