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Shahbaz Sharif is right in a point of view devaluing PKR from 130 to 155-168 had no impact on Export.

Desprado

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Shahbaz Sharif is right in a point of view devaluing PKR from 130 to 155-168 had no impact on Export.

In my point of view we had no advantage for export in Pakistan. Only thing market base currency has bought is inflation and things for inflated.

FDI dropped massively as well, indirect tax increased as well and Asad Umar compromised CPEC contract sharing with IMF in 2019.

In my point of view, Asad Umar and Hafeez Shiek badly negotiated IMF program in the history Pakistan it has delayed for more than year now. Now again delayed to September just because it was very badly negotiated and Government has no experience how to deal with International lenders.
 

Zaki

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I believe that Shaukat Tareen's appointment as Finance Minister, despite his historical criticism of the government for depreciating the PKR, is an admission that the decision to depreciate the Pakistani Rupee by 30-40% was a mistake.

I believe Asad Umar made a mistake in assuming that it will narrow the gap between imports and exports and make us more competitive in the region. Those who trade Forex may be aware that China has been frequently chastised by the West for depreciating the Renminbi in order to boost exports and become more competitive. Their export-oriented industrial sector has traditionally been subsidised by the government, with devaluation, lower-than-market-price electricity, and lower-than-market-price operating costs supporting exports. Even Japan was chastised a few years ago when the Japanese Yen appreciated and they were worried about it and their finance ministry interfered in the market to depreciate the value of Japanese Yen

PS: I am not opposed to the depreciation of the Pakistani rupee, as we lose about 8% to 10% of our currency's value every year, but in this case, we let the rupee to free fall, causing us a slew of issues.
 

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muhammadhafeezmalik

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I believe that Shaukat Tareen's appointment as Finance Minister, despite his historical criticism of the government for depreciating the PKR, is an admission that the decision to depreciate the Pakistani Rupee by 30-40% was a mistake.

I believe Asad Umar made a mistake in assuming that it will narrow the gap between imports and exports and make us more competitive in the region. Those who trade Forex may be aware that China has been frequently chastised by the West for depreciating the Renminbi in order to boost exports and become more competitive. Their export-oriented industrial sector has traditionally been subsidised by the government, with devaluation, lower-than-market-price electricity, and lower-than-market-price operating costs supporting exports. Even Japan was chastised a few years ago when the Japanese Yen appreciated and they were worried about it and their finance ministry interfered in the market to depreciate the value of Japanese Yen

PS: I am not opposed to the depreciation of the Pakistani rupee, as we lose about 8% to 10% of our currency's value every year, but in this case, we let the rupee to free fall, causing us a slew of issues.
Not only depreciating of PKR but increasing the Interest rate and imposing heavy import duty on raw material also caused havoc to the economy. We have lost some 500 billion rupees in taxes only, and paid another 500 billion rupees to hot money investors.
 

Zaki

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Not only depreciating of PKR but increasing the Interest rate and imposing heavy import duty on raw material also caused havoc to the economy. We have lost some 500 billion rupees in taxes only, and paid another 500 billion rupees to hot money investors.
I actually disagree with your point of view. We only have a few items to export (textiles, IT, and low-cost products such as fans and small electric appliances), but we have a population of 200 million people who can consume a lot of products if given the opportunity, so we always make it difficult for our importers to ensure that the gap between import and export does not widen to the point where it becomes unsustainable.

Importing raw materials hurts our little industrial sector, and I honestly feel that we must promote our industrial sector regardless of the circumstances.
 

Desprado

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Correct me if I am wrong but have not exports been increasing consistently in recent years (https://www.pbs.gov.pk/sites/default/files//tables/rename-as-per-table-type/14.01.pdf). Hardly my area of expertise so open to correction but this increase has been running simultaneously as the rupee was depreciated.

Meanwhile in the past we were pumping billions to artificially keep the PKR strong (https://tribune.com.pk/story/1691123/govt-injected-7b-keep-rupee-overvalued-recent-years).
Do you know Hafeez Sheik said in Shahbaz Rana show that we undervalued PKR to 160 because we wanted to increase export ,however, he said we failed to realize that the big barrier in that was power sector ,which had the worst effect of devaluation ,which Hafeez said we never realize that until Capacity Payments from 480 million reached to more than 2.5 trillion due to devaluation.


Even New FM says that devaluation was the worst mistake PTI did and second to Hafeez he said the same that Asad made his big mistake in his life that we did not went IMF from the get go. He said that we would have been in a boom era if Asad did not used his brain and just went to IMF. However, new FM also is saying that and even Kamran Khan said that Hafeez was booted because Hafeez never realized that Market base currency will be disaster for Power sector ,which will put our export to non performer.
 

hydrabadi_arab

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Anyone who knows basic abc of economics will laugh at Sharif. PTI was left with no dollars to buy rupees from market. Simple. Sharif made sure of that. PTI had no choice.

Now rupee value isnt artificial and neither govt is wasting dollars. Exports didnt rise because it will take time. 2 decades of over valued rupee is the reason and new industries take time. Imports did saw huge decline.

Now see what Pakistan imported in last couple years. Mobile imports exploded because smuggling was stopped. Same happened with many other items. Wheat imports because PPP/N 10 years barely saw increase in wheat production while we breed like rats. Basically Legal imports increased by huge amount! Affect of this is $600m investment in tyre factory by private party. Dozens of mobile companies now lining up to make smartphones in Pakistan.

Like I said it will take few more years to see affect of PTI policies.
 

Jazzbot

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Shahbaz Sharir or anyone from Noon / PeePee should be the last person to lecture on economy. These goons drained 24 billion $ to keep the currency at 100 mark vs dollar artificially.
 

Patriot forever

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Shahbaz Sharif is right in a point of view devaluing PKR from 130 to 155-168 had no impact on Export.

In my point of view we had no advantage for export in Pakistan. Only thing market base currency has bought is inflation and things for inflated.

FDI dropped massively as well, indirect tax increased as well and Asad Umar compromised CPEC contract sharing with IMF in 2019.

In my point of view, Asad Umar and Hafeez Shiek badly negotiated IMF program in the history Pakistan it has delayed for more than year now. Now again delayed to September just because it was very badly negotiated and Government has no experience how to deal with International lenders.
He is wrong.

Just to put perspective to your argument. What kind of logic is behind your argument? Capacity payments did not increase by just 20-30% inline with devaluation but 600% by 2023 due to continued added power capacity, and relief/grace payment period on plants expiring.

The minimal increase in power tariff (not all the charges are passed on) did erode the export potential increase but kept it stable, increase in tariff was inevitable (if not 2.5t than ~2.0t increase in capacity payment was inevitable even if we take out the 20-30% devaluation). It saved our exports from down further. Imagine increase in power tariff along with ~130 REER value of currency. It saved our export industries from going underwater.

At the end of the day our exports will be around 25b, if not for the 10day lockdown in May our exports were doing to be the highest ever.

Devaluation not only helped us to control CAD and bring it to a manageabke level. It is impossible to run economy with $19B in deficit projected to go up even further.

Market based currency helped us to save $500m per month which we were throwing in the market to subsidize imports by the end of FY2018 and was projected to go up at that time.

Investment left Pakistan due to corona ( more than $2b left the country in the initial days of lockdown). Once we get out of FATF expect inflows.

How much positive impact it had on remittances.

Keep in mind our exports were decreasing continously during plmn time, only got better in last months (even than less than ppp) when mifta devalued but at the same time he did not increase the power tariff.
 
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Zaki

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Correct me if I am wrong but have not exports been increasing consistently in recent years (https://www.pbs.gov.pk/sites/default/files//tables/rename-as-per-table-type/14.01.pdf). Hardly my area of expertise so open to correction but this increase has been running simultaneously as the rupee was depreciated.

Meanwhile in the past we were pumping billions to artificially keep the PKR strong (https://tribune.com.pk/story/1691123/govt-injected-7b-keep-rupee-overvalued-recent-years).
Our exports grow every year in Pakistani rupees, but our government need US dollars, thus the rise in exports is offset by currency depreciation.
 

Patriot forever

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Our exports grow every year in Pakistani rupees, but our government need US dollars, thus the rise in exports is offset by currency depreciation.
Yes that increase in revenue is what is enabling our export sector to expand.

The most important factor (which the OP failed to mention because it did not fit into his narrative) is capacity limitation of export industry. You can increase exports by a billion dollars or 2 based on exchange rate but to take it further one needs new manufacturing plants, which in the past was opposite. Now with record profits and revenue our industries are gearing up for expansion.


Now if we look at the breakdown of exports we will see an increase in value addition. Raw material exports have considersbly deckined.

Furthermore restriction of our trade with India has led down our exports by nearly 500m.
 

Desprado

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Anyone who knows basic abc of economics will laugh at Sharif. PTI was left with no dollars to buy rupees from market. Simple. Sharif made sure of that. PTI had no choice.

Now rupee value isnt artificial and neither govt is wasting dollars. Exports didnt rise because it will take time. 2 decades of over valued rupee is the reason and new industries take time. Imports did saw huge decline.

Now see what Pakistan imported in last couple years. Mobile imports exploded because smuggling was stopped. Same happened with many other items. Wheat imports because PPP/N 10 years barely saw increase in wheat production while we breed like rats. Basically Legal imports increased by huge amount! Affect of this is $600m investment in tyre factory by private party. Dozens of mobile companies now lining up to make smartphones in Pakistan.

Like I said it will take few more years to see affect of PTI policies.
Now Imports are at 5.2 billion dollar per on regular bases. Import are going up only because of food items and leave alone machinery item at the moment ,which will pick up do TERF financing.
 

Zaki

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He is wrong.

Just to put perspective to your argument. What kind of logic is behind your argument? Capacity payments did not increase by just 20-30% inline with devaluation but 600% by 2023 due to continued added power capacity, and relief/grace payment period on plants expiring.

The minimal increase in power tariff (not all the charges are passed on) did erode the export potential increase but kept it stable, increase in tariff was inevitable (if not 2.5t than ~2.0t increase in capacity payment was inevitable even if we take out the 20-30% devaluation). It saved our exports from down to 16b. Imagine increase in power tariff along with ~130 REER value of currency. It saved our export industries from going underwater.

At the end of the day our exports will be around 25b, if not for the 10day lockdown in May our exports were doing to be the highest ever.

Devaluation not only helped us to control CAD and bring it to a manageabke level. It is impossible to run economy with $19B in deficit projected to go up even further.

Market based currency helped us to save $500m per month which we were throwing in the market to subsidize imports by the end of FY2018 and was projected to go up at that time.

Investment left Pakistan due to corona ( more than $2b left the country in the initial days of lockdown). Once we get out of FATF expect inflows.

How much positive impact it had on remittances.

Keep in mind our exports were decreasing continously during plmn time, only got better in last months (even than less than ppp) when mifta devalued but at the same time he did not increase the power tariff.
Well, I've been wailing on this forum about the PML-N government's unjust deals when an average solar or wind energy plant in India produced electricity for 4-6 cents and 12-16 cents in Pakistan. Because these projects showed apparent signs of corruption, capacity payments were sure to rise.

However, we must keep in mind that one of the main reasons the PPP lost the 2013 election was their inability to find investors and implement power projects. They came with temporary solutions with corruption-laden projects, but nothing concrete. The PML-N, on the other hand, was able to attract investors, and the idea was similar to PTI's boasting on television that we should abandon expensive oil projects and invest in coal-powered energy projects because we have coal, despite the fact that the majority of us were unwilling to acknowledge that coal is not a viable energy source and that even those projects were very expensive in the long run, especially when compared to imported coal.

The truth is that we needed electricity, therefore whatever possibilities the previous government had, they took use of them. We know that WAPDA and Pakistani electricity companies predicted that demand for electricity would rise from 16,000MW - 18,000MW to 40,000MW in five years, so the projects were designed to secure the future. However, our economy and energy consumption did not grow as expected, and while there is still demand for electricity, line losses and a lack of transmission lines prevent us from expanding our range. In Pakistan, a sizable population still relies on generators, despite the fact that they could have simply utilised the government's electricity. Our electricity usage per capita is very low compared to other nations so there is always potential it will rise very quickly
 

CrazyZ

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Shahbaz Sharif is right in a point of view devaluing PKR from 130 to 155-168 had no impact on Export.

In my point of view we had no advantage for export in Pakistan. Only thing market base currency has bought is inflation and things for inflated.

FDI dropped massively as well, indirect tax increased as well and Asad Umar compromised CPEC contract sharing with IMF in 2019.

In my point of view, Asad Umar and Hafeez Shiek badly negotiated IMF program in the history Pakistan it has delayed for more than year now. Now again delayed to September just because it was very badly negotiated and Government has no experience how to deal with International lenders.
It is obvious that stronger currency is better(Shabaz is no genius for pointing this out), but....the currency had to free float to market value since there was no foreign exchange reserves that could be used to support the pkr. The sharifs set up PTI to take the hit that they were hiding by taking loans. The Sharif's made things much worse since in the end the PKR was devalued anyway and GOP had more external debt.
 
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CrazyZ

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Do you know Hafeez Sheik said in Shahbaz Rana show that we undervalued PKR to 160 because we wanted to increase export ,however, he said we failed to realize that the big barrier in that was power sector ,which had the worst effect of devaluation ,which Hafeez said we never realize that until Capacity Payments from 480 million reached to more than 2.5 trillion due to devaluation.


Even New FM says that devaluation was the worst mistake PTI did and second to Hafeez he said the same that Asad made his big mistake in his life that we did not went IMF from the get go. He said that we would have been in a boom era if Asad did not used his brain and just went to IMF. However, new FM also is saying that and even Kamran Khan said that Hafeez was booted because Hafeez never realized that Market base currency will be disaster for Power sector ,which will put our export to non performer.
GOP had minimal options to control PKR value. The market set the value...which is best IMO.
 

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