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

[VCheng]

This is what my question is. I cannot see American dollar being devalued.

More importantly and on topic, the PKR is being devalued in part due to the adverse balance of payments for Pakistan. It was forced down to below 100 to the USD not that long ago and is back up to well over 105. Further decline in its value is inevitable, and this is with a low energy import bill these days. Once oil prices go up, the pressures will increase further for PKR devaluation.

 

[Haroon Syed]

That is an interesting thought experiment. There is foreign debt and public debt. Can someone post the figures for both?

I don't ve the exact figures but external debt is about 75 billion $ and internal debt is about 17 trillion Rs

 

[Blue Marlin]

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translate please

 

[FaujHistorian]

I don't ve the exact figures but external debt is about 75 billion $ and internal debt is about 17 trillion Rs

As a I said OP lacks basic concepts of economy.

your figure is close.

Here are the figures from CIA factbook

$62.33 billion (30 June 2014 est.)
$57.8 billion (30 June 2013 est.)

So may be we are hovering about $70 billion in 2015.

peace

 

[I S I]

Good thread.

 

[rubyjackass]

What really matters is the HARD currency debt aka dollar debt.

All foreign debt is typically dollar denominated. Most public debt will be in local currency.

And by the way, OP is a doofus about world economy.

He doesn't understand that Pakistan like any other country needs lots of dollars every minute of every hour of every day of every week of every month of every year.


Get it OP? @Gamer-X

Get it?

Spare him bhai. Bechara, I think he meant to see how the hypothetical scenario it would be. Its a fun exercise.

Let us see.

I found this:
The Express Tribune Explains Pakistan's Foreign Debt

Pakistan has $50bil foreign debt. That is like one fifth of the GDP and more than the annual budget of Pakistan. So what would Pakistan do if it has $50bil of excess budget money. OMG its like what would I do if I get a 100 million dollars in my bank account.

May be a fifth will go to defence like in current budgets. There is still $40 bil. So need of ADB funds funds the two dams(barely $2 bil) in Azad Kashmir. Any more suggestions?

Yeah, nowadays all the action is in middle east. It's their chance to get loans written off.

Middleeast has never been short of action. There is no one there to ask for a loan write-off. Today there is some guy ruling a city, tomorrow there is another state.

@Icarus @big CAT
why are the chinese keeping thier currency devalued?

If a locally grown apple is Rs10 in your country and your currency is devalued, then apple will still be Rs10 for you. But one American dollar will buy more apples, so America will find it cheaper to buy from you. In other words, currency devaluation increases exports. Similarly it discourages imports.

 

[Haroon Syed]

All foreign debt is typically dollar denominated. Most public debt will be in local currency.


Spare him bhai. Bechara, I think he meant to see how the hypothetical scenario it would be. Its a fun exercise.

Let us see.

I found this:
The Express Tribune Explains Pakistan's Foreign Debt

Pakistan has $50bil foreign debt. That is like one fifth of the GDP and more than the annual budget of Pakistan. So what would Pakistan do if it has $50bil of excess budget money. OMG its like what would I do if I get a 100 million dollars in my bank account.

May be a fifth will go to defence like in current budgets. There is still $40 bil. So need of ADB funds funds the two dams(barely $2 bil) in ***. Any more suggestions?


Middleeast has never been short of action. There is no one there to ask for a loan write-off. Today there is some guy ruling a city, tomorrow there is another state.

You are presenting very old figure mate, our external debt as of June 15 was from 72 to 75 billion $.

 

[FaujHistorian]

Spare him bhai. Bechara, I think he meant to see how the hypothetical scenario it would be. Its a fun exercise.

Let us see.

I found this:
The Express Tribune Explains Pakistan's Foreign Debt

Pakistan has $50bil foreign debt. That is like one fifth of the GDP and more than the annual budget of Pakistan. So what would Pakistan do if it has $50bil of excess budget money. OMG its like what would I do if I get a 100 million dollars in my bank account.

Thanks

Your analogy is incorrect.
foreign debt for Pakistan is going to be one time pay off. That's all,.

Next year we are going to be in the same $hit.

Debt is not an issue.

what matters is what we bring home as revenues year after year after year.

Pakistan's "potential" AND real need in my mind is about $500 billion every year on long term basis.

But we are stuck discussing tiny amounts.

Sadly.

 

[Yousafzai_M]

I am not that good at understanding these economic matters, So just wanted to know from guys here who understand these things.
So my question is what effect will it have on Pakistan economy if all of its debt is written off(Which i think is round about $90 billion)?

The logic for debt repayment is the same whether its an individual or a country. Suppose you have a loan to repay and half of your salary goes to pay the instalments. If the bank would write off your loan, you would immediately become richer and spend that money to improve your living.

In Pakistan's case of course that hell lot of money can be spent on education, health, infrastructure and human development.

In practice though I can bet the money would be used to fill more bank accounts in Switzerland and more palaces are bought in Jeddah, London and everywhere else.

 

[VCheng]

In other words, currency devaluation increases exports. Similarly it discourages imports.

Only if the exports find buyers in a competitive global market.

 

[rubyjackass]

Thanks

Your analogy is incorrect.
foreign debt for Pakistan is going to be one time pay off. That's all,.

Next year we are going to be in the same $hit.

Debt is not an issue.

what matters is what we bring home as revenues year after year after year.

Pakistan's "potential" AND real need in my mind is about $500 billion every year on long term basis.

But we are stuck discussing tiny amounts.

Sadly.

2014–15 Pakistan federal budget - Wikipedia, the free encyclopedia
Pakistan's budget has no revenue deficit.
Fiscal deficit is only 5%($10 bil) of Pakistan's GDP. Whereas the savings on debt servicing will be $6.5 bil(at 8% interest will be $4 and $2.5bil principal, assuming 20 year period) per year. And once there is $50 bil ready cash, the interest rate won't be 8% anymore for next loan, it will be lesser. So there won't be $hit next year.

$500 bil?!! That is 10 times your budget every year. What do you want to do with it?

 

[Oracle 33]

credit rating would be shot to pieces and attracting FDI a big issue

USA can't just keep on printing dollars indefinitely. The more money they print, the more they offset the market and global demand for the dollar decreases.

$$ is still king and will be for the next 30 years

 

[rubyjackass]

You are presenting very old figure mate, our external debt as of June 15 was from 72 to 75 billion $.

Just saw your post bro. Anyway its a hypothetical scenario. And 50 is a better number than 75

 

[Haroon Syed]

Just saw your post bro. Anyway its a hypothetical scenario. And 50 is a better number than 75

I was correcting the figure bro . I would have loved if it was zero.

 

[rubyjackass]

Only if the exports find buyers in a competitive global market.

Of course. That I thought is a reasonable assumption. There is always someone to buy everything. And that someone will prefer a country with devalued currency to buy stuff.

I was correcting the figure bro . I would have loved if it was zero.

Hahaha. No I meant 50 is easier for calculations. Like it is easier to calculate x% of 50 and to calculate 50 as percentage of something else.