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IMF Christine Lagarde Vs 3 PhD’s

November 12, 2016

This is in response to “An open letter to IMF” by three eminent economist, Dr. Ashfaque Hassan Khan, Dr. Hafiz. A. Pasha & Dr. Salman Shah. To read click on the link below.

by asad rizvi

It is all about Acceptance and Recognition that leads to Reconciliation by the Rulers/Leaders. Recent Global Trend/Practices suggest that it is always Ruling Party’s prerogative to call a Spade a Spade or opt for Denial-ism whichever suits them.

Nature of Reality is no more a priority. Aspects of inequality, injustice, merit or being unfair is no more a serious consideration and hence it does not often come under scrutiny.

I can provide several political and financial examples/priorities.

Political Double Standard  

Despite voter’s mandate, look at the ongoing protest rallies in USA. And do watch the Anti-Lobby behavior Media and ( G-7 =  +5 -2= Russia & China ).

In June 2012, Egypt’s first Democratically elected government of Mohammed Morsi that had won elections by obtaining 51.7 pct of the runoff votes was forcefully ousted in July 2013 by the Sisi. No one bothered to take notice.

Another example is Turkey’s June 2016 coup. NATO or Western Allies did not come to Erdogan’s aid. Instead he was warned for post-coup crackdown.

Lingering Global Financial Crisis

-It is a self created Global Financial Problem, which is leading towards isolation because….

-Policy Makers/Regulators are solely responsible for all the Global mess, as they don’t do “What is Right“. They prefer to do “What is Easy“.

-Allowing Violations and Breaches

-By changing Accounting Rules to accommodate the violator for Wrong Doings.

-By allowing Window Dressing.

-By not questioning flawed Audit Reports.

-By means of Artificial Compensation (QE).

-By providing Cheap QE money for Bank Capitalization and by making lame excuse that funding is provided to protect the industry from collapse.

-Irresponsible Underwriting Practices and Flawed Credit Rating procedure.


I have a totally different view from all what is being written or discussed in media about IMF MD’s Christine Lagarde’s visit to Pakistan. There was obviously some purpose behind her visit, which surprisingly came after completion of its 3-year program. IMF kindness surely has some sort or reasoning for easing conditionality’s and by offering large number of waivers.

Ball is now in IMF’s court. The urgency in my view was felt because of creation of Asia Infrastructure Investment Bank (AIIB), which is an international financial institution that was proposed by China. Initially supported by 21 countries that signed Article of Agreement in October 2014 now contains a very long list of prospective founding members in the bank that includes China, UK, Germany, Saudi Arabia, Russia, France, Iran and Pakistan too is a member.

It is a thorn in flesh, as AIIB aims to invest in infrastructure projects in Asia Pacific region. It has certainly raised concern in the leading Global Financial Headquarters because potentially it a threat, as an alternative to Western lead Financial institutions.

AII Bank’s first inaugural meeting of the Advisory panel consisting of 11-Members was held in Beijing on October 19, 2016. Former Prime Minister of Pakistan Shaukat Aziz is part of the elite panel.

AIIB’s, 2030 Agenda Target is USD One-Trillion, which points to future investment. I consider AIIB a threat as it may offer better terms and condition to the borrowing country.

After CPEC or China Pakistan corridor, if the country needs any assistance in future, I am expecting Pakistan to get outright funding support from them. If I am reading correctly, IMF sees risk of losing its permanent customer. Since 1988, it was only on one or two occasions that the country did not ask for IMF assistance. Further, in broader terms our major problem is tax collection and export slowdown. Fall in exports is not mainly due to exchange rate, which has minor contribution. Or else European, Britain, Scandinavian and Japans economy would have bounced back.

It is because of outdated technology, obsolete practices and fall in global commodity prices. We only rely on subsidies and rebates. Why no one ever debate advantage of Export Refinance rate dropping to 3 pct from 10 pct in last 5-years that gives competative edge to exporters.

Inflation is no threat, as it will comfortably stay below 4.75 pct by end of June 2017. Then why is Target Rate and PIB Coupon rate not adjusted in line with inflation data, which will reduce governments huge borrowing cost substantially cheap bank lending with stimulate economy.

Why are we so naïve that we fail to identify the real problem by looking at the barometer that gives true picture of the economy? It is bank Deposit/Advance Ratio (ADR) gap that has widened beyond imagination to Rs 10.447 Trillion and Rs 5.165 Trillion respectively, which is 49.44 pct of ADR. It was 60 pct eight years ago? Based on this calculation in 8-years bank lending to Private sector has squeezed by almost Rs 3.4 Trillion.

Our Direct Taxes is roughly around 35 pct, which is why government is forced to borrow pushing Bank and Non-Banks Holdings of GOP Securities to Rs 8 Trillion.

In my view rest of the indicator is a minor guideline.

It depicts that there is an urgency to sharply cut target rate and reduce coupon rate that will give annual relief of nearly Rs 300-400 Billion. Economic activity caused by growth in private sector will also help in increasing tax collection by another Rs 500 billion. So what are we waiting for?

While making decisions we have to think big and be bolder in making our decisions, or else at the end of the day, our debt would continue to balloon until it becomes nuisance and haunt respective governments, which is the ultimate price that we have to pay for further delay. And larger debt means inviting more trouble.

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