IMF approves $1.1 billion loan for Pakistan

[Matrixx]

loan taken to pay loan interest

 

[A.M.]

Sorry your post makes no sense, please stop spreading wrong information.

Whatever is the exchange rate between PKR and USD, it doesn't make the currency worthless. 1 USD and 100 PKR can buy the same amount of stuff in the market. Same for 1 USD and 119 YEN.

If (and I am sure it is) the agreed transaction currency is USD for these international loans, then GOP can buy USD from open market (directly or indirectly) to pay interest and return these loans.

If done right, these loans should improve our economy and hence the strength of the rupee as well.

 

[FaujHistorian]

Yes, very.

Just so you know, any currency in the world including rupee can be converted into dollars (did I blow your mind?). Some are even worth more than dollars like £ and € (Is your mind fully obliterated right now?)

Here is the best one, Chinese with their yuan actually own the US.

Carry on.

Again bro you are confusing hard currencies like pounds and euros with rupees.

Rupee is a soft currency. thus it is not accepted internationally.

So if you have rupees, and you want to "legally" pay someone millions of dollars worth, they will not accept your rupees.

Period.

Why?

they cannot pay a third party with rupees.

And thus all our payments for imports (oil, food) is paid by our state bank from its hard earned dollar account.


So please do not confuse soft currency with hard currency.

Also do not confuse changing 100 rupees to a dollar on an airport shop. small change is covered by international treaties.


I am talking about billions of dollars that Pakistan needs to pay for its international obligations. you cannot pay such large sums using rupees. No one can. Not even India or China. As such transactions in soft currencies will limit the use of such money to mutual trade or international trade among very small group of countries.


I am so sorry to see that a finance major like you is confused about international payments.

So sorry.

Do any one know whats the interest rate of this loan?

These days it is usually in the range half to 1 percent.

 

[Faiez]

Again bro you are confusing hard currencies like pounds and euros with rupees.

Rupee is a soft currency. thus it is not accepted internationally.

So if you have rupees, and you want to "legally" pay someone millions of dollars worth, they will not accept your rupees.

Period.

Why?

they cannot pay a third party with rupees.

And thus all our payments for imports (oil, food) is paid by our state bank from its hard earned dollar account.


So please do not confuse soft currency with hard currency.

Also do not confuse changing 100 rupees to a dollar on an airport shop. small change is covered by international treaties.


I am talking about billions of dollars that Pakistan needs to pay for its international obligations. you cannot pay such large sums using rupees. No one can. Not even India or China. As such transactions in soft currencies will limit the use of such money to mutual trade or international trade among very small group of countries.


I am so sorry to see that a finance major like you is confused about international payments.

So sorry.

You don't understand what we're saying....

The government buys dollars from the market using ruppees to pay it's international obligations.

I hope you get it now. The government doesn't pay ruppees to people it owes dollars. It converts those ruppees into dollars before paying them.

If done right, these loans should improve our economy and hence the strength of the rupee as well.

tell me how exactly ?

 

[FaujHistorian]

Sorry your post makes no sense, please stop spreading wrong information.

Whatever is the exchange rate between PKR and USD, it doesn't make the currency worthless. 1 USD and 100 PKR can buy the same amount of stuff in the market. Same for 1 USD and 119 YEN.

If (and I am sure it is) the agreed transaction currency is USD for these international loans, then GOP can buy USD from open market (directly or indirectly) to pay interest and return these loans.

Very simplistic view. Almost at the level of a street vendor.

Dollars do not grow on trees. They come to statebank from international sources such as:

1. exports
2. expats
3. loans
4. aid
5. bonds

etc.

Once in state bank, you as a citizen can get dollars from them by paying in rupees.


That's the obligation of Pak gov to a citizen in terms of small change like few thousands dollars.


But when it comes to paying billions of dollars of international obligations, rupee is worthless.


It is amazing that so many here are so ignorant about basic facts related to international currency stuff.

or perhaps

pathetic to see so many ignorant Pakistanis with zero knowlege about dollars and other hard currencies when compared to soft currencies..

 

[A.M.]

You don't understand what we're saying....
tell me how exactly ?

Again putting this too simply but a smart government will use the loans to initiate projects. Which should lead to more people being put to work --> More income for the government --> growth in economy --->Strengthening of the rupee.

I'm not really sure how GOP will utilize the loans. Haven't done the research.

 

[FaujHistorian]

.....
The government buys dollars from the market using ruppees to pay it's international obligations. ?

How do these dollars come to the market?

fall from sky?

Again putting this too simply but a smart government will use the loans to initiate projects. Which should lead to more people being put to work --> More income for the government --> growth in economy --->Strengthening of the rupee.

I'm not really sure how GOP will utilize the loans. Haven't done the research.

four things are eating up dollars like crazy

1. our war on Talibiches.
2. Electric generation plants/projects
3. General infrastructure uplift.
4. paying back interest loans bonds

First three have rupee component too.

But fuel/energy and weaponry, machinery imports are all paid in dollars and big time.

If we can put the first three things in their proper place, our exports should rise.

But we'll remain in dollar hole until we copy chinese, Indians and south koreans.

when I say copy, I mean become 95+% like one or perhaps all of them.

Sorry I don't have time to explain in detail. But you all should know at least based on your observations.

 

[Faiez]

Again putting this too simply but a smart government will use the loans to initiate projects. Which should lead to more people being put to work --> More income for the government --> growth in economy --->Strengthening of the rupee.

I'm not really sure how GOP will utilize the loans. Haven't done the research.

Was the 14 something billion dollars not enough to do this? What will this additional $1.1 billion do for pakistani economy? Except devalue dollar for us. Which I think would make our exports less price competitive. It could actually hurt exports. So again, how will this addition of $1.1 billion help pakistan's trade balance? And how is strengthening of ruppee a good thing when it only makes imports cheaper and exports more expensive (gets harder to export due to lesser price competitiveness).

Also, a major chunk of our export is textiles and the textiles market is extremely price competitive. You can't give a good price, you're out of business. Pakistan's textile industry is competitive because of low labor costs. when you lower the exchange rate (make dollar cheaper), that competitiveness will slowly go away.

 

[FaujHistorian]

Was the 14 something billion dollars not enough to do this? What will this additional $1.1 billion do for pakistani economy? Except devalue dollar for us. Which I think would make our exports less price competitive. It could actually hurt exports. So again, how will this addition of $1.1 billion help pakistan's trade balance? And how is strengthening of ruppee a good thing when it only makes imports cheaper and exports more expensive (gets harder to export due to lesser price competitiveness).

Also, a major chunk of our export is textiles and the textiles market is extremely price competitive. You can't give a good price, you're out of business. Pakistan's textile industry is competitive because of low labor costs. when you lower the exchange rate (make dollar cheaper), that competitiveness will slowly go away.

Our real needs are way more than $15 billion per year.

Please learn basic things about a country with 200 million (and growing) people.

$14 billion is really chump change.


if Turkey is our model

We need at least $200-300 billion in reserve.

you can pick and choose any other country doing well and figure this out.

Don't try to make Pakistan another Somalia please.

Thank you

 

[Faiez]

How do these dollars come to the market?

fall from sky?

You are not making any sense buddy. I'm sorry.

 

[FaujHistorian]

You are not making any sense buddy. I'm sorry.

you can't tell.

you can't even tell how dollars come to our markets.

That's sad to see.

 

[Faiez]

Our real needs are way more than $15 billion per year.

Please learn basic things about a country with 200 million (and growing) people.

$14 billion is really chump change.


if Turkey is our model

We need at least $200 billion in reserve.

you can pick and choose any other country doing well and figure this out.

Don't try to make Pakistan another Somalia please.

Thank you

I've already explained in that post why this additional $1.1 billion in the market will be a bad thing for exports.

So what are you talking about?

 

[FaujHistorian]

I've already explained in that post why this additional $1.1 billion in the market will be a bad thing for exports.

So what are you talking about?

How much do we export per year?

My observations are based on our family's export business.

What do you export and how much per year?

 

[Faiez]

you can't tell.

you can't even tell how dollars come to our markets.

That's sad to see.

remittances, trade and FDI...that's where it comes from.

But how's that relevant here?

 

[FaujHistorian]

remittances, trade and FDI...that's where it comes from.

But how's that relevant here?

hahahah

OK. With your village-street level knowledge, you win this argument.

Shabash.

you win bro.

p.s. I highly recommend that you learn something about developing countries. Study some. Do not remain arrogant.