Economy

China’s Economic Recovery: A Mere Façade

Published

2 years ago

July 26, 2020

It would not be too far from the truth to say that China is not all that it says it is. Many of its military and diplomatic actions have gone against norms and messages propagated by its own government. Retracting its own statements and even concealing the truth comes naturally to a government that maintains a monopoly over all information in circulation within the country as well as that which leaves it. Recent statements from the Chinese government have painted a colorful picture for the coming months, with it soon to “regain the economic growth it lost” and maintain its internal strength. How much truth can actually be accorded to such a statement though? Is China’s economy truly in a good shape or is such a statement to be seen as a mere façade, shadowing a highly unstable country?

If recent trends emanating from the country were to be analyzed, one could indeed point to the latter. At the beginning of the year, China’s economic growth had already begun a steady decline, falling to its lowest in 27 years, a mere 6 percent in the 3rd quarter of 2019. Predictions during the time, from both within and outside, projected the growth rate to fall further, with an economist at the Chinese Academy of Social Sciences predicting a drop below the annualized 5 percent. Additionally, reports questioning the accuracy of the data released by China have also emerged. China’s national accounts are based on data collected by local governments who are rewarded for meeting growth and investment targets. In this regard, it has become apparent through outside observation as well as internal admittance that many of China’s provinces have had an incentive to skew local statistics, some by nearly 20% a few years ago.

Such manipulation of data can have serious ramifications on the calculation of national data, especially since China’s GDP is based on input data rather than real performance. It is also to be noted that in addition to local governments manipulating data, there is a discrepancy between underlying economic activity and GDP figures, which has allowed the government to ignore bad investments and project only the figures it approves off. Based on such an understanding of the Chinese economy, reports from 2019 show that both GDP as well as GDP growth in China are far below official predictions and statements. It must also be understood that the Chinese government itself has always had an incentive to project greater growth during its developing years. Claiming higher growth rates and lying about recessions has allowed China to retain or even increase investment. With that being said, it has become increasingly evident that the statistics and figures released by China cannot be wholly relied upon.

While the above highlights the concealing factor behind China’s economy, it also points to the possibility that China’s economy is currently in a bad state. With the shuttering of businesses across the country, it is evident that the Covid-19 crisis dealt a devastating blow to China’s already floundering economy. Reports published by China’s National Bureau of Statistics in April showed that the country’s GDP had fallen by 6.8 percent, a contraction the likes of which, China has not seen since at least 1992. However, with lockdown measures now ending and policymakers stepping up stimulus to combat the massive economic shock, the country is now set to return to a modest growth rate according to its government. This may be true as China has begun on a path of recovery, however, its economy may have to face another looming crisis soon.

Over the past few months, it has become increasingly evident that not only is foreign investment fleeing the country but there is increasing unrest among local investors as well. China’s economic downturn which began with the trade war and culminated in the COVID-19 economic crisis has frightened investors across China. Since the beginning of the trade war with the US, many international companies have begun shuttering business and departing from the country. The pandemic has seen that number only increase over the past few months with potentially disastrous economic outcomes. Additionally, fears within China have surfaced as well, with many attempting to send their capital abroad. The recent political turmoil now plaguing Hong Kong is also reviving fears over massive capital outflows from the country. China’s new national security bill and the retaliation promised by the US and others has stoked significant concerns. The first instance of this is seen in the immediate aftermath of China’s announcement of the Bill on May 22 when Hong Kong’s benchmark for local stocks plunged by 6.9%. Essentially, with tensions rising, further turmoil and capital flight may soon be in the cards.

Only time will tell whether the government will be able to reduce the possibly disastrous consequences of such capital flight or even reverse the same. In 2015, when similar fears of capital flight occurred, it spurred the country to spend nearly US$1 trillion of its reserves. However, with the current economic downturn in China, it would be highly unlikely that the Chinese government will be able to muster the funds needed in countering such consequences. The Chinese government has seemingly taken cognizance of this fact though and has therefore introduced measures aimed at ensuring Chinese investment and capital remains within China. Not only has China already put a cap on the amount of money allowed to leave the country but also cracked down severely on its underground banking system. Additionally, the government has been attempting to woo the fleeing investors back with promises of economic stability and recovery. China’s current projection of post-pandemic recovery and growth must therefore be viewed through a critical lens, and seen as merely a tool through which it attempts to influence and reassure investors.

On the government’s attempts at ensuring investment though, it has not merely acted in the field of rhetoric and promises though. Since the beginning of last year, the Chinese government has put a cap on the maximum amount allowed for withdrawal from its economy. According to new rules, individuals will only be allowed to withdraw a maximum of the equivalent of around $15,000 and carry transactions up to only $50,000 abroad in a year. Any Chinese citizen found to be withdrawing in excess of that amount will be barred from making any withdrawals for two consecutive years. Additionally, any Chinese citizen leaving China with an excess of RMB 20,000 in cash require a permit issued by the bank that provided the same. In enforcement, the State Administration of Foreign Exchange (SAFE) has already begun its crack down on capital flight. In November of last year, the agency fined Chinabank Payments $4.2 million for moving money overseas. In the following month, SAFE fined the Bank of China $6,000 for breaking a government rule and allowing a customer to withdraw over $50,000 in cash according to reports. One can be sure that the situation in China is indeed serious, when its government has become overly concerned over a mere $15,000 being withdrawn from the economy.

This concern has also been extended to the new surge in China’s underground banking system. China, in its efforts to counter threats to its economy, has begun a serious crack down on all capital outflows, whether legal or illegal. The Supreme People’s Court recently introduced stiff penalties for any and all illegal currency exchanges. According to new rulings, the government will introduce jail terms of five years or more for those operating ‘underground banks’, which currently facilitate illegal foreign exchange and cross border trading. Through this process, the Chinese government has effectively sought to stop tens of thousands of Chinese from funneling millions out of the country through these services. Since the government has put a cap on the amount of money being withdrawn from the country, people have sought other mechanisms through which they can transfer funds overseas, either for the purpose of investing in property or making other significant foreign exchanges.

The requirement for such mechanisms has motivated the creation of an Informal Value Transfer System (IVTS) known as ‘Underground Banking’. The IVTS involves the transfer of funds to a bank account controlled by a Chinese IVTS provider who then transfers the same into an account of the remitter’s choice. This allows for the transfer of large amounts of funds out of the country without the knowledge of the Chinese government. The stiff penalties now being imposed on such transfers are once again indicative of the governments need to retain capital within its own economy. Any large capital outflow can result in a fall in exchange rates, negative spiral of declining confidence and finally, no buffer for government debt. For a country currently facing a debt to GDP ratio of nearly 300%, capital outflows could result in serious consequences for its economy, especially during a time when mechanisms like the IVTS has seemingly gone into overdrive.

The government is currently doing everything within its power to paint a picture of recovery, provide opportunities for investment and crack down on individuals attempting to evade its rules and directives. While the crackdown on capital outflows and underground banking is evident, there has also been significant actions taken on the digital currency front. Within China, there has been a surge in both the transaction as well as mining of Bitcoins over the past few years. Many experts have stated the need for three factors in ensuring effective cryptocurrency mining, i.e. low-cost electricity, colder weather and reliable internet. The availability of all these factors in China has facilitated massive incursions into the usage of cryptocurrencies, with reports showing between 35-37 variants of the same currently available in the country.

With the property market currently being viewed as inflated and the stock market as a scam, cryptocurrencies provide an alternative to Chinese citizens who wish to make investments that are not riddled with problems or subject to government scrutiny. Many middle- and upper-class Chinese have thus begun making investments and transactions through Bitcoins and other cryptocurrencies. With the government being unable to shutdown Bitcoin accounts or monitor transactions made through the same, this mechanism effectively allows individuals to subvert it. It is estimated that this medium alone has accounted for transactions ranging in billions of dollars over the past few years. With the Renminbi (RMB) essentially losing its transactional value, the number of people now adopting these mechanisms has seen a significant increase, putting the government on alert. However, the only action the government can undertake in this regard, is accelerate the launch of its own sovereign digital currency and hope its citizens will give up on Bitcoins and other cryptocurrencies (a highly unlikely prospect).

It is evident that the government in China may soon have an economic crisis on its hands, one which it may be unable to counter. Extremely high debt to GDP rates and possibly massive capital outflows has put the government in a precarious position. It has therefore sought to curb high debt and also put out reports that its digital currency would be a game changer for Asia, allowing for more RMB demand in the region. Undoubtedly these reports are another one of its propaganda activities, aimed at retaining investment. According to reports, China’s economy will face two major shocks, a pandemic stimulus and a post-pandemic economic fallout.

It must also be noted that China depends on the global economy for its own recovery and if this does not occur soon enough, its economy will have to face serious consequences. The reasons for this are manifold. Most importantly, China, the world’s largest exporter, relies on the United States, Japan, South Korea and others for its economic activity. Exports to the US, are currently facing a shortage of demand as well as disruptions across global supply chains. Additionally, China needs to ensure continued implementation of its Belt and Road Initiative in order to continue a majority of its overseas economic activity. Currently, from Europe to Asia, trade as well as infrastructural projects across the BRI, which accounts for around 17 percent of China’s exports, have been put on hold.

It has therefore become apparent that China’s economic growth is not all that it would seem. While it is the second largest economy in the world and has shown spectacular growth in the past, it would seem like China’s glory days are behind it. Forces that once drove China’s economic growth are now withering. China’s economy can no longer rely on a trade surplus or foreign investment to boost growth and will probably see increased capital outflows in the coming months. Additionally, China is now on the verge of a debt crisis and the massive foreign reserves it has repeatedly used as stimulus in the past have been slowly declining. In this context, it is imperative to question the narratives propagated by the Chinese government. If the Chinese economy is truly on the path of economic recovery, then why has there been an increase in the lack of confidence shared by its own civilians? And if such are the woes facing the country, is the future of its’s economy truly as promising as it’s government would have the world believe? One would think not.

Related Topics:China Coronavirus Crypto-Currencies Economics

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Zeus Hans Mendez

Zeus Hans Mendez is a Research Associate and Centre Coordinator at the Centre for Security Studies (CSS), Jindal School of International Affairs, O.P. Jindal Global Univeristy. He is also a Research Assistant at the Centre for Security and Strategy Studies (CeSCube).

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Economy

A Real Estate and Banking Crisis in China?

Published

5 hours ago

July 17, 2022

Richard E. Caroll

While not getting much attention by the western media, a financial crisis is building in China, which could possibly lead to the collapse of the Chinese economy, and either the end of government rule by the Chinese Communist Party (CCP) or a sudden military adventure by the CCP in an attempt to distract the Chinese people from the financial crisis inside of China.

The Chinese Communist Party came to power by promising the Chinese people a higher standard of living. In order to provide this higher standard and living, and to remain in political power, the CCP opened up its economy to the West in 1978.

China’s GDP in 1978 was $149.5 billion. After China opened its markets to a free economy in 1978, the growth rate of the Chinese economy was nothing short of phenomenal. In 2021, China’s GDP was $17.7 trillion. The main reason for the explosive growth of the Chinese economy was that it’s economy in 1978 was bankrupt, and had no place to go but up.

While China’s economic growth has been impressive, it has relied specifically on “Steady State Growth.” Steady State Growth relies on continuous and increasingly amounts of economic inputs to keep its growth rate. Once the inputs into the economy level off or stagnates, the growth rate suffers, and a decline in the economy is inevitable.

In contrast, western economies are subject to the “Non-Steady State Growth” model by the Solow-Swan economic model. Non-Steady State Growth is where a technological change in production increases the productivity of the economy, which causes the supply curve of a particular good or service to shift to the right on a Cartesian coordinate system, which increases demand for that good or service at a lower price. Such an increase in a supply of a good and/or service increases that countries GDP without the use of additional economic inputs. The non-steady state growth rate continues until the new technology become the new normal, whereupon the non-steady state growth model transitions back into a steady state growth model.

China is not able to experience this type of economic growth due to its lack of an impartial judicial system in China to fairly and impartially adjudicate contract law conflicts. Because of this, the current Chinese economy depends on increasingly more and more economic inputs to increase meaningful economic growth.

Money As a Political Good

In the West, and throughout most of the world, money is an economic good. Money in the West is governed by the philosophy of a return on investment which creates more wealth. Money is used as an intermediation between buyer and seller.

In China, according to the geopolitician Peter Zeihan, money is considered by the CCP as a political good.

According to Mr. Zeihan “Investment decisions not driven by the concept of returns tend to add up. Conservatively, corporate debt in China is about 150% of GDP. That doesn’t count federal government debt, or provincial government debt, or local government debt. Nor does it involve the bond market, or non-standard borrowing such as LendingTree-like person-to-person programs, or shadow financing designed to evade even China’s hyper-lax financial regulatory authorities. It doesn’t even include US dollar-denominated debt that cropped up in those rare moments when Beijing took a few baby steps to address the debt issue and so firms sought funds from outside of China. With that sort of attitude towards capital, it shouldn’t come as much of a surprise that China’s stock markets are in essence gambling dens utterly disconnected from issues of supply and labor and markets and logistics and cashflow (and legality). Simply put, in China, debt levels simply are not perceived as an issue.”

In China, money is a political good, and only has value if it can be used to achieve a political goal. That political good is maximum employment.

The concepts of rate of return or profit margins do not exist in China, and therein lies the danger; eventually the law of supply and demand will win out, and the Chinese economy will have to face a correction. The longer it takes to face this economic correction, the greater damage that the inevitable correction will cause to the Chinese economy.

The Chinese Real Estate Market is in Crisis

The default by the massive real estate giant China Evergrande Group in December of 2021 foreshadowed the slow-motion train wreck of the Chinese real estate market. While teetering on default, state owned enterprises in China cherry picked assets of Evergrande and took them over with cash and in some instances assuming the debt of those assets with the blessings of the Chinese state government. Because of Chinese law, the international debt is what is known as ‘unsecured’ and issued by a Hong Kong offshoot, meaning creditors do not automatically have the right to seize anything on the mainland, where Evergrande has almost all of its 1,300 projects. There is little prospect that overseas investors will be able to recover their investment because of this law.

In July, an article in the British news organization Reuters detailed the continuing crisis of the real estate market in China. According to the article, homebuyers in 22 cities inside of China are refusing to make mortgage payments on unfinished condos and apartments. According to Dan Wang, chief economist for Hang Seng Bank China…”If tens of thousands of homebuyers really stop paying their mortgage, the real estate companies will soon collapse because they have no liquidity, there are huge risks for banks, particularly local banks, whose assets are mainly in the housing market, and there is no way that the central bank could save all of them.”

Those protestors are in danger of being punished under a government system called “social credit” which rewards what is considered good behavior by Chinese citizens, and punishes bad behavior. The refusal of frustrated Chinese families to pay for a mortgage for an apartment or home that may never be built, indicate the level of anger among thousands of Chinese buyers, and is bleeding over into the developing banking crisis in China.

A Developing Banking Crisis in China

On July 10, 2022, in the Chinese province of Henan, in the provincial city of Zhengzhou, a crowd numbering about 1,000 people clashed with the police in front of a branch of the Chinese Central Bank protesting their deposits being frozen by the bank.

The freeze on the bank’s deposits began in April of 2022. Depositors were not able to withdraw their money from the bank from that time on, despite promises that their money was safe.

The clash on July 10^th, resulted in many protestors being attacked and being beaten by unidentified men, which were later identified as government police, and then detained in detention centers. The protestors were released later on that afternoon. The next day, authorities announced that some monies would be released with a maximum amount of 50,000 yuan ($7434 in USD). Authorities announced that deposits frozen above this amount will eventually be released, though no information as to the how and when was given.

The bank, one of some 1,600 village banks, have been under pressure as a result of the slowdown in the Chinese real estate market. Many banks and financial institutions are heavily invested in the Chinese real estate market, and with the slowly collapsing real estate market, the damage is slowly seeping into the Chinese financial sector.

To juice its economy, China has announced a $1.1 trillion (USD) infrastructure package. This is an example of the Chinese economy adding inputs to its economy to spur growth, but the input is simply more debt. The stimulus package will depend on bonds, which provincial banks are supposed to invest in. Given the illiquidity of the smaller banks, this may prove to be a daunting challenge.

With the real estate market in crisis in China, and with collateral damage leaking into the Chinese banking industry, with funds being frozen to where the depositors cannot gain access to their capital, a serious crisis in real estate and banking is developing in China.

With the crash of the real estate market in China, and the beginnings of a crash of the Chinese banking system, it appears that the inevitable economic correction has arrived.

Economy

Jay Steinfeld – Author of bestselling book The 4 Principals for Profit and Prosperity

Published

9 hours ago

July 17, 2022

Vidhi Bubna

Jay Steinfeld founded and was the CEO of Blinds.com, the world’s number one online window covering retailer. Boot-strapped in 1996 for just $3,000 from his Bellaire, Texas, garage, Blinds.com was acquired by The Home Depot in 2014.

Jay remained as its CEO and later joined The Home Depot Online Leadership Team. After stepping away from these roles in early 2020, he teaches entrepreneurship at Rice University’s Jones Graduate School of Business and has increased his involvement on numerous private company boards and serves as a director of the public company Masonite (NYSE: DOOR). He also supports numerous charities.

Jay is an Ernst & Young Entrepreneur of the Year and has earned a Lifetime Achievement Award from the Houston Technology Center. Active as an industry speaker on topics including corporate culture, core values, how to scale a start-up, and disruption, he has more than 100 published articles and writes a column for Inc.com.

He also sings in the same barbershop quartet of which he’s been a part of for nearly 50 years. He lives with his wife, Barbara, in Houston, Texas, and has five children and seven grandchildren whom he proudly refers to as his seven start-ups.

Jay’s book, “Lead from the Core: The 4 Principles for Profit and Prosperity” is a Wall Street Journal Best Seller. It was published on November 30, 2021 and is available for purchase now at all the usual places, including amazon.

Please tell us more about your book.

Against all odds, Steinfeld’s journey in business included failed acquisitions, partnerships gone wrong, perpetual self-doubt, deaths in his family, budget-limited guerrilla marketing, brutal market competition, and his complete disruption of industry leaders, including Amazon and big box retailers. To build something meaningful like Steinfeld, you need to do more than dream about it. You need to Lead from the Core. Learn Steinfeld’s “4 Es”: Evolve Continuously, Experiment Without Fear of Failure, Express Yourself, and Enjoy the Ride. And how bringing humanity back into the workplace will help you build a business far beyond anything you could have imagined.

What inspired you to write this book?

After more than 25 years building the business, I knew one day I’d leave. I wanted to ensure that all my current and future employees knew what made us successful and they could use those principles to help continue its dominance. So the book was part historical framework, but mostly it was the theories, strategies, tactics, and mindsets I used to create teams, manage stakeholders, and disrupt others before they disrupted us.

What are the main takeaways from the book?

Anyone can build a business and a life of consequence by following 4 principles. My 4 Es: 1. Evolve continuously 2. Experiment without fear of failure 3. Express yourself and 4. Enjoy the ride. When following these key concepts, the company will automatically get better every day ( autonomous excellence) compounding over time. They do this by taking small but furiously rapid calculated chances , getting input from everyone, and enjoying the results. You’ll be capable of helping everyone become better then they ever believed possible. Collaboration and synergy happens automatically, leaving you as the leader the freedom to spend less time and have less pressure to find all the solutions.

A lot more on all this in the attached workbook, which you are free to include in the article.

Who are some authors that you have been inspired by?

I have a list of the most influential authors in my book.

Here are my book game changers:

• Man’s Search for Meaning by Victor Frankl—Put life in perspective for me, providing equanimity.

• The Happiness Hypothesis by Jonathan Haidt—Helped me to understand key contributors of happiness and life satisfaction, with perspective on how your brain affects that.

• Built to Last by Jim Collins—First book to show how purpose foundationally affects success.

• Good to Great by Jim Collins—Inspired my BHAG (Big Hairy Audacious Goal) and mission—and was the genesis for my thirst for nonfiction reading.

• Guerrilla Marketing by Jay Conrad Levinson—Gave me the hope and optimism that I could market effectively with little money.

• The Five Dysfunctions of a Team by Patrick Lencioni—Full of ideas to conquer a leadership team’s poor dynamics. • The Innovator’s Dilemma by Clayton Christensen—Gave me a better understanding of why the entrepreneur’s mindset to disrupt is antithetical to many corporate executives.

• Tell to Win by Peter Guber—Taught me how to pitch ideas and effectively raise money.

• You’re Not the Person I Hired! by Janet Boydell, Barry Deutsch, and Brad Remillard—A good discussion of how to hire objectively and ensure you’re considering the right hiring criteria.

A turning point in your life?

My wife’s death, right after I started the business full-time.

On August 12, 2002, my wife, Naomi, died of breast cancer at the age of forty-seven. We’d been married for twenty-six years, and throughout that time had been partners in life as well as in business. Now, left to do it all alone with three children and a business still in its infancy, I faced a complete reevaluation of my life. Suddenly, I wasn’t sure how to define happiness, or even whether I could ever be happy again. I thought often about what success meant to me, what it was that made me tick. I’d made it that far in life without ever really considering—at least not deeply— what truly mattered. Essentially, it was only when I found myself on a precipice that I asked myself: What are my core values? Through intense introspection, what I discovered changed the trajectory of my life, and the trajectories of all the people in my life. In fact, it was only after understanding what these values were—the values that drive my behavior—that we were able to begin building a company of significance, a company that became the number one online retailer of blinds in the world.

Is there any particular philosophy you follow?

The 4 Es.

Also, my definition of success is not to have achieved something. Not and extrinsically motivated goal. Success to me is being in the process of getting better. And helping everyone around me get better. When you have that philosophy, you can be successful ever day. And even multiple times during the day. Isn’t that a terrific way to live?

How can the youth transform its own future today?

Understand that you do not need to have all the answers today. And that you don’t even need to “follow your passion”. Just start experimenting with everything. Look for ways to influence others. Be as generous as possible with your time, your attention, and your interest in learning about everything and everyone. Then if you stay alert, you will enjoy every day and then you’ll be able to choose from many things that excite you.

Economy

Current Economic Turmoil in Pakistan

Published

1 day ago

July 16, 2022

Maryam Habib

Pakistan is facing one crisis after the other. There was a thorny political crisis faced by Imran Khan who was refusing to leave the prime minister’s office but somehow opposition alliance was successful in ousting the sitting prime minister with the vote of no confidence and Shahbaz Sharif was sworn to become the new prime minister of Pakistan. As a result, a huge economic crisis started looming over the country. The country is facing 6.4 billion dollars of debt, due over the next three years while the incumbent government is trying to meet the requirements to attain a bailout package by the International monetary fund organization. However, it’s not the first time that the country has been seeking a bailout package from IMF, rather it will be the 23rd time, but the real efforts at reform have been missing and the country is rolling back for the past five decades. The foreign currency reserves of the country are exhausting quickly. Pakistan has lost almost half of its reserves in the last few months. While the new fiscal year is on the way and Pakistan needs about 36 billion dollars of external assistance. According to a report published by Bloomberg, Pakistan’s currency is at its worst in all of Asia, currently devaluing at 8 percent in the last months. And this bail-out package from IMF and other countries has become imperative to the survival of the country. But to secure an IMF package is not simple as it comes with conditions when the country is already going through an economic crisis and these conditions of IMF are no less than a death wish for the new government. Some of these conditions include the legal reconstruction of the banking and tax system, decreasing the budget deficit, taking away electricity and energy subsidies along with less intervention of the state bank of Pakistan in the foreign exchange market.

There are several factors when we look at the causes behind the current economic backlash in the country. First and foremost is the large spending of the country on projects which are nonviable and contrary to growth in the country. It includes the metro bus project, orange train project, and several others. These projects are built on foreign loans but the irony is that these are not even self-sufficient projects, rather rely on huge subsidies from the government which is absolutely adding fuel to the fire of the economic crisis. Secondly, the relentless sinking of the Pakistani rupee against the dollar causes further troubles for the country as on one hand foreign debt is racing up while on the other hand, inflation is also increasing and the people are falling further below the poverty line.

Furthermore, the country needs to finalize the deal with IMF as other countries who have been lending money to Pakistan in past are also reluctant. These are the same countries that helped out Pakistan with its economic crisis back in 2018 when Prime Minister Imran khan asked for help. However, this time, as said by the current finance minister on 28^th May, earlier China, Saudi Arabia, and the UAE were willing to give money to Pakistan but after this political turmoil and the delay in securing the IMF package, the same countries are reluctant now. Although the sitting government has taken very unpopular steps of heightening fuel prices in the country to meet the conditions given by IMF so that loans from IMF and other countries can be secured. Although these decisions have also put the ruling parties on the wrath of Imran khan who has claimed repeatedly his progress to secure cheap oil and gas from Russia and several other countries.

Pakistan is going through economic uncertainty and the country’s stock market is downsizing day by day. Further delays in securing an IMF deal will worsen the economic condition and in no time, Pakistan will be the next Sri Lanka. But the question arises what is the solution in these desperate times? The answer is not easy. Because the path to survival is not easy and further recovery is more difficult. One thing is certain, Pakistan do need this IMF deal and the help of other countries for its survival. To secure this deal the government has no other way to implement the conditions of IMF in letter and spirit. The government will have to sacrifice its vote in order to save the country from economic breakdown. But this is not the question as the country will have the IMF package and support of other countries sooner or later. But the real question is, whether the government will be able to lead the country to sustainable economic growth? Will the government be able to pass and enact necessary legislation and policies in the tax sector, especially for the rich and capitalist class of the country? Will the government be able to uphold good governance and make necessary reforms in the public institutions? Will the government is able to do the necessary evil acts of privatization of public-owned enterprises like PIA, and the steel mill that has been a grave burden on the public exchequer? These are very daunting tasks for any political party since Pakistan is being run through a coalition government with no public mandate. Therefore, it is the need of hour to take necessary steps in order to achieve economic stability, like increasing the export production and rebate tax on export industries, controlling the current and fiscal deficit of this budget, and huge tax collection especially from the people who have been out of tax net in the past, and reduction in imports to save rupee from crashing against the dollar, and then the government must hold general elections to get a fresh mandate. Because this coalition government is very weak to enforce any large-scale long-term economic policies.