Zaheer Mangi’s Post

In my article published in today's Express Tribune, I argue that a "strategic default" on external debt is the only way to put Pakistan's faltering economy back on track. The present course of action which envisions taking on more and more debt to pay down interest on previous loans is not sustainable for very long. It is delusional for the government to think that it can continue to do this ad eturnum. There always comes a point when a house of cards crashes to the ground. #Pakistan #economy #foreigndebt #IMF

Pressure Mounts on Kenya’s Treasury on Rising Rates Against Domestic Borrowing The National Treasury plans to raise its domestic borrowing target by 27% to Ksh.522.7 billion ($4.05bn) and slash external borrowing by over 50% to Ksh.166.7 billion ($1.29bn) for the 2025/26 financial year (FY), aiming to shift from short- to long-term debt securities. https://lnkd.in/dcNgd89M

Pressure Mounts on Kenya’s Treasury on Rising Rates Against Domestic Borrowing The National Treasury plans to raise its domestic borrowing target by 27% to Ksh.522.7 billion ($4.05bn) and slash external borrowing by over 50% to Ksh.166.7 billion ($1.29bn) for the 2025/26 financial year (FY), aiming to shift from short- to long-term debt securities. https://lnkd.in/dcNgd89M

On the edge of a dilemma Pakistan is drowning in debt. The more of it that it takes the deeper it sinks. It is a downward spiral from which recovery is very difficult. But not impossible. What is the dilemma? What are the choices? And what should be done? My latest piece on Substack takes up these issues.

📢 NEW PAPER ! 📚💡 📈 🇵🇰 Pakistan’s economic challenges are deepening. Aasim Husain's latest paper dives into persistent macroeconomic imbalances, unsustainable deficits, and the pressing need for reform, proposing a fresh strategy to tackle the country’s critical debt situation. 🚀 Rather than endorsing default and restructuring, which carry well-known complexities and economic disruptions, this paper proposes a path focused on sustainable growth, structural reforms, and strategic fiscal adjustments. 🔎 To achieve this, it emphasizes the necessity for substantial and coordinated liquidity support from official creditors at concessionary interest rates, along with enhanced transparency. 👉 🔗 Dive into the analysis and read the full paper here: https://lnkd.in/dFkeFD-S #PakistanEconomy #DebtCrisis #Macroeconomics #FiscalPolicy #SustainableGrowth #IMF #EconomicResearch    

Since survival and wellbeing is purely reliant on good economic conditions, in Pakistan's case it f***ked or doomed however you want to call it. There are only two solutions to this: 1. Debt restructuring, economically. 2. And politically, a complete stop to the marriage of convenience system if governance. X-deputy governor State Bank of Pakistan (SBP), Murtaza Syed gives a detailed picture in this FT piece. This is a must read for everyone who has sympathy for the country and also those that may have an iota of shame. https://lnkd.in/dYaiGyPX

Pakistan reaches to IMF for a $6 billion bailout - Bloomberg PAK aims to engage in negotiations for an Extended Fund Facility with the IMF in March 2024. Last summer, PAK narrowly avoided default with a short-term IMF bailout, as the program nears expiration next month, the incoming government will need to secure a longer-term arrangement to stabilize the $350 billion economy. PAK implemented several measures mandated by the IMF, including budget revisions, a rise in the benchmark interest rate, and adjustments in electricity and natural gas tariffs. Fitch Ratings emphasized the importance of securing financing from multilateral and bilateral partners for PAK, failure to obtain a new loan could exacerbate liquidity stress and elevate default risks. Pakistan faces $25 billion in external debt payments in the fiscal year, a considerable sum compared to its foreign exchange reserves. The EFF loans typically span 3 - 4 years and support structural reforms, with repayments scheduled over 4.5 to 12 years. Political uncertainty following the election has heightened concerns among investors regarding Pakistan's ability to secure additional funding, intensifying the risk of default. Shehbaz Sharif, the nominated prime minister, has a track record of successful negotiations with the IMF, having secured a $3 billion loan under the Stand-By Arrangement in June. PAK is currently undergoing a final review under this program, potentially unlocking $1.1 billion in funding by April. The nation faces a $1 billion bond repayment due in April. PAK's history with the IMF includes 23 bailout packages since its independence in 1947, making it one of the most frequent recipients globally.

If we look at the the liabilities which Pakistan has to pay this year and Pakistan's ability to pay those liabilities, we can say that in present circumstances, we will default in this year. The reason is that IMF wants to get firm commitments by the countries that they will rollover debt payable by Pakistan for this year. Those countries are demanding to first sign agreement with IMF. Pakistan is stuck in this circle. Moreover, we have missed our tax collection target due to which IMF will force to increase the taxes. IMF also has snubbed Punjab government for the electricity subsidy and has asked them to take back this decision before 30th September. We need to understand that our position to negotiate is weak and we have to listen to the lender as it is the last option. The only good thing is that our current account deficit is very low so it gives Pakistan time to explore other options and to arrange the funds. It is very likely that we will get these funds and we will survive this year but due to extreme level of debt taken, our ability to get more loans is reducing very fast. Taking loan is not a bad thing if it is used correctly but we are taking loan to develop dead projects which are not generating revenue due to which our ability to pay back loans is 0%. IMF charged us 5% interest in its last programme. We need to figure out a way to get out of this trap as soon as possible because hope is never a good strategy.

*Pakistan's 2024 debt fiasco* In FY 2024 (i.e. July 2023 to June 2024), the government of Pakistan received Rs. 73 trillion from international banks. This debt was extended to Pakistan by these banks when the State Bank of Pakistan (SBP) had set the interest rate at 22%. The debt received during FY 2024 by the country exceeds the COMBINED total debt received during FY's 2023 & 2022 i.e. - 2023: Rs. 37 trillion - 2022: Rs. 34 trillion - Total amount: Rs. 71 trillion The lamentable part is that for the next fiscal year, the government has already sought National Assembly 's approval to borrow Rs. 34.6 trillion to meet the needs for: · debt servicing · constitutional organs of state (includes President of Pakistan, Supreme Court of Pakistan, National Assembly, Senate, Islamabad High Court, Pakistan Post Office, Foreign Office, Federal Ombudsman Office) #economics #economy #debt #pakistaneconomy #pakistaneconomiccrisis #economynews #banking #finance #debtservice #imf #internationalbankers #budget

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