Pakistan accepts 11 IMF conditions

[DarkStar]

kingfisher, as usual, you have flooded posts that have nothing to do with the subject. are you trying to kill the thread?

 

[kingfisher99]

sorry that wont happen again.

 

[DarkStar]

sorry that wont happen again.

its ok. but i do appreciate your contributions.

 

[DarkStar]

Exactly what I was trying to point out when everybody was crying about pak going bankrupt in the forum. Pak is only going to default on loans, although this default is serious. Right now, Pak just needs money to pay back older loans and continue investing in the power sector. But, Pak needs this money, atleast $4billion NOW and another $4Billion for the next few months so that Pak doesnot default.

Confidence in the economy is brought about by stability. But, the public in pak blindly believes that zardari was the cause of it all, when that is far from the truth. Investor confidence deteriorated in pakistan mainly cause of WoT, terrorism and not to mention the lal masjid incident.

You had already pointed out to me that WoT was a major cause. Then again, you need to see where the majority of overseas investments was made in pak. you need to see if investments made during Mush's time were just one time investments or they were prolonged for many years as in the case of india and china. For eg: japan recently announced investment in a freight corridor between delhi and mumbai (distance = 1500km). This will take YEARS to build.
But, if investors in pak have only made investments in communications and small industries, the returns will not be as large or lengthy as a freight corridor.
Big ticket investments will include infrastructure projects, R&D etc. Has pak attracted such investments or has pak attracted investments like small software parks for coding and testing etc.

It looks to me like investments during Mush's time were small, one time investments for immediate profits. Once that was done, no more investments followed and the reserves dried up, conveniently for Mush (meaning, just when he lost power).



Time will tell.

Some good points there. I have discussed this more thoroughly on another thread. But here it goes.

the FDI (which we have figures for) that Pakistan has attracted over the past few years is dominated by two industries, both attracting billions of dollars of investment.

That is Telecommunications and Finance.

While the telecommunications investment has seen a marked increase in the use of gsm cellphones, and a competitive provider industry, it has not done that much good to the "real" economy. This investment has benefitted some, i.e. those importing mobile phones, those constructing communication towers, and there has been a social benefit in terms of ease of access to communication. However, since most of the mobile telephone companies are foreign owned, they are free to repatriate their profits outside Pakistan. In the long run, this will have done nothing to improve Pakistan's biggest sector, the agri business, nor pakistans manufacturing base and export.

The same can be said for the billions invested into the Finance sector. If this extra money had been used to invest in huge infrastrucutural projects that would benefit the nation in generations to come, it would have been well adn good. But instead, most of this money is going on giving small credit to home owners, financing of cars and purchases, handing out credit cards. This could lead to a temporary boom in certain retail sectors, but the accumulation of debt by the middle classes has shown to be a destabilising factor in the long term. That is, once families have completely outspent themselves, a big chunk of their money would go to servicing this debt, thus directly affecting retail sails. So, in the long run, retail sales would slow.

The investment that we need is investment that will help Pakistan in industries which have potential for growth, export, creation of jobs.

We need to create blue collar jobs, for the unemployed in the urban areas. We need to use the one resource that we have in abundance, labour, to attract labour intensive industries which will benefit from the low labour costs in Pakistan. In that Pakistan can be a direct competitor to china and Bhaarat as a base for low cost manufacturing. All we need is to create confidence among both local and external investors to take advantage of Pakistan's huge labour market, and improve essential infrastrucutre (providing electricity to industry at competitive rates).

 

[fatman17]

Pakistan and IMF close to reaching loan agreement

By Farhan Bokhari

Published: November 08, 2008.

Islamabad: Pakistan's negotiations with the international monetary fund or IMF are more than likely to begin bearing tangible fruit this week as the two sides are expected to come close to agreement on a new loan programme.

Pakistani officials believe, they are likely to see a two year programme of at least $10 billion (Dh36.73 billion) come together which would bind the IMF to give enough money to the south Asian country to save its economy from its first ever collapse on foreign debt payments.

But even this rescue is far from likely to salvage the Karachi Stock Exchange (KSE) and turn around recent trends that have dramatically pulled down the KSE-100 index to unprecedented lows.

Indeed, the only support for the KSE that has kept the index intact at levels of late August this year is an artificial lock that prevents the stock market from falling below its point at that time.

Once the management of the KSE lifts the locking mechanism, it is possible that the KSE-100 may fall anywhere between 15 to 20 per cent or more, going by the logic of the situation which is making the rounds.

In the meantime, equity investors have practically abandoned making new commitments, with the consequence that the number of shares traded on a daily basis has hit an all time low.

In brief, the KSE has practically become a dead market with no chance of a bold recovery any time soon.

Artificial lock

Going forward, it would be prudent for the management of the KSE as well as the government to let the KSE sink for a while after the artificial lock on levels of the stock market are removed. This is essential mainly because stock markets across the world must be allowed to go up and down on their own.

For too long, equity investors and the KSE have been protected by the Pakistani government. Provisions such as tax holidays on amounts that are applied elsewhere in the business have only made the KSE's lot expect one concession after another from the government.

While key stakeholders in the stock market including brokers are keen to receive the government's support for propping up their financial interests, they have yet to provide a reconciliation of their phenomenal earnings from the previous five years.

Artificial propping on incentives such as tax concessions for the stock market only reinforces expectations of similar relaxations for other sectors of the economy.

Ultimately, the danger is that stakeholders in different sectors of the economy will expect to be treated in a similar way by gaining generous concessions.

As the IMF programme comes together to rescue Pakistan from what may seem like imminent economic collapse, the long term prospects for the country remain firmly within the hands of Pakistan's ruling establishment and its mass population.

Farhan Bokhari is a senior Pakistan journalist who writes for leading international news publications.

Gulfnews: Home

 

[sigatoka]

Some good points there. I have discussed this more thoroughly on another thread. But here it goes.

the FDI (which we have figures for) that Pakistan has attracted over the past few years is dominated by two industries, both attracting billions of dollars of investment.

That is Telecommunications and Finance.

While the telecommunications investment has seen a marked increase in the use of gsm cellphones, and a competitive provider industry, it has not done that much good to the "real" economy. This investment has benefitted some, i.e. those importing mobile phones, those constructing communication towers, and there has been a social benefit in terms of ease of access to communication. However, since most of the mobile telephone companies are foreign owned, they are free to repatriate their profits outside Pakistan. In the long run, this will have done nothing to improve Pakistan's biggest sector, the agri business, nor pakistans manufacturing base and export.

The same can be said for the billions invested into the Finance sector. If this extra money had been used to invest in huge infrastrucutural projects that would benefit the nation in generations to come, it would have been well adn good. But instead, most of this money is going on giving small credit to home owners, financing of cars and purchases, handing out credit cards. This could lead to a temporary boom in certain retail sectors, but the accumulation of debt by the middle classes has shown to be a destabilising factor in the long term. That is, once families have completely outspent themselves, a big chunk of their money would go to servicing this debt, thus directly affecting retail sails. So, in the long run, retail sales would slow.

The investment that we need is investment that will help Pakistan in industries which have potential for growth, export, creation of jobs.

We need to create blue collar jobs, for the unemployed in the urban areas. We need to use the one resource that we have in abundance, labour, to attract labour intensive industries which will benefit from the low labour costs in Pakistan. In that Pakistan can be a direct competitor to china and Bhaarat as a base for low cost manufacturing. All we need is to create confidence among both local and external investors to take advantage of Pakistan's huge labour market, and improve essential infrastrucutre (providing electricity to industry at competitive rates).

Classifying some industries as real and others not is fraught with dangers. It is typically utilized by sections of the business community in lobbying which results in usually inefficient subsidization and selective protection. The communication industry is essential in any modern economy, it does not merely serve in connecting loved ones but also serves as the nerve centre which lowers the cost of commerce.

The private accumulation of debt is rarely the problem and it would be unfortunate to take such a lesson from the credit crunch in the U.S. which was a combination of many factors including lax monetary policy, excessive government spending on Iraq and failure of financial oversight by the authorities.

Singling out manufacturing industries in need of government assistance would be counter-productive in the long run. While increased government expenditure is undoubtedly required in transportation, ports and reliable electricity supply it should not be exclusively aimed at benefitting only one sector of industry.

A priority of government investment should indeed be in hydroelectricity. Pakistan lacks access to cheap reliable supply of electricity. An increase in such a supply would also serve in reducing the high burden of oil imports. Additionally, the construction of dams would also assist agriculture through better water management.

 

[Imran Khan]

Govt to get cabinet’s approval for IMF loan



Tuesday, November 11, 2008
By Mehtab Haider

ISLAMABAD: The government will get approval from the cabinet for obtaining an IMF bailout package worth $7.4 billion for its ailing economy, it is learnt.

“First time, the incumbent regime is going to get approval of the cabinet for getting a bailout package from the IMF, which was never done before by any government in Pakistan,” a senior official at the finance ministry told The News here on Monday.

A special cabinet meeting is likely to be convened on Wednesday or Thursday in which the formal approval will be accorded to the government’s decision to get an IMF package. The decision to move the cabinet was taken during a meeting between Prime Minister Syed Yousuf Raza Gilani and Adviser to PM on Finance Shaukat Tarin held here on Monday. The official said Pakistan had got bailout packages from the IMF several times but none of the governments had to take the cabinet into confidence about conditions attached to the Fund’s programme.

“I don’t exactly know which details the government will divulge about the IMF programme to the cabinet prior to signing a Letter of Intent (LoI) with the Fund,” said the official. The adviser apprised the prime minister of the ongoing negotiations with the IMF as well as the plan to present the 9-point agenda for the approval of the cabinet.

The PM assured the adviser of his support and said that a special cabinet meeting will soon be called to discuss the country’s future economic plan. “Pakistan faces severe pressure from the external, fiscal and the monetary side, economic growth and politics. There are five angles in which we analyze a country’s ratings and Pakistan is negative on all counts,” the sources quoted latest report issued by the Standard & Poor on Monday.

Pakistan’s credit rating was cut by S&P on Oct 6 to CCC+, or seven levels below investment grade, on concern it won’t be able to pay its $3 billion debt servicing costs due in the coming year. It approached the International Monetary Fund last month for a bailout package after its foreign reserves shrunk to $3.71 billion on Oct 25 from $14.2 billion a year ago.

 

[fatman17]

Pakistan borrows $7.6B from IMFStory Highlights

Pakistan government agrees $7.6 billion aid deal with International Monetary Fund

Payments to be made over two years to help Pakistan meet short term needs

Loan will be used to bolster Pakistan's dwindling foreign currency reserves

U.S. fears economic instability could hurt anti-terror ally's fight against insurgents


ISLAMABAD, Pakistan (CNN) -- Pakistan's government has agreed to a $7.6 billion aid deal with the International Monetary Fund (IMF), Pakistan's top finance official said.

The IMF endorsed Pakistan's homegrown program after a review and agreed to the aid package to be paid out overtwo years to help Pakistan meet short term financial needs, including balance of payments, said Shaukat Tareen, the finance advisor to Pakistan's prime minister.

"The only thing which we debated was the interest rates," Tareen said. Pakistan agreed to a two percent interest rate, he said.

Pakistan expects to receive the first installment before the end of the month with further payments spread over a two-year period, according to The Associated Press.

The loan will be used to bolster Pakistan's dwindling foreign currency reserves amid concern that a run on the Pakistani rupee could force the country to default on its international debt, AP said.

The U.S. sees nuclear-armed Pakistan as a crucial regional ally in the so-called "War on Terror" and is concerned that economic instability in the country could undermine the government in Islamabad's efforts to counter insurgents in the semiautonomous northwestern tribal regions bordering Afghanistan.

Copyright 2008 CNN. All rights reserved.

 

[fatman17]

No Pakistan defense budget cut in IMF loan

Published: Nov. 21, 2008.

ISLAMABAD, Pakistan, Nov. 21 (UPI) -- The Pakistani government hasn't agreed to any defense budget cut to secure a bailout package from the International Monetary Fund, a minister said Friday.

Pakistani Finance Minister Hina Rabbani Khar told the National Assembly the government has also not agreed to impose any agriculture tax in return for IMF help to resolve the country's balance-of-payment crisis, the state-run Associated Press of Pakistan reported.

"We have agreed to no such issues and there is no such plan on the table ... IMF will not give dictation to Pakistan," Khar said.

She said while there are a number of wrong perceptions among the public about the IMF rescue, the program doesn't entail indirect taxes, the report said.

Khar said the IMF loan will carry an interest rate of 3.5 percent to 4.5 percent.

Pakistan is facing a severe economic crisis, critically low foreign exchange reserves and inflation running as high as 25 percent. It is negotiating with the IMF for a $7.6 billion bailout but IMF loans usually come with tough conditions.

Pakistani officials have said the government has approved an economic stabilization program and completed talks with the IMF.

Khar said Pakistan's foreign exchange reserves as of Nov. 14 totaled $6.6 billion, the news agency reported. She said direct taxation in the country remains a challenge as only 1 million people were under the tax net.

© 2008 United Press International, Inc.

 

[Quwa]

Enjoy! Your Mafiocracy at work...IMF loan's gonna come...they're gonna suck it up...they'll be untaxed and unchecked...and the next military govt's gonna pick up the tab...same old same old...

No plan to impose taxes on agri sector in Pakistan: Hina

'Pakistan Times' Wire Service

ISLAMABAD: State Minister for Finance and Economic Affairs Ms Hina Rabbani Khar said on Friday that the government has no plan to cut down defence budget and impose taxes on agriculture sector.

Talking to private television channel she said ,”There is no truth in reports that the government will cut down defence budget.

It also has no plan to impose taxes on agriculture sector after the agreement with IMF.” She said the government has held talks with IMF for the improvement of balance of payment.

State Minister said the government is free to make strategies for the enhancement of the GDP growth by imposing taxes.

Ms Hina Rabbani Khar said improvement will be seen in different sectors after the IMF’s financial package.

To a question she said IMF has endorsed the social protection strategy plan. She said a decrease has been registered in large manufacturing sector due to energy crisis.

 

[Chanakya.10]

Though it might looks like a conspiracy theory....but i think the tactics used by USA against Pakistan are familiar shown here, like borrowing from IMF, using their military bases, and forcing to privatize the nations assets like Quadirpur GAS company......


pay attention at 5:25 and after 6:40.....



YouTube - Zeitgeist: Addendum 3/13

 

[Quwa]

Though it might looks like a conspiracy theory....but i think the tactics used by USA against Pakistan are familiar shown here, like borrowing from IMF, using their military bases, and forcing to privatize the nations assets like Quadirpur GAS company......


pay attention at 5:25 and after 6:40.....



YouTube - Zeitgeist: Addendum 3/13

It's not a conspiracy...this stuff is being taught as history nowadays!

 

[Chanakya.10]

It's not a conspiracy...this stuff is being taught as history nowadays!

So isn't Pakistan being dragged into same fate??????

 

[Quwa]

So isn't Pakistan being dragged into same fate??????

Yes it is...but unlike a lot of past cases - especially with Latin American countries - Pakistan's military aren't a group of fascist right wing sellouts. In fact, the U.S. may be worried about the relatively antagonistic feelings of younger PA officers. Nonetheless, even Pakistani people have serious issues with the current set-up...if anything, the U.S. may end up dealing with another Venezuela...

 

[fatman17]

Yes it is...but unlike a lot of past cases - especially with Latin American countries - Pakistan's military aren't a group of fascist right wing sellouts. In fact, the U.S. may be worried about the relatively antagonistic feelings of younger PA officers. Nonetheless, even Pakistani people have serious issues with the current set-up...if anything, the U.S. may end up dealing with another Venezuela...

sans the oil reserves. i am not so sure if thats a good thing!