Why is IMF blaming previous Govts for current economic situation in Pakistan.

[That Guy]

PIA has broken even today so has now IMF asked to privatize it?

It broke even on an operational level, it still is far from being a profitable company.

Rupee was held up for corruption by PMLN but the actual inflation happened in energy and that is where IMF moves in.

Please explain, i'm not sure what you mean by this.

 

[BHarwana]

It broke even on an operational level, it still is far from being a profitable company.


Please explain, i'm not sure what you mean by this.

Look at Pakistani imports they are mostly energy. If you support rupee what will happen? At the same time you tax energy heavily. Means PMLN was just throwing rupee in market.

 

[Nilgiri]

At the same time you tax energy heavily.

What do you mean? Pakistan tbh severely under-taxes energy compared to developing peers.

PKR devaluation is because market wise Pakistan goods and services are just not in demand and stagnant in composition (due to lack of quality investment) compared to what Pakistan demands from the world (which just grows and diversifies each passing year)....and loans/subsidies were used by govt previously to hold at some artificial peg of PKR compared to the market forces....in basic kick-the-can-is-the-oligarch-plan style.

Essentially this system is one that prefers short term over-consumption + oligarchs compared to more balance with investment + competition (that actually grows and stabilises the economy long term). Why the former is preferred in Pakistan is a deeper story in itself.

So of course Pakistan must tax its consumption right now so it has buffer to pay back the loans it took. Keep on the road and that buffer turns into investment opportunity (i.e GFCF increase) after debt pressure is stabilised. In ideal world Pakistan would have shed its oligarch structure as much it could, focus on institutions and focus on investment in the lower-debt pressure years. But it didn't....and so now you have what you have....and you have only some options to deal with it. Saying energy is "taxed" "heavily" is frankly the very reason you got into this mess.

Some of your comments and positions in this thread are quite foolish and immature tbh. Pakistan must pull up its pants and get to work doing things hard way rather than launder extensive economic policy through some oligarchs and cartels that are out for a cheap buck using status quo....they have to be managed, not indulged.

@Oscar @That Guy @VCheng @Indus Pakistan

Means PMLN was just throwing rupee in market.

Not really, it was soaking in USD and other forex too much via debt. Understand that a loan essentially is not putting physical currency of your own to exchange what you take from another. It is the promise that you are good for doing so at a later date.

 

[That Guy]

Look at Pakistani imports they are mostly energy. If you support rupee what will happen? At the same time you tax energy heavily. Means PMLN was just throwing rupee in market.

I still not quite sure what you mean, but I can say that Pakistan doesn't really tax the energy sector at all. In fact, the energy sector is quite subsidized, and unjustifiable so, as the reason why those subsidizes existed was to encourage economic growth, through increased industrial output, but that has not materialized at all.

To be frank, the rupee has little to do with the energy sector, and only the end use is where the rupee actually factors in. The US dollar is what Pakistan uses to import oil and gas.

I should also mention, Pakistan also faces a huge problem of oil and gas theft, as well as illegal refineries, which have cost the economy and the energy sector quite literally billions of dollars, including unpaid taxes.

 

[BHarwana]

I still not quite sure what you mean, but I can say that Pakistan doesn't really tax the energy sector at all. In fact, the energy sector is quite subsidized, and unjustifiable so, as the reason why those subsidizes existed was to encourage economic growth, through increased industrial output, but that has not materialized at all.

To be frank, the rupee has little to do with the energy sector, and only the end use is where the rupee actually factors in. The US dollar is what Pakistan uses to import oil and gas.

I should also mention, Pakistan also faces a huge problem of oil and gas theft, as well as illegal refineries, which have cost the economy and the energy sector quite literally billions of dollars, including unpaid taxes.

Pakistan has all the problems which you have mentioned I agree and due to all these problems we went to imf in the first place. Now the question still remains we went to imf for these problem and now we have one additional problem of debt because of IMF. So have our problems reduced or grown because of IMF?

I am not talking in context to current loan I know we need it but I am talking in general context.

 

[VCheng]

Pakistan has all the problems which you have mentioned I agree and due to all these problems we went to imf in the first place. Now the question still remains we went to imf for these problem and now we have one additional problem of debt because of IMF. So have our problems reduced or grown because of IMF?

If going to IMF increases Pakistan's problems, then it always has the choice not to go to the IMF. Why approach them at all? Tussi IMF kol naa jao. Nobody forces Pakistan to do so. Even now PMIK has the choice not to approve the bailout.

 

[BHarwana]

If going to IMF increases Pakistan's problems, then it always has the choice not to go to the IMF. Why approach them at all? Tussi IMF kol naa jao. Nobody forces Pakistan to do so. Even now PMIK has the choice not to approve the bailout.

Going to IMF always increases problems but going to IMF is a necessity now because we don't have enough foreign reserves. They are very low and we need to increase our financial security. IK has no other option. What are his other options?

 

[VCheng]

Going to IMF always increases problems but going to IMF is a necessity now because we don't have enough foreign reserves. They are very low and we need to increase our financial security. IK has no other option. What are his other options?

Look at Argentina as an example of how to get over a crisis without going to the IMF.

 

[BHarwana]

Look at Argentina as an example of how to get over a crisis without going to the IMF.

Why look at Argentina, Argentina is not Pakistan. Argentina don't has Afghanistan as a neighbor where USA is cultivating terrorism.
Give me concrete options not your bed time theories plz.

 

[VCheng]

Why look at Argentina, Argentina is not Pakistan. Argentina don't has Afghanistan as a neighbor where USA is cultivating terrorism.
Give me concrete options not your bed time theories plz.

The basic principles are still the same. Would the sky fall down if Pakistan defaults? How much more difficult can it get than what it is already?

 

[BHarwana]

The basic principles are still the same. Would the sky fall down if Pakistan defaults? How much more difficult can it get than what it is already?

If we default on loans we risk a greater damage to our economy. We have to go it IMF there is no other option. We have huge Western debt of 95 billion and if we default we will have to give up our assets to Western firms and we would further reduce our govt spending and economy will become a puppet of the west. Now you tell me is that good or bad for us?

 

[VCheng]

If we default on loans we risk a greater damage to our economy. We have to go it IMF there is no other option. We have huge Western debt of 95 billion and if we default we will have to give up our assets to Western firms and we would further reduce our govt spending and economy will become a puppet of the west. Now you tell me is that good or bad for us?

So how is that any worse that what is happening anyway? At least this way there is no debt to carry forward.

@Nilgiri Any thoughts on the Argentinian "solution" please.

 

[BHarwana]

So how is that any worse that what is happening anyway? At least this way there is no debt to carry forward.

But the assests we will surrender are of far higher value than the the debt that is upon us, so how is it a good option for us and how will it make our situation better?

 

[VCheng]

But the assests we will surrender are of far higher value than the the debt that is upon us, so how is it a good option for us and how will it make our situation better?

What assets are you referring to here, and their value?

 

[BHarwana]

What assets are you referring to here, and their value?

Financial institutions will take over your govt run businesses and they will extract their money out of them? Won't they?

So going back to IMF is a necessity.

Now look at India they have a huge debt and they tell their population that no debt is good because of their high GDP but in actual IMF it's self said Indian GDP is not that big as told and all Indian forex are made from FDI and loans. If tomorrow India economic bubble burst the country will intiate the worst ever recession.

This is how IMF debt trap looks like thanks for helping me explain it.

Pakistan is currently in far better shape and can pull out of it. IMF loans and other institutional loans are never good. They always hurt economy and make economic difficulties for you. This loan which IK took from IMF is a burden on Pakistan which IK has placed on our shoulders but we Pakistanis have allowed so many corrupt to take loans in our name now why not allow a good leader to do so. May be he will prove IMF is good for countries after all.