Inflation is crushing Pakistan and we just got the news that the IMF is now going to step in. The IMF has officially extended a brand new loan to the country of Pakistan. Their idea is that they want to avert a potential default and they want to pave the way for more aid according to Bloomberg.
This IMF loan is important because Pakistan needs almost 41.2 billion dollars to repay its loan. Now of course whenever you see money sloshing around the next question should be what’s their inflation rate and why inflation is crushing Pakistan. Is it getting better or is it getting worse?
Steve hank is one of the economists that people pay attention to in some of these emerging markets. He pointed out that his current calculation of Pakistan inflation is at a stunning 43 percent year-over-year. He said that recently the IMF agreed to release 1.17 billion dollars in funds for Pakistan. But he doesn’t believe that another IMF loan will save Pakistan’s economy like all the past IMF loans this one will fail as well.
Now as we take a look at the global standings of inflation we can see that Pakistan sitting with about 40 percent or more inflation Inflation is crushing Pakistan. They’re doing better than places like Ukraine, leos, Venezuela, Argentina, Cuba, and zimbabwe. But sitting with more than 40 percent increase in prices year over year isn’t exactly reassuring to the people on the ground.
Now when we look at these local economies what we have to remember. Is that the growth of the money supply ends up creating issues but it’s not just the government themselves. The more debt that they take on as they try to inject this capital into every corner of their economy. It ends up driving more and more money chasing fewer and fewer goods. The country of Pakistan with more than 40 inflation is already in trouble. But they have so much debt that they can’t pay it back.
So now here comes the international monetary fund. They will step in and will give them funds to pay off the old debt. That’s like an individual consumer saying I have my first credit card and I can’t pay it off. So let me take out a second credit card to pay off the first one. When I can’t pay back my second credit card I’ll take out a third credit card to pay off the second. More and more debt is not the solution ultimately we need to return to some sort of sound money digital sound money.
Where it is not based on countries taking on more and more debt and punishing the value of the money that is held by their everyday citizens. We need a world where people can save for financial security. We need a world where it’s not based on how much debt can you take and how can you go and beg people like the IMF for more money.
ultimately the citizens of Pakistan want to live a happy life. They want to simply pursue financial security for themselves and their families. What we have to do is start to implement first principle solutions to these problems. We simply kick the can down the road. Create more volatility, create more problems. Ultimately relearn the lesson decade after decade after decade. The market intervention will never be as sustainable of a solution as permitting the unregulated economy to take care of our concerns.