What if Pakistan does defualt?
Pakistan is going through its worst economic situation at the moment and it has been revealed now that every ruling class from PML, PPP and ARMY failed to uplift the economy. We all know that Pakistan is a rich resource country in minerals, manpower and agriculture and moreover intelligent enough to be an Atomic Power. Then why it is unable to plan and managed its resources during last 6 decades? It is because we are being ruled by Land Lords and buerucracy who just exhausted the Government funds on their own benefits and luxury life style. Why these govt officials are provided with benefits like free fuel and other fringe benefits they are failure to us and our country. I have worked for one year in a semi Govt organization and the way they sucked the funds with no results you can imagine what a Pure govt organization and ministries are doing. May Allah save and bless us.
Answers (5)
Shaunak A
Strategy Consultant at IBM
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Caveat Emptor: I'm Indian, so you might not like what I'm about to write since my perspective may be completely different and unpalatable.
Pakistan's priorities since independence have always been reflexively reactive to India's. This is why growing the economy through meaningful reform has never been the number one (or two or three) priority for its rulers.
By making Kashmir the cornerstone of Pakistan's policy, its leaders made it Pakistan's raison d'etre, almost. This made Pakistan's policy anti-India in its stance, forcing it to try to match India's defence spending. Like it or not, there's a huge difference between the two countries in terms of economic potential. So Pakistan, early on, got caught trying to punch above its weight.
Another important factor was the Pakistan military's dominance of society. The Armed Forces control an overwhelming section of the economy through front companies. Running companies isn't their core competence, and the record reflects that. Interference by the armed forces meant that policies were enacted that helped these firms, instead of helping increase competition.
There are many factors, but the two most important, according to me, are ..
1. Pakistan's policy making became reactive and anti-India
2. Interference by the armed forces in the policy making process.
Cheers,
Shaunak
I think here we have two questions.
1. Why did Pakistan reach this state?
2. What will happen if Pakistan defaults?
Answer to part one I think lies in the sutained absence of a strong political will to tread the path of economic and social welfare. Pakistani politicians have even proven to be worse than their Indian counterparts!
Another problem with Pakistan has been lack of quality education and an economy incapable of engaging the talented Pakistani youth.
Answer to part 2 is,
If Pakistan defaults, the western world will rise to support Pakistan as a collapsing nuclear power can be a very dangerous situation which nobody would like to see. Now IMF and world bank are no stragers to collapsing economies and they have a well prepared recipe to handle such situations. I wouldn't be surprised if they come up with the same lousy policies which they used in East Asian crisis, in Argentina, etc. Thus we can expect financial help to Pakistan in return of much tighter control of IMF/"western powers" over the financial system of Pakistan.
Also, I expect USA in particular to try to play a more active role in local politics and would like to have an American puppet sitting at the helm of Pakistani political system. This is again nothing new to American foreign policy.
Bruno R
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Hi Majid,
As Bhasker has put it, it seems there are 2 questions. For the historical reason I have no clue.
For what may happen, I have a nightmare scenario that I'm not wishing you : the Chicago boys will enter the scene.
This means applying the "Shock Doctrine" as Naomi Klein had named it, and this has always been only possible by applying drastic reduction of democracy and people freedom. So will enter the game companies like Blackwater and other equivalents (private military corporations).
The FMI will again set some drastic conditions to lend money that will force the country to reduce or nearly eliminate any Govt implication in social helps (schools, health care, etc...) and sell most of its resources and industries to foreign private firms.
Their new leaders will make obscene profit, both for their company and personally, and the middle class will get poorer.
After 10 to 30 years of this treatment, the country will be so devastated that the most improbable will happen : back to democracy, nationalisation of the most important assets, recovery of some autonomy in the crucial domains (food, energy, land exploitation...)
During the dark age period, India and Muslim Middle East countries will play an important role, and socio cultural differences will exacerbate tension leading to a spread of urban riots, with a menace of "Balkanisation" of the country, and that will justify and reinforce the set-up of a very authoritative Govt.
My 2 cents,
Bruno.
Asad R
Owner, Currency Market Associates (CMKA)
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Hi Majid,
I have forwarded Fourth option to the Advisor od PM Shaukat Tareen.
Please folow the link.
http://www.brecorder.com/index.php?id=829319&currPageNo=2&query=&search=&term=&supDate=
We lack conviction, determination and are good enough to present our case. I do Business talk shows on AJJ Tv Channel.
Recently, I have put forward another plan on the Television Channel and recommended the government that Pakistan needs to have a group of sensible qualified financial analyst and economist and prepare a sheet to present its case. Jot down the numbers that is spent for security purpose.
How much money is our tourism business loosing? What is annual job loss number? How much does that impact on the GDP? Costing should be based on last 7-years. Put this bill that in the parliament, get it endorsed from the parliament and present it to the world or leave us alone.
Anyway, the country will not default, but times are certainly tough. Not only for Pakistan, the world will witness another collapse coming in next 3-months time. Credit Card and Auto Loans will take the lead. Preparing year end Balance Sheet and Maturities of large deals will also become pain in the neck.
Cheers
Asad
James C B
JCBCapital.com, JCB Capital Performance - Personal Wealth Management, Asset Manager, Financial Planner, Wealth Adviser
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Hi Majid,
Pakistan has requested aid from both China and the IMF - aid should be forthcoming.
Pakistan's central bank injected 39.37 billion rupees ($484 million) into the country's money markets to increase the funds available for banks to lend to each other. The Karachi-based State Bank of Pakistan added the funds through so-called two-day reverse repurchase agreements at a rate of 12 percent, it said in a statement today. The central bank received offers for 39.87 billion rupees of the funds. Repurchase agreements allow banks to borrow money using treasury bills as collateral and are used to manage occasional shortages or surpluses of cash in the interbank market. - Bloomberg
JC Brandon
