Making sense of the money

Published: March 18, 2018

A tiny proportion of the population are economists. They it is that speak to the populace and the rest of the world as to the national health of all things financial and for most people they may as well be speaking an obscure Martian dialect. The adviser to the prime minister on finance, speaking a day after the International Monetary Fund (IMF), said that the net national international reserves, once forex liabilities had been excluded stood at a negative $724 million. The concept of negative money will be new to most people. This, said the IMF, exposes the shallowness of the current gross — and official — $12.1 billion in reserves, which is presumably positive money.

The PM adviser speaking to the media on Mar 16th was altogether more sanguine saying that the methodology of the IMF calculations differed from that used locally and that Pakistan would have no difficulty in arranging foreign financing to meet ‘emerging needs’. One of those emerging needs is the circular debt in the power sector. Liabilities (debts) coupled with promised tax refunds — a legacy of a past finance minister — have now passed Rs1.3 trillion and the adviser said that the government “did not have the fiscal space” to clear those obligations before the election. To the layman that may look like the government is essentially bankrupt, not a position from which to proclaim strength and durability.

With unfulfillable promises strewn in the fiscal road there is no possibility of the current government going into the election ‘in the green’, though that will hardly be obvious to the casual observer who is still wondering if he or she has any negative money in their wallets. The power sector debt currently up for clearance actually belongs to the PPP government, which this government had actually cleared but has now accumulated again. Advisers and others babble in archaic Martian smiling broadly and all that any of us can be certain of is that financially we are in deep trouble. But fear not we have bundles of negative money to buy our way out of it.

Published in The Express Tribune, March 18th, 2018.

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