Pakistan's Forex reserves rise to $20.40bln

s.shahid

MPA (400+ posts)
o pai,

you are not going to get it , search for your answers on the internet you will find them.

here are some questions to ponder.
1.How do you buy dollars?
2.Why is Afghanistan currency worth more than Pakistani RS but nobody in the world buys Afghan , its only useful in Afghanistan.

3.How are world currencies tied to Gold, and other Commodities?
4.What is GDP how it determines Currency prices.
5.Why is US debt in 25 Trillions yet it is considered worlds top economy?
6.What is Currency trading?

7. What is the purpose of google search.

Once you find these answers the picture will become clearer.

Good night!
Your Quote: Only way to increase good (dollar) reserves is to collect taxes. Unquote

Ways to increase dollar reserves is to increase exports and attract Foreign Direct Investment.

Pakistani government does not buy dollar against Pakistani rupees (for oil or any other import). So Collecting more taxes in rupees will not build foreign exchange reserve.

'Ap' say murad Pakistan thi, not as in you (or me), ap nay personal hi lay lia :)

Petrodollar:

Anyways ,

Good Night
 

NasNY

Chief Minister (5k+ posts)
my quote "Only way to increase good reserves is to collect taxes."

Nothing personal, i understand the confusion
but 10 words to explain the economy is clearly my fault.

by "good reserves" i meant increase GDP

Increase GDP takes the pressure off from foreign reserves, and extra money can be used to spend within the country. Instead of borrowing from foreign lenders to build dams or any infrastructure project.
 

s.shahid

MPA (400+ posts)
my quote "Only way to increase good reserves is to collect taxes."

Nothing personal, i understand the confusion
but 10 words to explain the economy is clearly my fault.

by "good reserves" i meant increase GDP

Increase GDP takes the pressure off from foreign reserves, and extra money can be used to spend within the country. Instead of borrowing from foreign lenders to build dams or any infrastructure project.

ab tu ap nay aur confuse ker dia hai kyun kay now your sentence reads as follows:

only way to increase gdp is to collect taxes.

Anyways

As to the original question: to pay of the external debt we will have to build reserves, for that we need to have greater inflow of dollar than outflow of dollar by increasing exports and remittance.

$13 billion kay reserves say $113 billion ka qarz tu nahi utarnay wala, and you need reserves to pay for your imports and liabilities also.
 

Okara

Prime Minister (20k+ posts)
why did pakistan forex reserves fell from 24 billion dollars to 16 dollars between august 2016 and may 2018.
Wrong policies of Imran Khan. Alhamdu Lillah Ishaq Dar was making Pakistan Asian tiger but he replaced him with Miftah.
 

Okara

Prime Minister (20k+ posts)
my quote "Only way to increase good reserves is to collect taxes."

Nothing personal, i understand the confusion
but 10 words to explain the economy is clearly my fault.

by "good reserves" i meant increase GDP

Increase GDP takes the pressure off from foreign reserves, and extra money can be used to spend within the country. Instead of borrowing from foreign lenders to build dams or any infrastructure project.
It must be mandatory to all Pakistani above 18 must file personal taxes.
 

NasNY

Chief Minister (5k+ posts)
ab tu ap nay aur confuse ker dia hai kyun kay now your sentence reads as follows:

only way to increase gdp is to collect taxes.

Anyways

As to the original question: to pay of the external debt we will have to build reserves, for that we need to have greater inflow of dollar than outflow of dollar by increasing exports and remittance.

$13 billion kay reserves say $113 billion ka qarz tu nahi utarnay wala, and you need reserves to pay for your imports and liabilities also.
I doubt this will clear up your confusion but i then again i can hope.

How_is_GDP_calculated%3F.png
 

s.shahid

MPA (400+ posts)
I doubt this will clear up your confusion but i then again i can hope.

How_is_GDP_calculated%3F.png


Oh bhai meray, I know how GDP is computed. The very specific question to which you replied was as follows;

Can someone help me answer that if these reserves will help pay off the debt taken from the IMF in the near future to avoid being under their program?

Your reply was:

Main reason to have reserves is to import what the country needs, major import product is Oil, if there is no money in your bank account then no one will sell you their products, because they know you cant pay for them.

So in short large reserves proves stability of the economy. Only way to increase good reserves is to
collect taxes.

I agree with everything you said (highlighted in green). The only difference of opinion between you and me is you say to increase reserves you have to collect taxes, I am saying to increase reserves Pakistan has to increase inflow of dollars to the country through higher exports, FDI and remittances. In short inflow of dollar has to supersede outflow of dollar from the country.

Yes, Pakistan needs to increase its GDP but the foreign balance of trade (export less import) component of GDP is most vital for reserves to increase.

During PMLN tenure our GDP was increasing yet our reserves were drastically going down because of rising trade deficit. Pakistan exports have been stagnant for years upon years yet import bill was rising, hence the pressure on the reserves and constant borrowing. Our economy is running purely on debt because we haven't increased export and FDI.
 

NasNY

Chief Minister (5k+ posts)
Oh bhai meray, I know how GDP is computed. The very specific question to which you replied was as follows;

Can someone help me answer that if these reserves will help pay off the debt taken from the IMF in the near future to avoid being under their program?

Your reply was:

Main reason to have reserves is to import what the country needs, major import product is Oil, if there is no money in your bank account then no one will sell you their products, because they know you cant pay for them.

So in short large reserves proves stability of the economy. Only way to increase good reserves is to
collect taxes.

I agree with everything you said (highlighted in green). The only difference of opinion between you and me is you say to increase reserves you have to collect taxes, I am saying to increase reserves Pakistan has to increase inflow of dollars to the country through higher exports, FDI and remittances. In short inflow of dollar has to supersede outflow of dollar from the country.

Yes, Pakistan needs to increase its GDP but the foreign balance of trade (export less import) component of GDP is most vital for reserves to increase.

During PMLN tenure our GDP was increasing yet our reserves were drastically going down because of rising trade deficit. Pakistan exports have been stagnant for years upon years yet import bill was rising, hence the pressure on the reserves and constant borrowing. Our economy is running purely on debt because we haven't increased export and FDI.
So you dont like taxes, i agree with some of what you said but

solution is not to use the bucket to take the water out of the boat,
solution is not to plug the hole,
solution is not to lighten the load.

Solution is to build a better boat.


For long term progress of Pakistan Taxes is what the govt needs to develop the country which creates jobs which generates more taxes, rotates the money back to the people.

It is a well time tested system in all successful economies in the world with a large population.

Most major economies are moving away from the dollar. in the next 50 years Digital currency will take hold. financial Systems developed now will have to be held up for the next 100 years.

You cant think in what needs to be done Now, but what we need to do for 20 40 50 years from now.

A super system of Tax collection will sustain Pakistan economy regardless of what the world economy does.

In short
 
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s.shahid

MPA (400+ posts)
So you dont like taxes, i agree with some of what you said but

solution is not to use the bucket to take the water out of the boat,
solution is not to plug the hole,
solution is not to lighten the load.

Solution is to build a better boat.


For long term progress of Pakistan Taxes is what the govt needs to develop the country which creates jobs which generates more taxes, rotates the money back to the people.

It is a well time tested system in all successful economies in the world with a large population.

Most major economies are moving away from the dollar. in the next 50 years Digital currency will take hold. financial Systems developed now will have to be held up for the next 100 years.

You cant think in what needs to be done Now, but what we need to do for 20 40 50 years from now.

A super system of Tax collection will sustain Pakistan economy regardless of what the world economy does.

In short

So you don’t like taxes, i agree with some of what you said but

Question was not whether I like taxes or not, the question was about the reserves of Pakistan and external debt repayment.

For long term progress of Pakistan Taxes is what the govt needs to develop the country which creates jobs which generates more taxes, rotates the money back to the people.

Agreed and also Pakistan has a high recurring fiscal deficit (domestic income less expenditure) as we have been collecting very little taxes and spending beyond our mean, hence, the high domestic/internal debt and liabilities of the country.

Now as to the remaining point you made, to bhai meray economic factors are inter-related, you can’t look at things in isolation. For taxes to rise (a) productivity has to rise (b) tax evasion has to be curtailed.

For productivity to rise we need to import oil, other raw materials and machinery (used to produce many goods in Pakistan). We also need to import other essential items such as medical equipment, drugs, food commodities etc. You need foreign exchange reserves to import. In addition, productivity will rise if we export more (higher the export, more the wealth, more the taxes and employment). Take the example of current textile industry in Pakistan, its exporting more, creating more job opportunities and generating more taxes for the government.

In case of Pakistan, we are already in debt trap. Our foreign currency reserves are low and there is a current account deficit. To repay the loan we are taking new loans. When the current government took over, our external debt was $95.2 Billion, now its $113 billion (despite repayment of $24.5 billion by Pakistan in interest and principal loans during this period). It means we are taking more loans to pay back loans (this has been going on for decades). We are supposed to pay another $28 billion approximately till June 2023 (that’s about $1 Billion a month). From where will we get the foreign exchange to repay our imports and liabilities? More importantly, why are we in such a position? Because our exports have been stagnant for years (around $22 - $24 Billion per year for years), yet imports have been rising.

Year 2008: Export $20.3 Billion, Import $ 42.3 Billion

Year 2009: Export $17.5 Billion, Import $ 37.5 Billion

Year 2010: Export $21.4 Billion, Import $ 31.6 Billion

Year 2011: Export $25.3 Billion, Import $ 43.5 Billion

Year 2012: Export $24.6 Billion, Import $ 43.8 Billion

Year 2013: Export $25.1 Billion, Import $ 43.7 Billion

Year 2014: Export $24.7 Billion, Import $ 47.5 Billion

Year 2015: Export $22.1 Billion, Import $ 43.9 Billion

Year 2016: Export $20.5 Billion, Import $ 46.9 Billion

Year 2017: Export $21.8 Billion, Import $ 57.4 Billion

Year 2018: Export $23.6 Billion, Import $ 60.1 Billion

Fiscal Year 2019: Export $24.3 Billion, Import $ 51.9 Billion

Fiscal Year 2020: Export $22.5 Billion, Import $ 42.41 Billion

What we export in entire year India exports that much in other month. The pace at which India, Bangladesh and China’s exports have increased since 2003, had we followed at the same regional pace, our exports would have been worth more than $65 Billion today (yeah hota tu kitna hota aaj humara external debt, foreign exchange reserve and how much more taxes?)

To finance our imports and debt liabilities we have been borrowing again and again. When you are in such a situation, lenders not only dictate your economic but also political decision making. For example IMF constantly pressurize to remove subsidy on electricity. Our cost of energy is way too high, when we do so, cost of production increases. It causes less business viability, decrease income, unemployment and in turn lesser taxes.

Pressures from Saudi Arabia and UAE on multiple fronts are example of economic and political influence when you are highly indebted.

In short to improve and sustain economy, all economic indicators, current account deficit, fiscal deficit, taxes, unemployment, inflation etc etc has to improve.

Increases taxes and exports both. Hope that settles the matter.

Peace
 

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