Naya Pakistan Housing Scheme: Atif Mian thinks it is a ‘bad idea’

Renowned economist and former part of Economic Advisory Council Atif Mian thinks that starting a housing scheme in current economic crisis is a 'bad idea'.

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Atif-Mian

  • Economist Atif Mian shares why he thinks Naya Pakistan Housing Scheme is a ‘bad idea’.
  • Housing is one of the least productive sectors of the economy.
  • He thinks that starting a major credit-fueled housing program in the middle of the serious balance of payment problems is not likely to yield favourable results.
  • Atif added that an increase in mortgage credit and housing demand means increase imports, without any increase in exports – which is the last thing Pakistan needs right now.
  • Higher imports mean depressed exports.

Renowned economist and former part of Economic Advisory council Atif Mian has put forth his critical analysis of Prime Minister Imran Khan’s ambitious Naya Pakistan Housing Scheme. In the thread, Atif shares four reasons for why he thinks the housing scheme in prevailing economic situations will further worsen them.

  1. Credit-fueled housing program:

The initial point he raised was during the current crisis, diving in a major credit-fuelled scheme while the country is stranded in between a serious balance of payment problem. Credit-fuelled program means in which lenders accept risky assets as collateral.

Asset prices and credit reinforce each other, as booming asset prices allow lenders to extend more credit, enabling investors to bid prices even higher. Atif thinks that it will worsen the ongoing economic crisis and the welfare programme will be more damaging than favourable.


Also See: Economist Atif Mian Proposes Solution For Ongoing Economic Crisis


2. It will lead to high exports:

Atif thinks that when the mortgage credit and housing demand will increase, it will lead to an increase in imports while the exports will stay stagnant. It should be kept in mind that Pakistan is already plagued by a drastic trade deficit.

Pakistan recorded a trade deficit of 375354 PKR Million in April of 2019. Balance of Trade in Pakistan averaged -40949.71 PKR Million from 1957 until 2019, reaching an all-time high of 6457 PKR Million in June of 2003 and a record low of -452668 PKR Million in June of 2018.

3. Least productive sector of the economy:

Atif believes that apart from being highly import-dependent, housing is also one of the least productive sectors of the economy. Hence injecting labour and capital in this particular sector means compromising on more productive sectors.

He said that rather than exhausting resources on this, it is better to divert it to more productive segments particularly the exporting sector as it will produce long-term results.

4. High imports = depressed exports:

Concluding the thread, Atif said that the government needs to be mindful of how an expansion in imports is going to lead to a contraction of exports, which will be economically damaging. He added that the incumbent government should design policies keeping the bigger picture in mind.

Responding to his tweets, people also gave their input in the subject:

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