what would Happen to a Country if its Loan is Written off ?

[FaujHistorian]

$500 bil?!! That is 10 times your budget every year. What do you want to do with it?

That's our basic basic needs for a healthy country.

If I could use the example here.

For a healthy man, there is a need for 2000+ calorie per day. if he gets 700 calories per day he can survive perhaps but he definitely will not be healthy.

Same thing is true for Pakistan .

With 200 million population, we need about $500 billion a year to have a healthy society where food and fuel is affordable and health care and education is free.

Howe do we get to that stage.

Simple.

We need to copy hard work of citizens in our neighborhood like China, Bharat, and S Korea.

 

[VCheng]

Of course. That I thought is a reasonable assumption. There is always someone to buy everything. And that someone will prefer a country with devalued currency to buy stuff.

In this day and age of global markets, your assumption may not hold true any longer.

We need to copy hard work of citizens in our neighborhood like China, Bharat, and S Korea.

Not just hard work, hard work done consistently in the same direction over decades at least.

 

[Haroon Syed]

Hahaha. No I meant 50 is easier for calculations. Like it is easier to calculate x% of 50 and to calculate 50 as percentage of something else.

Don't you think zero would have made it more easy . Any ways it was nice talking to you.

 

[FaujHistorian]

Not just hard work, hard work done consistently in the same direction over decades at least.

Amen brother. Amen!

Like we cannot survive as a family by getting a job for one month.

Heck no!

We have to work year after year after year for decades and decades an on an on.

Only then situation will change for the positive.

Thank you.

 

[rubyjackass]

With 200 million population, we need about $500 billion a year to have a healthy society where food and fuel is affordable and health care and education is free.

Foreign debt is used to balance budgets. $500bil budget means around 5 times that as GDP. That will put Pakistan's GDP percapita at $12500. That is not a country with basic needs. That is a rich country.
I think you mean to say you need $500 bil GDP not $500 bil budget. But you are right that much can only come from a disciplined economy and taxation. And it needs Pakistan's population to grow slower than its economy, by a good margin.

 

[FaujHistorian]

I think you mean to say you need $500 bil GDP not $500 bil budget.

500 billion budget/year

Foreign debt is used to balance budgets. $500bil budget means around 5 times that as GDP. That will put Pakistan's GDP percapita at $12500. That is not a country with basic needs. That is a rich country..

For a healthy country these are the basic needs and the corresponding budget.

Actually Pakistanis do not understand how hard they need to work.

Many around here go to Norway and come back dreaming to be living just like Norwegians.

They don't understand that Pakistan will need HUGE per person spending in dollars (not some $hitty rupee)

How huge?

About 6 trillion a year.

So considering our hopes and dreams, 500 billion is small change. hahaha.

Hope you understand that I am not boasting here.

but just explaining that for a given lifestyle of citizens, how much is the spending need per year for a given country.

 

[VCheng]

And it needs Pakistan's population to grow slower than its economy, by a good margin.

That is another important point. As long as the rate of economic growth lags behind that of population growth, overall the population gets poorer and poorer, despite development.

 

[FaujHistorian]

That is another important point. As long as the rate of economic growth lags behind that of population growth, overall the population gets poorer and poorer, despite development.

While population figures are important

But in general population figures are red hearing

Just see what Chinese just realized. and repealed the one child policy.

FYI they have finally realized the folly of concentrating on population control.

 

[VCheng]

While population figures are important

But in general population figures are red hearing

Just see what Chinese just realized. and repealed the one child policy.

FYI they have finally realized the folly of concentrating on population control.

It is a very difficult balancing act over the long term, as the Chinese are finding out. Anomalies and disturbances in the population pyramids have significant effects, both positive and negative, over decades.

 

[rubyjackass]

If all the lenders write off Pakistan's $90 billion debt today, Pakistan will successfully get $90 billion worth of loans the very next day

So instead of building Foriegn reserves($20 billion), why dont we pay our debt with that?

I will explain this simplistically in as few lines as possible. Banks give loans to people who can return them not to those who need them. Same with loans given to countries. If people have no-confidence that you will return them, they will demand more interest from you.

The $20bil reserves of Pakistan is a dynamic number. Everyday imports reduce this number, exports increase it. Old loans are paid off with this reserves(because they reach maturity date). New loans are taken.

Now if the reserves are low, new loans will have higher interest rate. So the reserves keep depleting as the interest increases every year.


Let us say Pakistan paid $20 bil of its loans today. Then in one year, the economy will collapse unless government cuts back on essential expenditure or borrow again, because Pakistan is a trade deficit country. And this borrowing cost/interest would be much higher than the interest the country would pay with $20bil reserve.

And that is why Faiez's quote above is true though funny. Pakistan will get cheaper loans if current loans are written off.


Another funny thought:
If you are a Pakistani American, then it is a good business opportunity. You take a million dollar loan in US(there interest rates are now around 1%), then buy Pakistani government issued dollar bonds with it. The bonds will give you 8.5% interest. That way you are helping Pakistan by giving it dollars. If you use the profit to finally invest in Pakistan(buying land or something), then even better for Pakistan.

While population figures are important

But in general population figures are red hearing

Just see what Chinese just realized. and repealed the one child policy.

FYI they have finally realized the folly of concentrating on population control.

Chinese situation is totally different. They repealed one child policy because, they ended up in a situation where there are too few working people to bear too many senior citizens.

The lesson for us, which India has taken is that, do not drastically try to reduce your child births. The one-child generation will bear the burden of twice their population of senior citizens.

The lesson is not to 'don't control population at all'. More population is an asset only if all of it is productively employed and educated. Otherwise they are troublemakers/anarchists in the waiting with no jobs and livelihood. Pakistan needs to seriously control population now. Already the percentage of kids going to school is dropping. Which means unemployed/employed ratio is increasing, an impending law and order nightmare.

 

[VCheng]

Another funny thought:
If you are a Pakistani American, then it is a good business opportunity. You take a million dollar loan in US(there interest rates are now around 1%), then buy Pakistani government issued dollar bonds with it. The bonds will give you 8.5% interest. That way you are helping Pakistan by giving it dollars. If you use the profit to finally invest in Pakistan(buying land or something), then even better for Pakistan.

The reason Pakistani government bonds give 8.5% is only because they are rated to be far riskier.

 

[rubyjackass]

So considering our hopes and dreams, 500 billion is small change. hahaha.

Hope you understand that I am not boasting here.

but just explaining that for a given lifestyle of citizens, how much is the spending need per year for a given country.

I understand. You have higher standards. I will be content if there is no extreme poverty in India. Sub-$10000 percapita is ok.

The reason Pakistani government bonds give 8.5% is only because they are rated to be far riskier.

True. But we know(i mean we believe with our hearts) our governments don't default. If you are patriotic enough, you wouldn't mind. All the Pakistanis in the West flaunting their patriotism should put their money where their mouth is.
8.5% coupon per year dude! That is huge for someone spending in rupees.

 

[GreenGuy]

No need to bash the OP.
He just needed an answer to a hypothetical question which i am sure he got.
He just wanted to know what would happen if Pakistan's debt in 0.
Now being a hypothetical situation it doesnt matter how you make it zero keeping in view the context of the question.

Now i am not any good in economics either so i have some questions as well.
This thread is good for educational purpose.

Can a country ask for a type of payment of its own choice for goods being exported?

 

[FaujHistorian]

Chinese situation is totally different. They repealed one child policy because, they ended up in a situation where there are too few working people to bear too many senior citizens.

The lesson for us, which India has taken is that, do not drastically try to reduce your child births. The one-child generation will bear the burden of twice their population of senior citizens.

The lesson is not to 'don't control population at all'. More population is an asset only if all of it is productively employed and educated. Otherwise they are troublemakers/anarchists in the waiting with no jobs and livelihood. Pakistan needs to seriously control population now. Already the percentage of kids going to school is dropping. Which means unemployed/employed ratio is increasing, an impending law and order nightmare.

bhai

I think we are talking about the same thing.

We don't need population control.

No need to bash the OP.
He just needed an answer to a hypothetical question which i am sure he got.
He just wanted to know what would happen if Pakistan's debt in 0.
Now being a hypothetical situation it doesnt matter how you make it zero keeping in view the context of the question.

Now i am not any good in economics either so i have some questions as well.
This thread is good for educational purpose.

Can a country ask for a type of payment of its own choice for goods being exported?

Another simpleton post just like OP

It clearly shows our educated elite is being lazy arse no good baikaar.

Just be part of international system. Be good global citizen.

work your @rse off like they are doing in China, Bharat or South Korea

It is like you want to sit in FSc exam. Instead of working hard, you are looking for parchis.

Pathetic.

IAll the Pakistanis in the West flaunting their patriotism should put their money where their mouth is.
8.5% coupon per year dude! That is huge for someone spending in rupees.

Now I think you are joking about a complex financial instrument.

 

[GreenGuy]

O bhai he just wanted to know what would happen if a country's debt is zero.
Everybody knows that no one writes off someone's debt so simply.

Work hard is good but its of no use unless you are also making an effort in the right direction.