Pakistan’s Growth Story, Simplified

The story is now as Pakistani as it gets. We go to the IMF, get a few billion dollars, we use it to finance an import-led growth bubble which increases domestic consumption. It’s all good so far.

We say goodbye to the IMF. Consumption allows us to proclaim that we’re growing. The GDP is growing, after all. We make some speeches. We also take loans from the Chinese. We don’t tell you on what terms, though, we promise they love us (sweeter than honey, we proclaim).

People buy more stuff, the government spends some on infrastructure, others to hire more people, some on subsidies for those good-old industrialists. Our currency is overvalued because we have made the value of rupee somehow part of our pride.

All is jolly good. Then we import more to consume, but something is going wrong. We aren’t exporting enough. Why? We wonder. But who really cares. Oh, we do now, because we need to pay some of the loans we took back.

We also need to pay for all this imported stuff to keep this consumption-driven bubble going. Oh God, we’re running out of dollars. Maybe, we borrow some more, but for how long? Turns out not long enough.

Let’s try to crowdsource it from the diaspora. Jeez, patriotism goes out of the window when we ask them for dollars. Let’s try to ask the Saudis, oh, that is not enough. The Malaysians, maybe? They aren’t rich enough.

The growth bubble has burst. What do we do now? Devalue the rupee. Screw pride. Oh, that isn’t working. Why aren’t other countries buying our goods? Foreign conspiracy, maybe.

Let’s just print money. Damn, why are things becoming so expensive? Oh, that is why countries don’t print money. Wait. Can’t we pay for our imports or loans with rupees? We forgot we need dollars.

Who has dollars? Let’s call the IMF; hey can you bail us out? We promise this time will be different.

(this is a simplified version of real events which took place between 2013 and 2019 in Pakistan; I tweeted is here)

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