March 2010 April 2010 May 2010 June 2010 July 2010
August 2010
September 2010 October 2010
November 2010
December 2010
January 2011
February 2011 March 2011 April 2011 May 2011 June 2011 July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 January 2012 February 2012 March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012 October 2012 November 2012 December 2012 January 2013 February 2013 March 2013 April 2013 May 2013 June 2013 July 2013 August 2013 September 2013 October 2013 November 2013 December 2013 January 2014 February 2014 March 2014 April 2014 May 2014 June 2014 July 2014 August 2014 September 2014 October 2014 November 2014 December 2014 January 2015 February 2015 March 2015 April 2015 May 2015 June 2015 July 2015 August 2015 September 2015 October 2015 November 2015 December 2015 January 2016 February 2016 March 2016 April 2016 May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 January 2017 February 2017 March 2017 April 2017 May 2017 June 2017 July 2017 August 2017 September 2017 October 2017 November 2017 December 2017 January 2018 February 2018 March 2018 April 2018 May 2018 June 2018 July 2018 August 2018 September 2018 October 2018 November 2018 December 2018 January 2019 February 2019 March 2019 April 2019 May 2019 June 2019 July 2019 August 2019 September 2019 October 2019 November 2019 December 2019 January 2020 February 2020 March 2020 April 2020 May 2020 June 2020 July 2020 August 2020 September 2020 October 2020 November 2020 December 2020 January 2021 February 2021 March 2021 April 2021 May 2021 June 2021 July 2021 August 2021 September 2021 October 2021 November 2021 December 2021 January 2022 February 2022 March 2022 April 2022 May 2022 June 2022 July 2022 August 2022 September 2022 October 2022 November 2022 December 2022 January 2023 February 2023 March 2023 April 2023 May 2023 June 2023 July 2023 August 2023 September 2023 October 2023 November 2023 December 2023 January 2024 February 2024 March 2024
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29
30
31
News Every Day |

Is default an option for Pakistan?

6
Is default an option for Pakistan?

KARACHI: Keeping the government’s well-worn assurances aside, the International Monetary Fund (IMF) has yet not released the $1.2 billion tranche direly needed by Pakistan.

While the country’s nuclear arsenal is not under threat, it is a testament to the fear of default that such questions are being raised. However, what would happen if the promised funds do not materialise?

“Is Sri Lanka better after default?” the taboo question was voiced aloud by former Federal Board of Revenue (FBR) chairman Shabbar Zaidi, who seemed to think so in an interview with Dawn, a thought recently echoed by former president Asif Ali Zardari.

“Sri Lanka is better off on all economic indicators. Their production is improving, their consumption habits are better, their exchange rate has stabilised, and their politics are less in flux. The default made them realise the country’s problems and take the hard decisions,” Mr Zaidi says.

As controversial a statement as this is, Sri Lanka’s exchange rate appears to become less mercurial. Since it defaulted in April 2022, the Sri Lankan rupee has stabilised — it was 325 Sri Lankan rupees to a US dollar then and it is 342 Sri Lankan rupees as of last week, a depreciation of 6pc. Pakistani rupee, on the other hand, has depreciated by 54pc.

However, similar to Dar bowing under Fund’s pressure to have a free exchange rate, Sri Lanka also plans to ensure its rupee is fully market-driven. Since March 7, it has shifted to an ad hoc pegging arrangement that is leading to a continued depreciation of the currency.

As per Bloomberg, Sri Lanka’s inflation rate eased for the fifth straight month to 50.6pc last month after peaking at nearly 70pc last year. Thankfully, Pakistan is not facing a rate that high (as yet), but its Consumer Price Index is expected to continue to rise to 30pc. Its short-term inflation, measured by the Sensitive Price Index, hit an all-time high at 45.64pc for the week ended March 16.

“My analysis of Sri Lanka is not what the average Pakistani perceives. Sri Lanka has gone through a very dark period. Yes, it is awful for the country to default, but my question is, what is the technical difference: they could not import oil or open letters of credit and Pakistan is going through the same thing,” says the former FBR chairman.

But, according to the New York Times, just because the South Asian nation is calmer does not mean things are better. While long fuel lines have disappeared, two out of five households spend 75pc of their household income on just food purchases. Charity Save the Children estimates that half of Sri Lankan households are cutting their children’s food intake.

Sri Lanka has suffered through punishing IMF conditions, including a recent 100 basis points increase in the policy rate, to avail a $2.9bn bailout package. However, while things have stagnated in Sri Lanka, they are not getting worst post-default, whereas the same cannot be said for Pakistan’s indicators.

Moody’s recently downgraded Pakistan’s rating to Caaa3 — as per the company’s rating scale, only Ca (very near default) and C (defaulted) are below the country’s current standing. Sri Lanka is a step lower than Ca.

“I am not saying that Pakistan should default; the fear of bankruptcy is the fear of the unknown. While thousands died because of the Tamil Tigers issue, no deaths were caused by the default. Default is a taboo, but that is not the case,” says Mr Zaidi.

We have not had a sovereign debt default — which is when the government is unable to pay off its loans — but technically we are in a state of default, he adds.

Another example Mr Zaidi gives is Argentina. “Many countries, such as Argentina, have defaulted, but their economy recovered, and they still receive foreign direct investment (FDI) flows,” he says.

The Latin American country has been extended nearly $44bn under the Extended Fund Facility, the Fund’s largest-ever under that credit window. However, Argentina is a serial defaulter — it has defaulted nine times in its history, including three times during the past two decades. In 2001, the government defaulted by a whopping $132bn of federal sovereign debt. Its latest default was in May 2020.

Not an example to be emulated, Argentina’s policy rate is a staggering 78pc amidst inflation that has crossed 100pc. It’s growth rate is extremely volatile — in 2020 it was negative 9.94pc before jumping to 10.4pc in 2021 and stabilising to 4pc in 2022. It is also rated Ca by Moody’s.

It still became part of China’s Belt and Road Initiative in February 2022 though it is considered an ally of the United States. And Mr Zaidi is right; post-default, its FDI inflows stabilised — in 2021, they increased to $6.6bn from $4bn in 2020.

The German Ambassador Alfred Grannas once said Pakistan is important because it has ‘interesting’ neighbours. The country’s political ties and geo-strategic location seem to ensure that friendly countries park just enough in reserves to ward off default by a hair’s breadth.

While Pakistan has not officially declared its inability to pay off its loans, it is borrowing or rolling over debt to continue to stay afloat.

If Pakistan was to default tomorrow, everything that is happening: high inflation rate, high price of fuel, volatile exchange rate, and food scarcity would be exacerbated. Sri Lanka’s examples seem to indicate that, in that case, the country will sink further into a state of hunger and apathy, waiting for a better tomorrow based on borrowed funds.

Argentina’s history indicates that inflation, high-interest rates, and volatility will plague the country for decades even if investments (always iffy for Pakistan, even in more robust economic times) continue to flow in. The ditch the country has dug itself into cannot be escaped from in the short or medium term. Its repercussions may continue to haunt the next generation.

Published in Dawn, March 19th, 2023

Москва

Пассажир рейса Москва — Пермь попал в реанимацию

The 10 Intense New Action Movies on Netflix That Left Me on the Edge of My Seat!

Top 5 Websites to Watch FREE Movies - TV Shows (No Sign up!)

Top 10 Love Affair Movies of the 2000s and 2010s

I was diagnosed with cancer aged 39… you are never too rich, too famous or too young, says Dr Philippa Kaye

Ria.city






Read also

How buying a central Ohio home could change this summer

‘There is scope..’ – Journalist David Ornstein tips Man United to sign £100m rated striker

$935M Powerball jackpot up for grabs during weekend drawing

News, articles, comments, with a minute-by-minute update, now on Today24.pro

News Every Day

The 10 Intense New Action Movies on Netflix That Left Me on the Edge of My Seat!

Today24.pro — latest news 24/7. You can add your news instantly now — here


News Every Day

I was diagnosed with cancer aged 39… you are never too rich, too famous or too young, says Dr Philippa Kaye



Sports today


Новости тенниса
WTA

Азаренко вышла в полуфинал турнира WTA-1000 в Майами



Спорт в России и мире
Москва

Федерация бокса России на ВДНХ



All sports news today





Sports in Russia today

Москва

Федерация бокса России на ВДНХ


Новости России

Game News

Красочное приключение Lona: Realm Of Colors перенесли на смартфоны


Russian.city


Москва

Путин спросил Беглова о причинах снижения популярности Петербурга у туристов


Губернаторы России
Сергей Собянин

Удалось спасти: Москва не потеряла в больницах ни одного человека после теракта, сообщил Собянин


Заказать недорогой ремонт кухонной мебели в районе в Москве и Московской области

Заказать недорогой ремонт шкафов купе в Москве и Московской области

Музыкант удивляет публику: Революционный ремикс Бянки и Птахи - Тук Тук

Metaratings: "Спартак" может уволить Абаскаля по ходу сезона, клуб ищет тренера


Концерт благотворительного фонда Владимира Спивакова прошел в Солнечногорске

Певица Диана Арбенина опубликовала редкое фото матери

Двое ставропольцев войдут в команду музыкантов Дениса Мацуева

Шапки женские вязаные на Wildberries, 2024 — новый цвет от 392 руб. (модель 466)


Хачанов победил Черундоло и пробился в 1/8 финала турнира ATP в Майами

Чесноков оценил шансы Александровой в борьбе за выход в финал турнира WTA в Майами

Рыбакина, наряду со Свёнтек, имеет 70% побед на WTA-1000 против соперниц из топ-10

Теннисистка Касаткина отреагировала на высказывания Винер о россиянах



«Радио Зенит» – информационный партнер форума «Мы вместе. Спорт»

Шапки женские вязаные на Wildberries, 2024 — новый цвет от 392 руб. (модель 466)

Перенос дат II этапа культурного проекта «Классика: история и современность» в Дмитрове

Пассажир рейса Москва — Пермь попал в реанимацию


Архитектурные доминанты округов Москвы

Тариф – Большой Концертный Тур. Организация серии больших концертов.

Сергей Собянин рассказал, как Москва помогает производителям оборудования

Фильм Джонни Деппа о Модильяни покажут в России


Андрей Бочкарев: «Цифра» оптимизирует до 15 процентов от трат для строительства

Спецназ Росгвардии задержал подозреваемых в мошенничестве на юго-западе Москвы

Снег, каннибализм и воля к жизни. История Чуда в Андах

Москва за год возглавила 33 национальных рейтинга



Путин в России и мире






Персональные новости Russian.city
Рэпер ST

Рэпер ST признался, что не смог написать песню о трагедии в "Крокусе"



News Every Day

The 10 Intense New Action Movies on Netflix That Left Me on the Edge of My Seat!




Friends of Today24

Музыкальные новости

Персональные новости