The Ill-Fated Relationship Between Pakistan and the International Monetary Fund (IMF)

[FuturePAF]

What is the end goal here anyway? Keep taking loans from IMF and accrue more debt?

Did you know that expats in foreign countries cannot even deposit money in Pakistani bank accounts? Banks like HBL refuse to transfer the money. We all know where such dictation is coming from. Pakistani banks and other institutions share all kinds of financial information regarding expats with Western nations.

The myth that overseas Pakistanis living in Western nations can contribute economically is just that. The government hasn't got a leg to stand on.

As an Overseas Pakistani, I would agree transferring money through the banks is such a hassle, people use other means. But considering the benefit, the government would be better off getting the issues sorted out with transferring and depositing, then taking the $1 billion and agreeing to the terms of the IMF, that could undermine the national financial sovereignty and long term export potential.

Overseas Pakistanis would contribute if the reforms needed to the financial regulations and banks were carried, such that we could be assured there would be any improprieties, and growth takes off. What could be invested is retirement money, and not just from overseas Pakistanis but the pension funds around the world looking for solid returns on their investments. It’s what’s being done by the Indian financial system; getting foreign pension funds to invest in their country.

At the very least, if we can’t get our financial channels sorted out with the western countries, if we make the needed reforms to generate steady economic growth, we can try to seek funding from Chinese pension funds and Gulf Arab sovereign wealth funds. The Chinese pension funds are probably looking for a stable investment destination, because the returns in the Chinese real estate sector among other may not be generating the returns they had hoped for, and the Chinese government may limit cash flowing out of their country. Gulf Arab countries are always looking to diversify their investments and look into industries outside of petrochemicals, agriculture and mining with value added products could be it for them. If we make the reforms to the financial sector, we may be able to attract more Chinese and Gulf Arab investment, not loans.

Then cash flowing into the Pakistani banking sector would allow our own banks to loan the government the money. Hopefully then the government won’t have to go to the IMF ever again.

 

[Mohsin A]

There is only one way out of this mess largely created by previous governments.

1. Start extracting the country's natural resources....coal, minerals, gold, silver, copper, oil and begin to supply the nation and the world.
2. Get the rupee backed by gold & silver.

It's unbelievable that a country with such a wealth of resources hasn't taken the initiative to benefit from what God has blessed us with in the ground. Total and utter incompetence all round.

It's the only way to save us from the inevitable financial catastrophe creeping upon us, and in order to execute the plan, this country needs an iron fisted dictator. Unfortunately democracy just doesn't work for a place like Pakistan where the literacy level is shambolic.

 

[FuturePAF]

There is only one way out of this mess largely created by previous governments.

1. Start extracting the country's natural resources....coal, minerals, gold, silver, copper, oil and begin to supply the nation and the world.
2. Get the rupee backed by gold & silver.

It's unbelievable that a country with such a wealth of resources hasn't taken the initiative to benefit from what God has blessed us with in the ground. Total and utter incompetence all round.

It's the only way to save us from the inevitable financial catastrophe creeping upon us, and in order to execute the plan, this country needs an iron fisted dictator. Unfortunately democracy just doesn't work for a place like Pakistan where the literacy level is shambolic.

I agree with the first half of your post, but while we do need a national industrial strategy, going for a dictatorship with only stall political development and instead of addressing the issues, freeze then in place, and have people just blaming the dictator instead of solving the problems; primarily reforming ourselves. Granted, the democracy we do have seems to revolve around vote for a person rather then a party with a platform, it still forces the issues at hand

From the French Revolution to the Russian revolution, our people are not that different in terms of education and the fact many are farmers that just have enough to get by. We should be implementing literacy programs and civics education in schools, for kids (and adults that want to learn) so that people understand and come along with the national development, and buy into the development, rather then being dragged there.

This is why institutions need to be strengthened to prevent elected officials from derailing national development, but I agree something needs to force the issue (and hold them to it) so politicians have to do what is best for the nation rather then themselves.

 

[Mohsin A]

I agree with the first half of your post, but while we do need a national industrial strategy, going for a dictatorship with only stall political development and instead of addressing the issues, freeze then in place, and have people just blaming the dictator instead of solving the problems; primarily reforming ourselves. Granted, the democracy we do have seems to revolve around vote for a person rather then a party with a platform, it still forces the issues at hand

From the French Revolution to the Russian revolution, our people are not that different in terms of education and the fact many are farmers that just have enough to get by. We should be implementing literacy programs and civics education in schools, for kids (and adults that want to learn) so that people understand and come along with the national development, and buy into the development, rather then being dragged there.

This is why institutions need to be strengthened to prevent elected officials from derailing national development, but I agree something needs to force the issue (and hold them to it) so politicians have to do what is best for the nation rather then themselves.

I hear what you're saying brother, and in an ideal world what you say is true. However, Pakistan is now at a cross roads and through it's entire existence, it's been trying to strengthen institutes with the results in front of us. Every institute in the country is tangled in webs of corruption. Forgive my language, but these institutes are full of lalchi kutay (hungry dogs) putting the interests of themselves before the nation. So whilst you're correct in what you say in an ideal world, I personally feel a true honest dictator can bring in meaningful change in the short term which is the need of the hour. Otherwise, if we keep experimenting with democracy, the nation will continue to get shafted and unfortunately, that's just how the game is with Pakistan. The example of China is in front of us.

 

[Arulmozhi Varman]

There is only one way out of this mess largely created by previous governments.

1. Start extracting the country's natural resources....coal, minerals, gold, silver, copper, oil and begin to supply the nation and the world.
2. Get the rupee backed by gold & silver.

It's unbelievable that a country with such a wealth of resources hasn't taken the initiative to benefit from what God has blessed us with in the ground. Total and utter incompetence all round.

It's the only way to save us from the inevitable financial catastrophe creeping upon us, and in order to execute the plan, this country needs an iron fisted dictator. Unfortunately democracy just doesn't work for a place like Pakistan where the literacy level is shambolic.

Doesn't work like that always. Extracting coal, mineral need investment in billions in the first place. Foreign banks are nowadays not offering loan for coal or thermal power plant anyway.
And add money for power plants to utilize the coal. Yes it would be import substituting but would take more than a decade or two to break even. If it's a private led effort it would even take more time.

Even investment in oil has gone down. India had offered 500+ blocks of small, medium fields in auction to no avail. The moment, one invests and starts producing, OPEC will increase volume and kill competition in a year or two. They tried to do that to US but Canada became the unfortunate casualty.

 

[FuturePAF]

I hear what you're saying brother, and in an ideal world what you say is true. However, Pakistan is now at a cross roads and through it's entire existence, it's been trying to strengthen institutes with the results in front of us. Every institute in the country is tangled in webs of corruption. Forgive my language, but these institutes are full of lalchi kutay (hungry dogs) putting the interests of themselves before the nation. So whilst you're correct in what you say in an ideal world, I personally feel a true honest dictator can bring in meaningful change in the short term which is the need of the hour. Otherwise, if we keep experimenting with democracy, the nation will continue to get shafted and unfortunately, that's just how the game is with Pakistan. The example of China is in front of us.

Singapore would probably be a better model. Lee Kuan Yew was the elected prime minister for over 30 years, if I remember correctly. One generation to set things right; building the institutions and political/economic environment that has formed and sustained its industries.

How ever the country gets there (Ataturk is another potential model), what is clear, we need one generation; 30 years to focus on building up our economy and the institutions that will hold should a change of government occur.

30 years seems to be about how long all the East Asian tigers that are currently democracies, under some kind of one party rule.

 

[Clutch]

2. Get the rupee backed by gold & silver.

Pakistan doesn't have enough gold or silver to back it's currency as is needed for circulation.

Even if Pakistan were to peg it's currency to gold at, let's say, Rupees 5000/g.... Then everyone should be able to convert their money to gold at that rate today. Does the State Bank reserves hold 5,000 Tonnes of gold???... No!

 

[Mohsin A]

Doesn't work like that always. Extracting coal, mineral need investment in billions in the first place. Foreign banks are nowadays not offering loan for coal or thermal power plant anyway.
And add money for power plants to utilize the coal. Yes it would be import substituting but would take more than a decade or two to break even. If it's a private led effort it would even take more time.

Even investment in oil has gone down. India had offered 500+ blocks of small, medium fields in auction to no avail. The moment, one invests and starts producing, OPEC will increase volume and kill competition in a year or two. They tried to do that to US but Canada became the unfortunate casualty.

Where there is a will, there is a way. Pak could potentially lease some resources to for e.g. China or Russia For a set period. They build the infrastructure, and get to extract resources on a 60/40 split for a fixed period. Also, mineral & precious metal mining can be done relatively easily using open pit mines as they do in Russia. And as things stand precious metal demand is currently through the roof.

Singapore would probably be a better model. Lee Kuan Yew was the elected prime minister for over 30 years, if I remember correctly. One generation to set things right; building the institutions and political/economic environment that has formed and sustained its industries.

How ever the country gets there (Ataturk is another potential model), what is clear, we need one generation; 30 years to focus on building up our economy and the institutions that will hold should a change of government occur.

30 years seems to be about how long all the East Asian tigers that are currently democracies, under some kind of one party rule.

Agree. The country could really benefit from one party system for around 30 years to get it stabilised.

Pakistan doesn't have enough gold or silver to back it's currency as is needed for circulation.

Even if Pakistan were to peg it's currency to gold at, let's say, Rupees 5000/g.... Then everyone should be able to convert their money to gold at that rate today. Does the State Bank reserves hold 5,000 Tonnes of gold???... No!

Saindak & Reko Dink have more than enough gold and other metals to sort Pakistan out for generations to come. Need to make a start somewhere!

 

[Shehryar Ashraf]

should have left the IMF people to rot in Afghanistan.

 

[Dalit]

The military govt's of Ayub, Zia, and Musharraf were fortunate that they by chance governed in good times (for them). Ayub with the anti communist bloc, Zia after the USSR invasion of Afg and Musharraf after 9/11. If it wasnt for American/European/Middle East aid and largess the military regimes would have not pulled off any economic success.

The civilian govt's all had common characteristics of corruption and ineptitude but were unfortunate in not being part of any major international event/policy that would make Pak an important regional player so they plodded along only on borrowed money. CPEC being somewhat of an exception but that too came late in the Nawaz times. Pakistan's money has been stolen, misspent, and misused for decades, almost exclusively by Pakistanis.

I am no fan of IK but feel sorry for him as far as the economy goes as he has inherited a poisoned chalice and some of the geopolitics are outside his control but at the end of the day the buck stops with him.

The questions you need to ask yourselves are: Who is forcing Pak to borrow from IMF? or from Saudi? or UAE? or to take aid from the West?

Yes lets blame everyone else except ourselves. Lets be delusional, but its not going to solve Pak's economic issues.

The blame lies squarely with Imran Khan and the military regime. It should have been a clean start. Many difficult decisions should have been made from day 1. It would have been carnage and absolute hell, but Pakistan wouldn't be relying on malicious powers for economic assistance. Slowly but surely the plan would succeed in the coming decades. Our rulers are imbeciles. Some are corrupt to the core. Some are plain malicious. It is a terrible mix.