What's new

what would Happen to a Country if its Loan is Written off ?

Nah,i don't think that it's 65% of the present GDP because a few months back i read somewhere that the current external debt of India is around $406 billions where as our present GDP is around $2.3 trillions!!

external or dollar debt should be compared to yearly budget (OK 5 years average) and not GDP.

If you work as an engineer and your monthly pay is 5000 dollars. Then your credit card debt should be compared with that income/expense and not your "earning potential" which could be 10,000 dollars.
 
.
external or dollar debt should be compared to yearly budget (OK 5 years average) and not GDP.

If you work as an engineer and your monthly pay is 5000 dollars. Then your credit card debt should be compared with that income/expense and not your "earning potential" which could be 10,000 dollars.
Well,in that case i think our external debt is around 140%-150% of our yearly budget as our current yearly budget is around $280 billions(only the Union budget).
 
.
Well,in that case i think our external debt is around 140%-150% of our yearly budget as our current yearly budget is around $280 billions(only the Union budget).

Exactly. Thank you.

That means a person with 1000 dollar income is carrying a debt of 1400 to 1600 dollars. Not a big deal. In other words a "healthy debt".

Coming back to the main topic,

Pakistan's debt to budget ratio is very similar in ratio. A very healthy debt dare I say.

This is why I don't buy this crappy thinking that we should get our debt forgiven. Once a debt is forgiven is like you declare bankruptcy. Thus making you a bad person economically.

What Pakistan really needs is to become good global citizen and productive. This $60 billion or so dollars is really a chump change for a productive country.

peace
 
.
Another funny thought:
If you are a Pakistani American, then it is a good business opportunity. You take a million dollar loan in US(there interest rates are now around 1%), then buy Pakistani government issued dollar bonds with it. The bonds will give you 8.5% interest. That way you are helping Pakistan by giving it dollars. If you use the profit to finally invest in Pakistan(buying land or something), then even better for Pakistan.


You're not gonna get a loan at 1%........

But you're idea will still work. You'll be paying the difference in interest rates in the form of risk (of pakistan defaulting).

You Guys have No Idea how much money minting happen ... U say Thought ... How about reality


 
. .
.
USA and Japan both have hard currencies, they can write-off both internal and external debts.

Emphasis being on "can". Other countries that don't have a hard currency simply cannot get rid of external debt unless they have a hard currency.

Hmm...theoretically speaking, any of these combinations is possible:

1. A country with a hard currency can write off both internal and external (payment must still be made) debt, as you rightly point out.
2. A country which does not have a hard currency most definitely cannot write off external debt, in the sense that it must find a source of repayment apart from printing notes.
3. A country without a hard currency, however, can write off internal debt, provided:
a) it is able to manage its sovereign rating (because writing off debt is an implied admission that the country is either unable to repay or is not interested in repaying, both leading to credibility issues)
b) inflation is kept within control (internal debt could be owed to various institutions, and not all of it can be simply written off. Some of it will need to be paid to creditors by issuing more money, leading to inflationary conditions.)
c) currency is not suddenly devalued (same reason as above)

There is another variable to be considered. A country with an improving balance of trade/payments, even if its currency does not qualify as "hard", can consider writing of both internal and external debt. For the first scenario, china is a case in point. The NPA situation with Chinese banks, and the debts piled up by the local governments are internal government debt. China has already made the first move towards a partial write-off. In the first half of this year, Chinese local governments were instructed to convert certain high-interest bearing debt into low interest bonds. These will most likely be written off. If China can manage to pull this off, it will then try to do so increasingly with the rest of its debt.

Whether a country exports a lot will decide whether or not it has any leverage to write-off external debt as well. Take Iran's example. During the entire period that Iran was sanctioned, it sold crude to foreign governments. Some governments, instead of paying Iran in hard currency, tried to negotiate part-payment in their respective currencies. That would, of course, only be possible if Iran had any use for that currency for paying for imports from that country. India also tried such a negotiation, although with limited success. Only a small part of the money owed was converted to rupees. The Chinese, it can be assumed, would have more success in doing so.
 
.
There is another variable to be considered. A country with an improving balance of trade/payments, even if its currency does not qualify as "hard", can consider writing of both internal and external debt. For the first scenario, china is a case in point. The NPA situation with Chinese banks, and the debts piled up by the local governments are internal government debt. China has already made the first move towards a partial write-off. In the first half of this year, Chinese local governments were instructed to convert certain high-interest bearing debt into low interest bonds. These will most likely be written off. If China can manage to pull this off, it will then try to do so increasingly with the rest of its debt.

China is an exceptional case.

The thing that makes a hard currency, a hard currency, is the fact that it is used everywhere and can buy you anything.
Now china's currency is not used almost anywhere outside china but it can buy you everything china makes and china makes ALOT of stuff. Also, China is like 1/5th of the world. So it's already partially "hard".
 
.
Pakistan is not a productive country.

200m people and produce just $250B worth of goods/services.........that's not productive at all...

That's correct.

The reason our productivity is subpar?

We are disconnected from global trade that matches our potential. We were in civil war for almost 20 years.

However we are now getting out of it. If we don't lose hope, next 5 years are HUGE in terms of our productivity.

Read international finance magzines like Bloomberg. They are bullish about Pakistan.

Peace
 
.
Frking!! Seriously?!! I saw people complaining about the high coupon rate and thought Pakistan must be in trouble that is why they had to issue such high rate bonds. Now I feel suspicious that the high rate may be fixed. Only one guy buys that much?!! Is this confirmed news?

the Person Mian Mansha is one of the richest Person of country & Practically owns MCB (One of the top 5 Banks) .. It would be very easy for him to get this kinda Money ...

Plus it pretty decent long term secure return ..

Technically ... the Bond Interest Rate is not higher than what Pakistan already have released in near Past ... but experts say, it would have been better to wait a little for better days for releasing the bonds .. the UP side is Pakistan would have eventually be giving this Money at the same rate to someone outside the country ... but Mian mansha is aspiring for a kingdom .. diving in outside ventures ... so it would kinda help the economy (via trickle down effect) if he re-invest the profit in a new venture .. (hence some background deal could also be involved, with lots of people still making some enormous money) ..... but this is how it is for white collar corruption ... u r doing it & u r not doing it ! #CAPITALISM

the source (AKChishti is pretty decent one) .. it seems mansha cash on On a sweet deal via MCB .. very much possible !.. But i cannot confirm Dar involvement ...

& it is nothing to do with pakistan or any country ... thr are bigger white crimes in USA & Europe (some time in front of us i.e. the recent billions of Dollars bailout) .. must be many in india too ... these guys have no religion or patriotism .. All they know worship is MONEY !
 
.
the Person Mian Mansha is one of the richest Person of country & Practically owns MCB (One of the top 5 Banks) .. It would be very easy for him to get this kinda Money ...

Plus it pretty decent long term secure return ..

Technically ... the Bond Interest Rate is not higher than what Pakistan already have released in near Past ... but experts say, it would have been better to wait a little for better days for releasing the bonds .. the UP side is Pakistan would have eventually be giving this Money at the same rate to someone outside the country ... but Mian mansha is aspiring for a kingdom .. diving in outside ventures ... so it would kinda help the economy (via trickle down effect) if he re-invest the profit in a new venture .. (hence some background deal could also be involved, with lots of people still making some enormous money) ..... but this is how it is for white collar corruption ... u r doing it & u r not doing it ! #CAPITALISM
I agree. It is better than someone like George Soros picking up the bonds. Some maniacs in US are capable of whimsically drowning countries by dumping bonds just because they can. This way at least the euros stay in Pakistan.
the source (AKChishti is pretty decent one) .. it seems mansha cash on On a sweet deal via MCB .. very much possible !.. But i cannot confirm Dar involvement ...

& it is nothing to do with pakistan or any country ... thr are bigger white crimes in USA & Europe (some time in front of us i.e. the recent billions of Dollars bailout) .. must be many in india too ... these guys have no religion or patriotism .. All they know worship is MONEY !
India has much bigger white collar crimes. Look at 2G. There are even larger unheard scams of such proportions you will be dumbfounded hearing about. There was one case where 24000 acres of land(most of it is coastal) was sold to one consortium for peanuts. And this land was not even government's. They acquired it from poor farmers sometimes evacuating them forcibly and noone got the compensation promised, which by the way was pittance. Google VANPIC.

But bond capture by one single individual or company with behind the scenes handshakes and fixing coupon rates is impossible in India. I think RBI and SEBI are independent of politicians and they are very strict and transparent(when it comes to bond auctions).
 
.
Back
Top Bottom