Pak plans to seek USD 15 bn in new loans to pay external public debt

[El Sidd]

Vielen dank fur deinen beitrag.

Sag einfach NEIN

 

[El Sidd]

stop doing corruption and eating haram and things will get better....also don't forget to stick your head out of Mian sanp's rear end.

didn't you say you once bribed a judge in Pakistan and then went on to lose the case too? lol

 

[Flight of falcon]

didn't you say you once bribed a judge in Pakistan and then went on to lose the case too? lol

yes I did .... he was part of the Patwari family ...



he was one ugly bastard MOFO ... appointed by Nawaz Sharif because he wa his friend’s son....true haramkhour

 

[El Sidd]

Is shaheen ka gaon azaad kara do. iltijaa e aam

 

[Type59]

The key thing is trade deficit has fallen under PTI. The massive deficit had to be paid in dollars. Even under corona crisis deficit has fallen. Glass half full vs glass half empty.

Why any party went for making dams? Hydro electricity would save huge amount of dollar plus cheap electricity to consumers and good market for investors to settle companies in Pakistan due to cheap electricity?

After ayoub khan nothing happened in this regards. Now construction started under IK.

Imagine if we had continue with this pace we wouldnt needed loan for anything.

View attachment 637643

Lets be fair to pmln. Alot of hydropower projects were started, some were finished under pmln rule and others under pti. Pmln problem was corruption with development projects and allowing unsustainable import levels.

 

[Jungibaaz]

I see your point and yes I am wrong in many things. So lets clear few things first:

You seem to have a background in trading or banking. I am in a medical field and did joint degree with the business management (three courses short of finishing MBA in Health related field from CWRU, OHIO to be exact). So my knowledge of your specialized field of bonds and yields is limited. My job is to run businesses and invest not make and understand market interest policies.

I rarely, if ever, run into people who are professionals in their field here at Pakistan defence. Almost 95 percent posts are posted by political activists and people who feel they need to comment about things they have no knowledge of. I unfortunately return their sarcasm and insults with even more insults. Trust me I am not very proud of that.

Now coming back to the debt issue, I am aware that the government owes debts in different forms and cetagories.

Most of the Pakistan debt is from Multilateral donors/IMF etc. I also understand that this debt is at a lower interest (possibly the lowest rate) and more flexible payment options.

Debt owed to friendly countries which again is at the nominal fixed interest rate.

Government borrowing through T bills where the rate is very high even at around 9 percent today down from almost 13 percent few months back. But please correct me if I am wrong but T bills are safe for the government to offer as it is in Rs denomination and income earned is considered taxable and the investor has to pay taxes on earnings before cashing out. So the true cost to the government is less than 9% and its safer for the government because it is in local currency and no worry with fluctuating exchange rate.

Eurobonds and Sukuk where the market determines the yield based on our credit worthiness etc. This actually may be no more than 12 percent of our total debt.

And finally CPEC loan which if I understand is more of a commercial and market based loan. This is where I believe LIBOR is used for interest payments. I am well aware that no one ever gets posted LIBOR rate but if one is to believe that we owe China 30 billion dollars and we need to borrow more for payments/upcoming projects my thinking was that since the LIBOR rate is so low why can we not sort of refinance at the fixed lower rate and pay off expensive debts. Obviously it depends on the terms of the contracts and if such prepayment/refinancing clause is even used. Similarly many CPEC and other infrastructure projects were financed at commercial rates at the time the contracts were signed. Why can we not take advantage of lower commercial rates and borrow money to pay off more expensive debts?

We do allow public enterprises under state control to borrow money as well on commercial rates through commercial sources such as banks...for example PIA, power plants, oil purchase on credit etc.

what about the currency swap agreement? are they at the fixed rate too or base on an international rate such as LIBOR.

I just financed a real estate deal and the interest rate was fixed at LIBOR plus few points in Florida.

you know better and I would love to read comments to understand and educate myself.

As for using rude language against Patwaris and Indian trolls I am not going to spare them if they instigate me. Sorry....

All good, no worries. I'm sure there are plenty of subject areas in your expertise well beyond my ability too. And your comments on civility are appreciated. As for the questions about GoP's financing, you're correct in all of your assumptions, and your breakdown of the financing methods used by GoP are accurate. However I'm not certain of any specifics wrt to the exact terms of sovereign guarantees, xccy swaps with debt issuance and terms of the multilateral loans, this isn't public knowledge and certainly can't be procured by us either.

As for CPEC, I would like to set your mind at ease. Seriously, CPEC is in view is such a massive blessing, I've made a thread or two about it in the past. Haven't said much about financing aspect, I was more focused on the projects in the portfolio.

Let's just take a look at early harvest projects alone. Just under USD20bn worth of projects fall in this category. Of that, there are three forms of financing: a) Loans with sovereign guarantees, b) Commercial loans (private sector), c) Equity/private investment. The breakdown if I recall correctly was USD6bn in sovereign debt, USD~10bn in commercial loans, and a smaller proportion in equity. So total is just around USD20bn, again this number is smaller because we're only counting early harvest projects. Now if I recall correctly, we have >USD100bn in total external debt, that would mean early harvest CPEC sovereign loans only make up a small proportion.

Now here's the real kicker... Do you know what the interest rate on those sovereign guaranteed loans was according to Chinese official sources? 2%, and the repayment period? 20-25 years....

The Chinese could've literally parked that some of that money in UST and their returns would be better. Also, the real concern for us isn't CPEC debt, but as you pointed out the debt owed to western countries and western capital markets institutions in the form multilateral loans. I can't remember what proportion of our forex outflows go on servicing interest/debt on those multilateral loans, but it's huge compared to CPEC loans. Heck even the CPEC commercial loans I mentioned, the ones without sov guarantees, their rates are like 5%.

I know you'd be surprised to hear some of this, there's so much fear-mongering about CPEC. Anyway, on the question of refinancing (should the need ever arise), there are two approaches to looking at this. The hard-nosed market based approach which I believe isn't so relevant, and there's the more specific approach that takes into account political goals/bilateral aims, image building, historic relations between Pakistan, and the internal state of the Chinese economy. Again I don't want to bog this post down with details, but refinancing IMO would not present as big of a hurdle as it seems. Let's put aside where rates are at, our credit risk (sovereign), Chinese required rates, currency risk/swaps, current IBOR/benchmark rates vs prior, terms etc.

In my estimation, it is well within the interests of China to see CPEC succeed and not place excessive debt burdens on Pakistan, besides the money, they've investment far more political capital into their BRI initiatives. If we ever reach a more dire state, want to know what I think we might see happening between us and the Chinese? Refinancing for sure, deferments, changes in terms. We even might end up with some write-offs/debt forgiveness, sure concessions aren't one-sided, but I certainly can't envisage any scenario where the Chinese don't treat us with kid-gloves on this matter. And on the subject, I believe the Chinese have already refinanced tens of billions USD in loans to Angola, Ukraine, Sri Lanka etc. So, need for refinancing CPEC debt isn't there IMO, and even if it was, I think it'd be a lot simpler than what we might conclude ignoring all those other aspects I've alluded to.

Apologies if this post has become verbose, concision was never my forte.

 

[AZ1]

The key thing is trade deficit has fallen under PTI. The massive deficit had to be paid in dollars. Even under corona crisis deficit has fallen. Glass half full vs glass half empty.



Lets be fair to pmln. Alot of hydropower projects were started, some were finished under pmln rule and others under pti. Pmln problem was corruption with development projects and allowing unsustainable import levels.

If some were finish in pmln thats good but why electricity is expensive? Or we still have to make lots of dams for hydro?

 

[Type59]

If some were finish in pmln thats good but why electricity is expensive? Or we still have to make lots of dams for hydro?

I heard electricity is subsidised in Pakistan. So real cost is not paid by consumers.

Anyway lets look at an individual energy project. To finance project usually you need to borrow. With borrowed money important equipment like turbines need to be imported. Then paying contractors, usually are foreign based. Electricity bills are high is because you need to pay back money loaned. Usually takes 30 years to pay back completely for each project. After 30 years costs from maintenance and staffing will only need to be paid. The electricity from say neelum jhelum will cost peanuts when borrowed money is repaid.

Then remember problems with delays and corruption involving kickbacks escalate costs. Hope you understand my basic explanation.

 

[Dr. Strangelove]

I heard electricity is subsidised in Pakistan. So real cost is not paid by consumers.

Reason for this are Capacity Payment to IPPs what PMLN Did wrong was they started Projects left and right without Improving the Transmission system. Now we are stuck with a production of 37000 MW of which we can only use 22000 not counting the line losses this excess production is being paid for by the consumers. This is only set to increase hopefully hopefully GOP will negotiate a new IPP policy as they are under investigation for massive irregularities other wise power sector will become unsustainable.

Last year Subsidy given to power consumers was over a 100 billion. While capacity payments alone stood at over 300 billion.

If some were finish in pmln thats good but why electricity is expensive? Or we still have to make lots of dams for hydro?

 

[Flight of falcon]

All good, no worries. I'm sure there are plenty of subject areas in your expertise well beyond my ability too. And your comments on civility are appreciated. As for the questions about GoP's financing, you're correct in all of your assumptions, and your breakdown of the financing methods used by GoP are accurate. However I'm not certain of any specifics wrt to the exact terms of sovereign guarantees, xccy swaps with debt issuance and terms of the multilateral loans, this isn't public knowledge and certainly can't be procured by us either.

As for CPEC, I would like to set your mind at ease. Seriously, CPEC is in view is such a massive blessing, I've made a thread or two about it in the past. Haven't said much about financing aspect, I was more focused on the projects in the portfolio.

Let's just take a look at early harvest projects alone. Just under USD20bn worth of projects fall in this category. Of that, there are three forms of financing: a) Loans with sovereign guarantees, b) Commercial loans (private sector), c) Equity/private investment. The breakdown if I recall correctly was USD6bn in sovereign debt, USD~10bn in commercial loans, and a smaller proportion in equity. So total is just around USD20bn, again this number is smaller because we're only counting early harvest projects. Now if I recall correctly, we have >USD100bn in total external debt, that would mean early harvest CPEC sovereign loans only make up a small proportion.

Now here's the real kicker... Do you know what the interest rate on those sovereign guaranteed loans was according to Chinese official sources? 2%, and the repayment period? 20-25 years....

The Chinese could've literally parked that some of that money in UST and their returns would be better. Also, the real concern for us isn't CPEC debt, but as you pointed out the debt owed to western countries and western capital markets institutions in the form multilateral loans. I can't remember what proportion of our forex outflows go on servicing interest/debt on those multilateral loans, but it's huge compared to CPEC loans. Heck even the CPEC commercial loans I mentioned, the ones without sov guarantees, their rates are like 5%.

I know you'd be surprised to hear some of this, there's so much fear-mongering about CPEC. Anyway, on the question of refinancing (should the need ever arise), there are two approaches to looking at this. The hard-nosed market based approach which I believe isn't so relevant, and there's the more specific approach that takes into account political goals/bilateral aims, image building, historic relations between Pakistan, and the internal state of the Chinese economy. Again I don't want to bog this post down with details, but refinancing IMO would not present as big of a hurdle as it seems. Let's put aside where rates are at, our credit risk (sovereign), Chinese required rates, currency risk/swaps, current IBOR/benchmark rates vs prior, terms etc.

In my estimation, it is well within the interests of China to see CPEC succeed and not place excessive debt burdens on Pakistan, besides the money, they've investment far more political capital into their BRI initiatives. If we ever reach a more dire state, want to know what I think we might see happening between us and the Chinese? Refinancing for sure, deferments, changes in terms. We even might end up with some write-offs/debt forgiveness, sure concessions aren't one-sided, but I certainly can't envisage any scenario where the Chinese don't treat us with kid-gloves on this matter. And on the subject, I believe the Chinese have already refinanced tens of billions USD in loans to Angola, Ukraine, Sri Lanka etc. So, need for refinancing CPEC debt isn't there IMO, and even if it was, I think it'd be a lot simpler than what we might conclude ignoring all those other aspects I've alluded to.

Apologies if this post has become verbose, concision was never my forte.

I absolutely agree with you. The way I look at it most of the Chinese loan is “income generating” especially early harvest power plants etc.

No matter what the interest rate on these investments is the return far far exceed any amount that we will pay.

Just think about how the end of loadshedding will increase productivity and down time. Dams will revolutionize agriculture with more land for food and water storage not to mention cheap electricity.

Connectivity through highways open up employment opportunities and products making it to the market not to mention taxes and duties on anything crossing into China.

To me anyone criticizing Chinese loans/investments is a fool of highest degree.

Now let’s look at the non Chinese loans and institutional borrowing. Most common word one hears is the budgetary support.... in other words to run the country .. in exchange nothing physical or concrete is established or created instead politicians after screwing the country through corruption and mismanagement is thrown a life line to continue their **** ups and the later generation will pay the loans.

I rather have infrastructure/jobs/opportunity creating Chinese loans than to have IMF dictating and high interest paying bonds just so the politicians can make sure that the country forever stays under debt and control of goras.


In my opinion loans get bad names for no reason. Bottom line is what the loan is used for and what will it generate in return . I have made deals where a short term ( high interest ) transaction was necessary for the group to seize an opportunity but it provided the return many times more than the total cost .

Thankyou for your magnificent posts. It’s like a fresh air so missing from discussions here.

 

[Baghial]

Sag einfach NEIN

... our loan policy. translated from Deutsche

we will keep begging IMF-
till IMF is bank-rupt

 

[The Maverick]

https://www.bing.com/search?q=dolla...C55941B5A8B468F3692CA7FF&FORM=QBRE&sp=2&ghc=1

For those of you wondering why Pakistan GDP has declined from $314 billion to $265 billion

Please see the value of your Pakistani Rupee this as 101 per dollar 5 years ago TONIGHT its 165 rupees per dollar

that is a 50% drop of purchasing power globally

Your currency is free fall due to the IMF loans and Debts

Your country was not in this DEBT TRAP 5 years ago

SO what happened last 5 years ??? where have you accumulated the debt ??

I THINK some people did warn you this was coming because of some of he decisions your country made

 

[fisher1]

That is fine. Atleast people have Metro Train of $4 billion and roads ka jaal.

View attachment 637544

I mean we Peshawaris don't even have BRT so Punjabis are better that they have roads and cheap metro train.

8 years and we only received a matric pass as education minister. Now that's what i call vision that nobody else has.

BRT is like a corruption goldmine for PTI. And the best part is nobody even questions them.

 

[Blacklight]

Im sure he only meant to say that since rates generally are low, we should in his view be able to borrow more cheaply. But I don’t agree with this analysis, and I don’t think it’s relevant to current plans either.

Brother, in simple English can you explain the debt situation, and the new govt's response, and where does it leave the common man?

Is shaheen ka gaon azaad kara do. iltijaa e aam

Nafri eid ki chutiyoon say wapis nahi aiee. Aglay mahenay phir call karien.

 

[fisher1]

Excellent, the people of our country deserve this tabdeeli in all its glory. after all they all voted for it didn’t they. This is what happens to people who are thankless and are constantly concerned with what the other person is up to. Blaming everyone but themeselves for what all is wrong in their lives instead of lookin in their own giraibaan. Whether it’s their neighbour, their family, their colony, their friends or their leaders. Never happy with who is running the country. I am pretty sure imran Khan will get the same if not worse abuses for the rest of his life by the time his romance with the PMship is over. Benazir ko Nawaz se Zaleel krwao, Nawaz ko zardari se, zardari aur Nawaz ko imran se aur ab imran ko kisi aur se. So the problem is not with the leaders it’s with our people's brain. They believe everything they see on tv because they want to. Even if they know it’s wrong. And the source of all that is one thing alone ‘Hasad.’

Every single person in this country watches some YouTube, a few documentaries and thinks he can do any job better than the other. Whether it’s running a country or a khokha.

I completely agree with you bro. I voted for PTI because i ate up everything Imran Khan spoke and used to hate Nawaz Sharif blindly thinking everything he did was wrong. I even believed that Nawaz Sharif should ride on a cycle because Imran Khan told me x country's PM rides on a cycle.

When a train accident would happen, then a whole army of reporters would rush to Bani gala and Imran Khan would give us lectures on West does this, India did this, minister resigns so inquiry can go on.

When it finally came time of Imran Khan government, i was ecstatic, oh yar now Imran Khan will show what government really is like and he will make Riasat e Medina.

****, he goes on helicopter instead of a car, forget a bicycle lol, that Sheikh Rasheed smokes a cigar everytime there's a train accident, what resignation?

Imran Khan proved to be even worse than any other we had experienced. Allah ki panah, we can't even speak about the wrongs of Imran Khan without being insulted by his cult, at least we could insult Nawaz and Zardari. It's become blasphemy to speak against Imran Khan.

We were too blind in hatred of Nawaz Sharif. Completely blind that we couldn't see his good. Imran Khan used to say PMLN has been ruling Punjab for 10 years, what have they done? Well, Imran Khan has been ruling KPK for 8 years now. What has he given us except make it Mohanjadoro. I still go to Punjab for healthcare, our people still go to Punjab for education, when people get rich they go to Punjab because KPK is a shithole.

These worshippers of Imran Khan, they think IK will make Pakistan something if he is in government for 5/10/15 years. Stupid. Imran Khan has been in government in KPK for 8 years with full majority, still uneducated, still backwards in healthcare, backwards province. What IK will achieve is make the whole Pakistan KPK.