If Pakistan Defaults?

What happened if Pakistan defaults or bank corrupt and what a common people can do in this situation. These are the most frequently asking question now a days.

Let’s understand first, what is default means in economy. If a person fails to pay financial debt and declared that he or she has no source to pay the debt, than bank or mortgage company declared him or her as defaulted person. Similarly, when a country is unable to honor its financial commitment on time with its creditors such as IMF, world bank or other private financial institutions then a country considered to have defaulted.

The Worst Scenario. What is the possibility to default Pakistan?

Initially state declared to IMF and other creditors that they have defaulted. IMF give them one- or three-months’ notice to pay their debts and other financial commitments. If Government unable to pay the debts than you may ask them to renegotiate. In this case IMF may increase the interest rate , it damage your credit rating. After that, no other financial institution gives you further loan if you defaulted. If you cannot take further loan than your development work cannot be continued, and you must postpone your development projects. The second impact on stock market, investor withdraw all their investment and resulting your stock market may crash. Due to your bad credit rating, you cannot open new L.C (Letter of Credit) and cannot import materials and necessary things, it affects your industries and consequently resulting unemployment in the country, increase inflation and the currency of the country can be devaluated, if Pakistan declared defaulted than dollar may reach up to Rs.350 or Rs.400. Default is not a good condition for any country, it takes around two years to stabilize the country and five years to regain your credit credibility in the world. This is the worst situation if Pakistan default.

The positive Points

Now comes to the positive points, “The Half Glass is filled.” Countries can behave differently during their default.

Pakistan never default Alhamdulillah since its beginning. It is not rare for a country to default. Many countries default many times, its about 146 countries which have been defaulted some time.

Before 1939: Spain declared as defaulted about fifteen times.

1987: North Korea defaults

1994: Mexico defaults

1998: Russia defaults when it unable to pay its treasury bond.

2001: Ecuador defaults

2015 Greece defaults

2017 Venezuela defaults.

All these countries are surviving after these crises. Iran is facing sanctions since couple of decades, but they are still surviving. It is an inconvenient situation but not a question of life and death. Alhamdulillah Pakistan is a food sufficient country we have enough food to survive in sanctioned situation. We are depending on Oil, and we face energy crises, but we have hydro power as well as solar power to produce energy, even though its not sufficient but prevent blackout situation in the country. The major source of our income is our foreign remittance, if they have trust on the Government, they keep continue to send remittance in the country, which may help to stabilize our economic situation. Currency devaluation can help exporters and makes it cheaper for foreign countries to buy its products and services. Hope for the best.

What an average person can do?

              

1.     Convert their savings into Gold (Gold bars)

2.     Convert their savings into other stable currency.

3.     Purchase property (rental property)

4.     Farming (vegetables, cattle)

5.     Install solar panel to avoid upcoming energy crises.

6.     If you are running business, then open an office in other country also.

 

All above are my personal recommendation not an expert advise hope for the best once again.