Reagan deregulation created a romance with finance. My generation of educated Pakistanis benefited from it greatly — even gave us a Prime Minister. The romance with finance still plays strongly in Pakistani political/administrative and intellectual class. We look to finance our way out of things. Every government runs after money. Bureaucrats are trained to look for aid and financing as if that is the only issue that we have. We sing siren songs to foreign investors luring them thinking that we will hold them in our quagmire. We are drawn to all manner of clever financing schemes. There are always talks of diaspora bonds as if they will be any cheaper than the market because we can con our own. In policy circles talk of securitising remittances, floating convertible bonds or issuing more Sakooks is always very sexy. They think is magic and somehow it will turn out to be concessional. Why do we think that we can con the world with financial instruments? Do we now know that financial firms are better at it than anyone else? If they could fool the world as they did in 2008, why do our bureaucrats think they can fool them? Did IPPs not come back to haunt us? Did we not learn from the Reko Diq fiasco that the foreign investor is no friend but a shark who will take his pound of flesh? The romance with finance is also fed by donors after all they have to push money. We are always told how much we need their money for infrastructure, schooling, food security, sanitation, water, environment and much more. They do have an army of analysts who have nothing better to do than write reports and blogs and preach “you need money” to our governments. All officials know that their post retirement jobs depend on donors and their children’s careers lie with donors. So, they are captured audience to the donor mantra of “you need more finance.” Can finance solve all problems? Let us look the use simple economics to study the example of housing. Donors have pitched for long that the shortage of housing is because of the lack of mortgages and SBP keenly engaged in mission creep for the last 10 years to develop a mortgage market. Yet the housing stock expands through the DHAs, the bureaucratic plot development (DMG), or cooperative housing societies. The first 2 are schemes for self-dealing 101, and the last is Pakistan’s contribution to the scam literature given the number of uninvestigated scams in coops. So, the housing stock expands in expensive sprawl single family homes. Cheap flats in dense spaces where the middle class can live are severely limited because the self-dealing paradigm of land development inherent in the DHA/DMG model seeks to restrict density and flats. By now our demographic situation is well known. Our labour force is increasing about 2-3 million a year and our housing needs will also grow by about a 0.5 million a year. Yet the stock seems to grow in the 1000s given the myriad planning issues. Given the huge shortage, prices are escalating rapidly. More real estate construction will help invigorate the economy and the labour market. Increased and better skilled jobs will set up a virtuous cycle that will benefit all In most cities, the cheapest house runs over a 100,000 USD forcing most people to seek informal housing or join up in some form of informal extended family arrangement. Neither of the informal arrangements is bankable given the unclear property rights and contractual arrangements. Let us examine the proposition of getting a mortgage on a house of a 100,000 USD which is about the minimum in Pakistan. Even though interest rates have come down, mortgages will still be priced at 12-15 percent. At 12 percent the payment will be about 12,000 USD a year. Add a little for insurance and maintenance and not including principle we will be looking at a minimum of a 15,000 USD a year all included. Generally, it is regarded that housing should be no more than 30 percent of your income. This means that the income of the family buying such a house should be about 45,000 USD a year. Just review the state of salaries. 45000 is a seriously high salary in Pakistan even if both spouses are working. So even if we develop a mortgage market, are we doing it only for the rich? So why is SBP expending so much effort and why are donors funding this effort so hugely. Just bad analysis? Another approach could be to break the DHA/DMG hold on the housing market and allow more density and flat construction to bring the price of dwelling unit down. More real estate construction will help invigorate the economy and the labour market. Better and more jobs will set up a virtuous cycle that will benefit all. The result will be more bankable properties and the development of the mortgage market. Conclusion: countries and societies grow with good policy analysis rather than fanciful finance and begging for money. The writer was Deputy Chairman of the Planning Commission of Pakistan 2010-13. @nadeemhaque email: firstname.lastname@example.org Website: http://development20.blogspot.com Published in Daily Times, August 10th 2017.