Thought Behind Things · Jun 14, 2024 · 1:23:08

Default is a choice — and Pakistan keeps choosing to choke instead

Bristol economist Ahmad Jamal Pirzada walks through the arithmetic of Pakistan's external debt, why restructuring is effectively default with better optics, why three decades of similar reforms left Pakistan, India and Bangladesh on three different trajectories, and why the IMF's growth projections keep flattering the books.

with Ahmad Jamal Pirzada

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13 min read

Key takeaways

Pakistan's external debt servicing is around 35 to 40 percent of its dollar income — one of the highest ratios in the world among major economies.
Default is a choice, not a fate; the real question is whether default costs less than choking the economy hard enough to keep servicing the debt.
Restructuring is economically the same as default, but dressed in language polite enough for politicians to accept.
The IMF's growth projections for Pakistan — 5 percent indefinitely — are systematically misleading and assume private capital inflows that have never historically materialised.
Pakistan, India and Bangladesh ran very similar liberalisation reforms in the 1990s; thirty years of labour-productivity growth diverged sharply because Pakistan saved its dollar inflows in two-year bursts and spent them, while China saved more than it earned.
Without foreign-exchange reserves as an insurance buffer, even high returns can't pull in long-term investment because the risk premium swallows the return.
Pakistan's debt is no longer market debt — it is tied to geopolitics, which means no single political event can clear the table the way the post-9/11 Paris Club restructuring did.

The arithmetic of 26 billion dollars

The episode opens with Muzamil introducing his guest as a senior lecturer in economics at the University of Bristol, previously at Queen Mary University of London, with a PhD in monetary economics from Bristol and prior work at Pakistan’s Planning Commission. The first question is the one most viewers actually want answered: what does Pakistan’s debt situation really look like, stripped of political theatre?

Ahmad Jamal Pirzada starts with a single number. Pakistan owes roughly twenty-six billion dollars in external debt servicing over the next twelve months. That figure, he says, is “around thirty-five to forty percent” of Pakistan’s dollar income — primarily exports and remittances. “This is actually one of the highest in the world,” he tells Muzamil. The only countries with a higher ratio are a handful of very small African and island economies most people cannot even name. Among major economies, Pakistan stands out.

Pirzada is careful to clarify, when Muzamil interrupts to ask whether this is a share of GDP, that it is not. It is forty percent of the actual dollar income the country generates. The distinction matters because debt-to-GDP looks tolerable in Pakistan’s case. Debt-servicing-to-dollar-income does not.

This situation, he stresses, is not new. The number has been “floating around twenty, twenty-five billion” for two years. The buildup goes back to 2016 and 2017, when borrowing began compounding into the structure that finally peaked into today’s bill. The way Pakistan has been managing it is by slowing the domestic economy hard enough to generate a current-account surplus — currently around five billion dollars a year — almost all of which goes directly to interest payments on external debt.

Rolling over is not relief

Muzamil presses on a specific confusion that he says he carries into the conversation. When the finance minister talks about rolling over debt with friendly countries, does that mean the principal is genuinely deferred? Or does it mean the interest keeps compounding while the headline payment is pushed back?

Pirzada’s answer is layered. The COVID-era debt suspension, he says, did produce real relief — and the reserve buffer Pakistan built in 2021 was a direct consequence. What went wrong was the fiscal stimulus that followed in 2022, combined with the global monetary tightening that pulled capital out of every emerging economy at once. He also corrects a common framing: most of the twenty-six billion is not new debt. It is past debt now maturing — debt taken between 2018 and 2022, debt from CPEC, and a portion of the debt that was restructured all the way back in 2001.

He links this to a critical structural feature: Pakistan’s debt is not market debt. “It’s not that the investor or the market is lending to you depending on their projections about your future,” he explains. “A lot of this debt is very much tied to geopolitics.” World Bank, IMF, China, GCC deposits at the State Bank, swap lines with China that have already been maxed out — these are not bond investors making rate calls. They are sovereign relationships. The implication is uncomfortable. The 2001 restructuring worked because 9/11 created a single geopolitical moment that brought every creditor to the same table. There is no equivalent moment available today, because the creditor list is now too fragmented. China, GCC and the Paris Club do not share an aligned interest the way the Paris Club alone once did.

Default is a choice — and so is restructuring

Later in the discussion, the conversation reaches what Pirzada treats as the central economic question hiding behind the political theatre. “Default is a choice,” he says, more than once. A country can always choose not to default. It can cut its food spending, its education spending, its health spending — squeeze its citizens hard enough to keep servicing the debt. The question an economist asks is not whether default is bad. It is whether default is less bad than the alternative.

He cites Kenneth Rogoff approvingly here. There are conditions, Rogoff has argued in print, where a country is genuinely better off defaulting than adopting traditional adjustment policies. The reason governments avoid the conversation is political, not economic. “People kind of get offended by the term default,” Pirzada says. “But it’s a very economic question. Which of the two options is better?”

Restructuring, he points out, is the same thing wearing a more acceptable label. He breaks it into two forms. A haircut reduces nominal principal — one hundred billion becomes ninety. An NPV reduction keeps the nominal value but stretches the maturity, lowering the present value of the obligation. Pakistan’s debt-to-GDP ratio is high but not extreme. The debt-servicing-to-dollar-income ratio is what’s lethal. So a maturity extension that brings the annual bill from twenty-six billion down toward twelve or fifteen billion would, by itself, restore enough room for the finance minister to “come out of the mindset of checking which flight to catch to which country whose loan matures next month.”

Muzamil flags an additional complication that Pirzada confirms. Pakistan does not fall into the IMF/World Bank low-income classification — it sits in the upper category, which means any formal restructuring conversation will also pull domestic debt onto the table. And domestic debt restructuring is something the banking sector simply cannot absorb without triggering a second crisis. That, Pirzada notes, is exactly the kind of negotiation creditors and the IMF are most reluctant to open.

Why “inflating it away” is not actually a strategy

Muzamil floats one of the more popular fixes that circulates in commentary — that Pakistan could just inflate the local-currency debt away, the way Turkey effectively has. Pirzada rejects the premise cleanly. “If everyone knows this is what the government is going to do, then it won’t work,” he says. Bankers price forward. The moment they expect inflation to jump from ten percent to thirty, they price every new bond issuance at thirty. The surprise window closes the day the strategy becomes legible. The only way inflate-away works is by surprise — and you cannot build a multi-year policy around a one-time surprise.

There is a third option that doesn’t get named in headlines: the long, slow choke. Pirzada calls it “chipping away.” Privatise, cut the size of government, run a fiscal surplus, keep monetary policy tight, push the gap between exports plus remittances and imports wider and wider until you can start paying down principal rather than just interest. Greece did this. It worked, in a narrow technical sense. The economic and human cost was severe enough that economists openly debate whether default would have been kinder.

The IMF’s projections don’t add up

Pirzada is openly critical of the IMF’s forecasting. The Fund’s standard staff-level documents, he says, project Pakistan’s economy growing at five percent indefinitely — five percent through 2032. “Every child knows,” he says, that Pakistan’s trend growth is between three and four percent. The economy can spike above that briefly during a CPEC-style inflow or a post-COVID rebound, but it always reverts.

What troubles him about the IMF’s math is the input that produces the optimistic trajectory: a systematic over-projection of private creditor inflows. “Private creditors have never given you more than four or five billion in any year of your history,” he tells Muzamil. “And the IMF projects that number will jump to eight billion, then twelve billion. Like — come on.” This matters because once you assume those inflows, every other number works out. The debt-to-GDP ratio falls, the path looks sustainable, the colour on the dashboard turns from red to green. Strip the assumption out and the whole picture turns red again.

The point lands politically too. The IMF’s reluctance to be straight about the cost of a traditional adjustment program is, in Pirzada’s reading, what blocks honest national conversation about whether restructuring is the lower-cost path.

Three economies, three trajectories, one set of reforms

About halfway through, Muzamil pivots the conversation toward the structural question: how do you actually grow out of this? Pirzada anchors his answer in a comparison drawn from a book he is currently reading by Ishrat Husain — the development paths of Pakistan, India, Bangladesh and China from 1990 onward.

The 1990s reforms across all four countries, he points out, looked remarkably similar. Privatisation. Opening up to foreign investment. Lower trade tariffs. The starting policy mix in 1967 was also not wildly different — import substitution, subsidies, protection. So if the reforms were similar, why are the trajectories now so different?

He gives the numbers. From 1990 to 2018, Pakistan’s labour productivity grew by about 1.3 percent a year. Bangladesh grew at roughly 3.8 percent. India between four and five percent. China at seven to eight percent. He uses the example Muzamil offers — a worker in a jeans factory who can either stitch ten pairs a day or one hundred. That gap is productivity. It depends on the manager’s skill and on the quality of the machines the firm is willing to install.

Capital inflows do not explain the divergence. China received four to six percent of GDP in foreign inflows a year. India around four. Pakistan was at two — lower, but not catastrophically so. Bangladesh actually received less than Pakistan on average. So inflows are not the variable.

The variable, Pirzada argues, is what the country did with the dollars when they arrived. “China saved them as dollar reserves,” he says. “They actually ended up saving more than what came in, taking it out of their own pocket and putting it into reserves.” Pakistan, by contrast, “saves for two years, spends for two years, saves for two years, spends for two years.” The reserve buffer never accumulates. And without that buffer, no foreign investor can model their downside risk, so even attractive returns get discounted by the risk premium until they stop looking attractive at all.

Why the policymakers behave this way

Muzamil asks the question that needs to be asked: Pakistani policymakers are not stupid. They are not from Mars. They speak the language, they understand the arithmetic. Why do they keep choosing the short-sighted path?

Pirzada’s answer is that the short-sightedness is structural, not personal. Because reserves were never built, the economy is structurally vulnerable to even small shocks. A modest fiscal expansion under the wrong global conditions produces a crisis within six months. “In which economy does six months of loose fiscal policy produce a crisis?” he asks. The answer is: only an economy that never built insurance. And once you’re permanently vulnerable, every government inherits a horizon that ends in months, not years. The political economy of always-imminent crisis is what produces always-short-sighted policy.

The boom-and-bust pattern reinforces the productivity gap. Without long-horizon stability, no one installs the better machine. The jeans worker stays at one hundred pairs a day while his counterparts elsewhere reach two thousand. Returns in Pakistan can be high. But “you don’t just look at the return,” Pirzada says. “You also look at the risk. The risk is so damn high that even the very attractive returns are not attractive.”

Two theories of change — Acemoglu’s masses or Drèze’s wise elite

Toward the end, Pirzada lays out two competing frameworks for how Pakistan actually gets out. The first, drawn from Jean Drèze, is top-down: the elite recognises the failure of the current path, sits together, and chooses a different one. The second, drawn from Acemoglu and Robinson, is bottom-up: the masses protest, vote, and exert democratic pressure that forces the elite to change course.

Pirzada admits he leans toward the second. He uses a domestic example. The PTI government’s health-insurance policy was popular and effective — but voters did not stay loyal to it. They voted differently in subsequent local elections because they wanted to know what came next. “You’re not going to be a slave of a good policy you’ve implemented,” he says. “Show us a better future than what is already there.” The Pakistani voter, in his reading, is forward-looking, intelligent, and punishes politicians who stop delivering improvement — a more sophisticated electorate than the urban intellectual class typically credits.

His second concern is that the top-down model assumes elite decisions hold for decades. In the 21st century, he argues, the underlying technology and economic structure shift too fast for that. Even if the elite reached a wise consensus today, the world ten years out — AI, robotics, climate-shifted agriculture — would render the consensus obsolete. A flexible democratic system is messier but adapts faster.

He raises one more variable explicitly: the military. The military is not just a political actor in Pakistan. It is a major economic actor — real estate, food, fertiliser, multiple protected sectors. Any honest theory of change has to account for an institution whose business interests are structurally entangled with the policies that need to change.

Three scenarios — and only one is honest

By the end of the conversation Muzamil presses Pirzada on the inevitability of change. Things, he argues, cannot continue as they are. The population is too large, too educated, too aware. Business-as-usual has a shelf life.

Pirzada lays out three scenarios cleanly. The first is the status quo carrying forward: elites do not share power, the economy does not improve, no external rescue arrives, and Pakistan moves toward what he describes as anarchy or systemic persecution — the kind of environment where speaking up costs you, or your family, and where anyone with options simply leaves.

The second is the recurring Pakistani historical pattern: get lucky. A 9/11-style geopolitical accident shows up, a major creditor extends maturities by fifteen years, the global economy booms, and Pakistan buys another decade. He notes that the entire current policy posture — waiting for eighty billion from the GCC that became twenty, then five, then two, then the one hundred and one million from the US that has now become the news — is built around this hope. “The point is that you have been looking for someone else to come from the outside to bend you out so you can keep the whole thing going for another five, ten years.”

The third is the one he believes in. Elites step back. Power is genuinely shared — politically, ethnically, religiously, across regions including Balochistan, KPK, AJK, GB. Contracting institutions are made credible enough that a freelancer can trust they will be paid, and a manufacturer can trust a supply contract will hold. Only then, he argues, does the high-value-added production base that drives sustained productivity growth become possible. Without contractual credibility, no complex production chain forms, because every link in the chain is a risk.

The episode runs nearly an hour and fifty minutes — Muzamil notes they had originally agreed on forty-five. He closes by asking viewers what they think: should Pakistan default? Will the elite let go? Or does the system keep rolling, scenario by scenario, until one of them finally gives way?

Full transcript

Muzamil

सानवाज़ हबतीना रात welcome back to another episode of thought behind things. आज हमारे साथ एक बहुत ही ख़ास मेहमान मौजूद है who is currently a senior lecturer at of economics at University of Bristol if I'm not wrong. इससे पहले he was at Queen Mary University of London. वह planning commission पाकिस्ताने भी काम कर चुके हैं. उनकी PhD है in monetary economics from the University of Bristol. मेरे साथ मौजूद हैं अहमद जमाल pizza साहब. Sir, thank you so much for being part of the show.

Guest

Thanks a lot for having me with you.

Muzamil

मैं थोड़ा सा quickly just trying to understand. आजकल हम बहुत ज़्यादा sun रहे हैं कि Pakistan जो है वह default के bill को साथ खड़ा हुआ है और बार बार, you know, question आता है कि हमारा debt sustainable है कि नहीं है? हमारे IPPs बहुत ज़्यादा, you know, capacity payments की मदद में पैसे ले रहे हैं and it seems like for an for someone जो बाहर से इसको देख रहा है कि Pakistan जो है वह एक अजीब से spiral में है and it's almost an impossibility कि यह इससे बाहर निकल सकता है irrespective of politicians हमें जो भी बोलें, media हमें जो भी बोलें. Realistically,

Guest

if you can paint a picture just as a starter कि क्या क्या इस वक़्त सूरत है हाल है पाकिस्तानी economy की? Thank you, thank you for the question. Yeah, let me start with the external debt. I think that's very important. अगर आप अभी देखो कि आपने external debt अगले साल में, अगले बारह महीने में कितना देना है तो that's around 26,000,000,000 और 26,000,000,000 यह बनता है तकरीबन पैंतीस से चालीस फीसद आपकी जो dollar income है जो कि Pakistan की case में ज़्यादातर आप इसको exports और remittances ही समझ गए तकरीबन. उसका यह पैंतीस से चालीस फीसद बनता है और this is actually one of the highest in the world. इसके अलावा Pakistan अभी ना बाकियों से compare करें तो there is only a handful of very small economies. Some of them in Africa, some of them are islandic economies. You can't really even name them properly which probably have a bit of a higher higher ratio. अगर आप major economies में देखें तो Pakistan actually stands out amongst amongst

Muzamil

the League of Nations. यह जो आपने 40% थोड़ी यह आपका Sorry, मैं वह काट रहा आपको. मुझे बस यह बता दीजिएगा कि यह 40% आपकी GDP का है या यह 40% आपका जो export like जो total dollar earning है आपकी export और remittance मिलाकर?

Guest

यह आपकी dollar in income. Dollar जो आप income generate कर रहे हैं exports और remittances की शपिल में उसका 40% आपने अभी बारह महीने में देना है और इस यह situation कोई नई नहीं है. इस situation में आप पिछले दो साल से फ़ंसे हुए हैं. This number has been floating around 20,000,000,000 and then it went all the way up to 25,000,000,000. Two thousand and seventeen, sixteen में this was a lot lower but the whole thing was kind of building up and then it has kind of peaked as of today और यह अब आपको manage करना है और अब आप इसको manage कैसे कर रहे हैं इसमें manage करने का जो एक तरीका है वह यह है कि आप अपनी economy को इतना slow कर रहे हैं कि आप surpluses generate करें. Surpluses से मुराज़ यहां पर है कि जो आपकी export remittances से आपकी income है, that's more than what you are spending on exports. तो currently Pakistan में अगर आप देखें तो over a year आप you are basically generating as surplus defined as such of around 5,000,000,000. जो कि आपका सारा का सारा जो interest payments होती हैं external loan के ऊपर उसमें चला जाता है. तो that's maintaining an aura of stability जो आपकी exchange rate पर pressure नहीं आ रहा और सारा कुछ that's why we are driven by the slowdown which you have basically intentionally cost in the economy. Monetary contraction से या fiscal contraction से आपने उसको sustain किया हुआ है. But the problem is कि जो for example पिछले दो साल में भी discuss हो रहा था and then few people talked about this in public as well ministers for example कि इसको हम ऐसे ही चलाते रहेंगे और यह खुद ही चला जाएगा क्योंकि हम friendly countries हैं उनसे हम हर साल, दो साल, तीन साल का rule over पर आते रहेंगे and that's fine we can keep it going until this kind of goes away. That's very wishful thinking that will go away because you have to explain कि यह how will it go away. अब पिछले दो साल में तो we are kind of rolling it over और अभी आपने finance minister जो हमारे current हैं उनकी statement सुनी है कि अब वह जो kicking the can down the road वाला time given that's not going to happen moving in the future. तो what's the way out of it? Either आप इसको ऐसी तरह चलाते रहे और pretend करें कि कभी ना कभी हमें कोई ना कोई bailout करता जाएगा जो कि possibility है कि शायद होता रहे कोई भी नहीं चाहता आप उनके debt पर default करें. तो may be push comes to sharp they'll keep on rolling over but they'll only roll over for another year or maximum another two years which is what we have seen happening in the case of Pakistan. लेकिन इसका फिर मतलब यह भी होगा कि आप अपनी economy को बिल्कुल इसी तरह इसको slow down और choke करके रखें ताकि आप जो आपकी interest payments हैं हम उनको आप serve कर सकें. पिछले साल में we were we were a bit lucky as well कि आपकी income है वह थोड़ी सी increase होगी, remittances भी increase होगी. Exports were very much driven by जो India ने अपने food exports पर ban लगाया उसकी वजह से we ended up getting few few I think $2,000,000,000 a bit more. तो उससे bleeding space मिली. But that's a breathing space which very much depends on what India decides to do going forward in terms of their export ban on agricultural products. Right? So, you are getting a bit of a room there. So, you were a bit lucky. But that's only luck. You don't make policy based on getting lucky every single time when you think about the future. Right? So, that's where you stand in terms of your external debt और domestic debt again इसके ऊपर मोटूजा सैयद जी wrote a very good article in FTE. He also wrote a very good threat. So, he has also talked about the domestic debt and once again if you look at the matrices there, वहां पर भी again अगर आप बाकी मुल्कों से compare करें तो Pakistan stands out जिसका domestic debt बढ़ जाने the proportion of their revenue is probably one of the highest if not the highest. So these are the the the problem where you're stuck. We can keep on taking this forward. Again we talk about default. Again it's very important to keep in mind. Default is a choice. आप चाहो तो default ना करो. Right? अपने bank का loan वापस करने हैं तो आप अगर चाहो तो आप default ना करो. आप अपना खाना काम कर दो. आप अपनी education spending काम कर दो. आप अपनी बाकी activities को काम कर दो. आप बाद जाना ही बस कर दो. तो you'll have enough income to maybe service part of your debt और वह banker भी नहीं चाहता. आप उसके loan पर default करें तो वह भी कुछ ना कुछ loan over कर देगा. कुछ ना कुछ आप अपना pay बांधकर उससे service करते रहेंगे. लेकिन unless your income gets, your आप यह income increase करें one or you end up with some kind of an agreement where let's say the banker or the loan officer वह आपको कोई deal दे जो आपका extend कर दे maturity profile और आपकी जो payment requirements हैं वह छब्बीस billion से let's say कम होकर पंद्रह बारह billion के around आ जाएं which is something which is still pretty high but let's say better than what we have at the moment. Then you can kind of go forward. नहीं तो आपको इसी तरह पेट पर पत्थर बांधकर चलना पड़ेगा और हमेशा मत द्वाह करनी पड़ेगी कि कहीं ना कहीं से कोई ना कोई luck आपके

Muzamil

saving play करें. अच्छा इसके ऊपर I have a few questions based on what you just shared. पहला तो I want to understand कि आपने rollover की बात कि आपने 26,000,000,000 जो start में बोला था. Do you expect right? कमलोल. Does the rollover mean कि यार अच्छा मैंने let's say 1,000,000,000 देना था, अब मुझे बस एक pause आया हुआ है और मैं अगले साल दूंगा या does that basically mean कि अच्छा आप वह नहीं दे रहे इस साल? लेकिन उसका जो interest है इस साल का वह भी count हो रहा है और अगले साल का वह भी count हो रहा है. और इसी के साथ तीसरा tight question यह है कि COVID के time के ऊपर हमने सुना था कि, you know, कुछ ऐसे के लिए pause लग गया था debt के ऊपर, and we got some space जो कि उस time की government जो है वह जो जो कहती है कि हमने बहुत high growth दिखाई. उसमें एक major reason यह भी था कि you you did not have those payments. Otherwise, maybe we would have been sort of उस उस time पर भी हमारे हालात problematic होते. So, जब उस time के ऊपर आपका pause लगा हुआ था, were we still getting interest on-on that pause? And do you think one of the reasons why suddenly एक iceberg की तरह के यह हमें लगाए वह इसी वजह से because COVID के time पर जो relief मिला था हमने उसके लिए project नहीं किया. कि जब उस relief ने हटना है तो उसमें फिर जो इतना massive आपकी you know repayment की requirement आएगी उसके लिए हम किस तरह deal करेंगे?

Guest

I think अगर मैं आपका आपसी question पहले address कर दूं. I think COVID वाला जो आपको point आपके जो debt repayments हैं उसमें कमी तो definitely आई थी and it was very significant. लेकिन at the same time if you look at the numbers आपके reserves भी increase हुए थे. तो moving into 2022 which is an year after COVID the reserves, the reserve buffers that you had were quite significant. So, जो घूमती हुआ था, it wasn't that you ended up wasting it immediately at the time of COVID. You actually ended up building buffers based on that. Where things really went wrong was when you ended up on the fiscal stimulus site moving into the mid of twenty twenty two and that going forward. I think that's when things got really bad in terms of how much of a control we had over the situation. The other thing that you have to keep in mind is you have a debt burden छब्बीस billion है. That's it's actually building up. Right? It's not कि वह आज create हो रहा है. This is past debt which is maturing. Right. So this is the debt which, let's say, the government was taking between twenty eighteen to 2022. This was also the debt that had been taken in the period before 2038. For example, CPAC and all the all those fundings that came in. And this actually also included some of the debt जो 2001 में आपका restructure हुआ था. So, let's not forget कि जो आज हमारी situation है, if you only focus on aggregate numbers, this is very similar to the situation we had in 1999 or 1998 moving all the way into 2001. तो जो आपकी जो debt servicing team है जो कह रहा था पैंतीस से चालीसी सुधार की जो dollar income है that goes to let's say servicing your debt, it was almost a similar ratio back then as well. तो लेकिन again you got a bit lucky जो '2 thousand and one में आपका nine eleven हुआ and then we ended up joining the US war in Afghanistan उसकी वजह से we got a blanket relief for जो आप हिसारी debt servicing की mostly due to Paris club at the time वह that was that was extended by about fifteen years or so at the time. So that was also coming to maturity moving into the beer that we are currently in. So was a lot of debt that was being taken at the time and also a lot of the debt that was being taken in the past, ok? At the same time फिर वह आपका build up उसकी जो maturity है that ended up kind of coming together at a time जब जब आपका यह problem create हो रहा है. And it's also evolve also in a in a way was we were lucky but we were also unlucky कि जो आपकी global monetary policy है that ended up being very different to what it was let's say over the last ten years. US, सारे आपकी जो global central banks है उन्होंने अपने interest rate पर हाला शुरू कर दिए, investors were taking money out of emerging economies, COVID also spread it out of panic. So, all of those factors kind of worked in together including the debt you had taken in the past to make the situation really bad for us. एक और इसमें जो चीज़ आ जाती है जो कि which makes Pakistan quite different and also brings in the geopolitical side of it कि आपका जो debt है it's not market debt. It's not कि आप bond market में गए और आपने वहां से ढेर सारा debt उठा दिया या आपके banks ने बाकी global bank से borrow किया और उसको फिर आपने lend किया. I am not saying कि that's less harmful but the point is, it's not that the investor or the market is lending to you depending or based on their projections about your future. A lot of this debt is very much tied to geopolitics. आपको World Bank भी पैसे दे रहे हैं, आपको IMF भी पैसे दे रहे हैं, आपको China भी दे रहे हैं, आपको GCC countries भी दे रही हैं. GCC countries आपको किस तरह दे रहे हैं पैसे? वह आपके deposits रखवा रहे हैं state bank में और बाकी institutions में. है ना? China के साथ आपने swap lines उन arrangement में चले गए और वह आपने max out कर दी है और आप उसकी फिर maximum capacity भी आप बढ़ाने की बात कर रहे हो. तो a lot of the funding, lot of the debt, debt, debt that we have taken, that's very much tied to geopolitical dynamics that going on, that are or that were going on at the time. Right? Right. Those geopolitical rents were actually very important. At the same time, together with IMF, that's where I criticized the lending institutions. आपको they provide you a bit of a risk insurance but then that also means कि आप जहां से भी आपका bus चलता है आप वहां पर जाकर loans उठाते पर रहो क्योंकि investor को लगता है कि IMF ने आपका risk जो है वह underwrite किया हुआ है. लेकिन in effect आपने कभी ना कभी तो वह पैसे देने हैं and whenever the time comes and then if you don't have IMF in place then everyone panics and then there is a crisis. So the key thing is a lot of the lending that we, a lot of the debt that we accumulated over this time period let's say post February restructuring मिली थी, it was very much the debt which was very closely linked with the geopolitics that was shaping the world rather than what the investors were thinking about Pakistan

Muzamil

at the time. Right, but इसी में मेरा सवाल basically यह है कि जो जिस तरह हमने बात की ना कि अगर let's say 26,000,000,000 हमारा debt है और उसमें से 13,000,000,000 अगर rollover हो जाता है, what I'm trying to understand is कि अगर हम कोई, for example, कोई relief ले भी आते हैं, हम rollovers निकाल लेते हैं, हम कोई restructuring ले आते हैं, What does that mean in terms of their total liability? कि अगर, let's say, दो तीन साल हमें theoretically तो कुछ देना नहीं पड़ रहा ना? तेरह अरब जो है वह rollover हो गया, वह अगले साल चला गया, वह अगले साल चला गया. But क्या, let's say, तीन साल बाद फिर वह तेरह अरब ही होगा? या वह तेरह अरब plus let's say interest rate based on whatever जो आपके amount पिछले दो सालों की है वह होगी. What I'm trying to understand is जहां पर वह relief आती है वहां पर आपका total bill भी भरता रहता है. क्योंकि वहां पर फिर unless you do some underlying changes

Guest

जिसमें आप कहते हैं कि यार मैं कहीं से exports बढ़ाऊं, मैं कहीं से productivity बढ़ाऊं otherwise तो you're gonna get stuck again and again and probably worse off even than right now. I think over the long term वह तो आपको reforms तो करनी ही करनी है. There is no way out of this कि आप please आप reforms ना करें which we will talk about later or you just kind of wish it away. लेकिन at the same time you do need a breathing space, right? If you are stuck in a, in a mess और आपके दरवादे पर हर शाम को let's say वही आपका banker आकर आपसे पैसे मांग रहे हैं, it's a, it's a very different situation, right? You are in a very different mindset in terms of what you want to do, what your priorities are. Now, what about restructuring? The outcome really depends on the kind of negotiations you have. One is a hit cut. Let's say you say, अच्छा यार, मेरा total debt, let's say it's 100,000,000,000. We are going to bring it down to let's say 90,000,000,000, 80,000,000,000 something like that. The other is more in terms of NTV reduction कि वह value तो उसकी कम नहीं हो रही in terms of जो आपने the amount you need to give आप let's say सौ billion आपने देने आप लोगे, सौ billion ही ही लोगे. लेकिन you spread it over a longer term तो उसकी जो present value है वह कम हो जाएगी. इसको वह net present value भी कहते हैं. तो in NPV terms you end up getting some kind of debt relief. अब Pakistan के case में if you look at the debt to GDP ratio for external debt, it's, it's high but it's not very high. लेकिन the debt servicing जो छब्बीस billion और वह उसकी जो ratio बनती है आपकी dollar income के साथ, that's very high. So, अगर आपका debt जो है वह उसका time frame extend हो जाता है. So, that will definitely give you a lot of breathing space where आपके finance minister को या आपकी जो economic team है उसको यह नहीं सोचना कि अच्छा यार अब अगली flight मैंने किस मुल्की पकड़नी है. Check करो कि किसका loan mature हो रहा है. Let's say next month. So, you need to come out of that mindset before you start thinking about anything else. So, that's why that's important. But then again जो उसका end outcome होगा it will very well depend on the negotiations. Pakistan fortunately, unfortunately does not fall in the category of low income countries so it makes the process even more tricky क्योंकि then when you go and ask for restructuring.

Muzamil

It does not come in low income countries?

Guest

It does not and therefore it does not qualify. There is a certain category when you think about debt restructuring which brings Pakistan out of the fold where you don't have to do let's say domestic debt restructuring. Okay. अब जो Sri Lanka, Zambia, जो Hanaka, the one of the key difference, I think, if I don't get this wrong, I think Zambia was probably in that category. So Zambia did not have to do domestic debt restructuring.

Muzamil

So they only had to work out an arrangement where they end up restructuring their external debt. What does that mean? But I think, mean सिर्फ़ आपने कहा कि because when we don't fall in the low low income category, what does that mean in the context of debt restructuring जो आपने local के साथ connect किया?

Guest

Yeah, when you go to the IMF or when you default let's say, या you go to the IMF से and say कि हमें restructuring करनी है. So, उसमें क्या क्या उस ambit में क्या क्या आएगा? क्या उसमें सिर्फ external debt आएगा या उसमें domestic debt भी आएगा? तो the answer to this question really depends on which income group you fall into as per certain classification you I think IMF or World Bank one of or maybe both of them together decide to fall in which classification. So I think Pakistan does not fall in the lower classification which makes things a bit more easier. Pakistan falls in the upper classification which means कि अगर हम table पर जाएंगे तो we will be asked to not just restructure our against external debt की restructuring की against they'll also push us to also go and get the get the local debt restructured. Again, it's it's not a very straightforward process. Pakistan जो हमारे banks का exposure है to government, it you can't just go and say अच्छा आप इतने percent से cut कर दो वह तो पूरा का पूरा banking system आपको दबा हो जाएगा. Right. तो it there's a lot of back and forth in terms of what is optimal क्योंकि you don't want to create a second crisis two years down the line Just may you have to go back to the negotiation table and then tell everyone to let's do it again. Right? You don't want that to happen. You want to come up with a framework which will sort things out, and you won't be coming back to them asking for a debt relief in the next possibly ever again.

Muzamil

So that's Yeah. There's a lot of uncertainty there. I understand. Where do you where do you think this is going, practically speaking? Because अभी finance minister was in China. He was trying to get relief on maybe, what, $1,516,000,000,000 of the Chinese, you know, IPP loans if I'm not wrong. और उसमें मेरी confusion यह आ रही थी कि अगर हमारा debt का problem है तो why aren't we talking to everyone across the board? Right? Why aren't we getting, you know, the World Banks and the IMFs and the Paris Club in and saying कि listen, like, यह overall जो हमारा debt है, let's rethink how we can potentially return that. Why are we specifically targeting China here? And दूसरा, again, इसके बाद मैं tie करूंगा कि realistically speaking, Pakistan का जो local debt है वह does not seem even close to being sustainable. मैं नहीं कह रहा कि उसमें चले आप haircuts ले लें but it has to be redesigned in one way or the other because इस वक़्त तो government का सारा revenue उधर जा रहा और वो you know ever increasing एक उसके अंदर है. जिसमें and last मैं जो यह local debt के साथ connect करके एक सवाल करूंगा कि then potentially if we don't go towards default, what's the solution there? Like, are we looking at कि जी we can potentially inflate away? क्योंकि ठीक है PKR का debt है हमारा है. हम उसको inflate. We can inflate away the debt. Otherwise तो फिर यानी कि दो options हैं ना? या तो आप default करेंगे आप कहेंगे कि यार unsustainable था. हम वापस कर ही नहीं सकते cuts लें. लेकिन अगर उसमें आपका banking sector तबाह होता है तो फिर alternate यह है कि यार हम खामोशी खामोशी Turkey Turkey style, you know, 3040% inflation बर्दाश्त करें और एकदम से एक jump लेकर, you know, we'll inflate that away. What do you think, practically speaking? Yeah,

Guest

Yeah, I think इसमें inflate, it sounds as if this can work but then if everyone knows this is what the government is going to do then it won't work, right? अगर bankers को पता है कि inflation let's say government जो है उसको दस percent से या ग्यारह percent से, let's say बीस, तीस, चालीस percent पर लिया जाएगी, Right? जब वह आपको debt देंगे जब अपने let's say अपने bonds को renew कराना है या नए issue करने हैं. आपको वह दस percent पर issue करेंगे. They'll obviously they are forward looking. So they'll see what's gonna happen. So you can do it by surprise. No one knew it happened. Fair enough. But if you think of this as a strategy, it's not going to work out. Because then everyone will know that's what you're planning and they'll take that into account in their own pricing decisions. So, there's a limitation there. The alternate is कि it's not just about default or inflate. You can also squeeze yourself so much that over a very long period of time, you chip it away. Right? It's all about कि यार आप अपने आप को लेकर ना यह चोप था economy. Let's say it that way. Okay. आप इतना चोप करो. In this case, government case में यह होगा कि वह basically,

Muzamil

you know, government बहुत सारे दायरे offload कर देगी, privatize कर देगी, अपना size cut करना शुरू कर देगी. Basically,

Guest

fiscal surplus की तरफ जाएंगे, if I am not wrong. Right? Fiscal, आप fiscal surplus run करोगे. Then you keep the monetary policy tight enough. Essentially, the idea is that you keep your imports much lower than your exports and demat axis And they are already very low जो मैंने शुरू शुरू में बात की कि they are already low by about 5,000,000,000 or so over in अगर आप साल की बुनियाद पर देखो. But then you have to cut them or reduce them even further. You have to increase the gap between exports, remittances and imports even further कि आपका current account surplus surplus इतना ज़्यादा हो जाए कि then you can also start paying back the principal. Right? अभी तो आप सिर्फ interest pay कर रहे हो. लेकिन if you want to chip it away then you also have to start paying the principal. So तभी मैं कह रहा था कि default is a choice. अगर government चाहे तो default करें. अभी government चाहे कि नहीं यह cost हम देने को तो याद हैं तो ना default करें. Then you can choke it to an extent जिस तरह grease से किया कि ultimately everything kind of works out. Right? Everyone is miserable but if you're willing to pay no cost, fair enough. The point as an economist is more along the lines of, is it worth it? Where is it that you say that maybe default is a better option than choking the economy to an extent where really people are killing each other on the street, right? Or killing themselves, right? Committing suicides. So, they just, it's a, people kind of get offended by the term default. But it's a very economic question. आपको वारा gear खाता है. Which of the two options is better? At some point, default and economists are very open about this. Log off is a bit short in in in this field. He very expressly says there are often conditions where the country is actually better off defaulting than otherwise, than adopting the traditional policies, which mean very large primary surfaces, very stringent monetary policy, to choke the economy enough to balance the books at the end of the day over a certain period of time. Right? So the question is always, have you reached that point or not? Now अब रोगोव, if you look at him and many of the other people who talk about this, they obviously acknowledge कि the governments are generally reluctant which is coming back to your question earlier कि government then why do they work? Forget default. वह restructuring की तरह भी क्यों नहीं जाते? Restructuring is effectively default anyways. There's a very big political cost to it, right? If the political environment is not very stable, irrespective of who is ruling, you don't want to risk let's say getting a tag कि आप के time में तुम उल्का दिवारिया हो गया, right? So that's the language we'll use or let's say anyone who's on the other side of the fence no matter which comment will use to get the brownie points. Right? So, no one wants to attack कि यार हमने तुम्हल्का दीवालिया कर दिया. Right? So, that's one reason. The other reason is it's very costly as well. अगर आप restructuring की तरफ जाते हो और IMF and all these people, they also tell you पहले तो IMF and China all these people they are fighting between themselves लेकिन अगर आप उसको छोड़ भी दो site पर, अगर वह आते और कहते हैं आप अपने banks को restructure करो. Then again there is a question of construct of interest in terms of who is making the same for the country at the point in time, right? At irrespective of personalities. What is I mean? Bankers क्या वह चाहेंगे कि आपका debt restructure हो and the whole they have let's say or the influence they have on on the policy making circles, they'll obviously not want the government or the country to go or the policy to go in a direction where they end up at a point where domestic debt restructuring becomes part of the conversation at a higher level. Right? So a lot of that is in play. Then again, IMF is also not a very IMF also deserves a lot of criticism in the sense वो भी अपनी books को numbers को बस they kind of come up with numbers to make things look as if they are gonna work out fine. अगर आप IMF के पीछे दो साल, तीन साल की projections देखो कि कितने पैसे buy से आ रहे हैं और कितना हम current account deficit run कर सकेंगे. They have been off the chart systematically. Not a one off error but systematically in every IMF staff level agreement document that comes out, they have been systematically over projecting the money that we are going to get from the rest of the world which will then make everything add up. आप current account deficit भी छह billion सात billion आठ तीन का run करोगे. Growth भी पांच percent पर चली जाएगी दो साल में and everything is gonna work out very fine अगर पांच percent पर growth चली जाती है तो domestic debt भी as a proportion of GDP will become everything works out very fine. It's beautiful. Right. But to get to that beautiful outcome, have to make this play to an extent a misleading assumption, to use the term, where you keep pretending that the money is just gonna come in. So there's also them or the role of IMF that's also very questionable. Where they don't fully appreciate what the cost of a traditional program is going to be. Thus, forcing the government and the civil society and the country to think about what is the right way to go forward in terms of whether to consider restructuring or follow the path which I met. Say, it is going to work out towards a very reasonable outcome in two years time. Right? So, they also probably deserve a lot of criticism

Muzamil

or questions which they need to answer in that respect. Makes sense. I I wanna get a few things like कुछ understandings मैं for the consumer समझना चाहता हूं. पहला यह at this point in time जहां Pakistan खड़ा हुआ है, हमें default के बारे में तो बड़ा डराया जाता है. क्या default हो गया तो बाहर से पैसाना रुक जाएगा कुछ अर्से के लिए. Potentially imports तो the only outcome other than default फिर वह दूसरी तरफ यही है कि फिर हमें belt tightening इतनी करनी पड़ेगी कि irrespective economy रुकेगी. Irrespective आपकी imports choke होंगी. And for the consumer, है. It's not just, you know, life is great versus default where life is, you know, gonna be difficult. You're looking at difficulty either ways. What you're basically trying to understand is कि कौन सी difficulty में हमें long term sustainability and long term growth ज़्यादा बेहतर मिल रही है? ऐसा ही है?

Guest

Exactly. अब this is the fundamental question you have to ask, right? In terms of cost क्या है? दोनों costly हैं. Let's not say one is less costly or let's not say कि कोई एक option बहुत अच्छी है. दोनों costly है. The question or the judgement you have to make is ज़्यादा costly कौन सा है? या कम costly कौन सा है? And based on that judgement then you have to decide कि which of the two options is better. Let's forget default. Let's talk about restructuring. It's a bit more people are used to it. They get less offended. Politically, it's a bit more correct. Right. Even though it's it's effectively the same. But let's say restructuring, right? So, that's the choice you have to make. उसमें you have to then appreciate and that's why IMF और the numbers they put out are super important. अगर IMF आपको कह रहा है कि आप दो साल में if you do what we say, पांच percent पर आपकी economy grow करेगी and then it will stay at 5% forever. आप उनकी दो हज़ार बत्तीस तक की forecast देखें तो वह पांच percent पर ही है. Right. बच्चे बच्चे को पता है कि Pakistan की economy the trend is between three to 4%. Right. Right? वह वक्ती तौर पर three to four की जो range है उसको cross करके पांच percent, छह percent, साढ़े छह पर जा सकता है. लेकिन घूमकर उसने तीन चार तीन आने हैं. Right? COVID for example आप उसमें कहो rebound हो गया. You get lucky a bit from let's say foreign flows. Something like that happens like CPAC वगैरह के time में. You get the number to go up to 6%, six and a half percent. Has to come back to 3.5% unless कोई आप बहुत major structural reforms कर रहे हैं जिसकी वजह से let's say आपका जो trend है वह jump up करके let's say three, four से five, six पर चला गया है, right? So, but none of that is happening and in absence of that for the IMF to keep telling us कि नहीं यार आप पांच percent पर grow करना शुरू हो जाओगे. That's highly misleading क्योंकि that number then shows कि आपका debt to GDP ratio भी कम हो जाएगा. Your debt will become sustainable from red to green or whatever yellow whatever color profile that is उसमें आ जाएगा. That's super misleading and the way they are getting that number, my suspicion is they are feeding in wrong numbers around how much money is gonna come in from private creditors. हम इधर गलत वगैरह की भी बात नहीं कर रहे हैं. We are thinking about, we are talking about private creditors. Private creditors ने आपकी history में कभी आपको चार पांच billion से ज़्यादा नहीं दिया किसी साल में और IMF project कह रहे हैं कि that number will jump up to 8,000,000,000 and then it's gonna go to 12,000,000,000 like come on, right? So, so, so that also kind of feeds into a misleading perception kicking the can down the road is somehow going to sort things out. Right? Makes sense. So that's that's also that's also important to make a story. But then just just to reemphasize the question you asked, I think that's the fundamental question and that is what we should be focused on कि which of the two parts are less cost. Makes sense. इसमें मैं एक last

Muzamil

वैसे debt के ऊपर, you know, you've given me a good outlook on it. But एक चीज़ generally मैं tinfoil hat पहन के side से बैठकर देखूंगा. घर से मैं समझने कोशिश करूंगा. When I was looking at पाकिस्तानी debt and Pakistan के और सिर्फ़ Pakistan की debt नहीं है. पूरी दुनिया में ever since the interest rate increase जो US का हुआ है, उसकी वजह से crisis situation आई है. पहली दफानी आई, पहले भी आ चुकी है. जब भी US dollar being the reserve currency, जब भी उनका debt वह interest rate बढ़ता है तो पूरी दुनिया जो है वह परेशान होती है. अब जाहिर है कि उसको देखते देखते मैं US तक पहुंचा. मैंने US की economy को देखा. वहां पर देखकर realization होती है कि हमारी quack economics है लेकिन उनकी भी काफ़ीयत तक quack economics, you know, on steroids चल रही है. And यह similar question आजकल बहुत सारी economists में US economy के बारे में भी sun रहा हूं. वह कह रहे हैं $3,435,000,000,000,000 हो गया अब debt उनका और वह unsustainable है और उनकी military budget से ज़्यादा अब उनकी interest payments होना शुरू हो गई हैं and so on and so forth. तो वह भी एक point के ऊपर काफ़ी लोग यह कहते हैं कि जी America या तो default करेगा या America जो है वह inflate away कर लेगा अपना debt. And so my question to you is कि जो based on again यह मुझे बिल्कुल इसका idea नहीं है so it may be a very stupid question. But अगर दुनिया भर का तमाम जो आपका debt है वह dollar पर peg हुआ हुआ है और अगर हम कहते हैं कि potentially dollar itself US Government itself जो है वह inflate away करेगी अपना debt, would that mean that the rest of the world will in a way inflate away their debt as well courtesy of The US with अगर बहुत ज़्यादा market में dollar आ जाता है और dollar की value reduce होती है? या would that be वह वह लोग तो कर सकते हैं क्योंकि वह print करते हैं, वह वह उसको inflate कर सकते हैं but वह जो हम जैसे लोग हैं वो नहीं कर सकते. और particularly मैं ऐसा ऐसे ही question कर रहा हूँ because if there is that possibility then क्योंकि हमने पिछले दिनों सुना कि जी सोलह billion जो Chinese debt है उसकी restructuring term यह है कि यार हम dollar से हटा के इसको Chinese yuan में convert कर दें. तो अगर तो वाकई हमारा वह crisis बिल्कुल US के साथ साथ जा रहा है और US finally उसको inflate away करने लगा है और उसमें फिर हम finally आते और आगे कहते हैं कि यार अब हम yuan पर जाएंगे. तो wouldn't that be the biggest disaster in that context?

Guest

Yeah, I think US के case में so basically just to kind of bring back the economics to it, right? So what we are basically saying is कि अगर US में भी inflation जो है वह दो तीन चार percent से jump up करके let's say दस percent पर चली जाती है तो वही रहती है, right? इससे let's say एक साल में it jumped up and then it came back but let's say जो crisis से ना यूं कि आप बात कर रहे हो तो अगर US में भी inflation दस percent है, Pakistan में भी on average अगर आप history उठाकर देखो तो nine to 11% उसके beach में ही range करती है. तो अगर if that's the case the only thing that you are going to get out of that कि आपका exchange rate will be stable from that point onwards कि क्योंकि जो आपका exchange rate जो है उसने जो competitiveness के pressures हैं उन उनके response में adjust करना होता है, right? अगर आपकी price party यह है और USD price उतने से नहीं बढ़ी तो exchange rate को depreciate करना पड़ेगा ताकि वह capital Nine terms में आपकी

Muzamil

10% जो हमारी depreciation होती है वह उनके 910% के inflation पर cover हो जाएगी और वह exchange rate basically normalize हो जाएगा.

Guest

Exchange rate फिर आपका depreciation pressures आपके जो otherwise persist करते हैं और जो for a good reason वह होते हैं वह फिर आपके चले जाएंगे. Beyond that so that's the that's the story that's going to play for us, right?

Muzamil

Other than that I think But it's, I mean But it's only to, I mean, yeah. Just देखिए, my my question is, अगर मैं for example assume करता हूं कि the the US government goes into a money printing spree and they're basically, you know, pumping a lot of money into the economy. That money, to put it simply, again, माज़रत मैं economist नहीं हूं. Again, T shirt का order आया हुआ है Pakistan से, पांच dollar की है. ठीक है? अब वह जो है ना over a three year period वह पांच dollar से दस dollar की हो गई है, right? So, जो net exports हम कर रहे हैं वह basically for the same amount of products वह let's say दस अरब से अब बीस अरब हो गई हैं, right? So, आप यह कह रहे कि वह technically तो हमारी receivables तो बढ़े हैं ना? अगर granted के अगर हम जो है हमारी import bill भी बढ़ेगा उसके उसके corresponding. But then a lot of that is not being imported from The US. I'm just trying to understand कि अगर if the rest of the world stays the same and the US dollar depreciates, does that not reduce your Correct. Debt basically because it is back to the dollar, if that makes sense.

Guest

Yeah, अगर US dollar depreciate करेगा. So, what does it mean? आप अगर आप export competitiveness की बात कर रहे हो तो आप कह रहे हो कि आपका जो real exchange rate है, अगर dollar depreciate करेगा तो they will become more competitive, right? For a short term, not you. क्योंकि for them to buy the goods in rupee will be expensive than before, right? Right. But the but so so in that sense, the competitive advantage will go to them for a short time period until prices adjust to a point where you're back to normal. अब for example अगर आप real exchange rate जो real effective exchange rate जो हम बात करते हैं उसको देखो. It's been pretty flat, right? For a long period of time. It goes up, comes, goes back to nineties or eighties, comes back to 100. I am not saying 100 is the equilibrium value but then over a very long period of time it kind of keeps fluctuating around some central tendency, right? So, यह जो pricing adjustments होती हैं, exchange rate fluctuations होती हैं. They give you an advantage for a short term or put you in a disadvantage in a short term. But over the time period, unless your productivity improves or you become more competitive structurally speaking, in the long run the effect is not as much. Unless you keep your real real exchange rate undervalued systematically for a very long period of time, which is what we saw China do, which is also what we saw air station economies do in the after the eighties. Right? So unless you do that, systematically keep it undervalued for a very long period of time, then you'll have enough time to build capacity and then capitalize on that. But if you are not doing that, then these fluctuations kind of help you or go against you for a short time period. लेकिन उसके बाद

Muzamil

So. Pressures they kind of bring you back to where you are. Basically, what you're basically saying is कि हम यह decide कर लें कि यार हमने 10% depreciate करना ही करना है हर साल. Like, पहले भी करते आ रहे हैं economies के around tailor हुई भी है. तो हम 10% depreciate करते रहे even if dollar depreciate हो रहा है. But हम अपनी competitive advantage continuously बरकरार रखें.

Guest

But that will be a policy, right? अगर आप if you leave it to market, अगर dollar भी दस percent, वहां पर भी inflation दस percent है, आपकी तरफ भी inflation दस percent है. तो अगर if you leave it to market, exchange rate doesn't need to change too much. वह थोड़ा बहुत fluctuate होगा depending on the market force. इधर इधर shock पड़ गया, वहां पर shock पड़ गया. That's the end of the story. If you want to build a competitive advantage, then it doesn't really matter whether US inflation is 10% or 2%. You can always let your currency depreciate by enough to make sure that the that your real exchange rate remains undervalued for a very long period of time. Right? Not just for a few years, but for a very long period of time. So everyone in the industry and the foreign markets know that you will maintain export competitiveness systematically as a macro policy.

Muzamil

Would you say, would you say it would be smarter? Right now, what we're seeing in Pakistan is कि आपने by policy आपने imports को choke किया हुआ है. Right? आप alternate बोला कि आप depreciation थोड़ी ज़्यादा कर दें, market ख़ुद ही से जो है वह imports को choke कर लेगी, obviously because basic demand supply के ऊपर?

Guest

अन्य, अगर आप मेरे से पूछो, I'll probably say if you have to pick a choice then I'll go for, let's say keeping the currency undervalued systematically and that also means how do you do that? It's not very hard. It's basically जो भी आपके flows आ रहे हैं आप उनको reserves की form में accumulate करते रहे rather than just spending them out here and there for consumption purposes and that kind of keeps the currency to or the exchange rate उसको वह फिर let's say for example अभी आपको equality maintain करने के लिए exchange rate को छह percent depreciate होना पड़ता है on average. मैं दस बीस साल की बात कर रहा हूं not one year or two year or here and there. Let's say आपको कि यार हम rather than 6% on average we want to aim for let's say 7%. Right? So that could mean your exchange rate is depreciating by more than what is required by the prices. आपकी prices let's say दस percent से बढ़ी हैं. आपने exchange rate को let's say ग्यारह percent से गिरा दिया and then अगर आप इसी policy को continue करो then basically आप जो है real terms में you will be more competitive than otherwise. लेकिन there is another way as well. It's not कि आपने exchange rate को गिराना ही गिराना है. आप inflation को भी काम कर सकते हो. Right? Other countries have done that. आपको ज़रूर है आपने दस ग्यारह percent ही inflation चलानी है. You can bring that down to 2%, 3%, 4%. It's gonna be costly but it's gonna be a short term intervention. If you end up for example India को आप देखो. India में कितनी inflation है? The average inflation is around 4% or so, right? और this is something which they have achieved over the last ten or so years, right? It's it's historically inflation was high over there as well. So, if as a matter of policy, आप अपनी inflation को कम कर लो, around 3%, US में let's say it's 2.5% on average, Pakistan में if it's 2.5% on average, then you don't even need to let the exchange rate depreciate by 6%

Muzamil

to maintain that competitiveness. How do you do that? I thought deflation is market driven. Right? So how do you control inflation? Is that through lower government spending? And again locally आपने markets को choke कर दिया या how does that work practical terms के अंदर? How did India do that for example?

Guest

Yeah, over the long term तो money supply के साथ relationship है, right? But it's a lot more complex क्योंकि money also gets created. Banks जब loan देते हैं तो आपके account में credit आ जाता है और जो credit होता है वह भी money consider किया जाता है तो there is that as well at play. So really the key thing is you need to convince the market. So, that's let me make it very simple. You need to convince everyone whether you are a worker, whether you are a firm who's selling a product, whoever you are, whether you are a government who sets minimum wages or let's say revises pensions and so on. You need to convince everyone कि यार अगले साल से और अगले दो सालों से inflation आपकी दो percent, चार percent, पांच percent जो भी आपने यहां target है वह होगी. Right? Once you convince everyone so this is I am making it very simple. जब wait part gain होगी वह भी चार percent पांच percent पर होगी. Government जो salaries increase करेगी वह भी चार पांच percent पर होगी. Companyयां जो अपनी prices increase करेंगी उसमें productivity वगैरह you account for that. They'll also do that by 2%, 3%. क्योंकि productivity improve होती है. So you're gonna become better at doing the same thing again and again. So rather than 4%, 5%, you'll increase it by 2%, 3%. तो you've already solved the problem. The bigger problem is, how do you convince everyone that that's going to happen in two years' time? Right? So, that's where the central bank and the fiscal authorities have to come together. Practically speaking, you have to shock the system. Mhmm. Say, we are willing to pay the price that's required. That means, you know, choke the economy like, let's say, Paul Walker did back in the eighties in The US and other central bankers did in other countries as well until you convince the market that the future is going to be different as far as inflation is concerned. Once you convince the market, then it's going to be 2%, 4% there. Right? So, really, the challenge is how do you convince the market and what is the cost again that you have to pay to convince the market that that is going to be the case. Right? So, you have to pay the cost in any case but here it's important कि जो central bank है और fiscal authority है they they are on the same page. It cannot be कि central bank जो है वह तो interest rates बढ़ा रहे हैं और वह inflation को कम करने की कोशिश कर रहे और government जो है वह दूसरी तरफ से जाकर bankओं से करदे पर करदे लिए जा रही है. तो that is not going to work. I think both of them will have to be on the same page. यहां पर जो एक major problem वह यहां आ रही है कि जो again जो government

Muzamil

hoarding all of the, all of the money जो कि ना private sector में जा पाता है, ना कोई और जा पाता और वह बस constantly कर्जे ले जा रही है और फिर वह पैसा eventually pump होता है markets के अंदर. The government really needs to figure out its books and figure out कि थोड़ी सी हम financial hygiene हमारे अंदर आ जाए. मैं थोड़ा सा conversation को switch करता हूं. You've mentioned multiple times. You talked about productivity and competitiveness. We we keep on talking about even आजकल हमारा जो discourse है वह इस चीज़ के ऊपर focus कर रहा है कि यार जो इस वक़्त current looming crisis है of debt and this and that उसको कैसे fix किया जाए? आपने पहले mention किया आपने कहा twenty twenty two thousand one में हमने similar situation देखी and I feel like कि because वही वाली बात है कि हमने उस time के ऊपर जो prevailing crisis था, उसको तो solve कर लिया but we didn't have a lot of understanding of कि अच्छा हमने अब ठीक है, अब इस वक्त जो banker है वह बार बार खटखटा नहीं रहा. तो अब हमने घर के अंदर क्या reforms लेकर आने? Right? How do we ensure that we don't go back there? Tell me a little bit about that. I read your article recently about, you know, Pakistan के जो prevailing problems हैं और उसको किस तरीके से how can we grow out of it? क्योंकि पहले भी हम बात कर रहे थे and we said, you know, either you default or you tighten your belt. But then लोग आते और आकर एक third बात करते हैं. लोग कहते नहीं but why can't we grow out of it? Right? So-so then again I have that question for you कि why has Pakistan not been able to grow out of its debts, out of its, you know, sort of spiral जो कि हर थोड़े से बाद हमें IMF के सामने लायक खड़ा कर देते हैं.

Guest

Yeah, that's very important. I think and they are kind of related as well. So why are they related? अगर आप let's go back to nineties, right? So nineties I was reading इश्रात हसन's doctor इश्रात हसन's new book. Forgetting the name. So so in that he kind of talks about the reforms and then how India, Bangladesh and Pakistan evolved over the period of time. What was the economic makeup of these countries? And you actually find that the makeup was not or the structure or the policies they were implementing were not too different. They were not too out of sync with each other in '67. Oh, import substitution, subsidies, incentives, protection. And then come nineties, starting a bit more from late eighties, you end up reforming your economy. What does reform mean? In this case, is more privatization, bringing in, let's say, opening up to foreign investment, lowering the trade def the the the tariffs and so on and so forth. You kind of wonder कि if in the nineties, Bangladesh, Pakistan, China, they kind of implemented very similar programs or they or very similar kind of policies, then why are the future trajectories so different? Right? That's that's pretty fundamental. Just to put some context, अगर आप labor productivity growth की growth देखो. What is labor productivity? Labor productivity means कि जो भी करना काम कर रहे on average वह कितना produce कर रहा है. Right? So that's it. That also that depends on your managerial skills. For example, company कितनी smart है या managers कितना smart है in terms of using, let's say, computers or laptops or cardinia, छाड़ियां buildings and the people together.

Muzamil

And that also depends on how much of capital So, do you to put it very simple. मैं context में डालूं कि एक एक बंदा है वह genes export वाली factory में काम करता है. तो वह कितनी genes एक दिन में सी सकता है, right? पैसे तो उसको तो खातों एक ही महीने की मिल रही है. लेकिन अगर वह महीने में या तो दस genes भी सी सकता है, वह सौ genes भी सी सकता है. जो difference between 10 genes and 100 genes is the productivity जो उस बंदे की है.

Guest

हां, वह basically कोई 10, दस, सौ, that's productivity. That's that's labor productivity. Right? हमारे we have different measures but then let's stick to labor productivity और this will depend on two things. One कि manager factory कितनी अच्छी चला रहा है. Right? And it will also depend on कि जो machineएं उसके पास हैं वह कितनी ज़्यादा है और कितनी अच्छी quality की है which is हम उसको physical capital कहते हैं in in in economics, right? So that's broadly speaking. But stepping back over the last thirty years 1990 से अगर आप देखो twenty eighteen तक जो Pakistan में productivity growth थी हर साल, that's about 1.3%. अगर आप बांग्लादेश में उठाकर देखो I think that's 3.8% or something like that. India is 4.8 or between four to 5%. China is even higher, I guess, 7% or 8%. So, this is कि हर साल आपकी productivity कितनी growth कर रही है, कितनी मज़ीद आप jeans produce कर रहे हो. So, see how how low the productivity growth is in the case of Pakistan over the '38 period. That was. When when so just to link it to nineteen nineties, when all the economies kind of opened up, they went towards privatization. They lowered the trade tariffs and so on and so forth. But the future trajectories are very different. Also very interesting, if you look at the data on capital slows कि कितने पैसे बाइसे इन मुल्कों में आ रहे हैं. तो all the three countries actually got quite a lot of money coming in as a proportion of GDP. China में बहुत ज़्यादा था was around four to 6% of the GDP हर साल जुबाहिर से पैसे आते थे. India was somewhere between 4% of GDP जुबाहिर से पैसे आते थे. Pakistan was 2% कम थे. Surprisingly बंगालादेश में हमेशा Pakistan से भी on average कम पैसे आए. So, we are not that bad in terms of the money that we got from outside in terms of private investment. So, are things going wrong? Right? So why is productivity so low? And that's where I think things become a lot more important that there's eight major factor at your different depth, which kind of tells you कि जो policymakers की thinking care. And then I'll I'll come to I'll link it link it back to the bigger bigger question. Another factor which is very interesting, Bangladesh में भी पैसे आए, Pakistan में भी पैसे आए, Bangladesh से ज़्यादा, India में भी पैसे आए, China में भी पैसे आए in the same order. China ने उन पैसों को save किया dollar reserves की शक्ल में बल्कि उस चिल्ल भी ज़्यादा save किया. जितने आए बल्कि अपनी जेब से भी निकाल के उसने saving में डाले. जिसकी वजह से वह current account surplus run करते रहे. Safe किए. Pakistan यह दो सालों में safe करता था. अब यह दो सालों में खर्च है. दो साल आप safe करें अब यह दो साल अब फिर खर्च है. So, are getting the money saving it, spending it, saving it, spending saving it, spending it. आपने reserve buffers बेली नहीं थी. Why are reserve buffer important? They are important जब investor कहेगा यार अच्छा कल अगर बाकी investors पैसा निकालते हैं इस मुल्क से, इस मुल्क का जो exchange rate पता नहीं कहां से कहां चला देगा तो मेरा क्या होगा? Right? So, given that risk they might not even enter the market because they think कोई underlying किसी ने insurance नहीं liquidity. Results are a form of insurance in a way if you want to think in that terms, right? The question is Pakistan में policy makers why are they so different? क्या वह Mars से आए हैं? Right? They are the same people. They speak the same language. They understand these things. जब आप उनसे बात करते हो, I sure you have enough of an experience to talk to them in podcast. It's not that they are, they are not idiots. Right? But why is it that they are show, so so short sighted? Right? Is there a point? And that's where things become a lot more and and let me let me kind of link it, link it with one more thing. This shortness sightedness और यह जो आपने insurance cover नहीं create किया. Insurance policy अपनी नहीं लिखी आपने reserves की शक्ल में. This then also means कि boom and bust cycles आपकी तरफ बहुत ज़्यादा हैं municipal बाकी countries में. Specially post nineteen nineties, right? थोड़ा बहुत भी economy को shock लगता है चाहे वह external है या internal है. थोड़ा सा आपने fiscal expansion कर दी. मतलब it's crazy. थोड़ी सी आप fiscal expansion करते हैं. शौक तरीक साहब आए उन्होंने fix irresponsible policy but nonetheless within two months, within six months you have a crisis. यार किस economy में छह महीने की loose fiscal policy से crisis आ जाता है. I am talking about the current times, right? पुराने times में तो बहुत कुछ होता था. Right. So, you so that's how, that's how vulnerable you are and what does that mean? Given that so much इतनी ज़्यादा uncertain है आपकी economy and इतनी इतनी vulnerable है वह shocks को, चाहे वह external shocks हों in the form of oil price shocks, commodity price shocks, US monetary policy and whatever not या वह domestic shocks हों या irresponsible policies हों जो भी आप उसको कहने हैं अंडार साहब हों या शौक साहब हों, जो भी हों, any government policy. Why is the economy? The economy is not resilient at all, right? So vulnerable and that kind of brings you back to productivity क्यों काम है? Productivity इसलिए काम है कि कोई machine लगाने को तैयार ही नहीं है. Back to the factory example. Returns अच्छे हैं Pakistan में. But what about the risk? You don't just look at the return than you're investing. You also look at the risk. The risk is so बहुत damn high that even the very attractive returns are not attractive and you take into account the risk that people have to take. But the risk largely and that The risk to confirm. The risk largely is because

Muzamil

आपके पास foreign foreign foreign exchange reserves नहीं है और वह largely exist करता है because of policy. ऐसा ही है या कोई और risks हैं? मतलब when we talk about structure तो there are many other risks. Right. There are many other risks. Are political risk, policy continuity risk.

Guest

All that stuff is there. But I think if you look at the financial risk, the financial risk is very much tight. You ok fine. If you are hit by a shop, what's gonna happen to the exchange rate? Right? आपकी economy returns को deliver कर रही है ना? But at a very high risk. Right? So if there is no underlying insurance mechanism in the form of reserves. I am not saying this is the only factor. Don't get me wrong. But this is a very important factor and this kind of अब जब कोई machine ही लगाएगा तो आपने फिर सौ तीस साल में आप सौ जाबित हद बंदा jeans बनाता है उसने दो सौ पर ही जाना है ना मुश्किल से, right? Unlike others जो हज़ार पर पहुंच गए, बीस, दो हज़ार पर पहुंच गए, whatever, right? तो, तो that uncertainty in the, in the environment which is driven by the short sightedness of the policy makers is, is quite, quite telling.

Muzamil

Interesting. मुझे यह बताएं कि then what's the, what's the solution? Policies रही हैं और दो बहुत different trajectories emerge की हैं उसमें से. आज अगर हम side से बैठकर इसको study कर रहे हैं तो हमें क्या समझ आता है कि ठीक है, you know, what I want to do is I want to understand, ok, we are in a crisis. I don't want to linger on here कि यार अब तो हालात बहुत ख़राब हो जाएंगे. I wanna understand कि यार ठीक है, let's say today is the baseline and here is where we start. Right? We, I don't look at three years ago and say कि हम बहुत बुरे हो गए. I'm saying यहां से शुरू हो रहे हैं. Where do we go from here? If if if one has to create policy ground up and decide कि ok जो भी हो गया वह हो गया. आज से अब आपने इस जगह पर आगे लेकर जाना है. Then what what do we do to increase the productivity, increase? बहुत सारे मसले आपने बता दिया ना. आपने कहा जी investor का confidence का भी problem है, risk का भी problem है. Last time हमने risk की जो problem को solve करने की कोशिश की तो हमने अजीब बगड़ी किसी को sovereign guarantees दे दी और उसकी वजह से जो है जी on terms that are much more, I don't know, driven by the market, are much more are done in a way जो कि self sustainable हो. उसमें बार बार जो है ना हम assumptions पर ना चलें कि if this this this and this happens then all is good otherwise you know we're screwed.

Guest

यार इसमें I think this is this is interesting because you mentioned China and India. So, they're also very different economies in the sense that the scale of those economies, right? So, let me just reemphasize one thing before I move in a different direction which is that the short sightedness on the part of policy makers and what that means for let's say जो आपकी vulnerability build हो जाती है the short sightedness और उसमें boom and bus cycles आपका होते हैं. All that is super important for investment purposes which I think also to an extent explains आपकी investment rate इतना कम क्यों है बाकी countries से Which also then means something for productivity. So, it's a separate question to think about कि वह short sighted इतनी क्यों है? I think that's very kind of driven by the political economy problem which you deal with. आदित्य की regime है, कारगुरू regime है. You don't know who's gonna be in the power. Let's say if he is down the line, which is also what Doctor. Yishu talks about in his book in a very explicit manner. So that's, I think, a very good hypothesis to to keep in mind when we are to make sense of this. But coming to coming back to so that's one thing which I'd really highlight. The risk, the financial risk, the macroeconomic risk that's out there, is driven by the short sightedness of the policymakers, which has a very good reason behind it, right? Not because they are idiots or they don't like the country. Now coming to the bigger problem. The bigger problem is and this is the example I really like to give. Pakistan में जो आपका average बंद है, right? उसकी income सालाना इतनी भी नहीं है कि वह जाकर top end का iPhone खरीद सके. Right? Right. अब आप why does it matter? अगर आपने industrialize करना है, you need people who can buy stuff. Right. Right? Simple as that. अगर आपने industry लगानी है और आपने high value added industry लगानी है. You need people who can buy stuff. हम गाड़ियों के ऊपर auto sector में यह दो लाख, तीन लाख गाड़ियां हमारी साल की बेक जाती है और उस पर कहते हैं अच्छा यार इस वक्त auto sector में बहुत boom आया हुआ है. Look at what is happening in the international market. A single conveyor belt or a plant is producing millions of vehicles. The scale they are operating at is huge and that is what is letting them industrialize or push the frontier forward. Why or what is making them sell so much of the vehicles or the industrial output that they are making? Even they have a much bigger purchasing power because they have integrated with the rest of the world. Right? They are operating in much bigger markets. आप Pakistan, if you compare Pakistan, East Asia, सारी Cuttings, China, India सब कुछ, अब मनीषा वगैरह भी इतना मिला लें. Pakistan is at the bottom end when it, when it comes to how open we are with the rest of the world. How integrated we are in terms of imports and exports? How integrated we are in in terms of the supply chains or the value chains or the global value chains which economists, the term the economists use, we are at the at the right bottom of that distribution. What does that mean? That means we are operating in a super small economy and we are hoping कि फलाव को subsidy दे दो, फलाव को tax break दे दो, फलाव की चीज़ें आपको खरीद लो, उससे आप industrialize कर जाओगे. इस इतनी छोटी economy में जहां पर आपका average बंदा जो है वह iPhone खरीद नहीं सकता, अपनी सारी income की वह लगा दे. उस economy में if you keep it close आप नई industrialize कर सकते हैं. Right? And this is India is not very anyways, India is much better. But nonetheless, they also have a protectionist streak in their policy making discourse. But they have less of a problem because they are a very big guy. Right? Even if you think about even if their GDP per capita is probably the same as Pakistan or a bit better now, in the past, it's more than that high or probably Pakistan was better, there are still a lot of people to buy stuff to lead to industrialization. Right? Likewise, China. So, we can't really compare with them to the same extent. We really need to think about how we can expand the market. Right? And, if the markets, you go into regional trade agreements. That's the modern way of doing things. You have free trade agreements which are across the globe with any country here and there. But more in the last twenty, thirty years, have seen countries, they are part of the global economy, but they have become a lot more integrated regionally. ASEAN countries को आप उठाकर देख लो. They keep on expanding the set of countries that are part of ASEAN. उन्होंने R set बना दिया. African countries they got together. They were flat lagging behind. They got together. They ended up creating an African union और उसमें they ended up creating a trade bloc. EU has been part of the common market both labor भी move कर सकता है, goods भी move कर सकती हैं, finance भी move कर सकता है. तो they have kind of expanded their market. And EU doesn't matter because France is big or Germany is big or UK is big or was big but because the European economy as a whole is very big. Then that also gives them a big clout in the policy stage and foreign policy and so on and so forth. US, despite being very big, also ended up integrating with, let's say, Mexico, with Canada through Nasdaq and all that. They they were integrated with the EU. GCC countries, a more recent example, they have also ended up integrating their economies between themselves. Right? Labor भी move कर सकते हैं, goods भी move कर सकते हैं. It's a lot more easier to go between one country and another if you are within the GCC block. So where is Pakistan? How many दिन अकेले बैठे होंगे? और if I go back in the past it was quite a lot of the blame lies with us जो हम India के India के साथ भी kind of हमने बनाकर रखी रखी कि नहीं हमने इनको market access नहीं देनी Afghanistan तक के लिए and then हमने उसको use करना है strategic purposes के लिए rather than thinking about कि यार how can we get into an arrangement which is mutually beneficial. More recently आपको India की I think they have taken a very different position and I think now it's kind of from I am not a foreign policy expert but my naive reading is now it's kind of their policy to just undermine poly Pakistan both politically and economically going forward, right? So now I don't know how much of room there is to play with them but in the past obviously we wasted a very good opportunity for strategic reasons. The problem with China, हम कहते हैं China की तरफ़ हमने FTA तो sign कर लिया. The problem is a lot of China's e con power is not closer to us. It's really on the other side of it's it's on the other side of the Pacific. Right? It's it's closer to Pacific. So the powerhouse, the China, which was meant to lift Pakistan because they'll divert their trade to गवादा, they don't really care about this side of the country. They care about their province so it gets developed over the period of time. क्योंकि वहां पर भी there are issues with security and all that तो चाहते हैं कि वह develop हो जाए and it doesn't stay behind but that's not an economic powerhouse of China. If they are with trade they are going to trade you through Pacific और Russia के साथ ऊपर energy trade और Central Asia के साथ through the other way around So, we kind of keep on assuming कि कोई हमें आकर बचा रहेगा. Now then the only thing which is left is GCC. Maybe आप GCC के साथ integrate हो सकें. Afghanistan is a again problem. There is a lot of this, there is a lot of stuff. काफी हमारा अपनी, हमारी अपनी गलतियां भी हैं. कुछ they were kind of given to us for geopolitical reasons. But I do think at the same time कि internal discourse आपका policy का, it's not geared towards, towards integration. It's geared more and more towards protection. हमने textile को कैसे protect करना है? हमने autos को कैसे protect करना है? You pick up the industries जो Pakistan में dominate करती हैं. गंजालों, he came up with the papers. उसमें he gave the figures in terms of कि कितनी protection है. Food, fertilizers, autos, textiles, all the big industries that you name in Pakistan, they have super high protection. If your whole economy is geared towards कि नहीं हमने domestic economy पर बस serve करना है और उसी से पैसे कमाने हैं. Then there is only so much you can do out of world. Right? Right?

Muzamil

So जब आप protection अगर for example हटाते हैं या free flow करते हैं तो technically speaking जितनी मेरी understanding and people that I have spoken to, technically आपको Pakistan में चीनी नहीं बनानी चाहिए because you are a water I feel like कि मोटी मोटी तो हम बात कर लेते हैं but जब हम individualized चीज़ों पर आते हैं तो वहां पर conflict आता है, right? चावल हमारा एक बहुत major export है. लेकिन again, चावल is a very water intensive crop. So, question mark फिर आएगा कि क्या हम फिर eventually अगर हम open market access कर रहे हैं, हम price को real market पर लेकर आ रहे हैं rather than कि हम उसको क्योंकि आज अगर हम agree की बात करते हैं, agree में हम पानी को price ही नहीं कर रहे और अगर आज आप ना करें तो कल कोई crisis खड़ा होगा. यह वही जो आपका dollar की help हुआ है. एक point आएगा जब आपका पानी इतना scarce हो जाएगा कि eventually, you know, you'll you're not gonna be able to utilize it to your fields the way that you're able to do it right now. So either you price it properly going forward or you wait for a conflict to arise where water availability is an issue. And so, in a lot of ways, when people really ऊपर वाली बात तो कर लेते हैं कि, you know, we need open market, we need to do this and that. Unfortunately, जो उसकी repercussions हैं क्योंकि हमेशा हर policy का जो जो जो shift होता है, जो conversion होती है from an inefficient to efficient, उसमें जो inefficient industries हैं उसमें लोग connected हैं. उसमें लोगों की नौकरियां connected हैं, उसमें खानदान connected हैं. And so, they are the ones जो कि फिर आकर खप मचाते हैं और उस खप की वजह से for good reason or bad. But उस ख़प की वजह से फिर eventually, you know, फिर हम वह roadblocks आ जाते हैं, right? चाहे वह, you know, inefficient state state owned enterprises हैं जहां कि unions आपको आकर, know, constantly परेशान रखती हैं या वह government का इतना बड़ा size है जो कि inefficient है लेकिन वह वह रखती हैं. So, you think कि Pakistan के अंदर there is a communication problem there as well where we don't have आपने कहा ना policy के अंदर lack of continuity है but I also feel like कि policy कभी कोई बताता भी तो नहीं है ना? मतलब वह, you know, in a lot of ways, a lot of these politicians don't really truly understand it themselves. Maybe कि बस वह एक ऊपर से एक policy आ जाती है, बस उसको जो ना one way और the other घुमा फिर आकर justify करने की कोशिश करते हैं. Where they they could potentially come in, give a vision and say, listen, ok, hardships are coming, but this is the five year vision. I personally feel like जितना मैंने public को अब देखा है into a policy rather than sort of eased into it.

Guest

Yeah, that's why I think I kind of fame it. So this is quite interesting, this conversation. So, अच्छा विकोव let me correct one thing. Right. I think there's a lot of policy continuity. Right. I don't think there's a lack of policy continuity. From the 07/5060 downwards protection आपने दी हुई. हां. Right? आपने nineties में फिर reforms की if you look at आदिल मलिक's paper at Oxford. So, he wrote a paper in the contest of Pakistan. आपने tariffs को liberalize किया in the February but then the political economy kind of got them back up to where they were back in early two thousands, right? Pay then you kind of impose other custom duties. आपका tariff अगर लो भी है on paper custom duties add कर दोगे, taxes add कर दोगे, यह. You can come up with all kind of things to take the price back to where it was to provide the protection in in real in real terms. So, is a lot of continuity in terms of कि हमने protection provide करनी है, हमने real estate को promote करना है, हमने agriculture में taxes नहीं लगाने, you talked about agriculture that's super important. 40%, almost 40% of your labor force is in agriculture. Almost 40% of your labor force is in agriculture and agriculture is the least productive sector in Pakistan. वही, वही metric कि आप एक बंदा कितना produce कर रहे हैं. हां. बाकी countries, not just relative to the rest of the world but within the country agriculture is the least productive sector आपका और वह चालीस फीसद आपकी जो जो लोग हैं काम करने वाले हैं वह उस sector में काम करें. अब how can you get growth out of that? Right? You need people to move in productive sectors and so on and so forth. But let me kind of spin this around. You were talking about riots and कि वह थोड़ा मस्ता condition is difficult. Croundation is definitely difficult. लेकिन अगर आपने नए sectors की तरफ जाना है जो ज़्यादा productive है, right? तो we want the economy to get cost formed. Agriculture से labor force जो less productive है वहां से I am not saying कि आप agriculture को भूल जाएं और उसमें invest ना करें और उसको मदद productive करने की कोशिश ना करें. But at the same time we want the economy or the people to be working in sectors which are more productive or which can be more productive going in the future, right? So, what is that need? If you want some of the sectors to do better, what is that need? उसके लिए आपको finance चाहिए? आपको labor चाहिए? आपको land चाहिए और land भी यह नहीं चाहिए motorway पर कहीं भी site पर आप land इकट्ठा करते हो. जिससे हमें शौक है, industrial park बनाना है, कहीं भी बना दो. Right? You need land in urban centers जो which is very well connected to the educated population. Right? So, you don't need land here and there जो हम experiments करते रहते हैं फिर हम उनको breaks देते हैं and then भी kind of सीधी अच्छा इसमें से medical निकलेगा. You need land affordable land in urban centers or closer to urban centers जहां पर आप मेरे जैसे और पढ़े लिख के लोग या बाकी जो labor class है they can easily go, they can do their work, they can come back. Right? So अब यह कहां से आएगा? आप यह कहां से आएगा? This is a very important question. Right? आप अब हमें यह पता है let's say आप assume कर लो कि हमें ABC sector बहुत अच्छे हैं. उसकी तरफ हमें resources लेकर जानी है. Finance हमें bank bankओं का जो है जो direction उस तरफ हमने shift करनी है. Investor की direction उस तरफ shift करनी है, land हमने उस तरफ allocate करना है, labor को हमने उस तरफ direct करना है, आपने पकड़ के तो नहीं करना ना और कहीं पर यह चीज़ें पढ़ी नहीं हुई. These are already employed. कोई agriculture में काम कर रहे हैं. पैसा, land आप कर रहे हैं, real estate, DHAs, barriers, area इनमें लगा हुए हैं. Bankers जो हैं वह जो states हैं उनको fund करते हैं या government को fund करते हैं. अब आप और यह fundamental question है इसका answer आप बताओ. यह कौन करने लगेगा? क्या DHAs, real यह housing societies, dairyas या अब तो airport कहीं पर बनता है तो housing societies वहां पर ऐसे निकलती हैं जितना यही हमें काम आता है. यह जिन जिन लोगों के इस इन sectors के साथ में फ़ायद जुड़े हुए हैं और उनकी इससे चल रही है. आपको लगता है कि वह कहेंगे कि नहीं हमने जो इस तरह की speculative nearest state investment है उसको आप चलें tax कर लें ताकि इस तरफ investment कम आए और आपकी जो land prices हैं वह speed से ना बढ़े ताकि जो productive sector हैं उनके लिए affordable हो. Let's say land buy करना या let's say आपने rent करनी है अगर corporate property तो आप rent कर लो या let's say wages आपकी artificially इतनी ना increase और subsidies या यह government projects की वजह से या DHK आपकी जो labor force है वह यहां agriculture से निकलकर construction में चली जाए. Right? Construction again is quite unproductive. वहां पर growth rate of productivity is very low. तो who's gonna let that happen and that's very important कि हम यह तो कहते हैं जब हमारे ministers भी हैं कि IT को हम यहां से यहां ले जाएंगे. फ़िलहाल sector में हमारी बड़ी potential है. हम उसको सौ billion पर export चली जाएगी. फ़िलहाल यह बीस पर चली जाएगी. Let's say मैं मान लेता हूं सारी आपकी बात कि वह जो आप sectors कह रहे हो उनमें बहुत potential है और उसकी export मैं यह भी मान लेता हूं कि आप let's say zero से सौ billion पर जा सकती है. फ़र्क कर लो. वह zero से सौ billion तक जाने के लिए जो resources आपको चाहिए और जिन sectors में और जिन vested interest में जैसे शराफिया के

Muzamil

interest में वह resources इस वक्त काम कर रहे हैं. क्या वह आपको move करने देंगे वह resources वहां से? But then इसमें मेरा आपका counter question होगा आपसे कि क्या यह Pakistan में वाहिद ऐसी है शराफिया है जो कि rent seeker हैं जो कि exist करते थे या दुनिया भर में, particularly Asia में पिछले तीस सालों में जहां जहां पर economies खुली हैं. आपने Bangladesh, India के example दिया, आपने China के example दिया, आपने Indonesia. हम recently देखते आ रहे हैं कि यार उनका पड़ा similar वह था Pakistan के. मेरे लिए I would probably wanna study that, right? Because that's this is normal. I this is normal behavior कि अगर मैं let's assume कि मैं जो है ना वह YouTube का बात चाहूं और मेरे पास जो है कि YouTube से free dollar आता और मुझे कोई touch नहीं कर सकता. Either then potentially यहां पर creative destruction important होती है where the economy at at a certain point begins to realize कि listen, I mean what is unsustainable is unsustainable. So I'm gonna now punish all of you, right? And वह punishment की अंदर से फिर eventually value निकलती है. So then potentially मुझे एक चीज़ तो यह नज़र आती है कि यार अगर ठीक है lack of यह नहीं करने देंगे, मान लिया यह नहीं करने देंगे. But then the only outcome from that that I see is crash. I don't see a lag. I don't see कि अच्छा हम्बाज़ादा grow नहीं कर सकेंगे. I see a crash because in the absence of of of value driven high efficiency direction, you're basically going towards a spiral that is eventually one way or the other. In a in a country जहां पच्चीस करोड़ लोग हैं, आबादी भरती रहती है. आपने crash करना है. And from the ashes of that crash will basically a new economy rise.

Guest

Otherwise, आप कोई या तो वही कि आप stakeholders को बिठाएं और उनसे कहेंगे भाई या तो crash कर लो या you know let go. यह इसमें अब दो frameworks आ जाते हैं ना. I mean, so it's an important question, right? How do you shift the resources away from the people or the elites or the sectors which have vested interests and they are very much entrenched as well in the system. Right? So that's the that's the fundamental question. Right? चाहे वह real estate हो या let's say low productivity agriculture for example आपने sugar की बात की वगैरह वगैरह, all that comes into play. तो there are there are two ways to think about this. One और दोनों Pakistan में discuss हो रहे हैं और होते भी हैं depending on who you are and where you are. One is which is I'll put this in a slightly international context ताकि Pakistan से हम ज़रा दूरी रहे. For example जो अभी हमारे जो government ने advisor Oxford की professor है Stephen Durkhan, right? So, so I was talking to him. I met him in Oxford. So so what is his model or what is his thesis? So his thesis is, ok, fine. Things are going to crash. This system is unsustainable. You know it. You said it. Numbers are showing the same. You get growth अगर आप कहीं से geopolitical rents आ जाएं, कोई निर्भान हो जाए या you get lucky with a shock here and there. तब तक चीज़ें चलती हैं. जैसे ही वह बंद होता है तो आप, you choke, right? तो what's the way out? Either you let the system choke and see what happens or this thesis is किन्हें जो अशराफिया है, they come sit together around the table and they come up with some kind of an elite bargain. Now, this is one way to think about the solution, right? And this is a solution which I think जो है शाफी है उसको बहुत पसंद भी आता है क्योंकि ball stays in their court and it's up to them to design a new system as per their wishes, desires and so on, right? So that could be one way to think about it. Like, I'm just trying to give a framework here, and then people can decide on what they think is better. Just to announce The other because I like Yeah. I like data to guide me. Has there been similar grand bargains in other countries where turnarounds have happened? So, his book, he kind of... So, the book he has written, I think he kind of tries to provide some evidence of that being the case. I'm not too convinced looking at the case studies that he offers. I mean, those are things that either go wrong soon enough. Or, also, there's a fundamental question, which is, but let me come to that later. Okay. Let me give you the other framework, and then we can kind of see What's their framework? Their framework is more, bottom up. So the mechanism is this. Something is not working. You want the resources to move. You need some mechanism to make that happen. In Durkin's case, the mechanism is going to be Anit sitting together and being wise and deciding on that. In Hmoglu and Robinson's case, it's going to be the masses protesting on the street. And democratically exerting the pressure on the decision makers through a vote and making them decide or to take a different path. Right? So so this is a bottom up approach where it's it's a democratic process. In some way, the street or the voter makes the person at the drop listen to them that we are going to vote you out or whatever if you keep on calling the policies which are failing to deliver. This does not mean that the message of the individual is voting is very wise and knows about the system, how it works, but they are wise enough to see that this is not working. Right. So, without giving examples the voter knows when things are being run-in an irresponsible manner. Either either he either उसकी ज़िंदगी बेहतर हो रही है और अगर नहीं हो रही तो वह protest करेगा. It's very sort of मैं इसको binary में लेकर आ सकता हूं. It's very, it's very simple. Right, I mean, yeah. So, so I think generally I think, so I don't want to get into it given the politics of it. But I think पाकिस्तानी vote is very wise. Right. It's why very forward looking as well. So this example I really, I really like. So, I take the liberty of, hopefully, no one will mind it. So, for example, think about the PTI government, right, So, in so PTI government, they had a very good policy of health insurance. Right. Right? Now, the policy was ongoing anywhere. The government had expanded it in the previous जो भी पृष्ठि government थी. But then, think about the local government before all this vote of no confidence happened. The policy was already there but people ended up voting in a different direction come the first round of the local government election. Right. Do they not like the health insurance? They do because when it was taken away later, they complained and they actually protested. Some of them even voted based on that this was taken away from them. But when it was there, they were asking for more. Right? They were saying, what next? Show us a better future than what is already there. Let's move on. You're not going to be slave of a good policy that you've implemented. Thank you for that, but you were elected for that. Right? Right. So in many aspect, like likewise, they spend all those things. So people had been forward looking. They're not tied to someone to the grave. And in a in a broader framework, you can pick exceptions here and there. But, generally, I think the masses in general have been quite forward looking, and then they know what works, what doesn't work, and they punish the policymaker or the politician when they don't promise a better future given what they already have. But giving that aside, it's a very good example because no one people really tend to under appreciate how intelligent our average common person is, more than the intellectuals like us on the shores. And I do trust their judgment on these kind of things. But that's one way. So these are the two frameworks which you have. And then the question is, which of these two frameworks is better? I'm personally more inclined with the second framework. I do entertain the possibility that both can work. You can have a very go back to, let's say, UK's history. Right? So you have a new elite which takes over who were traders. They replaced the feudals, and their interests were very different. They were more trade oriented, open, go and capture the market. There was a very shadowy side to it in terms of colonialism. Was But more about expanding the networks, getting their products out there so they can scale up and get the profits and get the innovation going, obviously, at our expense. Right? South Asia and other countries that suffered. But the elites, you can get lucky that you end up with elites whose interests somehow align with the the country as a whole. Right? But that's an exception. You can just wait for some elites to take charge somehow because of some historical accidents and then take the country in a direction where their interest match that of the country. Right? So it's a very kind of, okay. Fine. Let's see what happens. And interest in in the twenty first century, I think it's also very problematic because things change very rapidly. Even if the elites, they sit together, and, let's say, they agree to the best way forward. Ten years down the line, that way forward will be completely redundant given how fast the changes are happening. We don't know what the production what the production is going to look like, what will be the role of PI, robotics, where the agriculture is going to be, what the climate change is going to look like. Right? The world is changing so fast, both in terms of technology and the vulnerabilities that are building around us, you cannot rely on, let's say, someone reaching a consensus, and then we are now stuck in a new equilibrium which cannot change until then elites are forced, let's say, fifty years down the road to sit again and think about a new path forward, which maybe is right, right, giving them the giving them that luxury, which I don't believe in. So this, that. Or you have a more flexible system, which is democratic in nature, and which responds in a much quicker way. It had its downside, but it's a lot more flexible to what's going on in the world and around you to to push the policymakers to make or to change the policy choices they have been making before. So so they are they are these two systems. But then at the same time, in the two systems, again, I think it's important to talk about the military here, which is a very important factor, which makes the system very uncertain. Right. You don't let the voter to decide, let me kick out this policy and bring in new sets of people with new sets of policies. You don't even let them you are not giving them that opportunity to get the process going. Right. Right? If you're not going to let, give them this opportunity and you're going to keep on intervening two years down the road because, obviously, military in Pakistan has very significant business interests. They are in real estate. They are in food. They are in fertilizer. They are in all the sectors where the protection is very high. So they are also a very important player, not just political or, let's say, quasi political, but also business or economic player in the whole in the whole scheme of things the way they are being played. So so I think that's also something which needs to be addressed somehow that the that that that you adopt the system, move toward the system, which is more continuous so that the policies can then be changed either by the policymakers as they realize or through the public pressure, which comes in in the terms of in the face of failed failed policies. Makes sense. And this is even though even though dopecia does not put it in this way, but I think his contention of the system being too disruptive, I think, is pointing in the same direction, that you're not letting the governments to stay for long enough where they have a bit of a longer horizon even when they're thinking about whether to spend the reserves or build up the reserves or just to give them a way to stimulate consumption and get some temporary growth so they can come back in power. So I think that disruptive political system that we have or quasi political system that we have, that is I think also at the root of what we have going on with the repeated balance of payment crisis. Makes sense. एक तो यह के जो doctor इश्यद की book है, do you have it lying around somewhere? If we can show it so that the viewer will I be do actually.

Muzamil

So, just show it in the camera. थोड़ा सा ऊपर कर लें. So, it's called development pathways. So, यह book जो है basically, if I'm not wrong twenty twenty two तक इसमें इन्होंने cover किया हुआ है. यह institutional reforms की बात करती है what does it talk about?

Guest

So I've only read the first three chapters so far which are more about the the development path the three countries have taken India, Bangladesh, Pakistan. It's very brief. There many chapters. They obviously abstract from a lot of other important things which even I think are important. But it kind of gives you a bit of a very quick overview of what was the path broadly speaking. And then I think in the follow-up parts, it gets into the data. There are co authors as well. People can see over here. Right. Doctor. Lisher. So they have written the other chapters in the book, I guess, or everyone has contributed. So I still haven't read it, so I can't say what's there. But I think it's a bit more on the data side. Makes sense.

Muzamil

इसमें अभी आपने बिल्कुल, I'm gonna wrap this up, but I just wanted to ask you. दो तीन आपने इसमें बातेंगी थी. आपने कहा था कि there's either a top down or a bottom up, you know, sort of sort of formula for change. और दूसरा आपने इसके अंदर अभी towards the end you alluded to the military which is itself is not just a political player or geopolitical player for Pakistan. It's also a economic player और वह जो है वह इस तरह के similar plays हमने again दूसरी countries में भी देखे हुए. जिसमें मैं particularly हमेशा example जो मुझे मेरी favorite example है वह Indonesia की है जहां पर military government of sorts थी. Military बहुत heavily entrenched थी उनकी economic system में, उनके इदारों में, उनकी सारी चीज़ों के अंदर. ज़ाहिर है, जब हम military की बात करते हैं तो वह एक institution है, बहुत बड़ा इदारा है. It's very powerful, it's very disciplined. उसके ऊपर आप जो हैं, वह ज़ाहिर है के argue कर सकते हैं कि यार वह अच्छा है या बुरा है या जो भी है. But अगर हम इस assumption से चलें कि यार बेहतरीन लोग हैं, सब बेहतरीन काम कर रहे हैं. But उनका वह काम नहीं है. So, वह inefficiencies again जब इतना बड़ा player एक आकर बैठेगा और जो आप पहली बात रहे थे कि how do you get a stakeholder to agree to the idea कि listen, I, you might have to do things differently now, right? What you're doing is inefficient and now you'll have to take some losses, you'll have to evolve yourself. तो वह more often than not जब एक institution की शक्ल में कोई चीज़ आती है तो वह तो बिल्कुल ही उसको हिलाना बड़ा मुश्किल हो जाता है. And so, in that context I'm trying to understand the inevitability of change. अगर मैं आपसे पूछूं आपको किस हद तक लगती है? क्योंकि मेरे con- मेरे understanding में मुझे personally लगता है कि we're now at a point where you can't really argue on the inevitability of change. You can potentially begin to understand कि वह change कहां से आएगा? क्या अब हम down ground up लेकर आऐंगे या वह top down लाना पड़ेगा. But and one of the reasons why I feel like कि वह जो change है वह होता हुआ नज़र नहीं आ रहा is because I feel like there's a lot of denial whether that is your rent seeking class, whether that's someone कि वह constantly पिछले दो तीन सालों से ना वह कहीं कहीं ना कहीं उनकी एक एक list है कि यार अगर यह हो जाएगा तो सब set हो जाएगा. नहीं नहीं, अब यह हो जाएगा तो सब set हो जाएगा. And those assumptions are the reason why जो हमारे crisis after crisis आ रहे हैं because वह हम उस assumption को play करते हैं और फिर realization होती है कि अच्छा यह भी काम नहीं की. फिर हम अगले पर जाते हैं और हम अगले पर जाते और उसकी वजह से ice to ice a temperature and एक एक एक जो chaos की feeling है. अभी मैं यह कह रहा chaos ground पर आया है but chaos की जो feeling है वह बढ़ती जा रही है because you're like wait. So this didn't work and this didn't work and this didn't work. And so, अगर आप इस इन इन इन pointers को देख रहे हैं ना तो आपको एक buildup नज़र आ रहा है जो कि structure आ जाएगा जिस पर change आ जाएगा. So that's ground up change. अच्छा, that's top down change, right? But the current state of the economy and the current state of Pakistan can no longer sustain. Like, जो है ना कि kick the can down the road नहीं हो सकता. Lack of growth नहीं हो सकती. You got a huge population who is now empowered and educated enough to know that they they don't want to live in the same way that they've lived or or their forefathers have lived. And so again मैं इसको थोड़ा सा वापस गुज़े में बंद करता हूं. Do you think that अगर मैं आपसे पूछूं कि do you, would you believe in the inevitability of change now at this point in time in modern Pakistan irrespective of कि यार चले आपका एक opinion है कि किस तरह से हो सकता है कि क्योंकि कोई opinion है. Yeah, I mean it's very hard to predict change honestly.

Guest

So, if you look at the industry, countries destroyed themselves because people didn't want to give up. Right? So people at the top didn't want to give up. Right? So giving up is is not that straightforward. Right? So the first instinct, अगर इतना आसान होता तो elites पर बैठकर खुद ही discuss क्यों ना बैठ लेते कि यार अच्छा यह path बेहतर है, अभी वाले path से तो let's move on to a different path and hope get the, get the size of the pie to be bigger which we can share both with us and everyone else, right? But that's not really what we see

Muzamil

in in in reality. So, not necessarily saying, I'm not necessarily saying that it's gonna be easy. All I'm saying इसलिए the the the statement that I used was the inevitability of change. Change काफ़ी दफा deadly भी हो जाता है. Change काफ़ी दफा जो है वह difficult भी हो जाता है. मेरा again, what I'm trying to hypothesize is that business as usual नहीं चल सकता. One way or the other, either you let go of that power and you agree to change and do it in a- in a way that, you know, sustains the stability of the system, sustains the stability of-of-of the nation. Or the alternate is कि लोग जो हैं वह, you know, chaos की तरफ जाएंगे one way or the other. चाहे वह rebellion हो, revolution हो, जो भी हो, you-you will see some form of change because there is a growing resentment amongst the population.

Guest

I think scenarios, scenarios treat करते हैं, right? So, what are the three possible ways for it? It's easy then to predict on what's happening. Right. So, one is, one is what you are saying. So, something which will be very chaotic, let's say, if not revolutionary, then at least bloody or let's say something which is extremely, say Ok, right. Suppose there are persecution, persecution होगी. Right? Right. So, if things go the way they are currently going, right, meaning elites, they don't decide to give up on power and share it more equally with, let's say, the growing population, the limited segment of the society and even the political peers, then I think we are going to go in that direction. And it's not just the educated segment of the society. I think that's again a bit more of a the kind of जो आपकी Pakistan more than literacy बहुत ज़्यादा नहीं थी Bangladesh में the formal East Pakistan. बलूचिस्तान, it's not that they are very educated in terms of the numbers, right? I'm talking about the formal education. I think a common person is more intelligent than perhaps many educated. But likewise, in KPE or in the पश्तूम Bank, in AJK, in GB. So, you have all these segments, different parts of the country, either in the past which were part of the country and today which are part of the country, which are not highly educated but they do need that power sharing. Right. They need political voice. They need representation. Right? यह जो idea है ना हमारे mind making का वादत वन जाएगा, economic development हो जाएगी and people will say, ok fine, we are happy to live with that. It's not that straightforward. In China people have a very high degree of trust in the government. It's a very different game, ball game. Pakistan is a very ethnically diverse country so everyone needs some kind of representation to express their identity, whether that's religious or ethnic in nature or whatever, nationalistic, whatever that is. So that friction is already there. If things go the way they're currently going, I think and no one either we the economy doesn't improve, meaning we don't get lucky with geopolitical rents. Elites, they don't give up on power. When I say give up on power, I mean in a way which is broadly shared with let's say the people or the political or the ethnic groups or the nationalities, religious groups across पाग्यास्तान. Then clearly, we are going to go towards what you were saying. It's going to be anarchy or it's going to be an environment where people are just going to be better off leaving because you won't be able to speak up. And if you speak up, you'll be persecuted Or, like, what's happening? More recently, your family members will get persecuted if you happen to be further away. Right? That's one scenario. That's the status quo if we say the current situation is going to carry on like this. The second is a bit better which is we'll get lucky and then another round of geopolitical rents will show up from somewhere. Some accident will happen like who? No one could predict let's say nine eleven, right? Nine eleven happened. We got major restructuring from the Paris club. Our debt got extended profile पंद्रह दस पंद्रह साल के लिए extend हो गई and more than that it wasn't a very good period in terms of the structure of the economy. आपकी investment rate गिर रहा है, आपकी exports to GDP ratio गिर रही है. So people from मुशहर फ़ैरा से पता नहीं it was a very excellent state of the world but आपकी debt सारा restructure हो गया ten to fifteen years. So, those pressures were gone all of a sudden. Next morning you wake up and that's not there. आपकी global economy was booming, Right? So your exports are doing very well. Remittances are getting picked up. Obviously, there was some reform done as well in the early days. The banking sector privatized work, telecom आया. So there was a lot of that happening. Credit where it's due. But overall, macro indicator in terms of जो चीज़, metric investment grade के साथ क्या हो रहा है? Export competitiveness के साथ क्या हो रहा है? All of those things were going downhit, right? The productivity numbers which I worked out in the paper, which I, with my other co authors, together, they are pretty low and they are also for the period when Moshev Saab was in power. Right? So, but you got that massive relief then you also ended up getting some inflows. They're not as big as let's say The US wants to pretend but then still they were big enough to make a dent on your financials. Then also you ended up getting the remittances also started to pick up. So all those things got together and then they gave you a bit of a space when you can kick the can down the road for long enough until the crisis emerges again. That's one way to run the country, which is what we have been doing forever. Things shit hits the fan. Excuse my language. And then we wait for us getting lucky. And then at some point, if we wait for long enough, we may get lucky. And often in the past, we have gotten lucky. And that gives you gives us another ten years, and then we kind of repeat the cycle. Right? What is it that the government is currently so over the last two years, what's the what's the thing that the policy makers have been looking up to? What they have been looking up to is getting lucky. GCC से अस्सी billion आ जाएगा. That came down to 20,000,000,000 आ जाएगा. That came down to 5,000,000,000 आ जाएगा. दो billion आ जाएगा. अब एक सौ एक million जो US ने aid approve किए या कर रहे हैं. अब उस पर बात आ गई है. What's the core? It's not about कि 100 से सौ million पर आ गया. That's not the point. The point is that you have been looking for someone else to come from the outside to bend you out so you can keep the whole thing going for another five, ten year, and then we'll see what happens. Right? So that's the approach that's been embedded in the policy making circles ever since we came into play, and that is also what we see today, right? As far as reforms are concerned, we don't see much happening there. There is no nothing happening on trade front या आपने market access लेनी है या आपने कोई अपने आप को expand करने हैं. There is nothing on let's say improving your governance structure. हम exports की बात करते हैं but there are studies which show कि half of what you end up exporting depends on the quality of your contracting institutions. अगर आपका contract ही नहीं abide होगा even as a freelancer. अगर आपका contract ही नहीं abide होगा तो how can you do freelancing? आपको अगला बंदा पैसी ना दे पर, right? तो कहीं ना कहीं तो आपका contract there are enough legal structures to make this whole freelancing thing to work in the, in the world. Right? So, you have to have those legal structures in place which are credible enough for people to invest. Not worry about कि अच्छा मुझे नहीं पता कल क्या होगा? Government change होगी या party change होगी या कोई और बंदा आ गया या memo से बाहर गया तो पता नहीं मेरे business के साथ. क्या हो जाएगा? Right? So those contracting institutions in addition to market size are super important if you are to start producing more high value added goods. जितना ज़्यादा complex होता है production process उतनी ज़्यादा आपको contractual arrangements चाहेंगे, right? किसी से आपने IT खरीदना है, किसी से आपने कोई part खरीदना है, किसी से आपने service agreement sign करना है, किसी से आपने customer site पर sales reps आपने sign करना है. So, the more complex it becomes, the production becomes, the more demanding the legal process becomes. So, until and unless you have that in place, it's not gonna happen. So, none of that is happening. Coming back to my point, the mindset is embedded over the last fifty, seventy years to whenever things go bad, look outside in the hope that someone will bail us out. Right? So, that's the second part, which is something which has worked over the last seventy years. Maybe it can keep working. I don't know. Like, I don't know. Like, how you can't predict being lucky or something going wrong in the region and then you siding on one side and that getting you a lot of the room to play with. It's a bit tricky because Pakistan's debt today is much more complex. पहले सिर्फ़ आपसे पहले Paris club को आपने वापस करना था. आज GCC को भी करना है, China को भी करना है, Paris club को भी करना है. So, it's very difficult for an event to happen which brings all of them to your table. Right? Right. So it's not as straightforward. But nonetheless, who knows? Maybe you can get lucky. And then the last thing is essentially the first option is that you do go towards the elites do step back and they give they share the power in a political way, which is compatible with the constitution, which brings in everyone into the national fold and make them feel as being part of the country. Because only then you can start thinking about contributing to the society and building your future in the country. Right? If you don't feel that you have been represented represented by the country, if your identity is being attacked to one way or the other, whether that's political identity, religious identity, ethnic identity, you don't want to build your future in the country. Right? You'll find another place somewhere else. I'm not saying everyone does that, but I'm just saying that spirit kind of takes a big hit. So you have to give that room in the modern twenty first century world where people have the freedom and the freedom to express themselves in every way possible, keeping, obviously, within the ambit of whatever the country represents in terms of norms and values. It's depending on which country you are, it's different. So whatever that is. But then the key thing is you have to have that freedom, that power sharing agreement, which makes people feel part of the community so they can then start thinking about the future rather than what's gonna happen tomorrow or how they can leave the country at the very next minute. Makes sense. भाई, I'm gonna wrap this up.

Muzamil

Thank you so much for the insight. Forty five minutes से कहा था, एक घंटा पचास minute यहां आपको आपकी हमने ले लिए. Thank you for taking out the time and sharing all that insight. Thank you very much. Was good to other player to be here. Challenge. That was the same for all of you guys. Thank you so much for watching. अगर आपको यह episode पसंद आई है दोस्तों हमें से ज़रूर share करिएगा. Let me know in the comment section below what are your thoughts on Pakistan's changing dynamic? Do you think कि finally elite जो है वह let go करने के mood में है या do you think कि जैसा system चल रहा है वैसे ही चलता रहेगा? साथ ही मुझे ज़रूर बताइएगा what are your thoughts on default? क्या Pakistan को default करना चाहिए? क्या आपकी क्या understanding है कि जब default नहीं, जब restructuring होती है तो मुल्क कैसा हो जाता है? क्या potential उसके फवायदे हैं या नुकसान आते हैं? I would love to know your thoughts. But anyways, this was सैयदिम्झामिल हसन सैदी you are watching Thought Behind Things. Thank you so much for watching and I'll see you in the next one.

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