Paris Club, China, IMF must help Pakistan in economic catastrophe: Financial Times
Business
Nothing to distinguish political parties battling an using situation for destructive fighting
(Web Desk) - The Paris Club of creditor nations, China and the International Monetary Fund (IMF) must hold debt-restructuring talks in order to help Pakistan emerge from current economic catastrophe, Financial Times has stated in a report.
The government's abolition of the dollar restriction has resulted in a significant depreciation of the rupee and frighteningly low foreign exchange reserves for the country. Public debt, which accounts for $270 billion or 79 percent of GDP is another significant issue.
Pakistan is currently dealing with the most difficult combination of problems in contemporary times. In a nation already riven by governmental ineptitude, a faltering economy, the destruction brought on by climate change and a terrorist strike last week claimed 100 lives, Financial Times report has said.
Pakistan, together with its creditors in the west and China are faced with a difficult set of options since prolonged instability in a nuclear-armed nation on a geopolitical fault line serves no one's interests. The political and military leaders of the nation have presided over decades of chaos, fraud and poor governance.
There is nothing to distinguish the major political parties' policies as they continue to battle it out. Instead of making significant attempts to improve Pakistan's situation elections this year will likely be used as an excuse for another round of destructive fighting.
They would encounter individuals who had little trust in the ability of the governing elite to make their plight any better if they ventured outside the bubble of Islamabad. Politicians must start prioritizing individuals over parties.
As things are Pakistan runs the risk of going bankrupt like Sri Lanka where food and medicine are in limited supply. However with a population ten times that of Sri Lanka, a nuclear arsenal, a military with a history of meddling and extremist Islamists who are once again exhibiting their bloodthirsty fanaticism, default is a situation that Pakistan needs the assistance of international creditors and multilateral institutions to avoid, the report stated.
The report called the numbers as startling where the country's foreign exchange reserves decreased to only $3.7 billion last month or about three weeks' worth of imports. Comparatively the entire public debt is $270 billion, or around 79% of GDP.
Keeping the lights on is difficult; the nation has seen blackouts. To top it all off tens of millions of people were impacted by flooding in Pakistan last year that cost $30 billion in damage.
Even if an additional $1 billion or so is unfrozen from the IMF this is only a bandage, Financial Times stated, adding that even more outrageous amounts are required if Pakistan wants to avoid default.
In that situation China shouldn't have any trouble adhering to the general idea of parity with other foreign creditors, accepting loan repayment conditions that are nearly identical to those of multilateral organizations and incurring comparable haircuts on repayments.
Instead of handing Pakistan a fait accompli reached behind closed doors after protracted negotiations, similar terms to which it must also try to negotiate with commercial creditors, China, the IMF, and the Paris Club of creditor nations must quickly bring Pakistan into debt-restructuring negotiations.
The predicament of Pakistan like that of Sri Lanka and Zambia before it demonstrates the urgent necessity to restructure the entire shaky structure of sovereign debt restructuring. It shouldn't require another default for that to occur.
