Pakistan debt, is it really grim as we think. Part-1

[RajaRawal111]

I also see the forex reserves and their boasting as a shady propaganda. When we have so much need for spending then why holding it up like this.
About the capacity of CPEC in paying our loans back and our agreements with china. This is what I want to learn, if it will change our situations. The way I see that we dont have any other option other than to let China make its stacks here.
1: No one else is sincere with us on financial matters and investments other than china. (Obviously for its own reasons) but what other options we have ---- answer is none.
2: With China having its stacks in Pakistan we will be saved from the gross scale aggression from west and India. And this is the first and foremost.

Veracity of data is extremely important in making judgment calls on both the present and the future. I think we all are aware of the shady tactics Ishaq Dar and his finance team have used both in the present and in the past to create scenarios that would be favorable for drawing more loans and showing bloated returns.

.

 

[RajaRawal111]

I am not denying anyone of these facts, but as I said above, Is there anyone else out in the world other than China to grab our hand.
For the world we are being portrayed as terrorist nation, and just at the brink of falling into Daaish and talibans hands.
Always at the brink of being penalized to adding the risk to the world by having Nukes.
What if we open us out to the world like India does. And What if we are asked to pay the price in terms of getting rig of or Miraculous Centrifuge technology. A start in our fortune. A pride that Allah gave us to live with.
Did China asked us get rid of it all. In fact they helps us in lots of ways not allowed to talk about. Let us please also look at this other aspect also rather than turning this data in to china bashing.
And (for a moment behaving like insafi) this guy Farukh Saleem is another Dr. Shahid qayamti type goof who will always tell us that Monster is just sitting at our door. A highly biased and crook who has an agenda of his own.

There is no doubt in the fact that Zardari would only cheat and eat as much as he could while Sharifs cheat eat and spend on the country some. They were a bit luckier too as oil prices fell from 104 to just 42, and that China, who wanted to start investments in 2009 but was not comfortable with Zardari, came up with CPEC investment plan. Despite all this, Sharif's could not reach good deals with the Chinese and offered up to 34% profit on equity which made electricity prices as mentioned in this article:

 

[RajaRawal111]

The idiots like farrukh saleem will collect all of the data like this but they will never tell what price Sweedish firm may ask us to get teh cheaper tariff compared to china. The west will never never never help us without asking us to dis-mental our Nuclear capabilities.
See how long did Iran-US honeymoon lasted. Are we ready to risk it all on Penneys to save on cheaper contracts compared to china.

There is no doubt in the fact that Zardari would only cheat and eat as much as he could while Sharifs cheat eat and spend on the country some. They were a bit luckier too as oil prices fell from 104 to just 42, and that China, who wanted to start investments in 2009 but was not comfortable with Zardari, came up with CPEC investment plan. Despite all this, Sharif's could not reach good deals with the Chinese and offered up to 34% profit on equity which made electricity prices as mentioned in this article:

Pakistan coal-based dirty electricity rate=Pakistani Rs 8.90/unit. India solar clean energy: Pakistani Rs 5.33/unit

​

Source​

 

[Shahid Abassi]

How will you pay 45 bn USD for imports and 10 bn in repayment of loans (55 billion USD) if your exports stay at 21 bn and remittances at about 20 bn. (41 billion USD)
There is a gap of 14 billion which you have to finance by borrowing money year after year. Inflation doesn't only come if you devalue the rupee by say 4%, borrowing inflates the market too. One needs to find a balance.

Shahid sahib you once told me that that the drop in exports is actually due to Govts push to keep Rs artificially stronger against dollar (compared to its natural value). My point was that it could be an honest step by Govt to keep the exports and our depts at the optimized state. Let the sale of Jurrab and Bunyan drop a bit and keep the inflation in control so that Awam in Pakistan does not get hurt. What is your opinion on this ?

 

[Munawarkhan]

How will you pay 45 bn USD for imports and 10 bn in repayment of loans (55 billion USD) if your exports stay at 21 bn and remittances at about 20 bn. (41 billion USD)
There is a gap of 14 billion which you have to finance by borrowing money year after year. Inflation doesn't only come if you devalue the rupee by say 4%, borrowing inflates the market too. One needs to find a balance.

& what will happen if the oil prices go back to e.g. USD 75 per barrel.

 

[Shahid Abassi]

& what will happen if the oil prices go back to e.g. USD 75 per barrel.

Then? then we will have long hours of load shedding again. Not because we won't have enough production capacity to meet the demand, but because there will be no money to pay for oil, gas and coal.

 

[Shahid Abassi]

نہیں راجہ صاحب ایسے جواب نہیں ۔ پہلی بات تو یہ کہہ مغربی ممالک آپ کو سوائے ملٹری اور نیوکلئیر ٹیکنالوجی ہر چیز بیچنے کو تیار ہیں بلکہ سولر پینلز جیسی پراڈکٹس بیچنے کے لئے تو وہ آپ کے پاؤں پکڑنے کو بھی تیار ہیں بشرط آپ کے پاس پیسہ ہو ۔
ویسے سوال یہ بھی نہیں کہ سویڈن ہمیں بیچے گا کہ نہیں بلکہ یہ ہے کہ چین جس کی مصنوعات عموماً مغرب کے مقابلہ میں آدھی قیمت پر ملتی ہیں وہ ہمیں وہی چیز جو سویڈن ۶۹۰۰۰۰ کی بیچ رہا ہے وہ ہمیں ۱۵ لاکھ میں کیوں بیچ رہا ہے ۔ کیا چین ہماری مجبوریوں سے فائدہ اٹھا کر ہمیں ہر چیز دگنی قیمت پر بیچ رہا ہے یا پھر کوئی مقامی طاقتیں ہیں جو اس میں اتنا بڑا کمیشن کما رہی ہیں ۔
ڈنمارک، سویڈن انڈیا اور خود چین بجلی ۵ روپئے یونٹ سے کم قیمت پر بنا رہے ہیں اور ہم ۱۴ روپئے میں ۔ میں خود ۰،۲۵ کرونا یونٹ کے حساب سے پے کرتا ہوں جو کہ ۴ روپئے بنتا ہے۔ یہ لوگ کیسے بجلی اس قیمت پر پیدا کر رہے ہیں جبکہ یہاں پر مزدور بھی ساڑھے تین لاکھ تنخواہ لیتا ہے ۔ آپ بہت اہم باتوں کو منجی تھلے گھسیٹ جاتے ہیں اور پھر:lol:کہتے ہیں اگے چلو۔
جب آپ کا صنعتکار اور کسان ۱۵ روپئے یونٹ ادا کرے گا جبکہ انڈیا اور چائینا کے صنعتکار ۵ روپئے ادا کر رہے ہونگے تو ایکسپورٹ کے ساتھ وہی تو ہونا ہے جو کہ ہو رہا ہے ۔​

The idiots like farrukh saleem will collect all of the data like this but they will never tell what price Sweedish firm may ask us to get teh cheaper tariff compared to china. The west will never never never help us without asking us to dis-mental our Nuclear capabilities.
See how long did Iran-US honeymoon lasted. Are we ready to risk it all on Penneys to save on cheaper contracts compared to china.

 

[Rhymetime]

A good thread. I have been looking for objective debates and reviews for a long time, but more often than not, discussions devolve into political matchups.


I will give my input on other factors as well, but I will just clarify the above point. The reason the lawsuit was cited was to show that ratings agencies routinely manipulate their numbers in order to present figures of scenarios that are favorable or unfavorable to certain governments/companies etc, depending on who is doing the lobbying. Once in a while, they are caught with their pants down, and are penalized. But they move on, and carry on. Little changes. So dont discount criticism just because.

In addition to the above, the current government has a long history of cooking the books as well, so we have to be careful when using any numbers floated by them. But in any case, I will try to base my input on facts to the best of my ability.[/COLOR]

Accountant always cook the books like Dar did 1999 .Let this Govt to go you will see real grim pic of Pak

 

[Will_Bite]

Correction: Exports are not 25 bn but the correct figure is 21bn. Our exports in the Zardari's last year were 25bn but since then have fallen yaer on year to 21bn.

I stand corrected. The figures are an approximation anyway.

 

[Will_Bite]

Shahid sahib you once told me that that the drop in exports is actually due to Govts push to keep Rs artificially stronger against dollar (compared to its natural value). My point was that it could be an honest step by Govt to keep the exports and our depts at the optimized state. Let the sale of Jurrab and Bunyan drop a bit and keep the inflation in control so that Awam in Pakistan does not get hurt. What is your opinion on this ?

I dont know the context in which Shahid sb made that statement, but revaluation of currency does not result in reduction in exports,..unless the local vendors are increasing their export prices, which is virtually impossible in a export starved country like Pakistan.

 

[Will_Bite]

I also see the forex reserves and their boasting as a shady propaganda. When we have so much need for spending then why holding it up like this.
About the capacity of CPEC in paying our loans back and our agreements with china. This is what I want to learn, if it will change our situations. The way I see that we dont have any other option other than to let China make its stacks here.
1: No one else is sincere with us on financial matters and investments other than china. (Obviously for its own reasons) but what other options we have ---- answer is none.
2: With China having its stacks in Pakistan we will be saved from the gross scale aggression from west and India. And this is the first and foremost.

The CPEC projects in their current state, have all the ingredients to change the geography for Pakistan...but for PAkistan, so far, it seems like nothing more than a small 5 marla home owner, who is renting his house to Hyperstar, and is assured of getting rental income for a long time to come. CPEC was not meant to be a toll earner for PAkistan. It was meant to be a source of economic zones, which would attract overseas companies to come and set up shop, pay to setup businesses, create local jobs, pay taxes, and develop manufacturing hubs. Instead, China has tossed in a few lame duck power plants to appease the masses, and rest is unheard of......

More importantly, the contracts that have been handed out to China are going to cost us twice as much as the IPPs and rental plants that we have so hated over the years. We are unable to keep up with the revenue payout of IPPs, despite that being at a 'tolerable' 15% on the USD, compared to the 30% that we are going to pay China on the average. Keep in mind that the issue with IPPs was not of power generation. It was of lack of complete recovery, and power losses. The first thing to manage was power transmission, and since that is most technical than physical, the govt ignored that, and went for visible projects, even if they dont produce the desired results. The payout situation to China will start clearing up soon, when our loans start maturing gradually, and the chinese start claiming stake in the organizations they build.

We have gone for China, not because it is friendly to us. Sharifs have gone to them because Chinese dont ask many questions, which is something the Sharifs love. When was the last time you saw any 2 countries sign MOUs worth $42 billion in a matter of weeks? Chinese firms themselves are generally riddled with corruption and kickbacks. They have acted more like loan sharks in our case, where they have gotten their cake, and are going to eat it too. Pakistan will be left with a long trail of interest payments, and since we cant make those payments, we will hand over stakes to those ocmpanies in order to compensate for that. The chinese have signed pretty foolproof contracts,as they dont trust the govt.

 

[Will_Bite]

The idiots like farrukh saleem will collect all of the data like this but they will never tell what price Sweedish firm may ask us to get teh cheaper tariff compared to china. The west will never never never help us without asking us to dis-mental our Nuclear capabilities.
See how long did Iran-US honeymoon lasted. Are we ready to risk it all on Penneys to save on cheaper contracts compared to china.

Perhaps its necessary to understand that Pakistan's problem is NOT of power generation. This has been said so many times on talk shows, forums, etc, but unfortunately, widespread illiteracy and ignorance in our public never allows the true picture to come out the way it is.
Pakistan has more than enough generational capacity. What we dont have is proper and adequate transmission services. Look at this scenario.... (all figures are approximations)

Pakistan has about 8000MW of hydel generational capacity.
Pakstan has about 12000MW of oil based capacity (IPPs)
Pakistan has about 5000MW of gas and coal based capacity (captive plants)

This amounts to more than 25000MW. Pakistans requirements at their peak in summer, are no more than 21000MW. That still leaves us with 4000MW surplus pwoer. So why do we have load shedding?
i) billing issues (frauds, theft, kundas, influential people, unpaid bills)
ii) old and dated transmission infrastructure, which is not able to carry loads over 17000MW, regardless.
iii) priorities of govt. fixing infrastructure is a relatively 'invisible' job. Setting up power plants is visible.

So long as oil prices are below $70, our furnace oil fired IPPs can produce cheaper electricity than coal or gas. So why are we not doing that right now? Oil is cheap...and we have enough IPP capacity. So why dont we have power running through our lines 24/7? Its because when all of those plants are fired, WAPDA network trips.

So before going to China, overseas, solar, etc, we need to fix the transmission grid...upgrade it, and refine it. In absence of that, we could have 40000MW generational capacity, but would still have load shedding.

 

[RajaRawal111]

Are we thinking that there will be night all the time ?
I dont say it will happen over night but improving power and gas supplies will increase the industrial production. Is there absolutely no change that our exports will increase in future. If there is not then why ??
No doubt the current situation is bad, but we are trying to see how it can get better. I want to fight this mind set of spreading disappointment all the time, but it is getting harder and harder.

How will you pay 45 bn USD for imports and 10 bn in repayment of loans (55 billion USD) if your exports stay at 21 bn and remittances at about 20 bn. (41 billion USD)
There is a gap of 14 billion which you have to finance by borrowing money year after year. Inflation doesn't only come if you devalue the rupee by say 4%, borrowing inflates the market too. One needs to find a balance.

 

[RajaRawal111]

Well there are problems over problems, we keep counting our problems and are not counting the solutions. In my part of resources, I will definitely try to address issue of power generation capacity and transmission. I hope i will find enough data to back up our information otherwise we will keep talking in the air like this and keep spreading the disappointment like this.

Perhaps its necessary to understand that Pakistan's problem is NOT of power generation. This has been said so many times on talk shows, forums, etc, but unfortunately, widespread illiteracy and ignorance in our public never allows the true picture to come out the way it is.
Pakistan has more than enough generational capacity. What we dont have is proper and adequate transmission services. Look at this scenario.... (all figures are approximations)

Pakistan has about 8000MW of hydel generational capacity.
Pakstan has about 12000MW of oil based capacity (IPPs)
Pakistan has about 5000MW of gas and coal based capacity (captive plants)

This amounts to more than 25000MW. Pakistans requirements at their peak in summer, are no more than 21000MW. That still leaves us with 4000MW surplus pwoer. So why do we have load shedding?
i) billing issues (frauds, theft, kundas, influential people, unpaid bills)
ii) old and dated transmission infrastructure, which is not able to carry loads over 17000MW, regardless.
iii) priorities of govt. fixing infrastructure is a relatively 'invisible' job. Setting up power plants is visible.

So long as oil prices are below $70, our furnace oil fired IPPs can produce cheaper electricity than coal or gas. So why are we not doing that right now? Oil is cheap...and we have enough IPP capacity. So why dont we have power running through our lines 24/7? Its because when all of those plants are fired, WAPDA network trips.

So before going to China, overseas, solar, etc, we need to fix the transmission grid...upgrade it, and refine it. In absence of that, we could have 40000MW generational capacity, but would still have load shedding.

 

[RajaRawal111]

Thank you Shahid sahib, Will bite and Sahir Shah
This part was to get the suggestions how to look into this matter. I am not getting any more suggestions so. My next part will be directly on Loans to GDP ratio and I will also touch on the loans per capita. I will gather some authentic data for this and post. Obviously need some time for this, so I will post part-2 in few days.

 

[Will_Bite]

Well there are problems over problems, we keep counting our problems and are not counting the solutions. In my part of resources, I will definitely try to address issue of power generation capacity and transmission. I hope i will find enough data to back up our information otherwise we will keep talking in the air like this and keep spreading the disappointment like this.

I am not willing to label anyone a traitor and claim that anyone other than who I vote for is not loyal to Pakistan. I wont say that for Sharif, nor for Zardari. Im sure they are both loyal and mean well within their own right. And if you look at the sticking points between PTI and these 2 parties, apart from the corruption allegations, the difference has always been in the way the govt is run.....the priorities. What needs to be done first. And that is really what defines the pace of progress.

This is what I believe could have happened if priorities were different. If the govt had invested in overhauling the transmission grid in 2013, it would have taken about 2-3 years to do the complete overhaul. And those 2-3 years would have had loadshedding, bt after overhauling, we would immediately see additional 3000 odd MW in our grid, which we are losing because of line losses and tripping. Instead, Sharifs are focusing on building new plants, which will add to generational power, but not to delivered electricity.

We have about 8000MW of hydel generational capacity. On the average, we produce 5000MW, because of water shortage, silt deposits, etc. And the thing about hydel power is that we cannot hold it back, or store it. Once water is released, power is generated...now whether its used, wasted, lost or unused, we cant get it back. The most amount lost is in hydel power, which also happens to be the cheapest. So priority should be to fix the lines, clean the dams, and prop things back up to where they should be.

 

[Shahid Abassi]

Of course things will move forward even if every one takes a piece of the pie as corrupt money. Sure Pakistan is not same as it was in 1947. Yes our exports can increase but does it help if exports increase by a billion or two when our imports are increasing by 3-4 billion a year and our debt bill is increasing by 2-3 billion every year. How long will we borrow in the market at 8% and with that money pay back debts which are due?

Raja sahib while analyzing economy, you don't just say things to create positivism. you must talk about facts and figures. To give a sense of positive feeling is a job of politicians not ours when talking about economy. I would rather like to put things forward as I see them. Normally I am a positive person who search good side of every thing. Sure there are some good sides to our economy too but first we must point out problems before going to solutions.

Improving power and gas situation will surely help but please you tell me if an indian or a chinese industrialist is paying half the price of electricity as compared to what a pakistani industrialist is paying, then how do you expect us to compete in the world market? As will_bite commented, we always had enough production capacity to produce electricity which could meet the demand but when there is no money then how would you buy gas and oil for these plants? Circular debt is about 600 billion rupees today.

Lastly, no doubt there are ways and solutions to correct the situation. We will talk about that.

Are we thinking that there will be night all the time ?
I dont say it will happen over night but improving power and gas supplies will increase the industrial production. Is there absolutely no change that our exports will increase in future. If there is not then why ??
No doubt the current situation is bad, but we are trying to see how it can get better. I want to fight this mind set of spreading disappointment all the time, but it is getting harder and harder.

 

[RajaRawal111]

Of course things will move forward even if every one takes a piece of the pie as corrupt money. Sure Pakistan is not same as it was in 1947. Yes our exports can increase but does it help if exports increase by a billion or two when our imports are increasing by 3-4 billion a year and our debt bill is increasing by 2-3 billion every year. How long will we borrow in the market at 8% and with that money pay back debts which are due?

Raja sahib while analyzing economy, you don't just say things to create positivism. you must talk about facts and figures. To give a sense of positive feeling is a job of politicians not ours when talking about economy. I would rather like to put things forward as I see them. Normally I am a positive person who search good side of every thing. Sure there are some good sides to our economy too but first we must point out problems before going to solutions.

Improving power and gas situation will surely help but please you tell me if an indian or a chinese industrialist is paying half the price of electricity as compared to what a pakistani industrialist is paying, then how do you expect us to compete in the world market? As will_bite commented, we always had enough production capacity to produce electricity which could meet the demand but when there is no money then how would you buy gas and oil for these plants? Circular debt is about 600 billion rupees today.

Lastly, no doubt there are ways and solutions to correct the situation. We will talk about that.

I may have a stuborn approach. But shahid saab I just dont want to keep talking in the air. I want to understand it myself on facts and figures. And that is why i want to involve you as you have apt understanding on these matters. Dont know how much successful i will be to gather real data. And how long it will take me but i will approach it from all aspact. And please dont take impression that i will be defending PMLN. I saw your message on my profile page about your student life few days ago. In same way I used to be Insafi before dhurna. I slipped out when i heard the desire for Umpires Ungli and since then I am not finding my way back. You must have seen my thoughts on Zia & Musharuf
I just cannot stand the idea of army intervention any more.
The job and family affairs do not give me much time to study these figures but i will truy best to conclude it as soon as possible. Indha Allah

 

[Shahid Abassi]

Good intentions, I appreciate your drive.
Yes the real problem is that we lack data other than what is in the media.
I am a bit busy today as tomorrow is the last date for filing VAT returns for my company. I will be with you after tomorrow, inshaAllah.

I may have a stuborn approach. But shahid saab I just dont want to keep talking in the air. I want to understand it myself on facts and figures. And that is why i want to involve you as you have apt understanding on these matters. Dont know how much successful i will be to gather real data. And how long it will take me but i will approach it from all aspact. And please dont take impression that i will be defending PMLN. I saw your message on my profile page about your student life few days ago. In same way I used to be Insafi before dhurna. I slipped out when i heard the desire for Umpires Ungli and since then I am not finding my way back. You must have seen my thoughts on Zia & Musharuf
I just cannot stand the idea of army intervention any more.
The job and family affairs do not give me much time to study these figures but i will truy best to conclude it as soon as possible. Indha Allah

 

[Shahid Abassi]

But as in short brake from work, I want to say this: look at the bigger picture
The government borrowed 4000 billion rupee from banks that is about 40 billion USD
The government borrowed additional 14 billion USD from external means
It makes 54 billion USD.

Now leaving Chinese CPEC aprat.

All metros cost less than a quarter of billion.
Reserves increased by 10 billion.

So where are the remaining 43 billion USD.

But people are happy because of metro, laptops and other perks which all cost nothing as compared to the total amount.

Of course, they haven't eaten up whole of this 43 billion in corruption but it is mismanagement + the problems with the economy.
Biggest reason being governments inability to collect taxes.

یہ اسی طرح ہے کہ ایک فیملی کا سربراہ جس کی ماہانہ آمدن ۵۰ ہزار ہے جاتا ہے اور ۲۰ کروڑ کا قرض لے آئے اور پھر اس رقم میں سے بچوں کو ایک سائیکل اور ایک کمپیوٹر لے دے ۔ بس اب بچے خوش اور انہیں کیا لین دین ہے قرض سے ۔ انہیں کیا معلوم کہ سائیکل اور کمپیوٹر تو قرض کی رقم کا سینکڑواں حصہ بھی نہیں ۔ اور یہ کہ قرض کی رقم کو واپس کیسے کرنا ہے ۔
یہاں بچے کی مثال ہماری عوام ہے ۔

I may have a stuborn approach. But shahid saab I just dont want to keep talking in the air. I want to understand it myself on facts and figures. And that is why i want to involve you as you have apt understanding on these matters. Dont know how much successful i will be to gather real data. And how long it will take me but i will approach it from all aspact. And please dont take impression that i will be defending PMLN. I saw your message on my profile page about your student life few days ago. In same way I used to be Insafi before dhurna. I slipped out when i heard the desire for Umpires Ungli and since then I am not finding my way back. You must have seen my thoughts on Zia & Musharuf
I just cannot stand the idea of army intervention any more.
The job and family affairs do not give me much time to study these figures but i will truy best to conclude it as soon as possible. Indha Allah