Tuesday, March 19, 2019

Terror-Hub Pakistan’s Economic Doom

Pakistan is doomed as a nation.  Not because someone is after it – although someone or the other is after EVERY nation, so that is no excuse whatsoever – but because Pakistan is what I call a “Narrative Nation”.  Its self image and the view of the world is not based on reality or action or honesty or integrity – but on the singular belief that everything can be settled by the right “Narrative”.

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From stalwarts like Moeed Pirzada to Ejaz Haider, from forever shouting Tariq Peerzada to Zafar Halali; and every small and dramatic anchor in between – there is just one argument from countless shows which try to “investigate” the eternal question “Why is Pakistan where it is and how it can improve”.  The spectacular answer – “correct the narrative to the world”.

Pakistan as Terror Hub

In last almost 18 years now, almost every terror attack around the world has had some links to Pakistan or direct Pakistani hand.  Is that a coincidence?  For example – Spain (2004 Madrid train bombing – Amer Azizi), Denmark (2007 and 2010 Copenhagen terror plot – orders from Pakistan), UK (2004 London Fertilizer bomb plot, 2005 London train bombings), US (9/11 attacks in 2001, 2001 Shoe bomber, 2006 Seattle Jewish Federation shooting, 2015 San Bernardino attack, 2016 New York Bombing), France (2012 Toulouse and Montauban shootings), Indonesia (2002 Bali bombings, 2003 Marriott Hotel bombing), China (several 2011 Xinjiang attacks), Saudi Arabia (2016 Madina, Jeddah and Qatif bombings).

And, we have not yet discussed countless ones in India and Afghanistan, including the 26/11 Mumbai attacks and Parliament attack.

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Please read: Pakistan on the Brink of Bankruptcy and Economic Ruin

Pakistan’s Economy

Pakistani economy is at staring at bankruptcy.  Here are the main figures as of August 2018:

Exports – $24.772 bn (source)

Imports – $55.846 bn (source)

Revenues – 15.2% of GDP(source)

Expenses – 21.8% of GDP (source)

Forex reserves – Central Bank ($9.885 bn) and Commercial banks ($6.484 billion) – Sept 6, 2018

The external debt of Pakistan is now $95 bn (source).  It was $33.172 bn in 2004.  It is expected to rise to $103 bn by June 2019.

Pak foreign debt

 

In terms of its loan repayments, Pakistan is staring at a bill of $28 bn and even if it scraps every relationship and begs every friend that it still has, it cannot get more than $20 bn.  If lucky.

Analysts and global financial institutions believe that Pakistan will require around $28 billion to meet its financing needs and the new government could potentially raise approximately $20 billion through multiple sources including a $12 billion bailout from the International Monetary Fund (IMF), $2 billion from China and $6-7 billion from Saudi Arabia and the Asian Development Bank.

As the US Dollar appreciates making it harder for Pakistan to repay its loans, US has warned Pakistan that it cannot use the IMF funds to repay the Chinese lenders.  This puts Pakistan in a bind and in a situation where even that $20 bn aid with the collective of IMF and China being a non-starter!

Meanwhile, the new Prime Minister Imran Khan has come in as the leader of the country and he made his address to the nation which laid out his plan to tackle the debt situation and the biggest issue of Water in the country.  His “innovative idea” – non-resident Pakistanis should send in the money!  Those in Middle-East can send whatever they can and those in Europe, US and Canada should plan to send $1000 each.

As is obvious to any serious observer, this is no solution for the economy which is losing $20 bn on its trade deficit every year with exports dwindling to almost nothing.  Even Bangladesh has exports of $37 bn!

Its not about narrative, silly

The problem with those steeped in evangelizing belief systems is that they think the world runs on narratives.  If my narrative is more convincing than yours, even my god is better than yours.   That may work with something that no one has seen or cares to see but profit from, but when it comes to hard cash and hard trade, no amount of hallucinating logic can work.

In Pakistan’s case – a country which has links to almost all major terror attacks in the world in the last 50 years – more than a rhetorical narrative is needed.  Actual economy is needed to save it.  And that is something it does not have.

Pakistan’s crisis of business and trade are manifold and impacted by many things including power shortage and crisis.  This article written in 2013 explains the situation and its impact very well.  Only the whole situation has worsened.

Pakistan is in the midst of one of the worst energy crises in its history. This is both slowing the pace of economic activity and causing public unrest with prolonged outages of electricity and gas. Capacity utilization in some key industries has fallen to nearly 50 percent. Worst affected is the fertilizer industry, which faces interruptions to its gas supply and forced closures. Pakistan has the capacity to produce more than one million tons in exportable surplus urea, yet in 2011-12 it imported more than 1.1 million tons. This eroded the country’s foreign exchange reserves and effectively entailed the payment of millions of dollars in subsidies, being the difference between the cost of locally produced and imported urea. Pakistan urgently needs to make some strategic decisions and change the national energy mix.

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