[QUOTE]
*Originally posted by TomSawyer: *
^ that's fine as long as it's understood that a) PIBs raised local debt b) PIBs are in Rupees so if these proceeds were used to repay $s and SDRs (as you contend), somewhere you bought hard currencies and c) since PIB rates are quite high (ranging 4 to 12+% I believe) it's not very smart to retire foreign debt this way. But, if you're happy so be it. After all the govt can print as many rupees as needed to pay the high interest and further endanger the fiscal situation.
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a) PIBs raise local debts
b) Are in Pak. Rupee. Govt. borrowed the money. Are you using borrowing and buying interchangibly?
c)Quite frankly, I dont know the exact coupon rate of PIBs, but i dont think its 12%+. Weighted average interest rate in the country is around 7%, so the coupon should calculate to around 9%, roughly speaking. It would be nice to know the exact number though. All i know is its the yield on these coupons is only marginal right now. Somewhere in the 1-3% bracket, if my memory serves me right.
On the last comment. Don't kid yourslef. If a common man such as yourself knows this, wouldn't the finance managers? You think you know how to run the finances better than a former WB Chief Economist?
My smarts v.a.v your minister's is not what we're discussing.
You said PIBs were used to raise funds to repay foreign debt. I said if that's the case, then your govt must have bought hard currency (or diverted from other use) because PIBs raised rupees (unlike the Indian RIBs which were hard currency denominated.
Now, to my last point which is why you seem to want to bring me down to the level of a minister - Let's see: I believe one of the major selling points cited for PIBs was one could buy them for short medium and long terms (as long as 15 or 20 years) and the rates promised for the l.t versions, while seemed 'high' then seem astronomical now. I don't remember exact rates but you can check that up quite easity in some pakistan finance website.
When the hard currency funds are netting under 5% do you really think it is wise to take on 9%->12% commitments? The only way that can be a worthwhile deal is if you plan to print rupees outside norms. If that was the intention right from the start, that'd make him a crook, not a smart.
The point was that if a lowly insignificant moocher could know such aspects of the finance, wouldn’t the finance managers be aware of it already?
ok.
15-20 years PIBs? How, when, where? Govt. sanctioned the auction of 15-20 years PIBs on Oct. 8th 2003, merely days before (Oct. 14th to be exact) it announced the prepayment of the debts in question.
If they havent even been sold yet, how could they possibly be used to prepay these debts? The PIBs in circulations right now have a max. maturity period of 10 years.
You say rates were ‘high’ ‘then’. How do you define high? And when was this ‘then’? So what exactly you are talking about is unclear.
We don’t know what the previous PIBs were used for, but right now the interest is low enough for the govt. to borrow cheaply from the domestic sources and pay the expensive foreign debts:
This is the yield for commercial banks. Govt. is probably borrowing it at even lesser rates! Who wouldn’t want to use this cheap resource?
Proof buddy proof. Don’t throw words around if you have no proof to back it up. Deposit rate was exactly 5.00% in June 2001, and T.Bill yield at that time was 12.88%. DR was 2.81% in March 2003, and T.Bill yield at 1.65%. And Like I have already showed to you, coupon rates on PIBs and T.Bills have fallen further since March. So your assumption that govt. borrowed at 9-12% to repay these loans when the DP was under 5% makes no sense because they are two years old figures. DP is under 5% right now -around 2.8%- but then the coupon rate is not between 9-12% by any stretch of imagination.
Cut the ifs. Nothing can be concluded based on these ifs. Post something based on facts, not assumptions. And the fact is that M2 increased by 12.5% this year (upto march), and 9.3% last year, as against an average of 15.3% for the 90’s. Currency as a percent of M2 has come down from 26.0% to 24.8% this year, as against the average of 26.3% for 90’s. M1 in absolute terms has grown at some 19% this year. But that can be attributed to the increase in net foreign inflows. Even then Pakistan has seen growths of 19.3 and 33.9% in M1 during the past decade, and foriegn inflows were not at all as high back then. So the figure of 19% is not at all abnormal and proves a point that the govt. has not resorted to the crude method of printing more notes just because it can. And I urge you to use common sense before forming any hypothesis in the future. This method of printing money to pay debts was used by Hungary after WW II with disastorous consequences. They taught us that in Introductry Macroeconomics. It would be safe to assume that these people with Doctorates in Economics would already know that. So right now I don’t know if our finance managers are smart or not, but i do know who the dodo is.
Did I say PIBs are revenue for govt. anywhere? Where did you get that?
awww how cute. The whole Debt Coordination Office @ Ministry of Finance must be pretty stupid, if that is true. But is it? Do you have proof to back your claims?
So, I think its you who needs to read slowly. Compare the interest rates figures closely. If you have trouble reading, seek help from that ingrate on top of you.
You are telling me something i already know.
Again proof..evidence? If no, scram!
What you’ve basically done is to repeat yourslef, told me stuff i already know, and concluded that with a pitiable jab on Pakistan. And THAT without providing any evidence, whatsoever. Gee, I wonder if this is the jist of reasoning you use in evreyday life? If you had carried out just a bit of research you would’ve known that the same practice of borrowing from domestic market to pay external debt has been going on in your own land. Maybe that little bit of research would’ve also stopped you from bracketing your own country as bizzaro land. So I will ask you again to bring some numbers/facts to the table that prove the blunders in this practise of prepayment of debt.
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*Originally posted by ChthonicPowers: *
Did I say PIBs are revenue for govt. anywhere? Where did you get that?
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Did I say you said PIBs are revenue? That's unnecessarily defensive.
I have no intention of doing research for you. Common sense should tell one the games played by govts for headlines. Look at how much due loans were rescheduled and how much was 'repaid'. Then look at how much fresh 'domestic' loans were taken vs how much external debt was 'repaid'.
We always talk about impact of servicing debt. You're witnessing the impact of servicing debt in such massive scale and the thrust of my arguement is to caution not to feel too good about paying peter without realizing fresh borrowings from paul.
I have no intention of doing research for you.
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Yeah right pal. Thats because you know you'll only end up blank. All your arguements are based on hot air. You never ever back any of your claims with anything concrete. Just don't expect me to agree with any of the un-substantiated baloney.
[QUOTE]
*Originally posted by TomSawyer: *
Common sense should tell one the games played by govts for headlines. Look at how much due loans were rescheduled and how much was 'repaid'. Then look at how much fresh 'domestic' loans were taken vs how much external debt was 'repaid'.
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Not all domestic debt is used for paying external debt. You can't directly link those. If you are, then you must tell us how. Anyway, if you are infering something, then its not clear what it is. If you are trying to tell me that all of this is just to get some attention, then I must tell you that this govt.'s record on external debt is pretty good. And unless you have some numbers that state otherwise, neither will I believe you, nor will I comment.
Thats besides the point that you are now brining in the govt's antics to grab headlines which is not really the subject of this topic.
[QUOTE]
*Originally posted by TomSawyer: *
We always talk about impact of servicing debt. You're witnessing the impact of servicing debt in such massive scale
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Massive scale? Exactly where/how? Care to elaborate with proof? It appears to me that at the moment you would rather sniff on a baboon's rear end than provide a single link to back any of the hog wash you are putting forward.
[QUOTE]
*Originally posted by TomSawyer: *
and the thrust of my arguement is to caution not to feel too good about paying peter without realizing fresh borrowings from paul.
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Right...and what i am trying to tell you is that internal borrowing at the moment is cheaper. The same common sense that you like to use most of the time tells us that if we can save a couple of million dollars in "debt servicing" in the long run, we should. Coppish?
[QUOTE]
*Originally posted by TomSawyer: *
Now you're arguing with yourself. You're the one that said the money to repay the foreign debt came from selling PIB.
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[QUOTE]
*Originally posted by TomSawyer: *
And then you ask me this?
"You can't directly link those. If you are, then you must tell us how."
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Excuse for mis-communication. The point was that all part of internal debt is not used to pay external debt. There are numerous other places where the govt. utilises it. So asking me to compare domestic liability incurred with external liability repaid didn't make sense:
[quote]
"Then look at how much fresh 'domestic' loans were taken vs how much external debt was 'repaid'."
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Update on this story. The government is scheduled to pay this almost $1.1 billion in the next few weeks, with plans to pay back billions more over the next few years.
Pakistan To Repay $1 Billion Debt To World Bank, ADB In 4 Weeks
Pakistan will pay over one billion dollars’ expensive debt it owes to Asian Development Bank and World Bank ahead of schedule within the next four weeks, said Finance Minister Shaukat Aziz Thursday. Aziz said the prepayment of debt won’t result in a dip in the country’s over $ 12 billion foreign exchange reserves because it is accumulating this amount separately. “We’re going to write this one billion dollars check in one-go,” Aziz told a press conference in Islamabad.
***Earlier, the government has said it would pay Manila-based Asian Development Bank $596.7 million for seven loans scheduled to mature between 2005 to 2013 with interest rates ranging from 6% to 11%. The World Bank will be paid $481.7 million for 11 loans, maturing between 2007 to 2019 with interest rates ranging from 4.6% to 7.6%.
Pakistan plans to prepay $4.5 billion of foreign debt to multilateral financial institutions ahead of schedule in the next few years to cut its debt servicing cost and make good use of foreign aid and capital flows.***
Aziz said Pakistan’s proposed $500 million Eurobond launch is on schedule; road shows for it are expected to be held in February Pakistan is preparing to sell the $500 million Eurobond in the first quarter of 2004 - its first international bond offering since 1999. JP Morgan, Deutsche Bank and ABN Amro Bank as the lead managers. The government has said it wants to use the Eurobond to set a benchmark for Pakistani borrowing ahead of its plan to exit a three-year, $1.46 billion International Monetary Fund loan facility this year.
