Creditors can't take away motorways in case of default. Worst thing that can happen is creditors taking over toll revenue from motorways after default. So no big deal
It is one and the same thing. Tomorrow, if the taxes you pay go to external creditors instead of your govt, then essentially the country is sold to external creditors.
Yes, the risk is there. But if that happens it's all own govt stupidity
I think the point here is that a sovereign nation giving collateral on a bond seems unprecedented. It shows the lack of confidence which creditors have in giving loan despite being offered a juicy interest rate of 7.95%
Beggars can't be choosers. Past govts took unprecedented debts in dollars without thinking country's ability to return these loans in future. Country is officially in a debt trap
So if you acknowledge this, what do you suggest Pakistan should do to come out of it.
Try to increase foreign direct investment, remittances and exports. There is no easy way out
Pakistan's problem is external debt not internal debt so slashing military budget won't have any affect on the problem
Feds are set to raise the interest rate in US. All developing economies have to price that into their interest rate. So you can expect India to also increase rates to keep pace.
Indian posters always come down to this point - that trade with India is the panacea for Pakistan's economic woes.
The underlying assets for this debt instrument should be halal.
How? Will India and Pakistan trade with local currencies or dollars? If dollars then how will Pakistan benefit from it?Indian posters always come down to this point - that trade with India is the panacea for Pakistan's economic woes.
While I'm sure that trade will be beneficial, I doubt it will be sufficient to resolve Pakistan's debt problem.
Pakistan has a free trade with China. But despite it, Pakistani industries have not been able to make significant exports to China because of relative inefficiencies in Pakistan's logistics.
Military purchases are done via cash from internal tax collection or cash from external debt. In Pakistan's case, a bulk of the purchases are via external debt.
So if the rate is high to Fed rate hike, is the 7.95% rate a floating rate which may come down later if lets say Fed reduces the rate after 2 years?Feds are set to raise the interest rate in US. All developing economies have to price that into their interest rate. So you can expect India to also increase rates to keep pace.
Indian posters always come down to this point - that trade with India is the panacea for Pakistan's economic woes.
While I'm sure that trade will be beneficial, I doubt it will be sufficient to resolve Pakistan's debt problem.
Let suppose Pakistan needs item A which is available from India at 10 dollars and also from UAE at 15 dollars. Since Pakistan is not trading with India, it pays $15 for it today. If it trades with India, Pakistan will save 5 dollars thus reducing the load on its forex.
If it's collateral, it'll be exacted in case of default. Investors and international bond markets don't take this sort of stuff lightly. More than likely the legal documentation of this bond offering include obligations on collateral.
One cannot easily speculate that far into the future. You've assumed that rates will go down in future, they could just as well go up. Pakistan is trying to raise money for the immediate problem, so it will try to make sure that the rates are in line with the expected trend.
