Pakistan to approach IMF for a bailout, Asad Umar announces

[313ghazi]

Lol at noonie toons rejoicing. First they wreck the economy, now they act innocent. There is no easy solution. Bills need to be paid, the awam will pay them either through direct taxation or indirect.

 

[Nilgiri]

Also from Debt perspective we don't even show up on radar

You need an investment grade credit rating to begin with.

 

[RIP Pak LAW]

Btw one credible news is, Asad was very much clear for IMF package but it was Imran Khan who was resisting earlier. Not anymore. Asad Umer even hinted for IMF during his first press conference after becoming finance minister.

BTW I remember, Mr Knows-it-all aka BHarwana Sb came up with an inside news that, Mian Atif was removed from an advisory panel only because he was on IMF payrole. So what he has to say now? I am sure, not just himself, he has made all of us laughing stock in front of Indians here.

 

[Nilgiri]

BTW I remember, Mr Knows-it-all aka BHarwana Sb came up with an inside news

Ppl should really stop taking that guy seriously. He was telling me that Indian rupee depreciation will lead to less remittance flow (earned in USD/dirham etc etc) LOL. You can't make this stuff up!

 

[RIP Pak LAW]

Ppl should really stop taking that guy seriously. He was telling me that Indian rupee depreciation will lead to less remittance flow (earned in USD/dirham etc etc) LOL. You can't make this stuff up!

No one takes him seriously on most of the stuff. But good thing about him is that he does like to talk on every issue be it defense, economics or political. But the way he defends his outrageous claims is shocking no matter how ignorant they are. He will get mature with time. Mind you, he does have sound grip on Pakistani politics but that's about it.

 

[Nilgiri]

No one takes him seriously on most of the stuff. But good thing about him is that he does like to talk on every issue be it defense, economics or political. But the way he defends his outrageous claims is shocking no matter how ignorant they are. He will get mature with time. Mind you, he does have sound grip on Pakistani politics but that's about it.

Yes spurring the issues/debate is always good thing to do...I welcome his interactions and posts from that standpoint...the conversation that is created hopefully educates broader audience.

 

[AZADPAKISTAN2009]

I would get worried about debt when we show up on Top 20 countries with debt till then , we continue with our economic reform program

• 12 IMF loans were taken by PPP and PML(N) but could not fix the Pakistan's main issue of taxation over 28 years
• The issue is they took the loan in past but did not fix the issues

NAWAZ BADSHAH : 3 Loans
ZARDARI DAKU: 3 Loans
BENAZIR BHUTTO CHALBAZ : 6 Loans​

So lets see if Imran Khan can go to IMF and fix Pakistan's Tax issue

TAX PAYMENT ~ IS THE CORE ISSUE which previous leaders failed to fix and that is the main objective FIX THE TAX SYSTEM or introduce sales tax / permit system culture
​

Real Question is

1- Zardari Took IMF loan did he manage to fix the Tax collection issue ? No
2- Nawaz Sharif , Took IMF loan did he manage to fix the Tax Collection issue ? No
3- Did Benazir Bhutto , Took 6 Loans she managed to fix the Tax Collection issue ? No
4- Did a Young Nawaz sharif managed to fix the tax collection issue ? No

Because the core issue was never fixed i.e Tax collection the issue remained
Nawaz sharif collecting a Massive 6.6 Billion Loan and then 100 Textile Mills in Punjab were closed ????

HISTORY OF NAWAZ/ ZARDAR / BENAZIR WITH IMF

September 04, 2013 -- IMF Survey : Pakistan Gets $6.6 Billion Loan from IMF
The IMF's Executive Board has approved today a $6.6 billion loan for Pakistan to support its program to stabilize the economy and boost growth while expanding its social safety net to protect the poor.

September 02, 2010 -- IMF Survey: IMF to Provide $450 Million in Flood Aid to Pakistan
The IMF announced it would provide around $450 million in new emergency financing to Pakistan to help the country cope with the economic impact of this summer’s massive floods, which have affected about one-fifth of Pakistan’s land mass and left millions homeless.


August 07, 2009 -- IMF Survey: IMF to Lend Pakistan $3.2 Billion More to Support Social Costs, Build Reserves
The IMF’s Executive Board agrees to increase lending to Pakistan by an extra $3.2 billion to fund priority spending and help the government provide assistance to nearly three million people displaced by military operations and a difficult security situation.

November 15, 2008 -- IMF Survey: IMF Outlines $7.6 Billion Loan for Pakistan
The IMF says it has reached an initial agreement with Pakistan on the key elements of an economic program supported by an $7.6 billion loan to meet the country's serious balance of payments difficulties.


Almost six loan arrangements were made during the regime of Benazir Bhutto including standby arrangement, Structural Adjustment Programs (SAP), Poverty reduction and Growth Facility (PRGF) and Extended SAP.

Two IMF loan arrangements were made during Nawaz Sharif regime and two standby agreement and PRGF under Musharraf regime to stabilize the economy. It is important to note that in the tenure of last two decades, on average almost 44% of the total lending amount has been drawn from the original 100% agreed upon lending amount because of the failure of the government to act upon the strict measures determined by IMF. For the first time in the year 2000, this tradition was broken in Musharraf regime when Musharraf’s government successfully implemented the conditions proposed by IMF and successfully drew the whole lending amount of $1.3 billion

 

[Indus Pakistan]

I am almost sure that short of a miracle Pakistan will have to go to IMF. The government is desperately trying to avoid going but it's inevitable. I don't think Uncle Sam's poodle Saudia is going to help and Chinese do not have the habit of chucking money around.

Just to place it on the record I do not think there is anything wrong going to IMF. It's not like IMF loans are expensive [indeed they are amongst the cheapest] and neither is the institution some evil monster - far from it. The problem is IMF has been painted evil by our previous governments. IMF conditions are merely what a responsible government would do anyway. For instance IMF might ask for PIA an d other public sector entities be disposed off to prevent anymore bleeding of public finances. That stands to logic. You can't cry 'broke' and ask for a bailout but at the same time bleed money through PIA etc. In addition they will request belt tightening and reduction in subsidies. You can't spend money you don't have. This means gas, electricty etc are priced at the real cost sans any subsidy. The problem is these are politically unpopular. And governments in the past have deflected the blame on IMF instead of owning up and saying to the public that austerity means everybody has to pay and no more freebees or things on the cheap. But instead the governments in past pointed toward IMF and pretended innocence. This made the IMF a evil entity in front of Pakistani public.

The government knows all this is is desperate to avoid going to IMF because that will have political cost. But I wish they just got over with it. It's tough and not fair as the government is picking up the pieces left by Mr Avenfield and Mr 10% but that is how it is.

just please get it over with. Then spend the next 5 years focussed on the education, social, health policies that the government has lined on it's manifesto.

 

[Nilgiri]

I would get worried about debt when we show up on Top 20 countries with debt till then

That's silly because "top 20" debt really applies only to "top 20" credit rating (AAA prime) type of countries (commensurate with top 20 GDP/market cap per capita etc as well)

Factoring in Pakistan's credit rating (B - B3 combined with negative outlook ref: Moody's, S&P, Fitch), its debt level is quite over-leveraged already given market-cap of around 100 billion USD only (for 200+ million people population).

Hence why this IMF bailout package because of the sustained CAD pressure for some years now as people have explained in this thread.

 

[AZADPAKISTAN2009]

Thats not a problem we will have AAA in 5 years as well

 

[Nilgiri]

Thats not a problem we will have AAA in 5 years as well

OK, guess we heard it first here. Mark the calendar.

 

[AZADPAKISTAN2009]

 

[Chakar The Great]

Some sane voice on the forum. Pakistan needs difficult but curative measures, no quick fix for economy.

I am almost sure that short of a miracle Pakistan will have to go to IMF. The government is desperately trying to avoid going but it's inevitable. I don't think Uncle Sam's poodle Saudia is going to help and Chinese do not have the habit of chucking money around.

Just to place it on the record I do not think there is anything wrong going to IMF. It's not like IMF loans are expensive [indeed they are amongst the cheapest] and neither is the institution some evil monster - far from it. The problem is IMF has been painted evil by our previous governments. IMF conditions are merely what a responsible government would do anyway. For instance IMF might ask for PIA an d other public sector entities be disposed off to prevent anymore bleeding of public finances. That stands to logic. You can't cry 'broke' and ask for a bailout but at the same time bleed money through PIA etc. In addition they will request belt tightening and reduction in subsidies. You can't spend money you don't have. This means gas, electricty etc are priced at the real cost sans any subsidy. The problem is these are politically unpopular. And governments in the past have deflected the blame on IMF instead of owning up and saying to the public that austerity means everybody has to pay and no more freebees or things on the cheap. But instead the governments in past pointed toward IMF and pretended innocence. This made the IMF a evil entity in front of Pakistani public.

The government knows all this is is desperate to avoid going to IMF because that will have political cost. But I wish they just got over with it. It's tough and not fair as the government is picking up the pieces left by Mr Avenfield and Mr 10% but that is how it is.

just please get it over with. Then spend the next 5 years focussed on the education, social, health policies that the government has lined on it's manifesto.

@Nilgiri your thoughts? Whats the solution? Keeping in mind Pakistan's limitation.

Cross post from other thread about IMF. Some cold realities :
I see a lot of cheer-leading , a lot of wishful thinking in this thread. Before i put my two cents forward , a little preface :
I have just recently interned with an IIM-B prof helping him with a whitepaper on Indian Fiscal deficit situation, so while not an expert in this field , I have gained a fair idea.( The prof. was congress aligned so the paper was quite adversarial in nature) .
I am also very involved with policy work on other fronts (mostly related to parliamentary reforms , if you think your government is fucked up, you will be surprised to learn how much of that is due to the bad policy infrastructure that is available to MP's)

So, with that being said . let's just jump in .....

On a global level three major things are happening :-

1. Crude prices are going up due to Iran sanctions, OPEC countries reducing Oil production after Shell got successfully killed .This particularly hits hard on oil dependent countries like India , Pakistan
2. US macroeconomic data has been doing well.
   
3. A lot of developing economies are in trouble ( S.A, Brazil, Turkey, Russia).This is resulting in Global Investors pulling out in general from developing countries and reinvesting in U.S .I see @BHarwana posting some odd threads about investors pulling out money from Indian markets, while i suspect his numbers but that phenomena is happening across all developing countries

So, some people here comment about loans from China/Saudi/ . Either they are kids with no knowledge of economics or jingoistic Drum Beaters. It's almost cringey reading their comments.
From DAY - 1 it was clear that Pakistan had no other option other than going to the IMF.Even a second grade economist would have told you that (privately at least).All this bullshit about loans, about getting investment from overseas Pakistani's was just that ...B.S.

So , We got that clear, let me tell you why IMF is good, a hard sell I know but hear me out :

1. IMF provides the loans at the cheapest rates ( STFU, i already knew that , you shout at me, bear with me till the second point please....)
2. Government Economic bodies secretly love IMF World Over. IMF suggest or rather forces reforms most which the economic council of Pakistan would have already suggested/pleaded/begged the GOP to implement.Now they have no choice to but implement these policies.
3. These policies can be labelled in two buckets :
   1. Short Term : Slashing developmental budgets, raising taxes, increasing interest rates ( All of these very unpopular with the populace)
   2. Long Term and Frankly the most important : Introducing frameworks like Congressional Budget Office in USA, setting up fiscal policy institutes ( via legislature) which sets binding fiscal targets/Debt ceiling for government at both state and federal level (All of these are very unpopular with ruling govt. and bureaucracy)

If you want to know why Pakistan in this mess , its because of point number 2.IMF is an enabler for these polity changes in loads of developing countries, which otherwise the rulers will never implement.

So there my two cents, oh...wait, coming from an Indian that would be my (2/million) cents....coincidentally this also happens to be the probability that Pakistani won't go to IMF to solve it BOP crisis

Some excellent points. Well done.

 

[Nilgiri]

I am almost sure that short of a miracle Pakistan will have to go to IMF. The government is desperately trying to avoid going but it's inevitable. I don't think Uncle Sam's poodle Saudia is going to help and Chinese do not have the habit of chucking money around.

Just to place it on the record I do not think there is anything wrong going to IMF. It's not like IMF loans are expensive [indeed they are amongst the cheapest] and neither is the institution some evil monster - far from it. The problem is IMF has been painted evil by our previous governments. IMF conditions are merely what a responsible government would do anyway. For instance IMF might ask for PIA an d other public sector entities be disposed off to prevent anymore bleeding of public finances. That stands to logic. You can't cry 'broke' and ask for a bailout but at the same time bleed money through PIA etc. In addition they will request belt tightening and reduction in subsidies. You can't spend money you don't have. This means gas, electricty etc are priced at the real cost sans any subsidy. The problem is these are politically unpopular. And governments in the past have deflected the blame on IMF instead of owning up and saying to the public that austerity means everybody has to pay and no more freebees or things on the cheap. But instead the governments in past pointed toward IMF and pretended innocence. This made the IMF a evil entity in front of Pakistani public.

The government knows all this is is desperate to avoid going to IMF because that will have political cost. But I wish they just got over with it. It's tough and not fair as the government is picking up the pieces left by Mr Avenfield and Mr 10% but that is how it is.

just please get it over with. Then spend the next 5 years focussed on the education, social, health policies that the government has lined on it's manifesto.

Spot on.

People assume all loans are the same thing and just vary by scale/size etc....when they don't understand the effect of time w.r.t such loans.

For example China has a large loan based investment commitment to Pakistan...but this a long term spread structure (both input and returns). China is not really in the business of doing the short term stuff because there is no real way to get quality short term return without enforcing strict requirements like what you explain with the IMF (and geopolitically China does not want to take that on....not to mention the nature of its underlying assets and collateral to back its loans such as US treasury bonds are quite long term too).

Same goes for the recent ADB loan announced (and World Bank loans follow this generally too), that one is also 3 year term and is based on funding specific infrastructure projects (rather than as a temporary CAD-induced palliative like what Pak govt needs now).

IMF is the only one that fits the bill for the acute pain with acute medicine.

 

[Proudpakistaniguy]

I feel curing a debt with more debt is strange strategy. The track record of this approach is awful. IMF will set tough conditions for loans such as further depreciation of rupees, increment in taxes , increment in oil/gas spending and decline in defence spending, rise in inflation etc . Successive Pakistani governments have relied on loans and foreign money to help them ride out periodic crises while leaving fundamental issues unaddressed