A Question on Darnomics

[SoulSpokesman]

This post has been triggered by the impending return of Ishaq Dar, fondly known as Dollar Dar, as the Pak FM. A common accusation against him has been that he kept the PKR artificially high which has been partly the cause of the current mess. However, there are a few things that don't make sense to me.

Pakistan Foreign Exchange Reserves, 1959 – 2024 | CEIC Data

Pakistan Foreign Exchange Reserves was measured at 12.8 USD bn in Mar 2024, compared with 12.4 USD bn in the previous month. Pakistan Foreign Exchange Reserves: USD mn data is updated monthly, available from Jan 1959 to Mar 2024.

www.ceicdata.com

If we see the Chart in the link above (Click on 10 years trend) we see that the forex reserves actually increased from around USD 8 bn in 2013 to around USD 15 bn in 2018. Why would forex reserves increase if the PKR was overvalued.

Pakistan External Debt, 2006 – 2024 | CEIC Data

Pakistan External Debt reached 131.2 USD bn in Dec 2023, compared with 129.7 USD bn in the previous quarter. Pakistan External Debt: USD mn data is updated quarterly, available from Jun 2006 to Dec 2023.

www.ceicdata.com

Then again if we look at the debt levels, while debt increased from USD 62 bn to USD 90 bn, a large chunk of this would be capex debt (mainly for CPEC), so it is unlikely that the reserves would be bolstered too much by working capital debt. But here again as we go forward from 2018 we see that the debt kept mounting from USD 90 bn in 2018 to around USD 110 bn plus by mid 2021 (i.e. even before the sharp upward movement of crude gained momentum).

The data appears a bit puzzling. Maybe some of the learned Maulaners here- @RiazHaq @waz @Jango @VCheng @Joe Shearer @Wood @maithil - can explain this conundrum

Regards

 

[maithil]

Yes.. Ishaq Dar is a misunderstood wizard..

 

[SoulSpokesman]

@maithil Bro

Sorry for not tagging you. Your answer though useful doesnt solve my conundrum.

Regards

 

[VCheng]

Maybe some of the learned Maulaners here-

What is a "Maulaner"?

 

[SoulSpokesman]

@VCheng

A learned man

Regards

 

[ziaulislam]

Pakistani industrialist economist and exporters after hearing about his return

 

[Samlee]

As per Aptma 150 textile mills shut down rendering 1.5 million people unemployed and exports fell from $25 billion in 2013 to $20 billion in 2017.This is his tajurbakaari

 

[Burger_King]

Let me explain this to you in terms which even simpletons on this website can understand.

Lets say you have annual aamdani of USD1,000 and expense of USD800. Your saving therefore is USD200 per year. For sake of simplicity, lets assume your expenses are on one product whose price is highly volatile.

Now assume that next year, your income stays the same but your expenses go down to USD300 because price of good you buy has crashed. Your saving therefore should be USD700 most of which you should save given that price of product you buy is highly volatile.

Now assume that instead of acting in good faith, you do what comes naturally to you and engage in rundibaazi and juwaakhori which eats up almost all of your windfall.

Now its the start of new year and the price of product you buy goes from USD300 to USD1,100.

Understand?

And to pupoo bachaas, DD kept price of USD low because that made it cheaper to send money abroad. This is common knowledge in Pakistani financial circles and among foreign investors who hold Pakistani USD bonds which have crashed today which makes it even harder for Pakistan to get out of clutches of IMF which is gora tuttoo.

I have no sympathy for Pakistani awam because qaums always get the fate that they deserve.

 

[SoulSpokesman]

@Burger_King

Understand?

No. That is the source of the whole puzzle. Had you theory been correct, Pak's forex reserves would have fallen, not increased in the period 2013-18, which didn't.

Dont get me wrong. Your theory is crystal clear. It just doesnt match the facts.

Regards

 

[Burger_King]

@Burger_King

Understand?

No. That is the source of the whole puzzle. Had you theory been correct, Pak's forex reserves would have fallen, not increased in the period 2013-18, which didn't.

Dont get me wrong. Your theory is crystal clear. It just doesnt match the facts.

Regards

You are one of the simpletons I am referring to.

Check what happened tp price of oil between 2013 and 2018.

 

[Enigma SIG]

@SoulSpokesman should get Modi to hire Dar for managing India's economy. He'll boost your reserves to 5tn USD. In a year.

 

[Ssan]

Dar picked up expensive short term loans - a lot of them to fund his endeavors. We have gone into debt trap due to him. This year apparently servicing cost is 20 bn $. That is combined doing of PDM and ppp govts.

Look at debt servicing costs over years.

Debt service on external debt, total (TDS, current US$) - Pakistan | Data

Debt service on external debt, total (TDS, current US$) - Pakistan from The World Bank: Data

data.worldbank.org

 

[VCheng]

However, there are a few things that don't make sense to me.

But it does make sense if one has the right perspective. Many would logically assume that the job of a finance minister is to implement the policies that serve the nation best. However, that is not true in Pakistan. Here, the job of the finance minister is to keep the 800 lb gorilla (that shall not be named) well-fed, and then distribute the scraps to benefit his own circle. The citizens can suck the hind tit with whatever is left.

 

[SoulSpokesman]

@VCheng sb,

Here, the job of the finance minister is to keep the 800 lb gorilla (that shall not be name) well-fed,

Wont embarass you by asking you to name the gorilla but presumably it is every FM's job to do so. So what is it about Dollar Dar which particularly cheeses off my PDF' bros.

Regards

 

[VCheng]

So what is it about Dollar Dar which particularly cheeses off my PDF' bros.

The answer is very simple: the group of chimpanzees that gets the best scraps after the gorilla is fed is different than what is preferred by most here. That is all.