(Short: 1/n) Wat caused #Pakistan's economy to grow between 2013-18? Short answer: consumption fueled by debt! Let's break it down: Data from recent econ survey shows that high growth rate in FY17 & FY18 was driven by consumption. But wat was behind this increase in consumption? 
(2/n) Debt, and all types of debt! Household debt increased from 2.84% of GDP in 2014 to 3.92% in 2018. Debt to private sector increased from 15.59% of GDP to 18.83% over similar period. Finally, govt debt also increased from 62% of GDP to 69.5% between 2014 and 2018.
(3/n) Next, y did everyone borrow so much? Bec interest rates decreased to historic low: from close to 10% in 2014 to less than 6% in 2016. Interest rates remained at their lowest all the way till 2018. Importantly, this was done in an ingenious way, perhaps not intentionally.
(4/n) Ingenuity: The federal government shut down most key channels through which unsustainable growth rate shows up as high inflation. This is imp because it is through controlling infl that the central bank stops the economy from over or under-heating. Wat were these channels?
(5/n) For example, govt used foreign reserves to stop exchange rate from depreciating thus killing an important channel through which an overheated economy will result in inflation. Second, govt also stopped increase in electricity and gas prices thus killing another channel.
(6/n) In short, fixed exchange rate regime + refusal to pass on necessary price adjustments helped keep infl artificially lower than it would have otherwise been. This resulted in historically low interest rates and, consequently, a debt binge resulting in an overheated economy.
(n/n) The party finally came to an end but the hangover still remains! Those who threw the party r quite happy with themselves. But those with hangover (i.e. awaam) r wondering wat went wrong! But whoever u blame, agli dafa jab char baj jain to party khutam ker di jiay ga! Enjoy!
P.S. no more threads for few days now! apologies for spamming your timelines!
