A 🧵comparing Ghana, Sri Lanka and Pakistan, and what it teaches us about dealing with crises ...
Ghana and Sri Lanka formally defaulted during the last two years, Pakistan did not
but currency devalued by 1/2 for both Pakistan and Ghana, and 1/3rd for Sri Lanka
Ghana and Sri Lanka formally defaulted during the last two years, Pakistan did not
but currency devalued by 1/2 for both Pakistan and Ghana, and 1/3rd for Sri Lanka
So Pak currency has devalued significantly more than SL's
More importantly, let's compare Pakistan's trajectory with that of SL and Ghana after they default ...
here is SL, the red arrow starts post-default
More importantly, let's compare Pakistan's trajectory with that of SL and Ghana after they default ...
here is SL, the red arrow starts post-default
And here is Ghana
Notice how both Ghana and SL currencies have stabilized post-default as they entered restructuring programs
Notice how both Ghana and SL currencies have stabilized post-default as they entered restructuring programs
Now, let's look at Pakistan - the red arrow points to the downward trajectory over the two years, and it continues to go down
*there is no end in sight*
What's the lesson?
*there is no end in sight*
What's the lesson?
To thump your chest and say "see we have not defaulted" means nothing if you continue to ignore the underlying crisis
The only thing worse than indecisiveness in the face of a crisis is incompetence
One example:
The only thing worse than indecisiveness in the face of a crisis is incompetence
One example:
Pakistan is selling petrol at a price that is 20%-25% below the price it is sold in Ghana, Sri Lanka, India, or Bangladesh
At the same time, the government is restricting imports of raw materials needed for production and export
At the same time, the government is restricting imports of raw materials needed for production and export
In other words, the government would rather cut the country's GDP in order to sell cheap petrol!
But then lower GDP will make it more difficult to pay off the debt - leading to more devaluation - more misery - and higher petrol prices in terms of purchasing power
But then lower GDP will make it more difficult to pay off the debt - leading to more devaluation - more misery - and higher petrol prices in terms of purchasing power
This is just one example of the non-sensical policy choices being made
Addressing a bop crisis requires that a country acts decisively, restructures aggressively, and takes courageous decisions that demonstrate a clear break from the past
Addressing a bop crisis requires that a country acts decisively, restructures aggressively, and takes courageous decisions that demonstrate a clear break from the past
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