Say what you will about PML they can handle basic economics

[Silaaj]

Re: Say what you will about PML they can handle basic economics

@Zafra

Okay seems this is an economic lesson thread again.

Silaaj lets take some basic facts and move from there.

1. If you take a loan from the IMF you have serious fiscal problems. It deals purely with balance of payment issues.
2. The IMF puts conditions whenever it gives you loans. Greece is a prime example.
3. Corruption is prevalent in all economies. Including in western governments.

Getting an IMF loan signals problems. Agreed. But countries with strong industrial or manufacturing backgrounds are able to negotiate the terms in order to suit their needs. Because such countries no doubt have other options when it comes to getting loans.

Now based on that would you say that Iceland, Ireland and Greece all artificially affected their exchange rates for a 4 to 5 year period?

I dont know about Iceland, but Ireland and Greece are part of the eurozone. Euro was kept from crashing by major US, French and German intervention. All 3 had invested heavily in greek bonds, and taking a write off would have been big.

More so if getting funding from the IMF means you are artificially affecting your exchange rate, then over 50% of the worlds exchange rates have been affected in the past 20 years.

IMF has lent to about 40 odd countries, less than a quarter of the worlds countries. And its not so outrageous to think that 40 exchange rates have been manipulated.

And two word for those of you complaining about a stable exchange rate: Energy imports. Now if you want to know why stable exchange rates are important for products with an inelastic demand (in the case of Pakistan) like energy imports, we will need a text book.

Noones disagreeing with that assertion. But in my first post, I noted the fact that we have yet to see the fruits of that ‘stability’ translated on the shelf. PKR has appreciated more than 10%, yet oil prices have only gone down by 2%. Even after factoring in the increase in international crude prices, Pakistan should have been benefiting from the currency valuation.