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Archive for category Economic Terrorists of Pakistan

Petitioning Prime Minister of Pakistan Mian Muhammad Nawaz Sharif (Prime Minister of Pakistan) and 1 other Start Construction of Kalabagh Dam for Prosperity of Pakistan by Azhar Panni Islamabad, Pakistan

Petitioning Prime Minister of Pakistan Mian Muhammad Nawaz Sharif (Prime Minister of Pakistan) and 1 other

Start Construction of Kalabagh Dam for Prosperity of Pakistan

Kalabagh Dam will bring economic prosperity all over Pakistan with additional water supply for irrigation through a storage capacity of 6.1 MAF, reduction in prevailing power shortage with annual generation of 12,000 million units from its 3,600 MW powerhouse and flood control with no adverse impacts to any of the provinces. Besides, the general feeling in the country, even in Khyber Pakhtunkhwa, is that the power crisis and water scarcity have not only pushed the economy to the brink of disaster but also destroyed the peace. The common man also endorses the views of the technical experts on the dam.

Benefits from Kalabagh Dam: Mangla Dam (1967) and Tarbela Dam (1977) were the main catalysts in the industrial and agricultural development of Pakistan. Since then their live storage capacity has reduced by 35% but no mega dam was constructed thereafter resulting in severe water shortage taking the country to the brink of the water-starved level and severe load shedding due to power generation shortfall. Kalabagh Dam Project would play a very important role by way of replacing storage lost by sedimentation in existing reservoirs at Mangla, Tarbela and Chashma, providing effective regulation of Indus river to meet additional Kharif allocations of the provinces under IRSA Water Apportionment Accord-1991, regulation and control of high flood peaks in the Indus, and generating a large chunk of hydro-power.

With Diamer Bhasha Dam construction nowhere in site, Kalabagh Dam is the most appropriate and better alternate option in terms of reduced cost; storage capacity with supply of water share to irrigate 800,000 acres of Khyber Pakhtunkhwa (KP) besides other provinces; enhanced generation capacity (with provision for expansion like Tarbela Dam now going to be +6,000 MW from initially designed capacity of 2,100 MW) with revenue of Hydel Profit to both Punjab and KP in proportion to area submerged; less transmission cost/losses due to proximity to load centre also contributing to reduction in NTDC’s power system transmission losses; preferable geology (remoteness from fault line); easy rail/road access (no dislocation of important roads like KKH – Karakoram Highway) and most important no impediment in financing by World Bank and other donors because of its location.

Flood Control: Floods in Jhelum and Indus rivers get controlled to a greater extent by Mangla and Tarbela dams, but same in Kabul, Swat, Chenab and Ravi rivers play havoc in KP, Punjab and Sindh during monsoons every year. The problem of inundation of Nowshehra and areas around during floods in Kabul and Swat rivers is mainly due to narrow Attock Gorge (about 7 km long 800 m wide) near Kherabad which blocks smooth flow of these rivers combined with controlled releases from Tarbela Dam. Devastation done by floods in these rivers during 2010 when Kalabagh Dam was still not there is clear to understand. Kalabagh Dam will help in minimising the peaks of major floods and providing the needed flood relief downstream. Munda Dam on River Swat is the right solution for protecting Nowshera and Swabi from its floods.

Politicisation of Kalabagh Dam: Construction of Kalabagh Dam was to be started in 1988, but the plan was shelved due to politically motivated opposition mainly from NWFP (now KP) and Sindh. Factual position is that neither Nowshehra (and so Swabi, Mardan, Charsadda, Peshawar at still higher elevations) nor SCARP projects of Mardan and Swabi (all above 950 Ft) are going to be submerged in its reservoir (max retention level of 915 Ft for few weeks only). Haripur and Khalabat Township in KP are practical examples, which have never submerged due to the construction of Tarbela Dam so close. Construction of dykes along banks of Kabul River under the project will further protect low-lying areas of Nowshera District from overflowing of the river.  Before construction of Tarbela Dam, Sind was receiving about 36 MAF per year, which became 43 MAF thereafter. With additional water supply of 4.75 MAF from Kalabagh Dam to irrigate additional 1 million acres of barren land, Sindh will never become barren but benefit more than any other province. Likewise, KP, Punjab and Balochistan will also benefit from their due shares of 2.01, 2.04 and 1.56 MAF of water supply respectively for irrigation from this project.   The apprehensions that Nowshehra will drown and Sindh become a desert by the construction of Kalabagh Dam are thus only figments of imagination. The opposition of Kalabagh Dam is therefore not based on solid facts but politically motivated spreading disinformation and blatant lies on behest of a foreign hand. This propaganda has best been countered in an article Such ka Qehatby a world-class expert on dams, Engr. Shamsul Mulk, Ex-Chairman WAPDA and CM Khyber Pakhtunkhwa, himself hailing from Nowshehra.

Mishandling of the Project: None of the governments so far has handled this matter wisely and earnestly preferring political expedience over national prosperity. Keeping this important project under the carpet due to politically motivated opposition by few elements amounts to being unpatriotic. Delaying construction of Kalabagh Dam any further will result disastrous due to a further reduction in agricultural produce on account of depleting storage capacity of existing reservoirs to feed rapidly exploding Population of Pakistan in near future. Pakistan is already losing about Rs. 180 billion annually, due to the replacement of its cheap hydel energy with costly thermal energy, just because of not constructing Kalabagh Dam. Pakistan’s enemies could have never wished the worst scenario for Pakistan than this. It constitutes the most grievous betrayal of Pakistan and its people by the political governing class and rulers. 

Action Required:

1.   Prime Minister of Pakistan is requested to immediately develop necessary consensus on Kalabagh Dam (even go for National Referendum, if so required) and start construction of the project without fearing any resistance from the rogue elements working on behest of enemies of Pakistan. In spite of international pressures, if you could decide for Atomic Explosions making the defence of Pakistan invincible, you can surely go for the building of Kalabagh Dam Project for securing prosperous future of Pakistan. God bless you with the addition of this feather in your cap as well.

2.   Chief of Army Staff – Pakistan is also requested to provide fullest moral and logistic support to the Government of Pakistan by playing a constructive and exertive role in this regard in line with wishes of Citizens of Pakistan.     

This petition will be delivered to:

  • Prime Minister of Pakistan
    Mian Muhammad Nawaz Sharif (Prime Minister of Pakistan)
  • Chief of Army Staff – Pakistan
    General Qamar Javed Bajwa 

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Will we be the 16th largest economy in 2050? by Khurram Husain

Will we be the 16th largest economy in 2050?

By

Khurram Husain |

2/16/2017 

A REPORT by PwC has everyone talking due to a claim reportedly made in it that Pakistan will be the world`s 16th largest economy by the year 2050.

The finance minister has gone the extra mile by publicly congratulating the country on the `economic turnaround` affected by his government, citing the PwC report and an opinion piece in Bloomberg by George Mason University`s Professor Tyler Cowen, in which he says that `most of Pakistan`s developments are fairly positive`.

Unfortunately, the finance minister, in his enthusiasm, claimed that Bloomberg has also declared Pakistan as the most underrated economy in the world in its recent report titled Pakistan`s Economy Is a Pleasant Surprise. In f act, the piece in question is not a `report` but an opinion column, and below it, the following disclaimer is clearly featured: `This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

In any case, let`s take the example of the PwC report since it is weightier and the claim being made sounds far more spectacular. The first thing to note is this: the PwC report does not say anywhere that Pakistan is going to be the 16th largest economy in the world by 2050. What it says is that Pakistan has the potential to be the 16th largest economy in the world by 2050. There is an important difference between both claims, and it should be borne in mind before popping any corks.

So the first obvious question to ask is this: what needs to be done in order to unlock this potential? The PwC report does not dwell on Pakistan in any detail. It features extended analyses on Poland, India, China, and Brazil, as well as boxed analyses on Turkey, Nigeria, and Columbia. It pinpoints Vietnam, India and Bangladesh `to be three of the world`s fastest-growing economies` till 2050, and says `Mexico could be larger than the UK and Germany by 2050`. Pakistan only features on a couple of lists presented in the report, showing it as having the potential to become a large economy by 2050 in purchasing power parity terms.

`To realize this growth potential,` the report says at the outset, `emerging market governments need to implement structural reforms to improve macroeconomic stability, diversify their economies away from undue reliance on natural resources (where this is currently the case), and develop effective political and legal institutions`.

Next question to ask is: how do they make their projections? What methodology do they use? The report projects future GDP growth rates based on four variables demographics, or the growth of a working-age population; growth in quality of the workforce, measured through average education levels in the workforce; growth in physical capital stock, measured as new investment minus depreciation of existing stock; and technological progress.

As any of these indicators improve, the projection for that country`s future GDP growth rate goes up. On top of that, they make an assumption about real market exchange rates relative to purchasing power parity rates. So if a country is a food importer, and its exchange rate depreciates significantly over time, that would make its food more expensive, thereby lowering its GDP in purchasing power parity terms.

A significant share of the boost that Pakistan gets in this projection comes from the large growth of its working-age population till 2050, compared to the ageing populations of the advanced industrial West or the advanced countries of the Far East (Japan and Korea for example and China`s workforce will be weighed down in the decades to come due to its one-child policy).

Second, Pakistan is food self-sufficient, which means food prices are relatively immune from international shocks, and below what they are in many other countries at the same level of development. This gives a boost to our GDP in purchasing power parity terms.

And that`s pretty much all folks. This methodology says we should grow rather spectacularly in the decades to come because the sheer number of able-bodied people available to work will increase and we can grow enough food to feed them all while keeping food prices under check. In fact, as per the data in the report, Pakistan has the second largest growth in the number of average working age population till 2050,afterEgypt.

The long story here is that the projections made in the report come with a heavy caveat. In order to unlock this potential, we will need further reforms in our political and institutional systems of rule, as well as diversification of our manufacturing base, increase productivity, and fix our balance of payments to underpin macroeconomic stability.

The short story is that, in our case, the methodology used to make the projections has given us a boost largely on the basis of a growing population.

If we can continue investing in our capital stock at present levels, and educate and feed each of these working-age members of the population at cheap rates, then our economy will have this potential.

The report is not meant to spark national celebrations. It is not even meant as a guide for policymakers. It is mainly aimed at large corporations and is trying to tell their leadership that, over the long run, the trade winds are blowing eastward.

Therefore, in order to position their enterprises to capture the dividends that this large, irreversible shift of economic dynamism towards the east is going to bring, they need to start entering markets like China and India n and solidify their presence in these economies. And in doing so, it uses a very broad brushstroke methodology to highlight the underlying sources of strength in the new centers of dynamism.

Pakistan found itself on the list largely by accident, by virtue of its young population and food self-sufficiency. Perhaps we`ll tap this potential, but let`s not pop any corks just yet.•

The writer is a member of staff.

khurram.husain@gmail.com Twitter: @khurramhusain

Editor’s Note: Even today, Pakistan’s underground tax evaders run economy is bigger than the prevailing economy.

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India afraid of Pakistan’s economic stability: Swedish Think Tank

India afraid of Pakistan's economic stability: Swedish thinktank

Swedish think-tank has pointed out that India is afraid of Pakistan’s economic stability through China-Pakistan Economic Corridor (CPEC).

According to the report titled “Silk Road Economic Belt considering security implications and the EU-China cooperation prospects”, India does not want China to perform as a mediator in the disputes, a private news channel reported.

“There is considerable concern within India that China, which has been neutral on Kashmir since 1963, can no longer be so now that its economic and security interests in these territories are growing in stake,” says a report by the Stockholm International Peace Research Institute (Sipri) – a Sweden-based think tank.

It further stated that China’s involvement after implementation of CPEC would possibly make it a stakeholder in Kashmir dispute as India does not want to internationalize this matter.

The report stated that India is depressed over the chances of employment in Pakistan after CPEC project.

Reference

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PAKISTAN THE DEPENDENT STATE – PART 1 Samson Simon Sharaf in The Nation

PAKISTAN THE DEPENDENT STATE  –  PART 1

 

 

Samson Simon Sharaf

2016 was a year of mixed achievements. Though theoretically, Pakistan is an independent sovereign democratic state, practically it is tied everywhere with chains. The governance structure of the state is ineffective and manipulated whimsically. The degeneration from a developing to an underdeveloped country is proceeding at a very fast pace. This decline is not attributable to any inherent defects of national power and political economy. It is manmade and artificially articulated to neutralize the many inherent capabilities of Pakistan. This neutralization is based on a premise of a weak and pliant country. Pakistan’s inherent capabilities are deliberately kept underdeveloped. Those that exist are being undermined or maligned in a manner that they do not matter. Pakistan is being strangulated by an apparently benign octopus with nonkinetic ferocity. This is what I called Pakistan’s Present and Future War way back in 2007. This hypothesis was framed by me in 2002 and has not changed since. The war has now entered its most destructive phase.

This series is an expose of how deliberate Pakistan’s meltdown is. In typical Kautilya Strategy, the enemies have reached into the womb and consuming from within. The analysis leads to the conclusion that Pakistan is already a dependent state in most elements of the policy. Economy, the engine that drives a state is now the biggest security threat followed by terrorism and non-performing democracy. Direct threat from India is way down the ladder.

The economic performance was explained ‘between the lines’ report of the State Bank of Pakistan. Tailored to look least critical and circumvent criticism from IMF, World Bank, and analysts, the central bank pointed to some fundamental structural defects beginning FY2016-17. Though such projections may fool the public and parliamentarians, experts have identified the holes in the argument.

 

 

Image Courtesy: Reference

 

Background

The Government is continuously borrowing money from internal and external sources. Therefore, external debt and liabilities (EDL) rose 7.5 per cent to $60.116 billion in 2010-11 as against $55.901 billion in 2009-10, depicting an increase of $4.2 billion, the State Bank of Pakistan (SBP) indicated in its report.
Public debt also increased to $56.315 billion rose from $52.107 billion. The external debt has risen $711 million in the last quarter of 2010-11. The scheduled bank borrowings increase by 23.8 per cent to $239 million, which were $193 billion in June 2010. In the total EDL, the loan from the IMF grew to $8.94 billion from the same period of last years $8.07 billion.

 

After the end of IMF programme Pakistan’s economic managers have suddenly started reflecting unusual economic indices. This trend points towards a freewheeling policy with no checks from regulators and parliament. Trying to make sense of this berserk behaviour, it begins to dawn why the government wants to put all autonomous regulatory mechanisms under the ministries and why it is legislating new economic laws. The suspicion is that many things akin to PROTECTION OF ECONOMIC REFORMS ACT 1992 are in offing. To know how this Act facilitated money laundering and offshore businesses, read Panama the Marshy Trails (Nation on 12 November 2016). The nightmare has just begun to unravel.

For instance, the report mentions an inflow of US$ 1.1 billion in FDI inflows from China. This lends credence to official claims that forex reserves are rising, growth increasing and fiscal deficits decreasing.  The government is making the nation believe that the economy is resurging, circular debts being contained and energy gap being reduced. We are being made to believe that the new round of investments from CPEC will change the fundamentals of Pakistan’s economy to an export powerhouse in the region. But this is far from true. This single indicator below exposes the hollowness of sustainable economic growth.

US$700 million from $1.1 billion inflow from China is a commercial loan from a Chinese Bank at unknown interest rates to cater for the purchase of Chinese plant equipment. It is a commercial borrowing hidden in the head of FDI. Pakistan at some stage will have to repay this and many other loans like this. One explanation given by critics for such fudging is the drying up of coalition support fund, a reimbursement arrangement shown as remittances in the past. Pakistan’s exports and inward remittances have shown a decrease and not made up for the CSF loss. The international relief in oil prices has been squandered and not translated into improved indices like value addition and exports.  So to build an illusion of growth, the government has plugged the hole with CPEC. This means that rather than making CPEC a viable engine to development, the government is hell bent on mortgaging Pakistan’s future at least to win next elections.

What havoc will such transactions play with structural balances of Pakistan’s economy be anybody’s guess?  Already the IMF has warned Pakistan that if the government does not put in place a comprehensive strategy for reforms, investment, exports and growth such arrangement will create exorbitant debt liabilities. Unlike the five years plans of the past, no comprehensive plan exists. Economic management is on day to day basis through tight controls by the ministry of finance. Economic development models never work like this. This is exactly what happened to Latin American countries during the Cold War and is happening to Africa now. It is also happening in Libya, Iraq, and Syria.

Subtracting the incidental growth created by inflation and consumption, Pakistan’s actual growth is negative. FBR collection has shrunk. In fact, it cannot even cater to debt liabilities. The agriculture sector, the quickest element of national growth is in negative and neglected. This has impacted exports that are mostly agricultural including value added products (textiles etc). These are also hit by the energy shortages. Large scale manufacturing (LSM) is stagnant. Not a single economic index indicates any effort at sustainability. So it is easy for the government to indulge in tied aid, promote consumerism built on imports (tied trade) accumulate bilateral and multilateral loans, borrow commercially from international and national banks, floats bonds and use up all to pay back liabilities (debt trap), plug deficits and support expenses. The cycle goes on and on.

The government borrowed Rs 1079 billion (a turnaround of Rs 1314 billion including paying Rs. 235 billion) from the State Bank of Pakistan during the past six months. This is being dome to cater for budgetary deficits. Once the FDI loans, direct and indirect international and domestic borrowing is combined, it leads to the irresistible conclusion that Pakistan is being led into the  Black Hole of a debt trap that will gradually become impossible to navigate. The government is adding public debt at a rate of Rs 288 billion per month (liability of every Pakistani increasing by Rs. 14,400 per month). Thus the total liabilities of every Pakistani as part of per capita segment of the total loans are not in hundreds of thousand per head but in millions.

Pakistan’s LSM that contributes to home led sustainability has collapsed. From November 2015 to March 2016 LSM recorded a rising trend at 7.6%. By June 2016 it nosedived to zero. The past figures were fudged to please IMF. The ugly conclusion is that LSM is just the tip of a stagnating economy.

These are few but tangible indices indicators. Conspicuously missing is the reflection of the hyped fanfare of CPEC. Military’s efforts in constructing communication highways of CPEC and making Balochistan peaceful are in full gear. But where is the five, ten or twenty-year development plan that shall see Pakistan grow as a self-reliant, export-oriented powerhouse of the region? As of now India is ranked 39th, Sri Lanka 79th and Pakistan a low 122.

This single dissection reasserts my oft-repeated assessment that Pakistan is fast moving towards economic insolvency. The situation is beyond a dependency. Pakistan is moving very fast towards a ‘heavy in debt’; discredited; pliant and non-nuclear state. Got it!

Pakistanis have the right to be dreamers. But dreams cannot be substituted with delusions.

Samson Simon Sharaf

Pakistan Has Mortgaged Airports, Motorways & Buildings to Getting Loans…………….Shame on Country’s Financial Managers

We just hope that our government(s), whether federal or provincial, find other means to improve the economy instead of issuing superficial claims based on such huge amounts of loans

With loans crossing reaching the $75 billion mark, we seriously need to put a stop to this before loans become unpayable and the country defaults.

Pakistan Has Mortgaged These Airports, Motorways & Buildings in order to Get Loans

1) Jinnah International Airport Karachi

2) National Motorways and Highways

3)  Pakistan Television Assets

4)  Radio Pakistan Assets

And more vital assets may be under consideration for a mortgage.

 

Reference: AADIL SHADMAN

For decades, Pakistani governments have been taking loans to fulfill local demands and start new projects. As things stand, Pakistan’s foreign debts have currently crossed the $75 billion mark.

Read More: Pakistan’s External Debt Will Soon Cross a Staggering $75 Billion

In recent times, the loan amounts have reached such highs that not even international or local lending institutions are willing to loan money under simple conditions since they want assurances that their investments won’t go in vain.

For that reason, Pakistani governments have started putting national assets of extremely high value as guarantees (mortgage) in exchange for more loans or otherwise for Sukuk Bonds.

What are Sukuk Bonds?

Sukuk bonds are Islamic bonds. They have structured in such a way that investors get returns without infringing any Islamic law (for example, no interest is charged on such investments). Sukuk represents undivided shares in the ownership of tangible assets relating to special investment activity. In other words, the bond issuing authority purchases an asset and the investors get partial ownership and returns.

The issuer also has to buy the bond back at par value at a later date.

We’ve compiled a list of national assets and the details regarding their mortgage based on official as well as leaked documents in the public domain. The sources have been included in the end.

Let’s take a look at them one by one.

Jinnah International Airport Karachi Mortgaged

Back in 2013, the government used Jinnah International Airport Karachi as security for the Sukuk bonds and raised Rs. 182 billion based on it. The profits for bonds were to be paid using the income from the airport.

The Karachi airport hasn’t been mortgaged just once. Here are all the instances where it has been used as collateral:

  • 2013 was the first year where the airport was put as collateral to borrow Rs. 182 billion.
  • In December 2015, Rs. 117 billion were borrowed against the Karachi airport.
  • In February 2016, Rs. 116.2 billion were raised by putting the airport on a mortgage.
  • A month later, in March 2016, the government used the airport as the underlying asset to borrow another Rs. 80.4 billion.

These amounts were received from local and international institutions and investors.

National Motorways and Highways Mortgaged

Recently, Pakistan government was ready to put up Sukuk bonds in order to raise $500 million from investors but it was oversubscribed at $2.4 billion.

Finally, the government decided to raise $1 billion from foreign investors by mortgaging the Islamabad-Chakwal section of the Islamabad-Lahore (M2) motorway. These bonds are set to mature within 5 years.

Back in 2014, the government pledged the Hafizabad-Lahore section of the M2 motorway to raise another $1 billion in terms of Sukuk Bonds with a 5-year maturity period.

In June 2014, the government borrowed Rs. 49.5 billion by mortgaging the Faisalabad-Pindi Bhatian Motorway (M3).

According to official reports from the Finance Minister and leaked documents from journalist Rauf Klasra the following motorways are already pledged to get loans:

  • Peshawar-Faisalabad motorway
  • Faisalabad-Pindi Bhattian motorway
  • Islamabad-Peshawar motorway
  • Islamabad-Lahore motorway

The news about the above mentioned M2 motorway was also leaked by Rauf Klasra before an official announcement.

Back in 2006, the government decided to pledge most of the national highways and some motorways in order to raise Rs. 6 billion. Islamabad-Peshawar Motorway (M-I), Faisalabad-Multan Motorway (M-4), Islamabad-Murree-Muzaffarabad Dual Carriageway (IMDC), Jacobabad Bypass, D.G.Khan-Rajanpur Highway, Okara Bypass and several other toll-yielding projects were set as security. A consortium of banks provided the loan for seven years.

With this, the trustees own the motorway, all constructions on it, flyovers and interchanges in the case of late payment.

PTV Mortgaged

According to leaked documents, Pakistan government has decided to mortgage all PTV assets in the whole country as collateral for more loans.

The PTV assets are estimated to be worth in billions of rupees at the very least and the national television also holds great importance as far as national security is concerned.

So far there has been no confirmation or denial from the government but considering that these are official documents, the leaks seem authentic. There have been no estimates of how much the government valued these assets for.

Radio Pakistan Assets Mortgage

Similar to the PTV mortgage, leaked documents state that all of Radio Pakistan’s assets in the country will be pledged to get loans.

More details have revealed that 61 Radio Pakistan buildings across the country have been valued at just Rs. 72 crore. Experts say that this amount is equivalent to the value of Radio Pakistan’s single building in Islamabad’s Red Zone let alone 61 buildings in premium areas across the country. Estimates price these assets at several times the valued amount.

By devaluing such a huge asset, it is the investors who are benefiting the most.

Another aspect questioned by the experts is that national radio holds the most importance in times of war and with matters heating up between India and Pakistan, we could lose an important national security asset if the government fails to return the loan on time.

Possible Consequences

Pakistan government has been taking these loans to fill exports gaps, increase foreign exchange reserves, meet budget requirements but more importantly to pay back previous loans.

Ishaq Dar is leading Pakistan to a debt-trap: Experts

When a government pays back loans by taking, even more, loans, it is usually a recipe for disaster. When commenting on this borrowing spree, local and foreign experts say that Pakistani Finance Minister is leading the country towards a “debt trap”. This is a term experts use to explain such disastrous scenarios.

Pakistan can lose these assets if it fails to pay back in time due to unforeseen circumstances

Moving on, this also means that Pakistan cannot pay back its loans at the moment mostly because of the lack of exports and tax collection. When the country cannot pay back loans, putting up national security assets as collateral for the mortgage makes little sense.

Just imagine if Pakistan is late on any of the payments, and/or the situation with India worsens and results in a war, this could lead to Pakistan losing these assets to private institutions.

Issuing bonds is a good way to borrow money. However, mortgaging most of your vital installations like the biggest airport in the country, the national radio or TV or the central roads as collateral seems like a risky proposition, to say the least. What if some issues occur and profits from these institutions cannot be used to pay back profits on the loans? The government would be in deep trouble if something like this happens.

Terrorist attacks or a war could put all profit returns burden on the government

Some analysts also question the use of Islamic Sukuk bonds for budget financing and then linking the returns with treasury bills, citing that it is forbidden and against Shariah laws. However, that is an altogether different debate for another time.

We just hope that our government(s), whether federal or provincial, find other means to improve the economy instead of issuing superficial claims based on such huge amounts of loans. With loans crossing reaching the $75 billion mark, we seriously need to put a stop to this before loans become unpayable and the country defaults.

Citations and Sources: Tribune 1Tribune 2Tribune 3DawnNation92 HD News

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Pakistan’s external debt likely to swell to $110b in four years By Shahbaz Rana

 

Image result for Pakistan's Debt Bomb

Pakistan’s external debt likely to swell to $110b in four years

By Shahbaz Rana

Published: November 13, 2016
 
ISLAMABAD: Pakistan’s external debt is projected to grow to a whopping $110 billion within four years and it will need over $22 billion a year just to meet external payment requirements, posing a serious threat to the country’s solvency.

By that time, Pakistan will again be back to the International Monetary Fund (IMF) to avoid default on international payments as it did in 2013, according to independent projections revealed at the National Debt Conference on Saturday.

Circular debt in power sector: Govt could not repay bank loans of Rs136.5b

Two renowned economists, former finance minister Dr Hafiz Pasha and former director general debt Dr Ashfaque Hasan Khan, have made the external debt projections. The $110-billion external debt level by 2019-20 will be $24 billion higher than projections made by the IMF in its latest report on Pakistan.

Khan shared his assessment at the debt conference, arranged by the Policy Research Institute of Market Economy (PRIME) – an independent think tank.

The duo updated their previous external debt forecast for fiscal year 2018-19 from $90 billion to $98 billion after the government borrowed heavily in the past one year.

At present, the external debt stands at $73 billion, which has been projected to swell 50% to $110 billion in just four years.

They did not see a major change in Pakistan’s export situation and anticipated that by 2019-20, the exports would stand roughly at $25 billion, a level that the country crossed in the last year of previous government of Pakistan Peoples Party (PPP).

Owing to slowdown in exports, Pakistan’s external debt to export ratio has been projected at 441.8% by 2019-20, which is highly unsustainable. By that year, the country will consume 40% of its export earnings to service the external debt.

“Pakistan is fast slipping into the debt trap and neither the government nor parliament is playing its due role,” remarked Asad Umar, MNA of Pakistan Tehreek-e-Insaf while speaking at the conference.

Khan said by 2019-20 amortisation payments would increase to $10 billion. To fill the current account gap, the country will require another $12.5 billion a year, increasing the total external payment requirement to $22.5 billion. The current account deficit will mainly widen due to imports of machinery and plants for projects being developed under the China-Pakistan Economic Corridor (CPEC).

Against IMF’s projection of $16.7 billion, Khan said total external financing needs to bridge the current account deficit and repay loans would stand at $22.5 billion by 2019-20.

After exhausting all available resources including CPEC financing, foreign investment and funds from traditional donors, there would still be $11-billion financing gap, which the country would not be able to bridge without IMF’s help, said Khan.

He predicted that Pakistan would return to the IMF in 2018-19 – the fiscal year when the country’s external debt would be $98 billion and its financing gap will be $9 billion.

“Pakistan’s debt situation is deteriorating rapidly and posing a serious threat to its solvency,” he cautioned. Commercial borrowings comprised 25% of external debt, which was a matter of concern, said Shahid Kardar, former governor of the State Bank of Pakistan.

He said low returns on the country’s foreign currency reserves compared to the borrowing cost were also a matter of concern.

Khan said the PML-N and PPP governments had added $49 billion to the current external debt of $73 billion. Most of this amount, estimated at $32.6 billion, was added from 2008 to 2016 while the remaining $17.4 billion was added during the 1990s.

Pakistan’s trade deficit widens 22%, stands at $9.3 billion

“We need to develop a more effective borrowing strategy, which should be consistent with the country’s development priorities,” suggested Khan.

“Pakistan can keep its debt at sustainable levels by achieving about 6% annual economic growth,” said Dr Ali Kemal, research economist at the Pakistan Institute of Development Economics (PIDE). He, however, said despite the increase in debt levels, Pakistan was still not Greece.

“We are at a comfortable stage and there is no need to worry about anything,” said Zafar Masud, Director General of the Central Directorate of National Savings, while speaking at the conference.

Published in The Express Tribune, November 13th, 2016.

 

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