1/6
Atif Mian explains Pakistan's debt position and the terrible consequences for the Pakistani economy. I'd add that while struggling to service its debt is a disaster for Pakistan, it's not very good for the rest of the world either.
Atif Mian explains Pakistan's debt position and the terrible consequences for the Pakistani economy. I'd add that while struggling to service its debt is a disaster for Pakistan, it's not very good for the rest of the world either.
2/6
Why? Because instead of recycling them in the form of imports, Pakistan's export earnings must be recycled in the form of debt repayments. This suppresses Pakistan's contribution to global demand by effectively converting its demand into unwanted global savings.
Why? Because instead of recycling them in the form of imports, Pakistan's export earnings must be recycled in the form of debt repayments. This suppresses Pakistan's contribution to global demand by effectively converting its demand into unwanted global savings.
3/6
This may be good for Pakistan's creditors, but it is bad for those who produce the goods that Pakistan might have imported.
Pakistan's struggle to repay debt doesn't just make its own workers and businesses worse off, in other words, but also workers and businesses abroad.
This may be good for Pakistan's creditors, but it is bad for those who produce the goods that Pakistan might have imported.
Pakistan's struggle to repay debt doesn't just make its own workers and businesses worse off, in other words, but also workers and businesses abroad.
4/6
When a country clearly cannot service its debt, the debt should be quickly restructured and written down. This not only benefits businesses and workers in the debtor nation, but also in the creditor nations. Squeezing an economy to repay debt makes nearly everyone worse off.
When a country clearly cannot service its debt, the debt should be quickly restructured and written down. This not only benefits businesses and workers in the debtor nation, but also in the creditor nations. Squeezing an economy to repay debt makes nearly everyone worse off.
5/6
Pakistan may be a small economy's whose contribution to global demand is small, but as a rising number of developing countries find themselves struggling to service their external debts, they become an increasingly large drag on the economies of the rest of the world.
Pakistan may be a small economy's whose contribution to global demand is small, but as a rising number of developing countries find themselves struggling to service their external debts, they become an increasingly large drag on the economies of the rest of the world.
6/6
Rather than worry about which creditors are coming out ahead of which other creditors, creditor nations should move more quickly to write down the debts owed to them. This automatically benefits their real economies, even if it hurts their financial sectors.
Rather than worry about which creditors are coming out ahead of which other creditors, creditor nations should move more quickly to write down the debts owed to them. This automatically benefits their real economies, even if it hurts their financial sectors.
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