Pakistan is selling its crown jewels at throwaway prices

The state of flux

The episode opens with Muzamil framing the brief. Pakistan’s economy crossed three hundred billion dollars in size in 2018 and has barely moved since. He has been spending more time on economic coverage, and to make sense of it he has brought on Ali Khizar, one of the country’s most widely-read finance journalists. The first question is the broadest one: where is Pakistan’s economy, in one sentence?

Ali does not soften the answer. “Our economy is in a state of flux,” he says. The boom-bust cycle has been running for years, and each turn of it gets worse. “The boom shrinks, and the burst grows.” He walks Muzamil back through the cycles — the post-1998 restructuring under Musharraf that bought fiscal space, the dollars that arrived after 9/11, the partial reforms in telecom, banking, and oil and gas, the growth spurt from 2002 to 2006, the smaller bust around 2015–16, the COVID bounce-back that ended in the most violent burst yet.

Now, he says, the country is in a stabilisation phase, and the stabilisation is painful. The fundamental shift underneath the pain is geopolitical. For forty-odd years Pakistan harvested a dividend from being aligned with the United States. That dividend is gone. “Today the biggest enemy of the US is China, and Pakistan’s friend is China. India is Pakistan’s enemy and China’s also. India and the US are friends. Pakistan and the US are not friends in that way.” There is no strategic depth in the relationship anymore, and there are no dollars showering down to paper over the structural cracks.

The squeeze you can see in everyday life

Ali asks Muzamil to picture what the macro pressure looks like at street level. The answer is a tour through the lifestyle adjustment of the last two years. Massive currency depreciation. Disposable income collapsing. Electricity bills and taxes climbing. Cars replaced by motorcycles. Discretionary spending cut. Foreign travel cancelled. Children moved to cheaper schools. A new fridge or air-conditioner deferred. Medical procedures delayed.

“Overall the economy has gone into a slowdown and lifestyle has adjusted and squeezed,” he says. The next two or three years, in his reading, will continue at this register. There will be a small growth spurt after that. But without structural reform, the moment the boom shows up, the next burst is already visible behind it. The country has reached an inflection point — the size at which informal economy, rent-seeking, and partial taxation can no longer carry the load. Indonesia, Turkey, India, the East Asian economies have all gone through this gate. Pakistan has not yet.

Two ways to clear a debt — and who pays for each

The most useful section of the conversation is the one where Ali draws the choice between Pakistan’s two routes out of unsustainable debt. Muzamil sets it up by referencing a Shahbaz Rana tweet arguing that Pakistan has effectively defaulted and is simply pretending otherwise, kicking the can down the IMF road.

Ali lays out the two paths cleanly. The first path, which is the one the country has been on for two years, is to inflate the debt away. Push inflation up, let purchasing power fall, let the size of the economy shrink in dollar terms, and over five or six years the debt-to-GDP ratio and the debt-servicing-to-revenue ratio collapse on their own. The mechanism is real. The cost is also real, and it is paid by a very specific group. “Inflation hits the lower and middle class harder, and the elite less, because asset prices go up. So broadly speaking it is the common person who suffers — over a hundred million plus people taking the pain.”

The second path is to restructure now. Take, in his phrase, a pound of flesh out of the system today. Restructure external debt and the domestic debt has to follow, because the main holders of domestic debt are commercial banks, and the largest depositors and lenders inside those banks are corporates and high-net-worth individuals. “The common person in Pakistan is either under-banked or unbanked, and their deposits are small. So when you hit, the hit lands on bank balance sheets, on corporate balance sheets, on the wealthy.”

The framing is the sharpest in the episode. Both paths squeeze the economy. The only question is who carries the squeeze — two hundred million ordinary citizens over five painful years, or a few thousand at the top in a single decision. “Unfortunately, since all these decisions are made by the elite — business elite, political elite, bureaucratic elite, military establishment elite — there is a consensus among them that they will not give up their pound of flesh. The common person takes the impact.”

Why the elite consensus does not break

Muzamil tests the diagnosis. He notes that the current government is talking about shutting thirty-three state-owned enterprises and cutting one hundred and fifty thousand public jobs, which look like the cost discipline everyone has been demanding. But every time retailers are asked to come into the tax net, the same retailers organise, push back, and the conversation returns to the drawing board. Everyone is pointing at someone else’s slice of the pie.

Ali agrees, and is direct about why. “We are not moving towards the reforms we need. Our elite consensus is to keep this model going. As long as the elite are getting what they want from each other, they don’t want to leave it.” There is internal friction inside the elite — industrialists and exporters are getting less than bureaucracy and the military establishment — but the friction is over share of a shrinking pie, not over fixing it. He repeats the point Muzamil keeps returning to: when the finance minister comes from a banking circle, banks get saved. When the previous one came from the IMF and World Bank fraternity, the multilaterals got served. When the one before came from business, business got served. None of them think about the middle class because none of them come from it.

Why the IMF stamp suddenly doesn’t fit

The IMF section is the section where the journalism shows. Ali takes Muzamil back to May and June 2023. Default talk everywhere. Reserves at three and a half billion dollars. Import compression. Pending dividend repatriation queues. Then, suddenly, the IMF board approves a nine-month standby facility. “I called my source. I said, are you joking? Yesterday you were saying default, today you’re saying SBA. What changed?” The answer was that the instruction had come from the top of the board down — a geopolitical stamp that Pakistan’s debt was sustainable.

Fast forward to 2024. Reserves above nine billion dollars. Inflation broken back into single digits. Global commodity prices softening. Global interest rates coming down. By every objective measure the picture is better than it was when the IMF approved the last programme. And yet this time the gross financing gap will not close. “If the debt was sustainable in 2023, it is sustainable today. But this time China is not providing gross financing. Saudi Arabia is delayed. And the IMF’s parrots have also flown away.”

The finance minister’s recent trip to China to ask for re-profiling of independent power producer debt did not land. Saudi Arabia and the UAE are tracking China. The question Ali wants viewers to sit with is the one Muzamil immediately voices back to him. When Uncle Sam is on your side, the IMF helps. When he is not, it does not. Pakistan is finding out which side of that line it now sits on.

Selling Reko Diq cheap to buy three months

This is the passage that gives the episode its title. Saudi Arabia is willing to plug part of the immediate financing gap by taking a stake in Reko Diq — the copper and gold reserve in Balochistan. The deal sits in front of a government that, on Ali’s reading, cannot think past the next three to six months.

He lays out the trade in plain terms. Copper is the metal of the energy transition — the battery, the grid, the electric vehicle. Gold is what central banks across Saudi Arabia, China, and India have been quietly accumulating because they expect fiat currencies, especially the dollar, to weaken. Pakistan is being offered today’s dollar price for assets whose value is structurally rising. “You sold your assets, the precious asset, at throwaway prices, just to remain afloat for today. That’s the worst thing you can have as a country. But you don’t have an option.” The government has compressed its planning horizon to a single quarter and is liquidating the long-dated balance sheet to fund it.

Muzamil sharpens the same point from the other side. The dollar is the currency the United States itself will eventually have to inflate away to manage a thirty-five-trillion-dollar debt. Restructuring out of dollar-denominated debt only to lock in more dollar exposure is moving in the wrong direction. Selling Reko Diq for fiat to a buyer who is converting their own reserves into gold is moving in the wrong direction. “Problem statement is a three to five year problem statement. Just extend it enough and whatever future you have becomes easier — not because you’re brilliant, but because the currency you’re denominated in is itself in crisis.”

Ali does not disagree. “If you restructure, you take the pound of flesh from the elite. If you sell Reko Diq, who suffers? The country, later. The people running the country today — and you know how fragile the political situation they are running it in is — they are protecting their own short-term benefits.”

The IPP burden, and why bills should ease anyway

Muzamil pulls the conversation onto something more concrete: electricity. Industrial power in Pakistan is now roughly four times the regional average. He frames it as a generational drag — if the cost of power is structurally broken, the only economics that work for a young person is to leave the country.

Ali does not promise prices will fall. He promises something more useful: that they will stop rising at the speed they have been rising. Four factors do the work. The IPP contracts signed from 2018 onwards begin retiring from 2027, and their capacity payments — which are effectively debt repayment lines — start dropping out. Few new projects of that profile are coming online. The currency depreciation that drove the recent surge is unlikely to repeat at the same pace. Global interest rates, to which much of the capacity payment is linked, are easing. And solarisation is accelerating — he mentions seeing rooftop solar on individual houses in DHA, on businesses, and on smaller households as Chinese battery costs continue to drop. “People are relying less and less on the grid.”

The arithmetic he wants the viewer to hold is the share-of-income one. Electricity bills that are running at thirty to thirty-five percent of household income today — versus the fifteen percent they used to be — should, in five years, return to fifteen or twenty percent. Not because tariffs fall, but because incomes catch up and tariffs slow.

Awareness, the middle class, and the lion that finally comes

By the end of the conversation Muzamil asks the question that he keeps returning to in this run of economy episodes. What does an eighteen-year-old in Pakistan do with all of this? He compares the moment to his own eighteenth year in 2008 — bombings, checkpoints, a country that felt under siege — and notes that even then there was hope. Today, the hope is harder to find. And a generation that stops trying becomes a self-fulfilling prophecy.

Ali’s answer is structural, not motivational. The same Musharraf years that opened up the economy from one hundred billion to two hundred billion dollars also reshuffled the political elite that the country had inherited from the non-party elections of 1985. The current ceiling on the economy — sitting at around three hundred billion dollars for six years — is, in his view, the next reshuffle waiting to happen. Awareness is now higher. Platforms like this one, he tells Muzamil, are part of why. “I am hopeful. In the next few elections, people from the middle class will come, they will get votes, they will understand the pain of the middle class. When a middle-class finance minister comes, he will protect the middle class’s interest. When an elite finance minister comes, he protects the elite’s interest.” Look at Sudan, he adds. Look at what happens when the rope finally snaps.

He closes with the line that gives the episode its frame. Pakistan has been telling itself, for years, that the lion is coming and the lion is not actually coming. “But one day the lion will come. And then what will we do?”