Pakistan’s debt at $90 billion

[Cyberian]

Wrong, Pakistan's external debt is not $90 billion. It is at $66.5 billion as of September 2015 as the article clearly points out.

At the same time, India's external debt by June 2015 has soared to $483 billion. I mean, billions are being piled on each month.

 

[dadeechi]

what is forex reserve vs debt ratio

I know where you are going but as long as the GDP is growing why worry about forex? Especially when Pakistan has China, Russia and US supporting it. Does India use Forex reserves to service it's debt? What about countries like Saudi who are using it's Forex to stay float as it's GDP tanks.

 

[Great Sachin]

I know where you are going but as long as the GDP is growing why worry about forex? Especially when Pakistan has China, Russia and US supporting it. Does India use Forex reserves to service it's debt? What about countries like Saudi who are using it's Forex to stay float as it's GDP tanks.

I am just saying that having a bigger loan or debt is not a problem but the problem is that what is your capacity to repay it.
if you are taking loan to pay loan or adding loan in your Forex reserve account to fool people ...then it is a big problem

 

[Odysseus]

I am just saying that having a bigger loan or debt is not a problem but the problem is that what is your capacity to repay it.
if you are taking loan to pay loan or adding loan in your Forex reserve account to fool people ...then it is a big problem

In short circular debt.

 

[Great Sachin]

In short circular debt.

in short..Nawaz Sharif is just fooling Pakistani people and destroying Pakistan economy

 

[Faiez]

I am just saying that having a bigger loan or debt is not a problem but the problem is that what is your capacity to repay it.
if you are taking loan to pay loan or adding loan in your Forex reserve account to fool people ...then it is a big problem

The thing with other countries mentioned that have large debt is that they have plan and they're working on it. Pakistan doesn't have a proper long term plan.

 

[Great Sachin]

The thing with other countries mentioned that have large debt is that they have plan and they're working on it. Pakistan doesn't have a proper long term plan.

that's what I am saying....when we take loan we plan for repaying it before taking loan....unless even small loan become big headache....I dont know how Pakistan govt is working

 

[SSGcommandoPAK]

The debt it high because what was supposed to happen in the past 70 years, is all of a sudden happening now. So if you spread the debt over the 70 years (growth related), you would've finished a few projects in the 60's, 70's and 80's, and post going live, you would've captured income which would've offset the debt over the years (decades and that too like 6-7).

So all things are being tackled in this term of the local government. Electricity, Infrastructure, CPEC, Privatization, Tax system overhaul, Metro projects, Airports, Port Operations Expansion, Military Ops in FATA, Power plants and alternative energies, Healthcare, Education, Industrial expansion, etc, etc, everything has been ignored for the past 7 decades.

You won't find a country who just in on 5 year terms deals with all the above things. So its almost like Pakistan was born in 2013 and now its the first government doing all this work to a new country. So naturally debt will be higher. But by 2020, the Pakistani economy would be over 600 - 700 Billion (GDP), so a $ 150 billion debt (being slowly paid off, would be 15% of the GDP). Which isn't bad. Growing countries could have up to 40-50% of debt. India ran on 45-50% of debt for the longest time, and still has high debt. That's how a poor country grows and establishes more businesses and expands infrastructure and economy!

Good info bro , but people here when they here about the debt growing they criticize the government of corruption and mock them for not doing anything for the country .

 

[Abingdonboy]

I am just saying that having a bigger loan or debt is not a problem but the problem is that what is your capacity to repay it.
if you are taking loan to pay loan or adding loan in your Forex reserve account to fool people ...then it is a big problem

This is a problem no one on this site wants to admit exsists, one gets lost in GDP growth figures but isn't asking where the money is coming from? When Pakistan's lenders are now charging discount rates of 7-30% and their Forex barely growing at 10%(?) annually there is a spectacular disaster awaiting their future government(s).

@Spectre @MilSpec @Bang Galore @PARIKRAMA @Levina @Vauban

 

[Spectre]

This is a problem no one on this site wants to admit exsists, one gets lost in GDP growth figures but isn't asking where the money is coming from? When Pakistan's lenders are now charging discount rates of 7-30% and their Forex barely growing at 10%(?) annually there is a spectacular disaster awaiting their future government(s).

@Spectre @MilSpec @Bang Galore @PARIKRAMA @Levina

Yeah, the absolute amount of Debt and GDP levels are often irrelevant except they do have a part in determining the credit rating which further determines risk and therefore interest rate.

The most important thing is Interest Coverage Ratio which is interest and principle component payable during the year and the Revenue (tax collections) available to pay them. If the payables are in foreign currency then you also need to hedge against the fx risk or hold sizeable forex reserves but that is it.

India is quite comfortably placed in this regard. It has ample forex coming in so it does not have to dip into it's reserves and the govt tax collections are enough to service debts both foreign and domestic.

Pakistan well is no too well placed and is on life support where it needs IMF/WB/ADB aid money to service the debt but essentially creating a bigger debt pile. Ideally the foreign support money should have been used to create productive assets but their is a behind the scene diversion of money to pay interests. Essentially Pozi Scheme but everyone is aware of it and tolerates it as they don't want the govt to collapse and renege of debts in the near term. Many Indian corporates too are in a bad shape and follow the same trajectory and GoI tolerates it so Pakistan is not unique in this.

Regards

 

[egodoc222]

List of countries by external debt - Wikipedia, the free encyclopedia
Rank Country External debt[2]
US dollars Date Per capita[3][4][5][6]
US dollars % of GDP[7][8][9]
1

United States 18,772,300,000,000 1 December 2015 58,255 103
2

United Kingdom 9,590,995,000,000 31 March 2014 160,158 406
3

France 5,750,152,000,000 31 March 2014 86,317 222
4

Germany 5,546,869,000,000 31 March 2014 68,720 145
5

Luxembourg[note 1] 3,472,282,000,000 31 March 2014 3,696,467 3,443
6

Japan 2,861,488,000,000 31 March 2014 24,000 60
7

Italy 2,651,413,000,000 31 March 2014 est. 43,621 124

 

[A.M.]

I am just saying that having a bigger loan or debt is not a problem but the problem is that what is your capacity to repay it.
if you are taking loan to pay loan or adding loan in your Forex reserve account to fool people ...then it is a big problem

The Forex wasn't increased to "fool people", it was done to shore up our liquidity position per the guidelines outlined by IMF. Most of the actions being taken by this government are to ensure that we keep receiving future tranches of the IMF loans. Tranches that are desperately needed to the time being.

I know everyone here loves to say "Nawaz this and Nawaz that" but it is incredibly shortsighted to pin the blame of this on him and his government of 2.5 years. If prior governments had done anything of value, we wouldn't have been in this place to begin with.

The hope is that with the recent investments, improvement in security situation around the country and contracts like the TAPI pipeline, our country will jump start and start growing again. Karachi alone has the potential to increase our growth by a significant amount.

And one more time, our debt is $66B which isn't much considering we have 200 million people living here.

 

[Abingdonboy]

Your post is perfectly rational and makes a lot of sense.

And one more time, our debt is $66B which isn't much considering we have 200 million people living here.

This is irrelevent, how many of thos 200 million pay tax? Since when has population been a consideration for a nationa's ability to service its debt?

 

[Great Sachin]

China is charging 17% interest for Pakistan China corridor project to Pakistan...That's insane....

 

[Abingdonboy]

China is charging 17% interest for Pakistan China corridor project to Pakistan...That's insane....

According to a Chinese analyst, in some projects China is charging 30% discount rates to the Pakistanis.