This is really scary news…
…for India.
Picked this up y’day morning…(Courtesy Paul Kedrosky) ” Pakistan, The Land That Financial Bad News Forgot: Part II“. The really scary bit is towards the end…(in bold – emphasis mine):
Given all the pain in markets last week, I thought it would be a good time to check in again on The Land That Financial Bad News Forgot. Yes, Pakistan.
If you recall, the wise folks running the Karachi Exchange decided back in August that they would put a floor under the KSE at 9100. After watching stocks tumble 40% in the preceding six months, no longer would investors have to worry about their stocks falling further. They could only drop enough to take the index to 9100, and then … well, they couldn’t fall further. Bad news be damned!
…After a few palpitations, the Karachi market has now flat-lined. …Volumes have collapsed, going from a healthy 186-million shares a day to a comatose million shares a day, a 99.4% decline. It is simply no longer a viable exchange, with companies unable to raise money and investors unable to get liquidity or — heaven forfend — buy shares. Nothing. Traders are reduced to sleeping and playing video games.
…At the same time, the “badla” rate, a sort of interest rate at which investors can borrow money, soared to 100% on Friday, making the record-high Libor look positively like a giveaway. It is, in short, really, really bad.
But the news gets even worse.Â
The country’s debt has been downgraded by S&P deep into junk status; it has just enough foreign reserves to pay for two months of imports; and Pakistan looks increasingly like it will default on a major loan on Friday, plus it has $3-billion more in upcoming debt payments. Unless something happens quickly, we are about to see what happens when you have a systemic collapse in a nuclear power next door to a terrorist hotbed.
Paul slightly amended his last sentence in one of the comments to:
…Let’s call it a systemic collapse of a country containing a sizable terrorist faction.
Also stumbled on this earlier today: Pakistan’s “Macabre” Economics in which Desh has this memorable sentence:
Aid was Pakistan’s “monetary and fiscal policy”. When it was absent, then it was Nuke and military sales.
Adjacent Posts:
Terrorism and Public Opinion in Pakistan Â
India – Pakistan: Notes from an Island
Emergency in Pakistan: Opportunity or Headache? Part-IIÂ and finally,
A related Link:
Pak seeks $10 bn bailout from US, UK to avoid bankruptcy
http://www.rediff.com/money/2008/oct/10bcrisis19.htm
Thanks Hemant…I had missed this…
This bit towards the end is particularly interesting:
Saudi Arabia and the conservative Arab monarchs have signalled their willingness to divert part of their sovereign wealth funds to shore up Pakistan. Gulf support will come at a price with the Emirates determined to ensure its own food security by buying up huge tracts of Sindh and Punjab provinces.
I wouldn’t worry too much about this …. I do not think that the nukes are just lying about for terrorists to sieze, if they are even operational to start with. I would expect that the CIA has full control of the Pak nukes or can get full control at short notice.
And, I have veered around to the view that Pakistan has to break-up …. that is the only way, we are going to get any stability in our neighbourhood. Baluchistan will become a separate nation, while the NWFP will be the Taliban state between Afghanistan and Pakistan. Much easier to then isolate and control and decimate the Taliban.
Sind and Punjab will form the rump Pakistan, unless Sind also decides to go its own way.
I think the disintegration of Pakistan is very close – may be a couple of years.
pakistan will survive as a single nation as long as the americans find it useful for its central asian plans.
Dear Shantanu,
As Tarique says as long as the intersts of the US is served politically they will not destroy Paskistan.
Bharat should be wary of the supposed to be support of the US. They play one against the other and they live of the spoils.
We believed in their systems and controls and when it collapsed they call the damage they have bestowed on this world economy as Collateral damage.
They will not never let their people down, but we will do it for a few dollars even if thrown as crumbs.
Today Bharat is facing every type of economic chaos because it followed the US regulations fully. Our Indian Babus killed the Badla system and introduced the futures and options and derivates and today Bharatiyas are feeling the heat, based only on the US advice.
Our Babus and leaders do not understand the economics of the world as they are trained in the IMF WB or studied at Harvard or Stanford or some US Business school, neither do they understand the basic Bharatiya economics.
The US will never let their regulators down, come what may, and they will give them all types of support; only our People will now start the blame game and pin some poor Babu or Banker for this crisis and lead the way for US type of regulations.
If we are not to go the Pakistan way it is time that we review our accounting, economic and political structure, and strengthen ourselves in every way we can.
Regards,
vck
vck , can u educate me on this…..bill clinton visits india and gets india to coperate on WTO and other similiar treaties ,when his term is a few months away from ending . we see the same in george bush’s visit during the end of his tenure trying to convince india to sign on the nuclear deal . why do these presidents think of india only after they have been presidents for 8 long yearas and now coming to the end of it ?? i feel vck can shed more light on this .