Pakistan to go bankrupt if power sector not reformed, warns IMF

[pkpatriotic]

Pakistan to go bankrupt if power sector not reformed, warns IMF
By Khalid Mustafa

ISLAMABAD: International Monetary Fund (IMF) has warned Pakistan of aid cut-off in case Islamabad does not come up with credible and irreversible plan to implement the power sector reforms.
Adnan Mazarie, head of the mission, has asked the government to introduce the irreversible plan to implement power sector reforms otherwise no funding will be provided to Pakistan, a senior official who is privy to the talks with IMF on power sector reforms told The News Tuesday. “The Fund has also warned that all IFIs including WB, ADB and even USAID will cease their credit lines and resultantly Pakistan will go into default.”

Since Pakistan has never looked serious in introducing the required power sector reforms the IMF has asked the top officials concerned to first show a credible plan to this effect, the official said.
Under the power sector reforms, the government has now dissolved Pakistan Electric Power Company, which was set up in 1998 soon after Wapda was converted into eight power distribution companies. “Pepco will go into liquidation by April 2011,” the official said.

The IMF mentioned in Tuesday’s meeting that Pepco was originally to be dissolved two years after it was set up but it took the government 10 years to dissolve the entity. Likewise, for the last two to three years, the National Electric Power Regulatory Authority (Nepra) was not empowered to notify power tariff and zero financial autonomy was given to electric power distribution companies.

Although the government has tabled the amended Nepra Act in the National Assembly, but it is yet to be approved.

The IMF also mentioned that the government has also failed to erase subsidies in the power sector. Pakistan says if subsidies are removed in one go, then power tariff will have to be increased by 30 to 35 per cent, which the government cannot afford politically. Pakistan will give the IMF today (Wednesday) the credible action plan to implement power sector reforms along with timeframe.

To a question the official said that 2.2 per cent increase in power tariff per month till 2011 will be made to recover the generation cost. The IMF was also told that the power sector is facing a deficit of Rs226 billion which will be financed partially through increase in tariff and efficient management of power distribution and generation. The government intends to save Rs50 billion through efficiency, reduction of line losses and good governance in 2010-11, but IMF does not agree with it.

Pakistan has told the IMF that financial autonomy will be ensured to the electric power distribution companies and their board of directors will be reconstituted by December 31, 2010. The directors of the board, the official said, would be taken from industry and business professionals while the government officials currently working as directors would be taken back.

The members of the board are to be selected competitively and ministry of water and power will hire a firm to select the members of BoD in order to minimise political intervention. Currently the government and political interventions are the main factor in the way of improving efficiency and governance. When depoliticised board of directors would be installed in each power utility, then all the decisions would be made on merit and every utility would then be able to perform. This is the only way to turn loss making entities into profit making ones,” he said.

Apart from it, the IMF was also told that the government has planned to enlist all eight electric power distribution companies (DisCos) on the stock exchange and offload 10-15 per cent shares of each power utility as part of ongoing power sector reforms. The offloading of 15 per cent shares of the two power utility companies will be a first step toward privatisation of power distribution companies.

“And to this effect we have decided to get Islamabad Electric Supply Company (Iesco) and Faisalabad Electric Supply Company (Fesco) and Genco-1 listed in the stock market by March 2011.” This will not only ensure transparency, he argued, but would also help improve the corporate culture in all the power utilities.

 

[xenia]

“The Fund has also warned that all IFIs including WB, ADB and even USAID will cease their credit lines and resultantly Pakistan will go into default.”[/U]

plz b quick..hope this ends some corruption ..

 

[Last Hope]

We STILL have to be bankrupt ?!!

 

[Tshering22]

plz b quick..hope this ends some corruption ..

But this would cease the little benefit that you're getting after most of it goes into your leaders' pockets. A politically insignificant country like Greece's defaulting in EU reached headlines and created havoc all over the Western world. You're right now the center of all attention. If this happens, in current situation it will be chaotic. With weak economy, terrorism rampant, political disorder, if a nation defaults; that's not a very hopeful thing to look out to.

Money makers like Zardari would simply pack their bags and fly off to UK where he'd get diplomatic asylum, with billions of dollars of Pakistani people in his account in Switzerland. He and his likes wouldn't be affected one bit, but commoners would be big time.

Just hope that your power bill reforms go ahead to avoid a chaos like this.

 

[Indiannn]

Good luck to Pakistan for the future!

 

[unicorn148]

i think better to invest the aid money you get from US on Infrastructure than on defence

 

[prototype]

So what is the problem in implementing power sector reforms?

 

[Avatar]

So what is the problem in implementing power sector reforms?

Incompetency, Corruption, you name it.

Pakistan should not depend on China, US or even some "Islamic friend" for saving it's a$$. In modern world you're the only one you can count on.

 

[PAKFA]

What happens if a country go bankrupt.

 

[PAKFA]

So what is the problem in implementing power sector reforms?

CIA is the biggest problem. CORRUPTION, INCOMPETENCY , ARROGANCE.

 

[Tshering22]

CIA is the biggest problem. CORRUPTION, INCOMPETENCY , ARROGANCE.

From where is CIA to blame if the politicians of their own kind don't feel for their people? CIA can offer money, it cannot finish off the entire country full of politicians through assassinations. It is silly to put blame of ones' own incompetency on other countries.

Others are here to take advantage of; it is upto the nation's people and ruling to make sure that this doesn't happen whether it is Pakistan or India or any other country.

 

[majesticpankaj]

From where is CIA to blame if the politicians of their own kind don't feel for their people? CIA can offer money, it cannot finish off the entire country full of politicians through assassinations. It is silly to put blame of ones' own incompetency on other countries.

Others are here to take advantage of; it is upto the nation's people and ruling to make sure that this doesn't happen whether it is Pakistan or India or any other country.

buddy CIA means CORRUPTION, INCOMPETENCY , ARROGANCE. not america's CIA..lol

 

[keeninterest]

What happens if a country go bankrupt.

Generally a country is not allowed to go bankrupt and certainly not a country of the size of Pakistan since there is too much at stake. It’s a country from where china and india can be closely monitored, has a direct access to the CAR, a’stan and iran are right across, America wont let it vanish in thin air there is too much strategic value attached. Then there are the nuclear weapons, and a terrorism problem.

What imf is delivering is a plain talk which is a part of a bigger picture and nothing else and they (when I use the term “they” it is specifically with reference to America and NATO in general) certainly cant walk the talk when there are the likes of the saudis and chinese sitting on the sidelines to see an official American exit and make hay because they will step in only when they see a full exit of America, with that the likes of zardari and kayani will also have to make way who are seen as puppets of the western interests. So either the amrericans will save them or the combination of ksa and china, and Americans wont let a situation evolve where the Saudis and the Chinese get all the control until ofcourse they get thrown out by the locals by way of some revolution.

America and NATO want Pakistan to enter north Waziristan and now the pressure on Pakistan is going to be even since post the elections the democrats would want to score some success in a’stan and pak region. The republicans are already asking the obama administration to re-work it’s a’stan strategy where exit as of now is not an option. Exit means a sure shot republican president in January, 2013.

What if Pakistan were to go bankrupt:

Their stock market will collapse immediately since investor confidence would have hit rock bottom, all the off shore, HNI and retail investors will try to take the money out of the system and from the country immediately, the Banking system will collapse in a matter of hours. The immediate reaction of the government will be to confiscate and cease the ownership of private industry, the stock market, the financial system so that the money doesn’t leave the country. It will also mean a complete state takeover of every thing.

The local currency will collapse, and just like Zimbabwe, million rupee note being printed wont be a big deal. Inflation would rise to astronomical heights, the once rich would become poor but before they hit that wall they will flee the country, the poor and middle class would become non-entities. the common man’s savings will become a property of GoP, and you will see people lining up in front of banks waiting to get whatever little money they can get hold of, similar queues will be seen in front of ration shops. People will be jobless, and soon enough it will be every man for himself with daily rioting and ransacking, and since Pakistan has a gun cultural where terrorists are treated as heroes then that would lead to a civil war.

The credit worthiness of the country will in negative, which means Pakistan will only be able to import something only when the country has done complete advance payment, possibly they might not get anything for that money as well since those deals could be traps to extract money from pakistan.

In plain simple words, it would be an all round anarchy, a complete collapse.

People should think a zillion times before wishing for a thing like bankruptcy for their country. It will solve corruption? Hell, the only thing it will do is make corruption an order of the day.

 

[Kinetic]

Generally a country is not allowed to go bankrupt and certainly not a country of the size of Pakistan since there is too much at stake. It’s a country from where china and india can be closely monitored, has a direct access to the CAR, a’stan and iran are right across, America wont let it vanish in thin air there is too much strategic value attached. Then there are the nuclear weapons, and a terrorism problem.

What imf is delivering is a plain talk which is a part of a bigger picture and nothing else and they (when I use the term “they” it is specifically with reference to America and NATO in general) certainly cant walk the talk when there are the likes of the saudis and chinese sitting on the sidelines to see an official American exit and make hay because they will step in only when they see a full exit of America, with that the likes of zardari and kayani will also have to make way who are seen as puppets of the western interests. So either the amrericans will save them or the combination of ksa and china, and Americans wont let a situation evolve where the Saudis and the Chinese get all the control until ofcourse they get thrown out by the locals by way of some revolution.

America and NATO want Pakistan to enter north Waziristan and now the pressure on Pakistan is going to be even since post the elections the democrats would want to score some success in a’stan and pak region. The republicans are already asking the obama administration to re-work it’s a’stan strategy where exit as of now is not an option. Exit means a sure shot republican president in January, 2013.

What if Pakistan were to go bankrupt:

Their stock market will collapse immediately since investor confidence would have hit rock bottom, all the off shore, HNI and retail investors will try to take the money out of the system and from the country immediately, the Banking system will collapse in a matter of hours. The immediate reaction of the government will be to confiscate and cease the ownership of private industry, the stock market, the financial system so that the money doesn’t leave the country. It will also mean a complete state takeover of every thing.

The local currency will collapse, and just like Zimbabwe, million rupee note being printed wont be a big deal. Inflation would rise to astronomical heights, the once rich would become poor but before they hit that wall they will flee the country, the poor and middle class would become non-entities. the common man’s savings will become a property of GoP, and you will see people lining up in front of banks waiting to get whatever little money they can get hold of, similar queues will be seen in front of ration shops. People will be jobless, and soon enough it will be every man for himself with daily rioting and ransacking, and since Pakistan has a gun cultural where terrorists are treated as heroes then that would lead to a civil war.

The credit worthiness of the country will in negative, which means Pakistan will only be able to import something only when the country has done complete advance payment, possibly they might not get anything for that money as well since those deals could be traps to extract money from pakistan.

In plain simple words, it would be an all round anarchy, a complete collapse.

People should think a zillion times before wishing for a thing like bankruptcy for their country. It will solve corruption? Hell, the only thing it will do is make corruption an order of the day.

You have quite good knowledge on economy!!!! Read an excellent post after long time.

 

[TaimiKhan]

Generally a country is not allowed to go bankrupt and certainly not a country of the size of Pakistan since there is too much at stake. It’s a country from where china and india can be closely monitored, has a direct access to the CAR, a’stan and iran are right across, America wont let it vanish in thin air there is too much strategic value attached. Then there are the nuclear weapons, and a terrorism problem.

What imf is delivering is a plain talk which is a part of a bigger picture and nothing else and they (when I use the term “they” it is specifically with reference to America and NATO in general) certainly cant walk the talk when there are the likes of the saudis and chinese sitting on the sidelines to see an official American exit and make hay because they will step in only when they see a full exit of America, with that the likes of zardari and kayani will also have to make way who are seen as puppets of the western interests. So either the amrericans will save them or the combination of ksa and china, and Americans wont let a situation evolve where the Saudis and the Chinese get all the control until ofcourse they get thrown out by the locals by way of some revolution.

America and NATO want Pakistan to enter north Waziristan and now the pressure on Pakistan is going to be even since post the elections the democrats would want to score some success in a’stan and pak region. The republicans are already asking the obama administration to re-work it’s a’stan strategy where exit as of now is not an option. Exit means a sure shot republican president in January, 2013.

What if Pakistan were to go bankrupt:

Their stock market will collapse immediately since investor confidence would have hit rock bottom, all the off shore, HNI and retail investors will try to take the money out of the system and from the country immediately, the Banking system will collapse in a matter of hours. The immediate reaction of the government will be to confiscate and cease the ownership of private industry, the stock market, the financial system so that the money doesn’t leave the country. It will also mean a complete state takeover of every thing.

The local currency will collapse, and just like Zimbabwe, million rupee note being printed wont be a big deal. Inflation would rise to astronomical heights, the once rich would become poor but before they hit that wall they will flee the country, the poor and middle class would become non-entities. the common man’s savings will become a property of GoP, and you will see people lining up in front of banks waiting to get whatever little money they can get hold of, similar queues will be seen in front of ration shops. People will be jobless, and soon enough it will be every man for himself with daily rioting and ransacking, and since Pakistan has a gun cultural where terrorists are treated as heroes then that would lead to a civil war.

The credit worthiness of the country will in negative, which means Pakistan will only be able to import something only when the country has done complete advance payment, possibly they might not get anything for that money as well since those deals could be traps to extract money from pakistan.

In plain simple words, it would be an all round anarchy, a complete collapse.

People should think a zillion times before wishing for a thing like bankruptcy for their country. It will solve corruption? Hell, the only thing it will do is make corruption an order of the day.

Well thank you for your informative insight.

But we Pakistanis, wishing for not getting IMF loans is not to get bankrupt or that we want to get bankrupt, but to bring pressure on the politicians to do things on their own to get this country back on its feet.

Our agri sector has no income tax or any other tax levied, agri sector alone has the capacity to generate more then 200B in taxes, which is nearly 2.5B US$$ in a single year, much more then the Kerry Lugar bill per year or IMF loan given in different tranches.

Beside Agri, other sectors are not being properly taxed or income tax is evaded.

Plus, lot of internal corruption, which goes into Billions of rupees and the net effect is Billions of $$$s per year, which if we start getting, will and can make us independent of loans or begging.

Here, read the below link, to give you an idea of what we produce and how much:

Agriculture in Pakistan - Wikipedia, the free encyclopedia

And the Economy of Pakistan:

Economy of Pakistan - Wikipedia, the free encyclopedia

Even with all these impressive numbers and unexploited potential to produce more, we are beggars and for a loan of just 1 or 2B $$, we are held hostage to western powers.

This is our bad luck.