(First published in The News on April 18, 2013)
This refers to the article, ‘Enough is Enough!’ by Dr Ashfaque H Khan (April 16). Regrettably, the dire predictions of the writer regarding sovereign default are not farfetched. And there are more things than those given in the article that will happen.
First, the cost of debt will rise, thus worsening the liquidity crisis in addition to harming investment and industrial growth.
Second, the debt already owed to foreign financial institutions will increase in real terms as the State Bank fails to keep the exchange rate of the rupee stable.
Third, capital controls – if enforced – will tarnish the already negative image of the country thus discouraging investors in the long term.
Ironically, even this list is not exhaustive. It needs to be appreciated by the caretaker setup that this is not the time for ‘moral’ restraint. Negotiations and preparations for a lending arrangement with the IMF should not be delayed any further, even if formal signing of the Letter of Intent has to wait.