On Monday early morning I read a rather disturbing news posted by Bloomberg regarding Pakistan’s debt profile http://www.bloomberg.com/news/articles/2016-02-14/pakistan-default-risk-surges-as-50-billion-debt-bill-coming-due. It raised questions about ability of the incumbent government to meet debt servicing obligations. While efforts were made not to create any panic, which was also evident from PSE-100 Index making significant gains during the day.
Having said that the news demands serious deliberation by all the stakeholders, biggest being the incumbent government. Many critics have been pleading that indiscriminate borrowing could cause serious problems for the country but present government insisted that borrowing was for accelerating GDP growth rate. It ignored the sustainability of rising debt servicing obligations.
Finance Minister, Senator Ishaq Dar has been painting a rosy picture of the economy. It may be true that PML-N government is trying to accelerate GDP growth rate but efforts are not focused. Even an ordinary person knows well that the country suffers from the worst energy crisis. Persistent increase in electricity and gas tariff and on top of all payment of billions of dollars in the name of ‘resolution of circular debt’ has not yielded desired results. While huge payments were made little efforts were made to contain blatant pilferage of electricity and gas and recovery of the outstanding dues.
It appears that the present government is living under the impression that at this juncture the multilateral lenders, following the guidelines of super powers, will not allow Pakistan to commit a default. This impression has emerged by going through the history of Pakistan, especially post USSR attack on Afghanistan.
A point must be kept in mind that it is not the question of survival or dismissal of a government but the very existence of Pakistan. The country has suffered the most post 9/11 and its economy has been shattered. Pakistan has always succeeded in soliciting loans from the IMF but failed miserably in boosting inflow of foreign direct investment.
Pakistan continues to suffer from budget and trade deficits but the level of ‘confidence deficit’ is also touching new highs. Exports are on the decline and the ruling junta is keen on taxing energy products to maximize tax collection to finance its extravaganzas.
The default may not happen at all because bailout packages will be offered, but these will not be without more stringent conditions. IMF will ask to impose new taxes that will erode purchasing power and savings to income ratio will further plunge, more people will be pushed below the poverty line.
- Achieving food security in Pakistan
- Announcement of policy rate by State Bank of Pakistan
- Defending Pakistan's territorial integrity
- Dirty oil politics
- Dishonest Western Media
- Energy Crisis in Pakistan
- Financial Inclusion program of SBP
- Geo political importance of Pakistan
- Geo Politics in South Asia and MENA
- Global Oil Glut
- Importance of remittances in pakistan's economy
- Investing in Commodities
- Investing in Pakistan stock market
- Investing in Pakistan Stock Market
- Investment opportunities in Pakistan
- Islamic Finance in Pakistan
- Making textile insutry robust
- Mutual Funds in Pakistan
- Oil and Gas Production in Pakistan
- Pak Afghan Relations
- Pakistan Foreign Policy
- Pakistan Stock Market Weekly Review
- Perforamance of exploration & production companies
- Performance of cement industry in Pakistan
- performance of commercial banks in Pakistan
- Performance of commerciial banks
- Performance of energy sector companies
- Performance of Fertilizer Industry in Pakistan
- Performance of insurance companies in Pakistan
- Performance of power generation companies
- Performance of textile sector of Pakistan
- Robust agriculture in Pakistan
- State of Pakistan Economy
- State of Pakistan's economy
- State of Pakistan's Economy
- Taxing POL consumers
- Textile Exports of Pakistan
- US-Saudi oil war
- War between shale oil producers and OPEC
- Warehouse Receipt Financing in Pakistan
- Who controls this world