Pakistan heading for new financial crisis without reforms

kakajee

Minister (2k+ posts)
hafeez-shaikh-afp-670.jpg

ISLAMABAD: Minuscule tax revenues, mismanagement and overgenerous subsidies mean Pakistan is heading for a new financial crisis, say diplomats and analysts, with this week’s budget unlikely to offer any respite.

The budget deficit stood at 6.6 per cent of GDP last year, according to the central bank, the State Bank of Pakistan (SBP), which warned that government borrowing was crowding out the private sector from access to credit.
That reduces the prospects for economic growth in a country that is on the front line of the war against al Qaeda and where more than 5,000 people have been killed in bomb and gun attacks by insurgents since 2007.
External forecasts for the current fiscal year see the budget deficit rising to about seven per cent of GDP, while economists warn the government is running out of ways to fund it — and reluctant to embrace reform with polls looming.
Some see little alternative to a major financial crisis or a return to the IMF, which bailed out Pakistan with an $11.3 billion loan package in 2008 that stopped last November after Islamabad rejected strict reform demands.
“I think it’s possible they could have a real financial crisis by the middle of this year or the fall. I don’t think it’s a question of if, but when they go back to the IMF,” one Western diplomat said.
Pakistan’s tax revenues are among the lowest in the world at just 9.8 per cent of GDP in fiscal 2010-2011, says the Asian Development Bank, and less than two per cent of the population pays tax on their income.
On top of this, the government shells out huge sums on electricity subsidies — about 1.5 per cent of GDP in 2010-11, according to the IMF — for a sector so blighted by mismanagement that most of the country suffers crippling power cuts.
Pakistan has also missed out on payments from the United States for its efforts to fight militancy under the Coalition Support Fund (CSF).
This brought around $8.8 billion into Pakistan’s coffers between 2002 and 2011, including $1.5 billion in 2009-10, but Islamabad stopped claiming the money as ties with Washington collapsed in the wake of the raid that killed Osama bin Laden last year.
“There’s not really any money coming in, and that being the case, the government is financing itself by borrowing from the local banks and the local banks aren’t seeing deposits coming in to keep up,” said Liz Martins, an economist with HSBC.
The pressure on finance houses “means they have very limited money to lend to the private sector,” she said.
“There’s no money coming from the IMF, no money coming from the bond markets, and international investors are very cautious.”
Islamabad borrowed 365 billion rupees ($4 billion) from the banking system — both private banks and the SBP — in the first half of the current financial year, the central bank said in its second quarter economic report.
With inflation already running at around 11 per cent, the alternative of printing money to pay debts opens the way to the nightmare of hyperinflation.
The IMF says Pakistan needs to raise tax revenues substantially to reduce the deficit sustainably, but with an election due within months analysts do not expect Finance Minister Abdul Hafeez Shaikh to follow its advice in his budget on Friday.
“I don’t think the government is able to bear the terms that come with going back to the IMF,” said Sartaj Aziz, former finance minister and vice chancellor of Beaconhouse National University.
The situation was already serious, he warned. “The total expansion of currency is higher than ever, so it is already reaching dangerous levels. It has to be arrested by drastic remedial measures,” he said.
Officials from the finance ministry were repeatedly contacted by AFP, but declined to comment on how they planned to finance the deficit.
In Pakistan, once a general election is called, an interim government takes power for three months while campaigning is under way and Aziz said he thought this would give the government a way to duck difficult budget decisions.
“I think the government will be happy to wait until the election is called and hand the problem over to the caretaker government,” he said.

 
Last edited by a moderator:

kakajee

Minister (2k+ posts)
Kuch tweets yaad aa rahi hain :

-


Tum Kitnay Bhutto maro gey , Ghar ghar se Bhutto niklay ga. ( Tumhari * Marney keliye)

Democracy is the best Revenge? (No Zardari is the best revenge)

Parliament is supreme. No body is above parliament. ( Dakuoon ka tola)

Why dont people leave Pakistan? Who is stopping them? (Our Chu.tia Crime minister)
 

AsifAmeer

Siasat.pk - Blogger
Pakistan has also missed out on payments from the United States for its efforts to fight militancy under the Coalition Support Fund (CSF).
[HI]
This brought around $8.8 billion into Pakistan’s coffers between 2002 and 2011, including $1.5 billion in 2009-10[/HI], but Islamabad stopped claiming the money as ties with Washington collapsed in the wake of the raid that killed Osama bin Laden last year.

[MENTION=17789]WatanDost[/MENTION]



 

AsifAmeer

Siasat.pk - Blogger
Highlights

  • Some see little alternative to a major financial crisis or a return to the IMF
  • “I think it’s possible they could have a real financial crisis by the middle of this year or the fall. I don’t think it’s a question of if, but when they go back to the IMF,” one Western diplomat said
  • Pakistan’s tax revenues are among the lowest in the world at just 9.8 per cent of GDP
  • Less than two per cent of the population pays tax on their income
  • Electricity subsidies — about 1.5 per cent of GDP in 2010-11
  • Printing money to pay debts opens the way to the nightmare of hyperinflation
  • “I don’t think the government is able to bear the terms that come with going back to the IMF,” said Sartaj Aziz
 

InsafianPTI

Minister (2k+ posts)
could you also tell us whether najaam sethi was right in saying that there won't be any more inflation etc (saw his programme few days after budget).

I mean I was thinking otherwise, cus as they are printing more money this will lead to hyper inflation, how did he say otherwise who is 'MR CLEVER FOR SOME'
 

AsifAmeer

Siasat.pk - Blogger
I heard that too.. God knows what he was thinking! Pakistan honestly need some good Financial analysts and free-market Economists that understand equities and debt markets!

could you also tell us whether najaam sethi was right in saying that there won't be any more inflation etc (saw his programme few days after budget).

I mean I was thinking otherwise, cus as they are printing more money this will lead to hyper inflation, how did he say otherwise who is 'MR CLEVER FOR SOME'
 

InsafianPTI

Minister (2k+ posts)
thanks, I guess he was perhaps thinking about the orders he gets on distorting fatcs, I must say he does do very good job on that.
I heard that too.. God knows what he was thinking! Pakistan honestly need some good Financial analysts and free-market Economists that understand equities and debt markets!
 

InsafianPTI

Minister (2k+ posts)
hey did you see the news that china is going to put few million dollars in pakistani banks, not an investment just to save pakistan's economy (just heard about it news)
see who did they have to go and beg, I'm disgusted,
I hope zardari don't transfer that money in swiss banks.

I heard that too.. God knows what he was thinking! Pakistan honestly need some good Financial analysts and free-market Economists that understand equities and debt markets!
 

AsifAmeer

Siasat.pk - Blogger
Nahi.. I didnt hear that. I saw some news like "SBP issuing Dollar bonds" this morning in its auctions.. I didnt look too deep into it. Lekin where did u get the Pak-Cheen Dollar dosti news?

Again, if something like this is done, it wouldnt be a Central Bank Swapline b/w SBP & Chinese Central Banks. I dont know how tthat would work out.. coz Its not like China is gonna profit anything from the deposit. Infact it will surely loose all that money.

Things with the US r getting sour by the day! I honestly dont see IMF stepping in this time. Everyone has their eyes on Greece and Spain but I think the Financial bomb will go off from Pakistan!

hey did you see the news that china is going to put few million dollars in pakistani banks, not an investment just to save pakistan's economy (just heard about it news)
see who did they have to go and beg, I'm disgusted,
I hope zardari don't transfer that money in swiss banks.
 

InsafianPTI

Minister (2k+ posts)
hmm I get worried about my family but on the other hand I wish this to happen as well.
when I see those recieving BISP and laptops and see them madly in love with the current political powers, I wish them to suffer, I wish them to see what they are loving.

I no longer know what to wish!

I heard this news on aaj live tv, I don't think they will just give out a made up news, I'm also not sure how would this help zardari in this crises.
Nahi.. I didnt hear that. I saw some news like "SBP issuing Dollar bonds" this morning in its auctions.. I didnt look too deep into it. Lekin where did u get the Pak-Cheen Dollar dosti news?

Again, if something like this is done, it wouldnt be a Central Bank Swapline b/w SBP & Chinese Central Banks. I dont know how tthat would work out.. coz Its not like China is gonna profit anything from the deposit. Infact it will surely loose all that money.

Things with the US r getting sour by the day! I honestly dont see IMF stepping in this time. Everyone has their eyes on Greece and Spain but I think the Financial bomb will go off from Pakistan!
 

AsifAmeer

Siasat.pk - Blogger
I hear ya bro!

I know this guy who also has family in Pakistan. He sends them money every month. Tells me he has increased remittance because of skyhigh inflation in Pakistan. Took his child out of private school and into the public school to adjust for increased remittances. And how shameslessly these politicians boast about increased remittances. This remittance is "********* money". There was no work Pakistan did to earn it. Remittance is khairat money... its honorless money. A country living on honorless money is without honor!

I have 3 incomplete articles. One explains the nature of "Modern Money", other makes a case for a Sovereign Default on Foreign Loans and the last one on Economics, Finance and Islamic Scholars inwhich I am gonna lash out at them. If every single person in Pakistan is corrupt, then what is their excuse to be quiet and not present a solution..

Bro, just ask your family to maintain a supply of portable drinking water, cooking oil, pulses, lentils and dried beans. KEEP savings in FOREIGN CURRENCY.

A friend of mine who is an ICAP certified Accountant. I was sharing all my info with him about 18 months ago and he thought "Yaar tum Americans baray hyper hote ho". Now he is looking for a job in Dubai...


hmm I get worried about my family but on the other hand I wish this to happen as well.
when I see those recieving BISP and laptops and see them madly in love with the current political powers, I wish them to suffer, I wish them to see what they are loving.

I no longer know what to wish!

I heard this news on aaj live tv, I don't think they will just give out a made up news, I'm also not sure how would this help zardari in this crises.
 

AsifAmeer

Siasat.pk - Blogger
hmm I get worried about my family but on the other hand I wish this to happen as well.
when I see those recieving BISP and laptops and see them madly in love with the current political powers, I wish them to suffer, I wish them to see what they are loving.

I no longer know what to wish!

I heard this news on aaj live tv, I don't think they will just give out a made up news, I'm also not sure how would this help zardari in this crises.

wtf.... u cant write begha!rat?
 

InsafianPTI

Minister (2k+ posts)
yes my family is doing the same, sending more money.
Allah hi bachaey humein.

I hear ya bro!

I know this guy who also has family in Pakistan. He sends them money every month. Tells me he has increased remittance because of skyhigh inflation in Pakistan. Took his child out of private school and into the public school to adjust for increased remittances. And how shameslessly these politicians boast about increased remittances. This remittance is "********* money". There was no work Pakistan did to earn it. Remittance is khairat money... its honorless money. A country living on honorless money is without honor!

I have 3 incomplete articles. One explains the nature of "Modern Money", other makes a case for a Sovereign Default on Foreign Loans and the last one on Economics, Finance and Islamic Scholars inwhich I am gonna lash out at them. If every single person in Pakistan is corrupt, then what is their excuse to be quiet and not present a solution..

Bro, just ask your family to maintain a supply of portable drinking water, cooking oil, pulses, lentils and dried beans. KEEP savings in FOREIGN CURRENCY.

A friend of mine who is an ICAP certified Accountant. I was sharing all my info with him about 18 months ago and he thought "Yaar tum Americans baray hyper hote ho". Now he is looking for a job in Dubai...
 
Sponsored Link