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News, Pakistan

Pakistan is defaulting on sovereign debt

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Power sector dues: Govt defaults on sovereign guarantees

By Shahbaz Rana

ISLAMABAD: Failure to honour its financial commitments to Independent Power Producers (IPP) has led to the first-ever sovereign default by the government in Pakistan’s history.

The default on sovereign guarantees – assurances the government provides to foreign investors – may not only unnerve the financial markets, but also downgrade the government’s creditworthiness, making it more expensive to borrow money.

“Today, the government of Pakistan has committed a sovereign default for the first time in the history of the country”, announced the IPPs Advisory Committee here on Tuesday.

“The government has defaulted on payments of roughly Rs45 billion to nine IPPs that generate 1,700 megawatts of electricity”, said Abdullah Yusuf, Chairman IPP Advisory Committee while talking to The Express Tribune. These nine IPPs started operations in 2004 and their total receivables amount to almost Rs232 billion.

Taking legal course

The IPPs gave a 30-day payment notice to the power purchaser, the Central Power Purchasing Agency (CPPA), followed by a 10-day notice to the government. Neither the CPPA nor the government cleared the overdue amounts, said the advisory committee.

The IPPs have exhausted all avenues available and the notice served to the government expired on Tuesday, the committee said.

After the default, the IPPs have issued a legal notice to the government for recovery by Thursday, May 10th, 2012 failing which the IPPs will follow a legal course.

Yusuf said the IPPs will go to the Pakistani courts.

“The default is a very serious matter and carries negative implications for the country”, Yusuf added. ….

Read more » The Express Tribune

Economy, India, Pakistan, Politics

Pakistan, India & China: A tale of triplets

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COMMENT: A tale of triplets — by Shahab Usto

Pakistan’s utmost priority should be to follow the Chinese model: shun external engagements and turn inwards to focus only on economic, social and human development. Remember, we have missed the bus twice

Independent Pakistan, India and China were born at almost the same time, inherited the same decrepit state structures, and shared the same trajectory of international wars and civil strife. But they do not share the same present. China is the fastest growing economy. India is catching up fast with it. But Pakistan lags far behind both.

As it is, China (closely followed by India) is all set to dominate the Asia-Pacific region, if not the world. The US-led West is jittery. Stuck in a financial crisis, the West has lost faith in its economic philosophy based on unregulated markets. “The teachers are in trouble,” as one Chinese minister put it, referring to the ideologues of the failing Anglo-Saxon corporate and financial models. …

Read more : Daily Times

International, Pakistan, Politics

Afghanistan: NATO’s mission impossible – by Shiraz Paracha

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…. But in 1991, all that ended abruptly with the smooth and peaceful split of the Soviet Union. The West painted the Soviet demise as its victory. But in fact, it was the biggest shock for the huge Western military and propaganda machine.

The Cold War mindset was not ready to accept the new change. The mysterious attacks in the United States on September 11, 2001 and the subsequent ‘war on terror’ filled the enemy vacuum for the Cold War warriors, but it did not help an organization like NATO that was created on the concept of traditional warfare.

In the post-1945 era, despite their technological superiority and military and economic power, Western countries did not fight directly against powerful states. Proxy wars were the West’s preferred method throughout the Cold War period.

Nevertheless, in the 1990s, the West opted for military interventions and regime changes. Western countries acted as a pack of wolves and attacked small and weak states. The strategy provided an opportunity to lightweights such as Bush and Blair to imitate Churchill and Roosevelt and appear strong and victorious.

But the US defeat in Iraq and the NATO’s failed mission in Afghanistan have proven that military occupations and interventions are counterproductive and expose weaknesses of occupiers and aggressors.

Today, NATO is disillusioned and disoriented. It is demanding from its member states to allocate at least two percent of their GDPs to defense budgets. In a desperate effort to keep its large and bureaucratic structures and huge budget, NATO has been adding vague, unrealistic and ambiguous aims and objectives to its mission. It has committed blunders like Afghanistan but its commanders did not seem to have learned any lessons.

Regardless of the Lisbon rhetoric, not all NATO member states can afford ever increasing military budgets to counter open-ended threats and fight unspecified enemies. Weakening European economies need trade and investment rather than wars. They rely on energy but the energy sources are out of Europe. Skilled labor and markets are beyond the geographical sphere of the most NATO states. And most NATO countries certainly do not have the will and capacity for missions impossible, like the one in Afghanistan.

To read full article : Criticalppp