Pakistani Bailout Plan
By Ghazala Khan • Oct 18th, 2008 • Category: Politics, Worth A Second Look • 32 CommentsGovernor of The State Bank of Pakistan Dr. Shamshad Akhtar has at last woken up after days of uncertainty of the banking sector and has admitted somewhat reluctantly that international economic crisis at one side, but mainly the reason behind Pakistani crumbled down economy is the lapses by the government, and excessive government borrowing is mainly responsible for the current liquidity crisis in the country. She has also approved an amorphous injection of Rs. 270 billion into the market to ease the liquidity crisis.
State Bank is treading a very tough ground littered with mines. It could blow itself with one misleading step and the whole fragile edifice would crash in a jiffy, and country would plunge into total economic chaos. State Bank has to be very careful. Investors, stock-holders and other stakeholders could grow nervous about the trajectory of the SPB’s bailout plan if it appears that enough progress isn’t being made, and the vision isn’t there. This bailout plan must be executed professionally, carefully and in stages, otherwise it would be like pouring petrol on the burning pyre.
There is a pale silver lining to this financial crisis and that would be the shrinking of the banking sector, which has unnaturally ballooned, and has generated bad habits of credit cards, auto loans, house loans and other types of easy loans in the masses, who are borrowing and spending more, way more than they earn. This would put the fear of God in the public about the fact that something can also go bad, while leaving them with virtually nothing.
What does this economic crisis mean for the Pakistani people? More unemployment, more price hike, more poverty, more hunger, more shortages of flour, power, gas and water and other utilities of life and more selling of children and more suicides, and more drifting towards the apathy, oblivion and gloom. While our koshers are fast getting empty and foreign reserves are pathetically low and our leaders are scouring the world to beg for alms, nobody is telling the countrymen to change their habits and convert these loses and deprivation into their gains.
Shouldn’t in the darkness of the load-shedding, we be thinking that there must be more dams, whatever some regional politicians threaten? Shouldn’t in the screams of our hungry children, we be thinking about controlling the population, preserving the natural resources, working hard to produce more and consume less? Shouldn’t be in this age of closed industry, receding business and diminishing job opportunities, we be trying to innovate something novel and dynamic?
Don’t expect anything from the leaders. They are there just to rule us and to fill up their accounts and palaces abroad. They are not going to do anything in this regard except borrowing more and striking secret deals to prolong their Draconian rules. We have to do it ourselves. We have to change ourselves.
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I have few questions. What does this say about the private sector? Why can’t the all of the private equity funds, sovereign wealth funds, and enormous pools of capital do this themselves? There are trillions of dollars sitting around in cash, yet none of it that sees any value here?
I suspect that part of what we’re seeing in the shoring up of lending markets (i.e. banks) is strategic behavior on the part of big financial players who stand to benefit from the bailout. Who knows where these Rs. 270 billion would end up? Swiss Accounts?
We already know that SBP has so brazenly used aid money to speculate or to buy failing competitors. As the economic crash gets worse, they may just park it in treasuries to try to save their own hides.Either way, they probably won’t use it to keep the system from freezing up and “liquid” or to extend credit to consumers or businesses. False hopes will get expose very soon.
Right now the most important debate among economists, high-level investment advisors and financial experts should be that whether the Pakistani economy will survive or not - that is, whether it will go into runaway inflation or deflation? And more importantly WHAT TO DO?
I don’t know about any of these economic complex things, I just know that I cannot buy flour and I spend my time in darkness and I am seeing nothing that things will improve even in the distant future.
Hey Ghazala, nice to you see. Its always good. You should be writing more.
During these times, safety and liquidity remain key concerns for investments, as investors look to preserve their assets and wealth through what are going to be close to the most difficult of times.
In such a circumstance, gold and silver would be primary hedging tools that would retain real value and also be portable in the event of possible civil turmoil. Also, at some point, the failure of the world’s primary reserve currency will lead to the structuring of a new global currency system. I would not be surprised to find gold as part of the new system, structured in there in an effort to sell the system to the public.
The old systems, institutions and habits are collapsing. This is a window of opportunity to reach people with truth.
On the other hand, there is a tendency for people to become scared, to be driven lower on the Maslow pyramid to the point that they have no energy to think about truth or justice or liberty.
Indeed, this is exactly what the elites hope.
Banks would get a relief from this pumping of badly needed money and it would restore the people confidence on the banks.
This is the spin, but it is completely false.
State bank can do nothing in isolation. It is regulatory authority, not governing body it self to control Pakistan history’s worst trade deficits of last year and this year and still going on. I endorse that this governor of state bank is very dedicated but she is unable to control all matters. State bank should increase liquidity positing in the country if they want to save stock exchange and private investment. No doubt inflation will increase more if liquidity ll be increased but we can save country to go in cycle of internation turmoil. Best of luck for State bank of Pakistan. Our government will do noting so don’t expect. They can only go on visits like beggars to fill their own desires on account of Pakistan.
is it naive to suggest letting the banks fail? let the people who made hundreds of millions from risky bets suffer the consequence by paying hefty taxes on all profits they have made . spend the money on infrastructure such as national health, small business incentives,college funds,education, roads/efficient rail, debt consolidation and relief,care for seniors , sure up social security and pensions ,enrergy solutions… for all of us. or preserve our economy the way it is and still suffer a contraction/depression, lost jobs ,no available credit,a worthless dollar, to keep consuming the way we have.
What else would you expect from “Soodi Nizam”. It is bound for colossal failure.
World should now try Islamic Banking. Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia’h) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba. Generally, Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam.
Islamic finance has been gaining momentum on a global scale for the last 30 years.
Many Islamic Banks have sprung up over the last few years. These changes are occurring both in Muslim and in western countries, and are driven by a global trend amongst Muslims to become more observant of their faith. It might have been the reason why Islamic Banking emerged, however, today Islamic Banking is sought by Muslims and non-Muslims due to the benefits it offers.
Industry size is currently estimated at more than $400 billion, with projected growth of 15% per annum.
Financial institutions around the globe are trying to keep pace with the growing demand for Sharia’h compliant products and services.
Writer’s comments required after so many comments
Stupid Pakistanis (and most unfortunate nation in the world) what have you done!
Repent and cry as such as nobody has cried before. To hell with ch. iftikhar, aitazaz ahsan, qazi hussain, imran khan, nawaz sharif, zardari, geo, ary, aaj, hamid mir, kashif abbasi, shahid masood, kamran khan, talat hussain. They are the enemies of Pakistan.
Look what Musharraf and PML-Q had done for Pakistan in last 5 years of their tenure.
Pak Economy in 1999 was: $ 75 billion
Pak Economy in 2007 is: $ 160 billion
GDP Purchasing Power Parity (PPP) in 1999: $ 270 billion
GDP Purchasing Power Parity (PPP) in 2007: $ 475.5 billion
Pak revenue collection 1999: Rs. 305 billion
Pak revenue collection 2007: Rs. 708 billion
Pak Foreign reserves in 1999: $ 700 million
Pak Foreign reserves in 2007: $ 17 billion
Pak Exports in 1999: $ 7.5 billion
Pak Exports in 2007: $ 18.5 billion
Textile Exports in 1999: $ 5.5 billion
Textile Exports in 2007: $ 11.2 billion
KHI stock exchange 1999: $ 5 billion at 700 points
KHI stock exchange 2007: $ 70 billion at 14,000 points
Foreign Direct Investment in 1999: $ 1 billion
Foreign Direct Investment in 2007: $ 8 billion
Debt servicing 1999: 65% of GDP
Debt servicing 2007: 26% of GDP
Poverty level in 1999: 34%
Poverty level in 2007: 24%
Literacy rate in 1999: 45%
Literacy rate in 2007: 53%
Pak Development programs 1999: Rs. 80 billion
Pak Development programs 2007: Rs. 520 billion
[...] Governor of The State Bank of Pakistan Dr. Shamshad Akhtar has at last woken up after days of uncertainty of the banking sector and has admitted somewhat.[Continue Reading] [...]
[...] Original post: Pakistani Bailout Plan [...]
Stupid Pakistanis (and most unfortunate nation in the world) what have you done!
Repent and cry as such as nobody has cried before. To hell with ch. iftikhar, aitazaz ahsan, qazi hussain, imran khan, nawaz sharif, zardari, geo, ary, aaj, hamid mir, kashif abbasi, shahid masood, kamran khan, talat hussain. They are the enemies of Pakistan.
Look what Musharraf and PML-Q had done for Pakistan in last 5 years of their tenure.
Pak Economy in 1999 was: $ 75 billion
Pak Economy in 2007 is: $ 160 billion
GDP Purchasing Power Parity (PPP) in 1999: $ 270 billion
GDP Purchasing Power Parity (PPP) in 2007: $ 475.5 billion
Pak revenue collection 1999: Rs. 305 billion
Pak revenue collection 2007: Rs. 708 billion
Pak Foreign reserves in 1999: $ 700 million
Pak Foreign reserves in 2007: $ 17 billion
Pak Exports in 1999: $ 7.5 billion
Pak Exports in 2007: $ 18.5 billion
Textile Exports in 1999: $ 5.5 billion
Textile Exports in 2007: $ 11.2 billion
KHI stock exchange 1999: $ 5 billion at 700 points
KHI stock exchange 2007: $ 70 billion at 14,000 points
Foreign Direct Investment in 1999: $ 1 billion
Foreign Direct Investment in 2007: $ 8 billion
Debt servicing 1999: 65% of GDP
Debt servicing 2007: 26% of GDP
Poverty level in 1999: 34%
Poverty level in 2007: 24%
Literacy rate in 1999: 45%
Literacy rate in 2007: 53%
Pak Development programs 1999: Rs. 80 billion
Pak Development programs 2007: Rs. 520 billion
My analysis and intenational reports says that this recent financial turmoil in Western world is like a Allah’s blessing for poor countries. No doubt this hitted badly USA and Europe…
But what about international consumption trends and prices of utility items in Int’l market… Crude Oil has reached $70 per barrel…. It was $140+ 3 months back… Vegetable Oil prices deflated by more than 50% because demand for Bio Fuel has gone down due to low fossil oil prices. Wheat prices have gone down… Even lower than Pakistan Government support price set for next crops… i.e 950/40kg.
Why this all happened…Reason is only and only financial turmoil in USA…that is a consumer of 26% of whole world production of every thing. Spending trend has gone so down in USa that demand of these utlitiy items has fell down by 50%.
Our government basically searches for excueses… There is no big impact of Int’l turmoil on our economy. Our economy is going down due to Government’s own in efficiencies. Trade deficit is increasing… Is it due to Int’l turnoil. Wheat prices are going sky high, is it due to Int’l turmoil….
Previously Musharraf was used to sit infront of selected reporters and showed them calculations that Our wheat price is lowest in region… Can government do it now….because wheat price is lower in Int’l market but double in Pakistan.
This time they got this excuse of Financial Turmoil, otherwise least population is dependent on Loans in Pakistan and they can’t shake whole economy.
Roti kapra Aur Makkan… was the first priority of PPP Government since 18 Feb.. They negated all other issues by holding this so called slogan… No other issue is disturbing them to do real governance.. Why they are still not able to solve this one issue>>>> it is called excuses upon excuses. They have nothing to do and they are not intend to do any thing… Just searches for other excuse,,,if one excuse gets inapplicable.
So my dear writer and fellow… you just cry and cry. No body is there to hear you innocent people of Pakistan. You have to make your own ways yourself and I am doing the same since first day. Once you will understand that you are alone in the world and you have to do yourself for your survival then you will succeed in practical life. Good Luck!