Peanuts!!!

ADB has approved a package of US$ 500 million for Pakistan to accelerate economic transformation. Reminds of an incident in 1979 when Zia ul Haq rebuffed an offer of $325 million by Jimmy Carter as “peanuts”. We should do the same with ADB aid package.

The foreign exchange reserves of Pakistan stand around $8 billion. With monthly foreign exchange burn rate (difference between monthly import bill and export proceeds a.k.a trade deficit) of $800 million to $1 billion. At this rate, and no other sources of major inflows expected, we will go bankrupt by first quarter next year. The only impact of ADB package will be to delay the inevitable by another 15-20 days.

But I got a good laugh from reading the purpose of this loan on ADB’s website

The fiscal space created by reforms [from this package] will cut financing gaps, generate conditions for a better deal in the sectors down the road, and provide much-needed cash flow to pay for safety net programs that protect the most vulnerable. ADB’s support balances the need for addressing the needs of Pakistan’s people while reassuring markets that the government is on the right track with its ongoing economic stabilization program.

What stabilization program? I have yet to heard of a program. About ‘Safety net program’ the only news I recall was its removal where government is removing subsidies from gas, electricity and most recently wheat.

Will somebody please share with me any solid steps taken by the current government to stabilize the situation. The only thing that is keeping the country afloat is the credit crisis in the world. With everybody worried about western economies crashing, nobody has time to really step back and worry about Pakistan except for Moody’s, Standard & Poor’s and Pakistani press. We all know how credible they are.

Now the question that arises is what is needed? Frankly, a lot of money. $10 Billion per year for 3 to 4 years. Yeah Right!! Who is going to give us this money? At the way we are operating at the moment _ no one. We don’t have a plan or strategy or even an inkling of an idea to get ourselves out of this mess.

We need the first $10 Billion just to stabilize the currency. And other billions to put in place sustainable growth program. Programs which unlike the ones implemented by former banker-turned-prime minister do not result in windfall profits to just banks but the effects trickle down to common man as well.

It is not impossible. But requires honesty and hard-work two things that never come to mind when you think about the current government. Rather than use the advices of imported consultants/ ministers/ governors from Citibank, IMF or ADB where they only end up benefiting their former employers or elite segments of society, we need to use our local economist and we do have some very good ones to chalk out a strategy to take us out of this mess.

Fingers crossed.

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