Pak PM urges US to waive Pakistan's debt to overcome economic problems

MMuthu

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ISLAMABAD: Prime Minister Syed Yusuf Raza Gilanion Friday called upon the United States to write off its debt to help Pakistan overcome the present economic difficulties accentuated by the war on terror, growing crisis of IDPs and the negative impact of global recession.

The Prime Minister was talking to Richard Holbrooke, US Special Envoy for Pakistan and Afghanistan who called on him at PM House.

The Prime Minister urged the US administration to initiate action through the US Congress for substantial increase in aid for Pakistan as well as fast track much-needed military supplies for Pakistan's campaign against terrorism.

The Prime Minister acknowledged that the US had assisted Pakistan in providing relief to the dislocated people of Malakand Division by providing an aid package of more than US $300 million.

He hoped that the major European and Muslim world countries would follow the United States and come forward with their timely assistance.

The Prime Minister said the nation was united on the vitalissue of army operation against Taliban.

The Government of Pakistan and all the national institutions were fully on board in fighting the menace of terror and there was national cohesion and spirit of reconciliation on national issues among all the political stakeholders, he added.

Ambassador Richard Holbrooke responded that the US would look into Pakistan's request for the debt write-off and measures were being taken to accelerate the pace of military supplies to Pakistan.

Holbrooke while dilating upon his trip to the camps for dislocated persons expressed appreciation on the overall conditions there.

He praised the tradition of Pashtoon-wali and the traditional hospitality of the people of Pakistan in accommodating the displaced people in their homes and catering for IDPs needs despite their own meagre resources.
 
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Unless India act with full force.
if that happened everyone will rush to save them with more aid, against big bad India, this aid is a complete waste of money and pakistan has not done anything to earn one penny of it as war as their war effort goes and no transparency to the aid too makes even better to steal all they want, who cares after all it is US taxpayers paying for it US govt sure dosen't.
 

S.A.T.A

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Pakistan's external debt is something like $ 40BN,quite a high price Pakistan has put for the war on terror.This is not the first Pakistan has requested a wrote off,infact most western countries probably already know Pakistan will never be in a position to ever pay the debt off.

West did not lend a kind ear during its prosperous years,why does Pakistan think it will magnanimous now when they are almost bankrupt.
 

Daredevil

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If their economy is in dire straits then why live beyond their means as pointed in this article.

ADB report says Pakistan ‘living beyond its means’

By Amin Ahmed

Wednesday, 03 Jun, 2009 | 10:41 PM PST |


RAWALPINDI: The country’s burgeoning current account deficit indicates Pakistan was ‘living beyond its means’ with excessive domestic demand boosting imports and fuelling the inflation which restrict exports, according to the Asian Development Bank in its latest report on the economic crisis of Pakistan.

This orthodox interpretation of the external financial situation of the country presumes the current account deficit must be ‘financed’ by flows of foreign reserves, which for the most part must be attracted by high returns and a stable political, economic and social environment, says the report titled: ‘A Reinterpretation of Pakistan’s Economic Crisis and Options for Policy Makers.’

The worsening trade account implies that local Pakistani consumption became dependent on the whims of foreign lenders. Further, given its large budget deficit, the government is said to be increasingly dependent on the foreign purchases of its debt to supplement domestic savers’ purchases of government debt.

The report warns if Pakistan cannot attract these needed reserves, it must slow its growth to reduce imports; lowering prices and wages could also encourage exports.

Thus, both monetary and fiscal policy ought to be tightened to encourage such capital flows even as this reduces the need for them, the report suggests.

Summing up how Pakistan’s new government doing in dealing with the current crisis, and setting the economy on a sustainable course, the report says the national government was trying to implement a series of measures to stabilize the economy and in this way set the basis for a successful recovery. At the same time it was trying to deal with the inflation problem.

The report recommended that tax and spending reform should be formulated to accomplish economic, social, and political objectives rather than to hit a deficit target. The government will find it very difficult to achieve its budget deficit target even if it were to cut spending on social services like education, health, etc. and development expenditures drastically.

This is because such draconian cuts would likely throw the economy into a deep recession that would reduce tax revenues. If this were done, it would have serious repercussions for the country’s political stability and for its future. A better strategy would be to negotiate with multilateral agencies a programme that would allow the country to service its external debt, and gradually reduce its trade deficit until it reaches a more manageable level. During this time, the structure of spending should be analyzed, and a realistic development program should be devised.

While referring to the recent agreement with IMF, the report opine that that there was still latitude within the constrained policy environment to pursue more sustainable outcomes than those established by the limited horizons set by the IMF agreement. Further, says the report, the IMF programme does not correctly portray the source of the inflation pressures, or the constraints on economic development.

It says Pakistan needs to foster conditions that will reduce its dependence on imports. The growth and development path chosen will make a difference to the country’s capacity to import. However, the orthodox solution to a current account deficit will actually make it more difficult for Pakistan to reduce dependence on imports.

Giving its assessment of the current situation in Pakistan, the report says growth by itself is not an adequate goal given the needs of the country. Policy must be designed to pursue the goal of full employment, price stability, and equity. While Pakistan’s latest growth experience during 2004–2007 initially led to high growth, it has now become clear that this growth model failed to address the main problems afflicting the Pakistani economy.

A crisis of confidence in the government prevails that was unable to undertake strong economic measures, such as creating jobs, solving the power and water shortages, and relieving poverty. There is also an inability to keep inflation in check, a neglect of some important components of the supply side of the economy, perceived inability to address the increasing fiscal and current account deficits that are believed in many quarters to be undesirable, and inadequate response to security threats.

The report recommends Pakistan must continue to seek international funds, while negotiating for minimal conditionalities. It is highly likely that the IMF will continue to provide loans as needed, but with conditions that include fiscal restraint.

Unfortunately, this is a risky time for budget cuts, which would entail both economic and political repercussions. Significant budget cuts can only be made in areas of military spending, food and fuel subsidies, pensions, or development. For obvious reasons, cuts in all of these areas would be problematic.

The alternative is to raise taxes – again a highly problematic policy for a nation whose growth was already slowing even before the global crisis generated recession throughout much of the world. The economic and political situation had not improved in the recent weeks and the government has requested further assistance from the international community.

The report points to a reduction domestic currency debt service or domestic debt relief. Debt service alone will likely absorb more than half of all government revenue. Cutting the SBP’s target interest rate would free more revenue than is likely to be obtained either by draconian cuts to other spending or by huge increases to tax rates.

In the context of the immediate urgency imposed by the foreign currency reserve crisis that most likely will last at least through 2009–2010, the ADB recognizes the reality that short-term policy options will be heavily conditioned by the IMF arrangement. However, the Bank believes that there could be some room to consider elements of a ‘debt relief’ strategy within the IMF arrangement, as well as pursuing a range of fruitful strategies even though the IMF agreement has been signed.

For the medium-term, the report suggests a package of policies that includes reorient emphasis towards employment-creating policies and away from growth for-its-own-sake policies; reformulate tax and transfer policy; address the external deficit and the fall in international reserves in a manner that does not lead to domestic stagnation, unemployment, and poverty.

The government should seek debt relief and especially gradual elimination of foreign-currency-denominated debt. The government should diversify the country’s export basket with a view to promoting those sectors that will lead to sustainable economic development in the long run.

A well-designed export-led growth strategy can play an important role in the country’s development. The aim of this development strategy is not to direct domestic resources toward production for external consumers instead of using them to produce for domestic consumption. The objective of this programme is to reduce import reliance and limit the external debt drains on foreign reserves, the report says.

DAWN.COM | Business | ADB report says Pakistan ?living beyond its means?
 
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pakistan has a policy of keeping intentionally high debt so they can get a handout wherever they can, recently with all the aid they got they claimed they had 11 billion in foreign reserves.
 

thakur_ritesh

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this is a ploy pakistan has played once too many times and one does not have to stretch one's memory too long back when they last did the same and man they are masters at pulling it off with quite a lot of success. post 9/11 mush's regime which at that time was reeling under tremendous external debt made a similar plea and the background then was also not very different, when they were struggling to maintain a healthy rate of forex reserves and looked like heading towards bankruptcy and as were to be the case their friends in the white house came to their rescue by pressing up on various lenders who wrote off those loans as bad debts. they say history repeats itself and i for one do not see any difference this time round as well. lets go back a few months and recall the statement of zardari where he put a figure of 100b usd that his nation required to move out of the financial mess that they found themselves in, well its not been a year to that statement and he has been able to pull off something like 25b usd so far when at that time we all had a big laugh and mind you this at a time when there is global recession. a point needs to be noted here, when a financial figure is thrown then that is worked in such a way that it is a few times of the actual required number and if their aim was around 60b usd they built a case around a figure of around 100b usd and started selling the figure and from where i can see they have yet again pulled of a master stoke. there is a reason why zardari is called mr 10%, and least we write him off when he is capable of much more.
 

1.44

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And dreams of having J-10's,AWACS's.Nuke subs,taking control of Kashmir and India....and so on
IF WISHER WERE HORSES........................THEN BEGGARS WOULD RIDE
 

F-14

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a dogs tail will never be stright no matter how hard we Try
 

Yusuf

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Standard Pakistani ploy. It begs for aid and begs for debt relief. In the mean while it uses all the money in nefarious activities.
Pakistan has gotten away with it every time and thats why it continues the policy of splurging as it knows it will be able to get all the money written off or get more aid.
 

F-14

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or they will say that we are the FLS (Front Line State ) In the war on terror Blha blah..... and then they will say that if we go then it is end of the world as we know and shit
 

luckyy

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in the point of view of pakistan govt , they would like to keep this war going for ever as it has became cash cow for them....

the moment money stop coming , pappus will again join hand with taliban......
 

constantin

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Well this is a pure Pakistani trick to get money and use it against India, almost the whole political world knows this fact what Pakistan has been doing with American Aid. though I guess they are taking actions to destroy Taliban but you never know whats going on inside their minds
A possible related article can be Enews the article talks about is Pakistan playing with the world?
 
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USA should forgive Pakistan's loan and forgive them for 9/11,Osama Bin laden and Taliban and Nuclear proliferation,losing afghan war and give them 100 billion dollars for being such good allies i think this is what Obama will do next.
 

Rage

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Is there no end to this mendicity?

As a nation they must feel really proud of their ability to scrounge for orts at the bottom of the tub.

Pakistan, you amaze me!
 

johnee

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Pakistan knows that the uncle will not let it drown. The fact that Pak has able to pull it off is not due to Pak's talent, but becoz of White House. White House has kept Pak alive artificially to use it as a counter against India. Without Pak, US will not be able to do much in this region. India would become too uncontrollable, specially with CAR nations opening up to India. Pak allows US to intervene in this region and keep CAR away from India. So, US will keep giving aid to Pak. That is the reason that Pak always talks of mismatch of power(or arms race) in this region to convince US to give more. Becoz Paks know that both US and China use it as a counterbalance for India.

If India were in a similar position as Paks, US would help us also. Becoz he intends to use India as a counterbalance for China. China knows that and therefore has played foul. It has used rogue nations(nations that will not listen to US) as its puppets to further its geopolitical interests. We need to do the same that China has done. As India grows, we need to take some hard(very hard) decisions, support shady regimes, proliferate all kinds of weapons and tech, copy, borrow and steal. India will be demonised by west, as it grows and we have to take it on chin. There is no easy path. We either become another Japan(ever dependent on US) or China(next potential superpower). US' interest is in maintaining status quo, it will not allow any one nation to rise too much. It will try to balance it out by raising its opponent to the same level. This is what US is doing with Pak. US will not allow Pak to die lest it loses any influence on this region and India. And to break out of this structure, India will have to play dirty, just as China had done starting from 90s. And today, it is reaping the rewards. US is starting to accept and concede power to China.
 

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