Pakistanis sink deeper in debt with 28% per capita increase

[Haris Ali2140]

Don't be an idiot. You have any idea how much profits were guaranteed to oil and gas importers by previous govt? How much profits power generation companies were guaranteed? This is the main reason for constant price hikes in energy sector and ever growing circular debt.

I am talking about taxes on foreign companies who wants to invest in Pakistan.

 

[Norwegian]

IMO Imran Khan should've had resigned and gone back to the people and should've had taken a strong mandate. These political compromises, having little to none power won't let him achieve much. If people won't give him better mandate; it's their choice and they deserve what they are getting. But again ya to kursi ka shashka pura kar lo and compromise on everything you stood for or you keep your integrity and resign.

People will never vote for Imran Khan again as they know they will get inflation and taxes. Every Pakistani wants a free ride except Imran Khan

 

[313ghazi]

If you devalue you rupee (because it was artificially inflated), your debt is going to go up, to reflect the lower value of your currency.

The government is doing the right thing. It's increasing taxes, making imports more costly, but it could do it smarter. For example, @blueazure mentioned medical machinery, there are other example of imports which are essential to our economy, or that we ought to be encouraging. In these conditions we should be allowing cheaper tarrifs on those specific items. Short term if our imports don't go down, but change from luxury items to machinery to be used in industry - then long term we will benefit.

HOWEVER

The market has a role to play and the business community is failing. If prices of food items are high - who's started growing those items to sell? Will the government grow Atta for you? How many businesses are trying to export their products? How many have the skillset to do that? There are plenty of people who could setup SME's e-commerce platforms. Who's out there doing that? Making money?

It seems easier in Pakistan to create a drama, than to exploit business opportunities. OF course ideally the poor governance which creates the opportunities for these businesses wouldn't be there.

 

[Rank]

If you devalue you rupee (because it was artificially inflated), your debt is going to go up, to reflect the lower value of your currency.

The government is doing the right thing. It's increasing taxes, making imports more costly, but it could do it smarter. For example, @blueazure mentioned medical machinery, there are other example of imports which are essential to our economy, or that we ought to be encouraging. In these conditions we should be allowing cheaper tarrifs on those specific items. Short term if our imports don't go down, but change from luxury items to machinery to be used in industry - then long term we will benefit.

HOWEVER

The market has a role to play and the business community is failing. If prices of food items are high - who's started growing those items to sell? Will the government grow Atta for you? How many businesses are trying to export their products? How many have the skillset to do that? There are plenty of people who could setup SME's e-commerce platforms. Who's out there doing that? Making money?

It seems easier in Pakistan to create a drama, than to exploit business opportunities. OF course ideally the poor governance which creates the opportunities for these businesses wouldn't be there.

lemme tell u how this govt completely destroyed the large scale manufacturing. Many things which we are exporting are basically developed with the help of imported raw materials. Now after banning and increasing tariffs on imported materials, no one is buying our product because first, the businesses have to establish another industry to make the required material which before they are getting from different foreign sources which were extremely cheap. After spends further $$$ to make a raw material in-house, the cost now further escalating. The vendor/manufacturer has to calculate the cost of raw material as well. Sometimes you don't have the expertise to develop nor you can make everything cheap. That's the reason Apple getting stuff from Samsung for its iPhone. It's a normal thingy u can get imported stuff at the lower cost from a third-party vendor and incorporate it with urs. There is no fucking need to spend billions just to make that raw material that is widely available and in a much much better quantity.

 

[313ghazi]

lemme tell u how this govt completely destroyed the large scale manufacturing. Many things which we are exporting are basically developed with the help of imported raw materials. Now after banning and increasing tarrif on import, noone is buying out product because first the businesses has to estalisbhed another industry first to make that kind of material which they bought ti develop stuff and that was extremely cheap, after spending further $$$$ on establishing another hub for the taw material, the cost is now further increase bcuz the vendor has to calculate the cost of that raw material production. Also, the vendor does’nt have such expertise nor such tech to make the raw material cheap. The reason Apple getting stuff from Samsung for their iPhone. Its a normal thingy u can get stuff at lower cost from third party vendor to incorporate with ur product put ur branding its usual and following by the entire world. There is no fucking need to spend billions to just make that raw material which is widely available and in much much better quantity.

Do you have details of the import tarrif increases? There's a lot of rhetoric going around, but I really do wonder if the tarrifs on stuff like oil, gas, cotton etc have gone up - or if it's all talk.

http://download1.fbr.gov.pk/Docs/20...nceBill(FifthScheduletotheCustomsAct1969).pdf

If you look at previous years it's about the same -

https://fbr.gov.pk/categ/customs-tariff/51149/70853/ 131190

Read through the first PDF, a lot of machinery is at 0%.

If someone can prove me wrong, i'm happy to listen. Like i said - i think we should be curbing imports we don't need, not stuff important for industry.

 

[Abu Shaleh Rumi]

And the ignorant bufoons in my country just won't get it and will keep questioning the sanity of those who actually know its gonna take patience.

Ignorance is bliss, and a few of these folk with posts on top of the thread are a bit too high on that bliss.

They might have better solutions!

 

[Pan-Islamic-Pakistan]

People will never vote for Imran Khan again as they know they will get inflation and taxes. Every Pakistani wants a free ride except Imran Khan

We still have 2-3 years. There is still time to turn things around.

I believe in Imran Khan, I think he can deliver on his promises, even with obfuscation of all of the United opposition. Army is still by his side.

 

[BHarwana]

Have been seeing this thread for few days but finally free enough to engage.

So the debt has increase by 28% and devaluation of rupee has been some what 32%, which means PTI decreased actual debt by 4%?

 

[ejaz007]

It is now around 12 percent so the investers are only getting 1 percent real interest not 13 percent as claimed by patwaris.

Inflation is 14.56% now so investors are not getting any real interest. Problem solved.

 

[Mav3rick]

What are you smoking again, Mr smart pmln govt Patwari?

Please don't tag me if you absolutely have to speak the PTI way because I cannot stoop to your level.

For details, you can read the full account of debt here:

https://www.dawn.com/news/1442378

"In addition, the massive rollout of the China-Pakistan Economic Corridor, which led to further inflows of external loans, led the total government external debt to increase by 46pc to $76.3 billion by 2018."

Check the official figures above

I know you will not take my words for it, how about the words of the then Finance Minister and senior PTI leader Asad Umar? This is what he had to say:

"ISLAMABAD: The Federal Minister for Finance, Asad Umar, told the Senate on Friday that Pakistan obtained $70 billion loan during the last five years while $49 billion loans were paid back."

All in all PML borrowed USD 70 Billion and paid back 49 Billion which left a debt of roughly USD 21 Billion. Add the debt from the previous Governments, USD 55 Billion and the total debt arrives at USD 76; give or take a few million.

https://www.thenews.com.pk/print/36...n-loans-obtained-in-last-five-years-says-asad.[/QUOTE]

Actual loan details 2013-2018 as per Asad Umar PTI finance minister submitted in Senate:

View attachment 603195

Can you please post a link to that? Thanks.

 

[ejaz007]

Please don't tag me if you absolutely have to speak the PTI way because I cannot stoop to your level.

For details, you can read the full account of debt here:

https://www.dawn.com/news/1442378

"In addition, the massive rollout of the China-Pakistan Economic Corridor, which led to further inflows of external loans, led the total government external debt to increase by 46pc to $76.3 billion by 2018."





I know you will not take my words for it, how about the words of the then Finance Minister and senior PTI leader Asad Umar? This is what he had to say:

"ISLAMABAD: The Federal Minister for Finance, Asad Umar, told the Senate on Friday that Pakistan obtained $70 billion loan during the last five years while $49 billion loans were paid back."

All in all PML borrowed USD 70 Billion and paid back 49 Billion which left a debt of roughly USD 21 Billion. Add the debt from the previous Governments, USD 55 Billion and the total debt arrives at USD 76; give or take a few million.

https://www.thenews.com.pk/print/36...n-loans-obtained-in-last-five-years-says-asad.

Can you please post a link to that? Thanks.[/QUOTE]

http://www.senate.gov.pk/uploads/documents/questions/1535687032_486.pdf

 

[Mav3rick]

But but but your smart pmln told us that Cpec was China's 60 billion dollar investment. How did it become external debt? If it was debt why was it called investment?
View attachment 603197

CPEC is neither clear nor transparent. There are too many if and buts but we all know that it has the potential to be very good for the country's economy. As for your very specific question, is it possible that China has already invested a big amount and that total Chinese investment may eventually stand at USD 60 Billion, as you said, if that amount has not already been invested by the Chinese.

However, the Government of Pakistan too has a stake in CPEC and so the GoP must also have made investments in CPEC and related activities, why else would we have Chinese debt? Regardless, CPEC apparently is a sound investment which will start paying dividends very soon, Inshallah.

Inflation is 14.56% now so investors are not getting any real interest. Problem solved.

I am sure actual inflation is a lot higher and any figure under 30% year on year is misleading and engineered.

View attachment 603198 View attachment 603199

external debt.

I have very clearly posted evidence from the then Finance Minister Asad Umer who himself contests those figures in his response to the Senate hearing. You may refer to the post above mine for link to the PDF document which another member has very kindly linked.

However, if anyone is really interested, please read what Ishaq Dar himself says. Read it while being neutral and with an open mind. Read it not as if it was written by Ishaq Dar or PML leader but as a former Finance Minister who is more aware of finances than any of us. Just read it for clarity and then make up your minds instead of making up your minds on PTI rhetoric:

"
A lot of rhetoric by the incumbent government has been flashed publicly through the media about the public debt, perhaps to divert the public attention from their incompetence, mis-governance and anti-public policies which all is quite visible in the first seventy days in office. It needs to be understood that for any government, there is an opening figure of public debt to which is added in its tenure the amounts of yearly budget deficits along with the conversion loss on foreign/external portion of public debt due to devaluation of Pak rupee in such period. As the said budget deficits are duly approved by the Parliament, the whole process is transparent and is the responsibility of the Parliament and there should be no hidden surprises for anyone.

When the PML-N government started its term in June 2013 with Mian Muhammad Nawaz Sharif as Prime Minister, it inherited multiple challenges like large fiscal deficit, rising debt burden, unfavorable balance of payments, low foreign exchange reserves, poor growth in tax revenues, a shrinking tax-base, swelling current expenditures, a gigantic circular debt, which was unraveling the energy sector, flight of capital, weakening exchange rate and perilously declining investors’ confidence. On the external front, the major development partners had virtually ended their support on the face of a rapidly weakening economic indicators and apparent inability of the country to service its external obligations in the near future. One of the main challenges was absence of external financing which was causing turbulence in the domestic exchange markets and shifting the composition of public debt towards domestic debt, and that too into shorter maturities creating vulnerabilities and entailing high rollover and refinancing risks. State Bank of Pakistan (SBP) forex reserves, which stood at $6 billion in June 2013 fell to $2.8 billion in February 2014 as concerted efforts were made to destabilise the economy by market speculators, which was fueled in no less a measure by an irresponsible statement by an MNA of PTI, who had the audacity to claim around September 2013 that the exchange rate would soon climb to Rs127 to the US Dollar. It was a highly precarious, volatile and explosive situation to steer the economy and stabilise the external account.

In early 2013, there were predictions that the country would default on its sovereign obligations if necessary steps to avert the situation were not taken. These predictions were made by the financial experts, who had analysed the macroeconomic situation prevalent at that time and reached the conclusion that the country would not have sufficient external resources to meet its obligations of external debt falling due beyond February 2014. There was a dire need for stemming the depleting reserves and stabilising a fast depreciating currency, which touched around Rs111 to US Dollar in November 2013 as it was fueling inflation and raising the cost of debt servicing. The importance of lengthening the maturity profile of domestic debt became inevitable while maintaining interest rate stability and regaining growth momentum was also required to counter the impact of indebtedness.

Instead of playing to the gallery and blaming the previous PPP government, on assuming office in June 2013, the PML-N government immediately got down to rescue work and took necessary steps to avoid default, restore fiscal discipline, stabilise a collapsing economy and lay the foundation of accelerating growth. PML-N government introduced structural reforms with stabilisation measures within few days in its first Budget for 2013-14.

The PPP government had entered into a front-loaded Stand-By Arrangement (SBA) with International Monetary Fund (IMF) in 2008 with a total loan of $11.5 billion but left the programme after receiving an amount of $7,455 million against implementing first four of twelve phases of structural reforms due to its inability to implement the remaining agreed economic reforms. Out of the said PPP loan, PML-N had to repay $ 4.6 billion in its tenure and therefore entered into an Extended Fund Facility (EFF) with the IMF, agreed in July 2013, with an estimated amount of $6.4 billion leaving a net-intake of IMF loan of a meagre $1.8 billion in its tenure. Yet for the sake of economic stability and restoring fiscal discipline, the PML-N completed the entire reforms programme with commitment and diligence to enable Pakistan to restore its lost credibility in the community of nations as well as re-enter the international capital markets after an absence of around seven years. Simultaneously, other International Financial Institutions (IFIs) were re-engaged to obtain highly concessional foreign resources through policy loans as they had suspended business with Pakistan due to the macroeconomic instability which was prevailing in Pakistan in early 2013.

A number of politically motivated voices are raising doubts about the economic achievements of the PML-N government and particularly misrepresenting the nation, either due to lack of knowledge or purposely, about total public debt accumulation in the country during last tenure of 2013-18 of PML-N. As per ‘Fiscal Responsibility and Debt Limitation Act’, the Total Public Debt is defined as the Debt of the Government (including the Federal and Provincial Governments), less Government Deposits with the banking system, serviced out of the Consolidated Fund and the debts owed to the IMF. The inclusion in the total public debt of liabilities relating to private sector’s external debt, PSE’s debt, commodity operations’ borrowing and inter-company external debt from direct investor abroad is not as per law as these payments are not to be made out of the said Consolidated Fund with the State Bank of Pakistan. Therefore, the figure of Rs. 30,000 billion quoted by the incumbent government as total public debt as on 30th June 2018 is factually incorrect and the correct figure is Rs. 23,051 billion as per detail below. It is important to put the record straight as per the law of the land.

Musharraf’s government 1999-2008 increased the total public debt by 97%, in PPP’s tenure 2008-13 it increased by 153% and the increase in PML-N’s tenure 2013-18 was 71%. However, in first four years of PML-N tenure to June 2017, the increase was barely 46% (Rs6,177 billion) for the simple reason that the PML-N government had imposed strict fiscal discipline and undertook a number of real austerity measures including abolition of discretionary funds of the prime minister and the ministers.

The increase in total public debt during the year 2017-18 was Rs. 3,416 billion of which Rs1,978 billion was external debt. What happened this year, which saw an increase in debt from Rs19,635 billion to Rs23,051 billion, or from 46% to 71%, was very unfortunate, as prime minister Nawaz Sharif was disqualified from office and the author relinquished the charge of Finance Ministry in November 2017. PML-N’s new Prime Minister Shahid Khaqan Abbasiand his economic team had to face huge unbudgeted financial demands and consequently the economic discipline that was so painstakingly nurtured and preserved in the previous four years could not be maintained.

World over, the public debt is not quoted in absolute numbers but is referred to as a percentage to the GDP which is more meaningful in economic context. GDP growth generally co-relates with enhanced public debt and Pakistan’s GDP grew from Rs22,386 billion in June 2013 to Rs34,397 billion in June 2018. Total public debt to GDP of Pakistan was 60.1% in June 2013 which rose to 61.4% by June 2017 and 67% by June 2018 due to additional extra-ordinary security-related expenditure for war against terrorism (operation Zarb-e-Azb) etc and heavy investment in Public Sector development projects with clear focus on elimination of gas and electricity load-shedding from the country, improving highways transport, information technology and communication sectors. Incidentally, in 2018, public debt to GDP of USA is 106%, Japan 221%, Italy 138%, Belgium 115% and Singapore 105%, which all are far too above that of Pakistan.

One must remember that despite PTI’s political ‘Dharnas’ spread over months and submission of resignations of its members of the National Assembly in order to derail the democratic system which caused a lot of damage to the economy and the investors’ confidence, PML-N in its tenure, with Allah’s Kindness, achieved an increase in the federal taxes collection by 100%, enhanced GDP Growth from around 3% to 5.8% (highest in 13 years) and managed lowest inflation, export re-finance/long-term finance facility/lending policy rates in the last forty years in addition to an increase in foreign remittances from $13.9 billion to $19.4 billion, stable exchange rate and rise in national foreign exchange reserves from $7.5 billion in February2014 to $21.4 billion by 30th June 2017, after having touched historic peak of $23.1 billion on 30th June 2016. Global institutions and rating agencies including Moody’s, Standard and Poor’s, Forbes, Bloomberg, Economist and IFIs had all the positive reports on the macro-economic stability and achievements of Pakistan in the PML-N’s tenure to 30th June 2017 and PricewaterhouseCoopers report predicted Pakistan joining G-20 by 2030 and would leave economies of Canada and Italy behind. If said Dharnas and political destabilisation efforts by PTI throughout the last tenure of PML-N were not there, the economic performance of the country would have been even better. The author repeatedly offered PTI and other opposition parties to agree on a ‘Charter of Economy’ in order to keep economy free from politics but unfortunately none co-operated.

The above analysis of total public debt during different regimes since 1999 shows that the debt numbers cited by the incumbent government are baseless and the story weaved around the debt burden is self-serving and politically motivated, devoid of any economic merit. One sincerely hopes that the government stops mourning, as it had done in opposition in last five years, and gets down to work as people of Pakistan have already suffered a lot in its first seventy days through massive devaluation of Rupee, decline in Pakistan Stock Exchange Index (PSX) and sky-high increase in cost of living with unprecedented hike in prices of essential commodities, gas, and electricity etc.
"

Link: https://www.thenews.com.pk/print/386814-facts-about-public-debt

 

[ejaz007]

Do you have details of the import tarrif increases? There's a lot of rhetoric going around, but I really do wonder if the tarrifs on stuff like oil, gas, cotton etc have gone up - or if it's all talk.

http://download1.fbr.gov.pk/Docs/20...nceBill(FifthScheduletotheCustomsAct1969).pdf

View attachment 603240


If you look at previous years it's about the same -

https://fbr.gov.pk/categ/customs-tariff/51149/70853/ 131190

Read through the first PDF, a lot of machinery is at 0%.

If someone can prove me wrong, i'm happy to listen. Like i said - i think we should be curbing imports we don't need, not stuff important for industry.

Custom duty on cotton yarn has increased to 11% in 2018-19.

http://download1.fbr.gov.pk/Docs/2018817158749999PakistanCustomTariff2018-19-CH1-99.pdf

 

[Norwegian]

Inflation is 14.56% now so investors are not getting any real interest. Problem solved.

Inflation is temporary. It will eventually go down below interest rate.

 

[Norwegian]

"In addition, the massive rollout of the China-Pakistan Economic Corridor, which led to further inflows of external loans, led the total government external debt to increase by 46pc to $76.3 billion by 2018."

These figures do not include roll over debt from previous governments. Here is total increase in external debt after CPEC "investments".

CPEC is neither clear nor transparent. There are too many if and buts but we all know that it has the potential to be very good for the country's economy. As for your very specific question, is it possible that China has already invested a big amount and that total Chinese investment may eventually stand at USD 60 Billion, as you said, if that amount has not already been invested by the Chinese.

Why don't you stop calling CPEC "investment" as per PMLN propaganda? Investments do not lead to massive trade and current account deficits, growth in external debt, as it happened after CPEC.

China waited for PML-N rule before making CPEC investment: Nawaz

However, the Government of Pakistan too has a stake in CPEC and so the GoP must also have made investments in CPEC and related activities, why else would we have Chinese debt? Regardless, CPEC apparently is a sound investment which will start paying dividends very soon, Inshallah.

Inshallah won't help you here. There were no studies conducted to evaluate the price and cost of CPEC for decades to come. That's why Pakistani economy came to a standstill after CPEC started. Because it wasn't an investment but Chinese projects fueled by Pakistani trade, current account deficits and growth in external debt.