[000:00:00;00] the challenge is here. after you can start a set to get a $3000000000.00 bailout from the international monetary fund. the country is close to defaulting on its international debts. so will this be or safe pakistan? hope critic pushed the country deeper into this. this is inside story,

the hello welcome to the program. i'm adrian finnegan. pakistan is facing it's the worst economic crisis in decades. dwindling for an reserves and a full and the value of the p is fueling soaring inflation. political chaos, a scared off foreign investors of last year is devastating floods of added to the many challenges facing the country. many hope that a stand by deal with the i am asked for offer some relief and prevent the country going into default with pakistan. it's been negotiating with the international monetary fund for more than a year. so what terms has it agreed to? well, the countries revised budget for this year is that to raise to $1340000000.00 in new texas. and in the past few days it agreed to hike the made interest rate to 22 percent and keep it high for the coming year. it's a curb soaring inflation, few of the energy subsidies introduced by a former prime minister in wrong con,

a be ended. the new government says the bunch it is as people friendly as possible . but pakistan is still struggling with its highest inflation rates since 1957. and many in the countries say that reduced subsidies, coupled with higher taxes, won't bring the relief they need. so let's bring it, i guess, for today's discussion, from the whole we're joined by the sean. so dean, who's a political analyst working at the construction, see from a ton of lab ad in this lot of bad, we have somebody hello, he who is a political scientist and for the pakistan on back to the, to the united nation state. i just states the united kingdom, welcome to you personally. hello the best of that. let's start with you. $3000000000.00. sounds a loss. but given the size of practice, times economy and the state, but it's currently in 3000000000, isn't that much a tool? is it going to be enough to get practice on the economy back on track?

the short answer is no. it won't. it is a short term arrangement which will address focus on immediate, urgent need not to fort, not to have a debt before. i mean, of course, it comes as a huge relief because it doesn't mean that box on is able to have a default. but because focus on financing needs of so enormous this short term arrangement can only provide very limited reading space. and in a few months time focus, i really need to go back to the fund for a longer term arrangement. i'm going to give you one example of focused on needs. and this fiscal year, which started today, in fact, almost $23000000000.00 to fill the financing gap on its external account. now this $3000000000.00 is not going to really say to that. and in any case of

focused on has to do much more done around its economy than simply getting the funds from from the i mess it needs to take many structured and measures which can then address focus on. but in the financial crisis, on the do it over basis is a perennial financial crisis about why is it a perennial annual crisis? how, how did practice done? get into this mess in the 1st place and, and why is it so perpetual. what i mean quite simply because the successive governments have been living beyond their means, they have faded to raise taxes to match the expenditure. and on the external side, i think uh they have been borrowing, rather than again finding ways to increase our exports. because we do have a huge gap in our trade accounts, we have a huge gap in our current account. we have a current account deficit. so really, you know,

the sole or the roots of focus on financial crisis is equity. it's fiscal crisis. so unless focus on is be able to deal with this because you know, successive governments, as i said, have simply get the can down the road. i mean, that's why we've been in almost 2 dozen. i'm there for the not programs position it is this paler load, i'm sorry. go to mean anything to, to the, the average crossman in pakistan. but it improve the lots of tools struggling as most people in the country with the cost of living crisis. that's a very good question and i would very much echo everything the excellence of nobody has already mentioned. it's possible the best could have some kind of an effect on the average public, but not for the reasons that would be found and certainly not for economically. some reasons. first interest having this money could mean that the incumbent political party, a bad thing to be able and the bbc simply because they have some money in the

coffers. now perhaps the ability to collect the conduct elections in addition to not defaulting, give them better selection season. they come in that a range of protection or even measures to protect the consumer against inflationary pressure. but not only would go against, i'm of stipulations and go against would be on the one sparks on to do which has to be mentioned as rationalizing our expenditures against our revenues. but it also be detrimental in the long term because in order to go down to short term gain bills being, you know, both of the poles at a time when the 2 political parties, partly in power, are perhaps at their lowest and informed in terms of both performance and popularity would be a nightmare scenario for the country. so yeah, there could be some relief, but that release was not necessarily going quite to come from a sound set of decisions made by the people in charge. you also ask the question about why this is happening and i would very much echo ah, excellence below these statements of yes,

we cannot rationalize of our expenditures. we have been historically unable to hold onto the hard fiscal measures that would be very painful in the short term, but good for us in the long term. in the pursuit of protecting the consumer from insulation in our handling the repeat study and the floating rate and starts with markets. the parts of the data on the enterprises are operating on a huge loss of wonder. so when we didn't get to, yeah, what, why is that, why is that situation? i mean, is, is it to do with politics? is it to do with the fact that the governments want to give people a sleep number in the show knowing that it's going to cause a long time game? absolutely, and i would say an investor, nobody can a back the up on this. this is not something for you to use the word perennial and that word is actually very accurate. this is not a problem that exists with a particular political set up or a party in the country. this is across the board. the last political party that was in charge up until may of 2020,

to the parties thought that he can solve for example, led by former prime minister him on the phone, is in my you can be of the same issues in the same uh, you know, decisions that let us towards the path of economic doing right before is allister, recognizing that a vote of no confidence control and not committed. but i would very much talk economic suicide by the, this huge fuel subsidy that costs a national exchequer north of somewhere around $250000000000.00 the piece a month simply to provide relief to the public. and to ensure that his popularity stayed as high as it was. and since then, since the new power has come in this, i am a still has been in the work since september of last year. but because of decisions made by the government, because of, you know, the surgeon as well as the policies and statements, i would say that are counter productive as well as not in the interest of the general public. and certainly not in the interest of the social contract. the program has been delayed quite literally to with last possible date of june 30th,

which is around when it was announced, but the frequently known is going ahead. so yeah, to prevent your leisure and politics is very much at the center of the body. but your thoughts spend on november's election, you, you talked about governments continually kicking to come down the road. what are the implications of the election for this, this loan, which i think we've already established as a short term fix. is there any danger of it packaged on good renee, on the deal, off to the election and what are the implications of benefit those? i think the danger is actually before the election because we still have a few months to go. when this government has to relinquish part and then hand over under the constitution to a good take a government. so i think there's a in and present danger that the administration of prime minister shall by should eve begins to resort to election gimmicks because they know that

why uh, troubleshooting if is digging credits to for a vote in the default. they also know that there are the delay in the i'm a program, the delay in taking why is it cannot make decisions has come at a huge cost to focus of the economy. plus, i think the kind of economic mismanagement we've seen in the last year. and of course previously as well, has meant that inflation has really faded into the cost of living prices that you spoke of agent. and that is going to have a election cost for this government. so i think on the one hand, there is a risk that the present government, we start taking measures that can up and actually uh the map program. uh, the other risk is that the new government, whatever government is elected, is going to be a repeat of the thought. because what we have seen is that focus on economic crisis

have really been rooted and it's governance crisis where we've had the reform of us leads politically, dates that are just not interested in economic reform. and unless there is a white or white skin, a sweeping economic measures under forms of focus on but not be able to get in to get out of this vicious cycle of high budget and balance of payments deficits. rising debt. and of course, chronic foreign exchange prices, which have led to repeated i'm, it's been out so uh, so the order picks up is b is going to play into the economics and economics also. uh, you know, that went into the vendor and obviously the extra company linked the economics is already playing into, uh, the, you know, possible cost uh to the political future of this who and, and coordination of this one i've got to bring in a bunch of leo from shotwell, he's a cabinet minister of commerce industry and technical education in kind of

a practical providence. good teddy with this minister, and best of the lady was, was talking about a government's a bit surely and practiced on living beyond the means. what does practiced on need in terms of a long term fix for its economy in your opinion, to especially thank you for having me and as the very need for should be have got it yesterday. it's a very literally a half inches long, and i have a very long standing lead. i think we're going to get the ball game probably going to get 1000000000 next month. hopefully in the next 66 or 9 months. we're going to have for the inside deliver base. so let me talk about the rules of that, the pro 5, but that's ok them onto the truck that could really be stable for, for much better for monday on worthington law. and after that, the repeats perhaps on the state, but it'd be the charge of the board has been valerie and the senate, the rest of the market and the business community will be very positive,

stopping from next what we control. but in the long term, if you look into it, the installation factor, which is the consumer of the livelihood of the people going to be just up. because the conditionality is have a way to add the full level. this tribute is not going to be enough along focused on to be off the liabilities. number one fail via the light bands and the fail. oh, the see of miles because one thing might happen. good. starting from the coming week is that the, as has been with have been people have the payment to mature the n c. they bought that song, his not export on it. and finally, bucks on his import or the song or whatever the export 40 plus along the bank has to be imported. so i think the are we have to look into it and there has been business phone me and the vendor and the provincial level. and so, but done, do that, we must and reassessed we should as we must bring all started doing the functioning of the boardman. because at this very moment,

the spelling is very lovely street. so i think we have to look into that. so when also number one, number 2 is bad, then we have to come up with the program by continuing the business community dental goes rendition that this is what does it. because the amount of x ray shows we have some, if it's complex, there's like a viable strong thing that this about if you want to start with businesses, maybe 20 different texas, which we have to pay. so i think it'd be really have to work on the best thing f, b i from abroad and the hub to the main. so existing business depot a lot already doing business and funds on that visit other than that. okay. after flight, they must, then they should bring that captured back when they have some that are brought in for. but i'm interested in over here just because i'm just, i'm this next. but nature's not goes down of the government at the moment or better . and the revenue does not jack. so i think this problem to remain,

they are losing hands or my child or so i think this will be there. and so i the yes i agree, i believe has been there. all right. but like i said, the governments have to work very hard about the body, a dungeon. they mentioned foreign direct investment. the just having tie important is how vital to park stones economy is foreign direct investment and, and will this load at least give other nations some confidence that they can safely invest in the country? now i think the key is to create the right political and economic environment to interest investors. we have a situation where our indigenous business community isn't investing. so if they're not investing, how can we expect to increase f d, which is not doing all the time? know in the last couple of years. so what is needed is a stable environment,

a business environment that is lip and consistent. and we also need political parties to assure us that they will not be policy changes, because i think the one thing that drives investors away is when they see that there's no point investing long term capital in the country where the rules of the game changed. so often, so i think, you know, talk of f d i right now, frankly for me is a bit of a buying this guy. unless we get the basics, right. it's very difficult to see how many kind of significant a form, direct investment. would it be possible and yet, of course, agent, you're absolutely right. a box on like any other country, desperately needs this. a big problem is our external account. and the fact that, you know, i'm bored, some orthodontics board, so we have direct payments to meet and you know, remittances from overseas of workers we, we use those,

of course that helps us in filling the financing gabriel and external accounts. we also need to, yeah. and i'm afraid the quote has not been very, very encouraging in the, in recent years a session. what are the main drivers effect starts economy right now? is it fair to make comparisons with india is economy, which of course continues to, to power ahead. and if any is, is doing so why isn't practice tons what is practiced on need to do to get its economy out of the doldrums and didn't to shape a shape like india's i think you hit the nail on the head and when i think that is the central question, a lot of the conversation in the last day and will be for the next week, including from the hon minister and other individuals will be about how this is in some way as a cause for celebration and show it is. we want to avoid default the people to improve against the daughter. absolutely. there will be some level of confidence building and both in the national markets kind of the best of markets. but this is by no means

a long term solution. there are 3 sources of income per box when it comes to the external account name's the same thing, so it's a foreign dark investment and then what exports and we are failing and obviously funds. so one of the 1st things that we have to do, of course, is to improve the metrics and all 3 areas. and other issue is the fact that our revenue is, are very, very low. there's a very small percentage of progress findings that actually ends up paying taxes. and that's primarily because box that is very much it cash based economy. a lot of the transactions that happen in the country do not really fall into the purview of any kind of regulatory bodies or the central bank. and by virtue of that, this fall underneath the radar, there are some efforts now be made to digitize the economy to find, you know, capture a larger chunk of the, the larger tax amount from various sources. but what that ends of really doing is it squeezes those that are already inside the tax, but instead of improving and expanding tax net. and the best thing to do is to fix our believe a state home enterprises. everything from airlines to railways to natural highway

authority, certain power authorities, as well as a certain steel mills. and in addition to that, i would say every one of the things that we really kind of have to look at something that's about removing it's already looked at or spoken about. and that is when, when there's some little instability and policy instability in the country where you have foreign companies leaving box on the left, right, and center because of that environment. what do you have a hyper obstructionist, any hyper risk averse baracus when you have the kind of environment which is not conducive to conducting business fairly quickly and a speed really? that is another way to bring in the kind of investment, the kind of confidence, the kind of in the installer terms and direct investment to the country needs. i'll pick this in the simplest terms possible. one of the biggest problems with the chinese have been focused on, for example, in terms of investment kids, is that they just run their contractors to be able to do work. they want be a function. this policy is a box on to be taken out of the equation so that what they need to do under the

agreement that have already been ford's gonna happen. and the real danger for that as investor movie also has already highlighted is that there is a historical precedent here of going back on our work and changing the stipulations under which we agreed the certain law firms or foreign direct investment or any kind of bilateral agreements and as long as that instability exists, both on the policy and the political front american best funding, fixing some of the larger structural issues, the economy is going to remain in pipe a bunch of that, let's pick up on, on what section i was just saying that about political instability, if the country continues to be politically stable, there's very little chance of it becoming economically stable. is that ok? i took a b which has been so it's just not because it says, let's say if any country is not approved to come straight because it has the stability and it's monica spent with it. then obviously b is going to be a problem then. but, and this is

a problem that's out of this person from the last few years. i think the one me, what joshua bought me is a solution. and all the political bosses, loss and shop said, for the sake of this country they must say to make this country alive was going to be a good, great, good moment guaranteed because because a lot of provincial, i think we have a potential for done it on the 10th, but i think the main problem is a straight forward as a stay focused on not trusting each other. i think you're still in need of that in a a because my, i'm a part of the f b. she said, which is a for additional bucks i general phone was industrial. i was going to remember them back. so i'd be able to do keeping on leasing that to be ever giving the like presentation. and we're talking to the right up in the, in the front of the boeing's level, then this is a, we need this thing, the business i'm going to do. you need a break because typically the, and that's what i've been drawing a little while. we haven't been trying to bring to ease of bringing business on the basically what kind of problem on that leg and otherwise i think the people liked or done finishes in charlotte. i wouldn't be able to carry on this. these are big business is

a very successful man look in trouble to well. so i think the post of the a bumps on depends on the political, electronic stability and best of the loaded. we talked to those about about political stability. what about in security the and, and is how much of a drain that is on pakistan's economy and military spending to how much of of, of pakistan's g d p is expanding on the military right now. but i think, you know, it's a combination of factors. agent and you are right to identify some of the other factors as well. but i do think that one of the, you know, what is really needed is that, is that a form is government that sort of looks at the, you know, it has a full spectrum view as a true of all the issues that you know, your other, a guess civil and so i didn't defied and i've also tried to identify so you're right. why is security and the challenges that focus on faced from terrorism. and of course,

from the long war in the neighborhood and the finest on 20 years of that war went on naturally, the phone out on focused on was inverse a. and that wasn't going to attract investment. when people were unsure. uh, you know, the extent to which this wall was spilling over into bucket sands, the prospect concerns voters into bits of a areas of habitable 2 o'clock and the driver driver bent. but i think to a large extent, focused on, has effectively managed uh, the issue of terrorism. and although yes, there are stir uh, security questions. but i think the main um, sort of if, if i can put it back to the mean in the me, off of economic stability is doubling products. and the inability of how politically does to agree. and even it wore some kind of an economic vision for

bucks that i think the rest of the problems can still be bizarre. but unless you have elected leaders who show responsibility. oh, that's a lot to him because all they think about is the next election. and how they can get the watch. but if we have to resort focus on problems on a sustainable basis and focus on on a bulk of sustainable. ringback didn't need to ship aspect is key. i can think of no country that has made economic progress that didn't have a leadership in place that was committed to long term economic measures and that had a capable team to assist it. so i think these are very important factors also, unfortunately, the public deals, political leadership and focus on has contributed enormously to the economic best decision. i'm picking up on, on what the ambassador was saying that them and how do you put that sort of that

sort of political team together and then sell it to the electorate of building political consensus and body son. adrian, to this point is a very difficult task. focused on is probably going to do what we can call the poly prices. there's a lot of it is the central prices that have sort of know that together. and that amalgamation has treated huge issues from august on and put it in the points that historically, it's never really, truly been in before. there's a political crisis, there was an institutional prices. there's a constitutional crisis. we have prices related to the economy, security and climate change. and what i find fascinating is that whenever we speak about economy in this country, the political consensus, one of the things that we always leave out is that about that of climate change. this agreement would be with the interest for $3000000000.00. the floods that happened in the box on the last year between june, september costs of the country of $30000000000.00. that's 10 times be about $1700.00 plus people buy $1400000.00 light stock was killed. a 3rd of this country

entry to satellite imagery confirmed this was underwater. a 3rd of the country was effectively the seat. climate change is one of the biggest special crisis companies facing, and it is going to be a resource drain. and the bulk of it, of the responsibility of it, they squarely lives with a developed nations that have created the kind of funded crisis that exists in the country right now. the world bank, for instance, has been producing reports since the beginning of this year are related to beacon on the prices. there's a company comic memorandum. there's a climate change and development report. there's the public expenditure report, the middle one department change, a development report, states that parks, palm beach, somewhere north of $200000000000.00 between now and the end of 2030 in order to meet us, clement finance. and we don't have a fraction of this month. imagine what happens when a company like boxes on the population of over 232000000. so far as the adverse effects of climate change to the point. then the 1st on the system collapses,

the governing structure. you have to 132000000 people with mass urban migration, international migration, refugee management, and a range of host of other issues. the world truly need to pay attention. okay, that's a part and parcel of that. you cannot make the price. i'd love to look into them as a, as a silly question. i'm sorry to interrupt you. one final, very quick question too. and best of the lady picking up on, on what decision was, was, was saying that does the international community, but at least some obligation to it shouldn't be obliged to, to help breakfast on right now, given organization will say, but if you're getting help with another from the lender of last resort to the i'm asked but, but should the international community be shipping into what does i think already the international community depends what you mean by the international community. i think china has stood by focused on. it's rolled over a number of the knows that the majority and that to get focused on fiscal space.

so it'd be a helped they chipped in the you a also a tipton, so one can say the international community hasn't helped focused on. but i think the real question is, how much can focus on help itself? it cannot keep looking side to resolve problems which brought its own problem. okay . all right, i guess i'm sorry. i'm sorry to cut you short. we're out of time a many thanks indeed to all of you for being with us today at the end, julio position. so holding at our best of the really hello teeth and thank you for watching. so if you get, you can see the program again at any time by going to the website that i was a 0 dot com for further discussion. join us on facebook page, you'll find that at facebook dot com forward slash ha inside story. and you can join the conversation on twitter handle at a inside story for me, avery and so they can have a whole team here. let's see again 5 for that. the

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