Debt Strangles Pakistan’s Naval Ambitions

[farhan_9909]

The External debt repayments on several loans taken up by the
Sharif government such as

1 New IMF loan ; 2 ) Euro bonds ; 3 ) Sukuk bonds 4) Other Payments such as WB / ADB
will start from FY 17 ie July 2017 onwards

Similarly the Paris club restructuring of debt has postponed the debt repayments
till FY 17

Add to it the trade deficit and the negligible investments coming in
the Balance of payments position will deteriorate
from FY 17

Govt breaches limit, adds $15.3bn to external debt - Newspaper - DAWN.COM

@farhan_9909

SBP, in its annual report for FY14, also indicated that the increase in debt servicing is likely to stoke pressure on the country’s foreign exchange reserves in the medium term, due to a number of factors, which include maturity of 10-year Eurobonds issued in FY06 ($ 500 million) and FY07 ($ 750 million) is due in FY16 and FY17, secondly repayment of rescheduled Paris Club debt under Official Development Assistance (ODA) will start from FY17. In addition servicing of Extended Fund Facility (EFF) programme with the IMF will begin in FY18 and the 5-year Eurobond issued in April 2014 amounting to $ 1 billion will mature in FY19.

In the past few years, while external debt repayments have seen expansion since FY12 due to heavy repayments to the IMF, while, the growth in foreign exchange earnings of the country, particularly exports, has largely remained modest. Since the country has already made large repayments to IMF in FY14, the repayment pressure is likely to ease in FY15 and FY16. However, this will resurface in FY17 onwards, with the onset of repayments of rescheduled Paris Club debt, Eurobonds and the current EFF with the IMF.

Source BR ePaper | External debt servicing posts 16pc rise in FY14

Well the payment will be a issue but not as it was under the PPP govt.

*Economic growth is on rise after a gap of like 7 years
*Revenue generation growth in first year was 16% and about 12% this year as compared to only 3% on average in the last 5 years.
*stable rating
*12% increase in FDI in fy 2014


So don't worry,it will not a big problem to repay them this time when we are growing with atleast 6.5% in 2017-18

 

[rockstar08]

We need to focus on Navy ... even in 71 war our navy caught by surprise and couldnt retaliate ... we can not let this happen ... i dont know what our Navy people think or do they even have any plans to modernize their fleet...but i am sure that money is the main issue for that ...
I still hope that once those 6 Subs which are been ordered by PN from China will arrive , they will enhanced our capability , but i think we should take our hands on Type 54A frigates , and we can also make our F-22p's upgraded by more tons , and other capabilities ...

 

[VelocuR]

I have served in PN for 22 years (2nd generation),
but if both of you are champions in Naval Strategy, good for you.

I am not here to discuss our capabilities openly.

Appreciate that sir, just Pakistan management doesn't handle well on Pakistan Navy, almost everyone has same questions regarding our navy progress last ten years and poor budgets. No clue what will Pakistan do to prevent same mistakes.

 

[Rashid Mahmood]

Appreciate that sir, just Pakistan management doesn't handle well on Pakistan Navy, almost everyone has same questions regarding our navy progress last ten years and poor budgets. No clue what will Pakistan do to prevent same mistakes.

I agree with your comments, we have neglected our Navy for a long time.
But things are not that bad as they seem. It looks grim from the outside though, however, we can defend our homeland quite easily.

Things will change, the present CNS is a professional commander.
He was my Academy training officer in 1987-89 and I have know him since.

 

[VelocuR]

I agree with your comments, we have neglected our Navy for a long time.
But things are not that bad as they seem. It looks grim from the outside though, however, we can defend our homeland quite easily.

Things will change, the present CNS is a professional commander.
He was my Academy training officer in 1987-89 and I have know him since.

Thank you, that's relief. Enough to know that we can protect our seas and big cities.

Keep building and expanding our ships, insha'Allah.

 

[XYON]

Navy is not getting what it was promised by the Government. All of its major projects are currently stalled due to dire financial crunch!

 

[Indian Patriot]

A nation who plans to build her economy on borrowed money is DOOMED to failure unless they have a team of very competent professionals who plan on a proper investment of the money. Debts always bring a very high interest rate with them and there are a lot of clauses and conditions attached. India faced that situation in 1990-91 when India had to mortgage its gold bullion for money. That was the most difficult phase of Indian economy, but today Indian economy is a strong one and even managed to edge past china in last quarter.

When taking a debt a government has to make some rather strong and at time highly unpopular decisions. India had to sell off its public sector units in 1990-91 and wave off subsidies. If they want to tide over the economic crisis then pakistan will have to do the same. One pakistani poster here mentioned that the pakistani government hands out enormous subsidies in oil and gas, that needs to be removed. Subsidies will have to be removed, taxes will have to be increased, government spending will have to be curbed, imports will have to be curbed, projects will have to be prioritized and most importantly defense spending will have to be cut down drastically. All money and efforts will be diverted to boosting up the economy. If pakistan does not do that then they run the risk of ending up like Greece.

In pakistan the military holds considerable influence and hence genuine economic reforms will not be easy to implement. Borrowing from IMF, WB, China is short-term relief but recipe for long term disaster.

 

[black-hawk_101]

Image: Wikimedia/U.S. Navy photo by Photographer's Mate 3rd Class Tony Spiker

Pakistan dreams of being a naval power. Its shoddy finances are impeding on that goal.

Jack Detsch
February 19, 2015

In October, Pakistan’s prime minister Nawaz Sharif walked with a throng of cadets through the sprawling campus of the Navy War College in Lahore to inaugurate a new facility. “I feel proud to have learnt that Pakistan Navy is constructing indigenous large warships,” Sharif told a group of students. “The emphasis should remain on indigenous construction and joint ventures through transfer of technology.”

With Pakistan’s lone shipyard in Karachi now fully operational, the Pakistan Navy is getting its sea legs in producing defense equipment, having built two tugboats in early 2013. Sharif has lofty hopes that the defense sector of Pakistan will soon churn out warships big and small, from frigates to corvettes. For years, Pakistan has talked of a major naval modernization campaign. Can Islamabad actually make it happen?

It’s not likely, at least for now. Financial trouble has sidetracked modernization for over a decade. Former prime minister Yousuf Raza Gilani’s $24 billion strategy to revamp the entire military, known as the Armed Forces Development 2025 plan, was shelved when Islamabad agreed to a strict bailout from the International Monetary Fund in 2008. Strapped for cash, the navy was forced to abandon its submarine acquisition, corvette and frigate programs. “By 2015, they were supposed to have fifteen frigate-class vessels, and six or seven submarines,” says Haris Khan, a Senior Analyst at PakDef Military Consortium, a Tampa-based think tank. When Admiral Muhammad Zakaullah assumed command of the navy, around the time of Sharif’s visit to Lahore, Pakistan had just received six new Yuan-class submarines from China, but maintained just ten frigates.

Pakistan’s defense ministry, where misappropriation of manpower and resources run rampant, bears part of the blame. Even though Pakistan boasts the seventh-largest military in the world, the navy subsisted on just $725 million last year, less than a third the cost of a single American destroyer. “When something comes up, it is left to the chief of the armed forces to do the business of procurement,” Khan says. Sharif not only holds the portfolio of prime minister, but is deeply involved in crafting the agenda of the ministry of defense. “If you’re holding that many portfolios, nothing happens.”

Islamabad doesn’t have the money to splurge on brand new ships every year as do the Americans and the Chinese, but the size of the surface fleet has still jumped from six to ten frigates since 2001. The last of four F-22P Zulfiquar-class frigates arrived from China in 2013. “The navy is much more capable of projecting their capabilities.” Khan argues. Six Amazon-class frigates purchased from the British Royal Navy in 1994 have been outfitted with new weapons technology: two vessels have received Chinese LY-60 surface-to-air missiles (SAM) and four others have gotten American Harpoon surface-to-surface missiles (SSM), giving Pakistan greater ability to deal with threats from the air and sea. The defense budget increased to $7 billion dollars last year, up eleven percent from 2013.

Still, Islamabad’s economic challenges have gotten no easier. Growth has averaged just 3.8 percent over the past four years, and Pakistan continues to struggle with its debt. The crunch forced Sharif to borrow $2 billion more from the IMF in 2013, at exorbitant interest rates.

Though Sharif has managed to relieve some of the pressure on Pakistan’s energy sector, a deteriorating financial situation forced the government to agree to a hefty $6.6 billion IMF bailout package in 2013. That deal was attached to debt reduction targets. Pakistan has met those goals so far, but that’s largely due to one-off measures such as cash transfers from state-owned enterprises, foreign grants, and cuts in development spending. Reducing subsidies could be another boon to those efforts.

Pakistan’s murky financial picture leaves the future of naval modernization in serious doubt. Plans to acquire four additional F-22P Zulfiquar frigates from China will likely be derailed by funding issues and Congress halted delivery of three American Oliver Hazard Perry frigates last year with Islamabad struggling to meet its counterterrorism and non-proliferation objectives. The Pakistani Navy hoped the F-22P and Oliver Perry frigates would replace its aging British ships. Meaningful fleet expansion would require hikes in defense spending, a non-starter with the IMF.

But even if the navy can’t acquire additional ships, Sharif can still pursue greater maneuverability in the Persian Gulf, an important maritime goal. “They want to use the Gulf as a cushion for themselves.” Khan argues. With just a bit of control there, “they can choke off India.” New Delhi, the world’s fourth biggest consumer of crude oil, imports much of its supply from the Gulf.

That objective is increasingly important as India pursues an aggressive naval buildup, with hopes of expanding to a 160-ship fleet and three carrier groups, which would dwarf Pakistan’s Navy. “They don’t have the capability to hold off India in a full-scale war,” Khan maintains.

Leverage isn’t just about deterring India, though. The Pakistanis hope a strengthened navy will allow them to arbitrate regional disputes, like those in the Persian Gulf. “The Pakistanis feel that with a presence in the Gulf, if there’s a chance of a war between Iran and the Gulf countries, they can stop it.” Khan says. A majority-Sunni country, Pakistan’s prominent Shia minority gives diplomats unique credibility in dealing with both Iran and its neighbors. Pakistan held joint naval exercises with Tehran in the Persian Gulf last year, demonstrating the strength of their friendship to the world.

Pakistan’s hopes for a larger regional role are not new. “After the first Gulf war, the Pakistanis lost their cushion in the Gulf.” Khan argues. But Pakistan has maintained strong relationships in the Gulf: Emirati and Qatari Navy recruits still train in Pakistan, and Islamabad is deeply involved in naval diplomacy with both. Saudi Arabian officials celebrated their “historic” relationship with Pakistan during a visit early last year.

Ultimately, Sharif is betting that he can increase Pakistan’s leverage with India by modernizing his fleet. To do so, he will have to sort out a corrosive debt situation in Islamabad. Will he be successful? It’s anyone’s guess.

Jack Detsch is a writer, journalist, and researcher in the San Francisco Bay Area. He can be found on Twitter @JackDetsch.

Debt Strangles Pakistan’s Naval Ambitions | The National Interest

Heard that its now high time for PN to scrap all of their old equipment including firgates, FACs, Logistical, Tankers and other vessels and build new ones.

As they are building Tugs, Tankers, FACs and Frigates but not in the right numbers. Even KS&EWs can take task to make money by scraping EUs and other countries marine vessels.

 

[MilSpec]

@Horus what's this group: Haris Khan, a Senior Analyst at PakDef Military Consortium, a Tampa-based think tank

 

[Indian Patriot]

Heard that its now high time for PN to scrap all of their old equipment including firgates, FACs, Logistical, Tankers and other vessels and build new ones.

As they are building Tugs, Tankers, FACs and Frigates but not in the right numbers. Even KS&EWs can take task to make money by scraping EUs and other countries marine vessels.

Sometimes countries keep obsolete weapons just to boost numbers. If PN scraps its obsolete ships it will be reduced to single digits. Something is better than nothing.

 

[Kompromat]

@Horus what's this group: Haris Khan, a Senior Analyst at PakDef Military Consortium, a Tampa-based think tank

I assume its our good friends from pakdef.org

btw Ignoring Navy will come at a great cost.

 

[Dr. Strangelove]

talks for these are ongoing

Type 056 corvette - Wikipedia, the free encyclopedia
source fatman

 

[MilSpec]

I assume its our good friends from pakdef.org

btw Ignoring Navy will come at a great cost.

Does pakistan build any maritime large crank case engines?

 

[black-hawk_101]

Sometimes countries keep obsolete weapons just to boost numbers. If PN scraps its obsolete ships it will be reduced to single digits. Something is better than nothing.

But the cost of maintenance will be immense. If PN had managed to produced about 6 F-22Ps, 4 Tankers, 12 FACs, 4-6 Tugs and other equipment needed under license from other countries than it can easily survive.

 

[Indian Patriot]

But the cost of maintenance will be immense. If PN had managed to produced about 6 F-22Ps, 4 Tankers, 12 FACs, 4-6 Tugs and other equipment needed under license from other countries than it can easily survive.

Agreed. That is why decision to keep obsolete equipment active is always taken under compulsion.

PN can't do that because army has the largest share. Secondly the limited budget and debt compulsions means PN will have to go slow on defense deals. IMF and WB does not five loans for defense purchase. If PN is buying frigates, destroyers etc. left right and center then the IMF will refuse further loans.

Economy is the key here.