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The fault in our Dar(s)

ghazi52

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FlWjMhZWIAEMCJD
 

epebble

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Wow, this man Dar talks complete gibberish. Nothing makes any sense to me. What are these Saudi Arabian and Chinese 'Deposits' going to do? They are not loans that can be used. He is talking optimistically about foreign exchange at end of June, whereas I don't think anyone has a clue about next 30 or 60 days. He seems to have been triggered by the much talked about 'White Paper'.

Dar expects Saudi Arabia, China to beef up forex reserves by Jan-end

 

Imran Khan

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ڈار نے مریم کے داماد کا انڈیا سے گرڈ تو منگوا دیا ہے نا ؟ ملک جائے بھاڑ میں

Wow, this man Dar talks complete gibberish. Nothing makes any sense to me. What are these Saudi Arabian and Chinese 'Deposits' going to do? They are not loans that can be used. He is talking optimistically about foreign exchange at end of June, whereas I don't think anyone has a clue about next 30 or 60 days. He seems to have been triggered by the much talked about 'White Paper'.

Dar expects Saudi Arabia, China to beef up forex reserves by Jan-end

انہوں نے بھی کہہ دیا ہے معاف کرو بابا
 

Olympus81

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I don’t think so.

Elections are no where on the horizon. The PDM/Establishment will disqualify Imran Khan first, defang PTI and then hold elections where PMLN will be the winner. Next round PPP and then so forth.

The establishment is mighty pissed off at Imran Khan for exposing their RCO, corruption etc. No way in hell will they allow IK back in power.
 

ghazi52

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Pressure mounts on Dar to stop ‘managing’ exchange rate

Shahid Iqbal
January 8, 2023

KARACHI: As Pakistan’s foreign exchange reserves have fallen to an alarming level — not even sufficient enough to cover three weeks’ worth of imports — the financial sector has asked Finance Minister Ishaq Dar to stop ‘managing’ the rupee-dollar parity, which is one of the key conditions set by the International Monetary Fund (IMF) for resuming stalled talks for the release of a $1.12 billion tranche.

Prime Minister Shehbaz Sharif on Thursday announced that an IMF mission would come to Pakistan in two or three days.

Pressure is now mounting on the finance minister from stakeholders to stop efforts to get control over the exchange rate artificially as this policy has resulted in three types of exchange rates — interbank, open market and grey — that have practically been fuelling economic instability.

However, sources claimed that the finance minister is not ready to accept the single exchange rate market.

Sources said the IMF needs no physical visit to Pakistan since the pre-conditions for resuming talks are already on the table of the finance minister. The virtual or physical talks have no difference when the conditionalities are already known to both parties.

Experts and currency dealers also advised the finance minister recently to stop influencing the currency as it causes more instability than stability.

“If a single exchange rate is maintained, immediately the dollar prices will shoot up but the grey market will disappear as the reason for its existence will not be there,” said Atif Ahmed, an interbank currency dealer.

At the moment, getting dollars on interbank rates is extremely difficult since the State Bank of Pakistan (SBP) has a strong grip over the opening of letters of credit (LCs). The US dollars are available in the open market but not at the rate they announce daily.

“We met the finance minister and advised him to bring a single rate market but the minister did not agree,” said Zafar Paracha, Secretary General Exchange Companies Association of Pakistan (ECAP).

He also suggested allowing the exchange companies to clear blocked small LCs up to $50,000. “It will substantially reduce the burden on the government,” he said, adding that many imported goods are stuck at the port because of the non-opening of LCs for small amounts. If the exchange companies are allowed, up to 50 per cent of the load on the government will reduce.

However, some experts believe that the single market suggestion will cost heavily to this political government as well as the economy. The inflation will immediately surge as the dollar could immediately rise to Rs240-Rs245.

Mr Ahmed believes the country will have to pay the cost of a single exchange rate market as it will inflate the prices from top to bottom, but a chance to survive against the default is there.

Faisal Mamsa, CEO of Tresmark, expressed reservations about rupee depreciation: “Those blindly ready to follow the depreciation diktat may need to reevaluate its effectiveness when the rupee went down from 160 to 230. How much of the import demand was quashed? How did it impact our balance of payments and inflation?”

“While in theory, currency depreciation should boost exports, our decades of low investment, capacity constraints, poor infrastructure and a myriad of other issues, do not allow a sustainable rise in exports. So essentially the equation doesn’t change except for the fact that inflation turns red hot, and people feel the heat,” he said.

“But how things play out will not be known any time soon […] and till then no one wants you to catch the falling knives,” he said. “Consequently, market consensus is that PKR looks to weaken at a faster pace in the next few weeks and may slow down only if the outlook and sentiment on the foreign exchange reserves position get better,” he said.

Published in Dawn, January 8th, 2023
 

epebble

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That sinking feeling​

The finance minister has adopted an ego-driven and hard-charging approach in his negotiations with the IMF. This has resulted in friction and a delay in resumption of the IMF programme. Perhaps, Mr Dar fancies his chances of getting some concessions because of the recent floods but an adversarial approach is unlikely to work when the IMF holds all the cards and Pakistan’s government does not have the luxury of biding its time.

Administrative controls over the dollar-to-rupee exchange rate provide a textbook economics result as to the outcomes of such an approach. Dollar shortage. Check. Black markets. Check. Hoarding by suppliers (exporters). Check. And not least there is the adverse impact on remittances as Pakistanis residing overseas avoid using official channels for inward transfers of foreign currency turning instead to unofficial sources that pay higher market-based rates
 

ghazi52

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Govt will not take over commercial banks’ dollars, clarifies Dar

Says his earlier comment that “dollars held by commercial banks also belonged to the country” was misconstrued.

Finance Minister Ishaq Dar clarified on Wednesday that the government would not take over foreign exchange held by commercial banks, saying that his earlier statement on the country’s reserves had been twisted by certain sections.

His remarks come days after he said in an interview that Pakistan’s foreign exchange reserves stand at $10 billion, a much higher figure than the central bank’s $5.6bn reserves as of Dec 30, 2022, because “dollars held by commercial banks also belonged to the country”. This comment gave rise to fears that the government may confiscate dollars from private banks as had been done in 1998 when Dar was the finance minister.

However, Dar said today that his comment was “greatly misconstrued” and “nothing of the sort will happen”.
 

ghazi52

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Thousands of containers held up at Karachi port as dollars dry up​

Shortage leaves banks refusing to issue new letters of credit for importers

AFP
January 15, 2023

Thousands of containers packed with essential food items, raw materials and medical equipment have been held up at Karachi port as the country grapples with a desperate foreign exchange crisis.

A shortage of crucial dollars has left banks refusing to issue new letters of credit for importers, hitting an economy already squeezed by soaring inflation and lacklustre growth.

"I have been in the business for the past 40 years and I have not witnessed a worse time," said Abdul Majeed, an official with the All Pakistan Customs Agents Association.

He was speaking from an office near Karachi port, where shipping containers are stuck waiting for payment guarantees -- packed with lentils, pharmaceuticals, diagnostic equipment and chemicals for manufacturing industries.

"We've got thousands of containers stranded at the port because of the shortage of dollars," said Maqbool Ahmed Malik, chairman of the customs association, adding that operations were down at least 50 per cent.

State bank forex reserves this week dwindled to less than $6 billion -- the lowest in nearly nine years -- with obligations of more than $8 billion due in the first quarter alone.

The reserves are enough to pay for around a month of imports, according to analysts.

The economy has crumbled alongside a simmering political crisis, with the rupee plummeting and inflation at decades-high levels, while devastating floods and a major shortage of energy have piled on further pressure.

The nation's enormous national debt –- currently $274 billion, or nearly 90 per cent of gross domestic product -- and the endless effort to service it makes Pakistan particularly vulnerable to economic shocks.

Islamabad has been pinning its hopes on an IMF deal brokered under the former prime minister Imran Khan, but the latest payment has been pending since September.
 

ghazi52

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The precarious position Pakistan finds itself in

Bilal Hussain
January 16, 2023

Finance Minister Ishaq Dar is under heavy criticism from business owners and the public. Journalists have also taken a dig at him. His claims that the rupee’s real value should be below 200 have come under fire as well. But it doesn’t stop there — his own party members have been criticising him.

Former finance minister Miftah Ismail has been vociferously vocal against Dar and his policies. National Assembly Standing Committee on Finance and Revenue Chairman MNA Qaiser Ahmed Sheikh has criticised him, stating how Dar has remained inaccessible to the committee as well as the business community.

APTMA bemoans raw material shortages

Businessmen, who enjoyed cheap imports under Dar’s previous tenure, are now increasingly frustrated. Along with industry associations, they have begun criticising Dar for not paying heed to their issues, nor meeting with them.

They have criticised the veteran politician for dollar shortage in the market, which has subsequently brought many businesses to a standstill.

Cotton import restrictions: APTMA seeks Dar’s intervention

Pakistan is facing a severe dollar shortage as state reserves deplete.

However, businesses involved in the import of ‘essential’ goods are also reportedly unable to open Letters of Credit (LCs).

The reason for this is the disparity in the dollar rate.

Currently, there’s one inter-bank rate where most banks do not have dollar supply, and then there’s the open market rate, where exchange companies are seen struggling with liquidity. For some reason, however, there appear to be plenty of dollars in the black market.

Pak Suzuki extends plant shutdown again due to inventory shortage

But no matter how much Dar appears to be pulling strings in order to keep the dollar rate afloat – after all he has to keep his reputation intact – market mechanisms have shifted a bulk of the trading to the black market – where the actual value of the currency lies. Falling remittances is another effect of the policy.

Textile manufacturers, who previously accounted for about 60% of Pakistan’s total imports, made their frustrations known in a heated press briefing, blaming the government for not being able to open LCs in order to import raw material.

Dollar shortage bites, steel-maker temporarily shuts operations

Even to import material from the list of goods, officials state they have been unable to open LCs for even $5,000 for raw material or spare parts for machinery in some cases.

The same is the case with the pharmaceutical industry despite being placed high on the priority list of goods allowed for import.

Country on brink of X-ray, CT, MRI films’ shortage: Fujifilm Pakistan CEO

Industry officials say they are unable to open LCs because banks don’t have dollars, or atleast they appear not to.

The auto sector appears to be completely sidelined because cars are being considered as luxury goods. It should be sidelined for a while under the precarious condition Pakistan is. However, dilapidated infrastructure and lack of decent public transport in the country make cars and motorcycles essential goods.

The current situation requires Dar to give up Dar-onomics.

The government needs to settle this issue while keeping a vigilant eye on currency dealers and banks.

As for political capital, it is already exhausting. Getting back to market fundamentals will do more benefit than harm. Getting back the International Monetary Fund (IMF) programme, where the exchange rate is a keenly-debated topic, will do more benefit than harm.

Indus Motor Company increases car prices across entire lineup
 

epebble

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The precarious position Pakistan finds itself in

Bilal Hussain
January 16, 2023

Finance Minister Ishaq Dar is under heavy criticism from business owners and the public. Journalists have also taken a dig at him. His claims that the rupee’s real value should be below 200 have come under fire as well. But it doesn’t stop there — his own party members have been criticising him.

Former finance minister Miftah Ismail has been vociferously vocal against Dar and his policies. National Assembly Standing Committee on Finance and Revenue Chairman MNA Qaiser Ahmed Sheikh has criticised him, stating how Dar has remained inaccessible to the committee as well as the business community.

APTMA bemoans raw material shortages

Businessmen, who enjoyed cheap imports under Dar’s previous tenure, are now increasingly frustrated. Along with industry associations, they have begun criticising Dar for not paying heed to their issues, nor meeting with them.

They have criticised the veteran politician for dollar shortage in the market, which has subsequently brought many businesses to a standstill.

Cotton import restrictions: APTMA seeks Dar’s intervention

Pakistan is facing a severe dollar shortage as state reserves deplete.

However, businesses involved in the import of ‘essential’ goods are also reportedly unable to open Letters of Credit (LCs).

The reason for this is the disparity in the dollar rate.

Currently, there’s one inter-bank rate where most banks do not have dollar supply, and then there’s the open market rate, where exchange companies are seen struggling with liquidity. For some reason, however, there appear to be plenty of dollars in the black market.

Pak Suzuki extends plant shutdown again due to inventory shortage

But no matter how much Dar appears to be pulling strings in order to keep the dollar rate afloat – after all he has to keep his reputation intact – market mechanisms have shifted a bulk of the trading to the black market – where the actual value of the currency lies. Falling remittances is another effect of the policy.

Textile manufacturers, who previously accounted for about 60% of Pakistan’s total imports, made their frustrations known in a heated press briefing, blaming the government for not being able to open LCs in order to import raw material.

Dollar shortage bites, steel-maker temporarily shuts operations

Even to import material from the list of goods, officials state they have been unable to open LCs for even $5,000 for raw material or spare parts for machinery in some cases.

The same is the case with the pharmaceutical industry despite being placed high on the priority list of goods allowed for import.

Country on brink of X-ray, CT, MRI films’ shortage: Fujifilm Pakistan CEO

Industry officials say they are unable to open LCs because banks don’t have dollars, or atleast they appear not to.

The auto sector appears to be completely sidelined because cars are being considered as luxury goods. It should be sidelined for a while under the precarious condition Pakistan is. However, dilapidated infrastructure and lack of decent public transport in the country make cars and motorcycles essential goods.

The current situation requires Dar to give up Dar-onomics.

The government needs to settle this issue while keeping a vigilant eye on currency dealers and banks.

As for political capital, it is already exhausting. Getting back to market fundamentals will do more benefit than harm. Getting back the International Monetary Fund (IMF) programme, where the exchange rate is a keenly-debated topic, will do more benefit than harm.

Indus Motor Company increases car prices across entire lineup
Looks like a great depression is in the offing.
 

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