Asad Umar: Elections, Economy, Taxes, PIA and The Future Of PTI
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HerbertPervert
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Nothing PTI wasn't able to contain and resolve within its tenure. By this I mean, the country didn't bankrupt and was able to increase cash inflows to cope.
His mistake is nothing compared to the economic damage done within the last ten months of PDM which has brought Pakistan to default, and sabotage its ability to get out of the debt trap.
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VCheng
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Summary for the one hour, if anyone wishes to not waste time:
"I am one of the elite, and PTI will come back only if it is decided to be allowed to do so, just like before. In the meantime, I will continue to be a part of the elite capture that keeps Pakistan and its people right where we want them."
The End.
Indos
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The economic situation in Pakistan is not made by the current administration. It is due to both The Fed tightening policy and Russian/Ukraine war economic effect that create this mess to so many countries. Not only Pakistan who enter IMF, within your region you will see Sri Langka asked IMF help and Bangladesh has become IMF patient as well.
The same tightening policy that bring disaster within South East and North East Asian countries during 1997 and bring Indonesian economic to huge stress for couple of years.
Indonesian has prepared for this event for more than 2 decades and apply many reform and economic prudent policy like limiting budget deficit into less than 3 percents since early 2000 and made a law about it.
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What happened in Pakistan has been predicted since 2021, during IK term. Those Military who initiated the push to kick IK out from power dont have economic expert that can advise them good advise. Better them dont do that vote of no confident and wait..........But emotion become the main drive of the military and opposition policy and action and they make their own trap
UNCTADstat - General Profile: Pakistan
Overview of key economic statistics. The statistical themes covered are: International trade, economic trends, foreign direct investment, external financial resources, population and labor force, information economy and maritime transport.
unctadstat.unctad.org
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313ghazi
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You can write it on one line.
The seperate line stuff is best practice for complex queries.
How many of you guys are CS folk here on this forum?
The current situation is precisely due to the change of govt. The corrupt parties represented by PDM have never had any overseas support or trust and immediately after they came back our remittances dropped by half a billion dollars a month to now over a billion dollars decrease over month which is what created this crisis.The economic situation in Pakistan is not made by the current administration. It is due to both The Fed tightening policy and Russian/Ukraine war economic effect that create this mess to so many countries. Not only Pakistan who enter IMF, within your region you will see Sri Langka asked IMF help and Bangladesh has become IMF patient as well.
The same tightening policy that bring disaster within South East and North East Asian countries during 1997 and bring Indonesian economic to huge stress for couple of years.
Indonesian has prepared for this event for more than 2 decades and apply many reform and economic prudent policy like limiting budget deficit into less than 3 percents since early 2000 and made a law about it.
----------------------------------
What happened in Pakistan has been predicted since 2021, during IK term. Those Military who initiated the push to kick IK out from power dont have economic expert that can advise them good advise. Better them dont do that vote of no confident and wait..........But emotion become the main drive of the military and opposition policy and action and they make their own trap
View attachment 920760
View attachment 920761
UNCTADstat - General Profile: Pakistan
Overview of key economic statistics. The statistical themes covered are: International trade, economic trends, foreign direct investment, external financial resources, population and labor force, information economy and maritime transport.unctadstat.unctad.org
What made the crisis worse was the great man Dar himself though.
The south Asian economies, India, Pakistan are less affected by the interest rate or fed policy rate than East Asian economies are. This is why the last crisis affected all the East Asian countries but no the south Asian ones in the 90s. Same is true for India and Bangladesh, they are not affected.
The south Asian economies, India, Pakistan are less affected by the interest rate or fed policy rate than East Asian economies are. This is why the last crisis affected all the East Asian countries but no the south Asian ones in the 90s. Same is true for India and Bangladesh, they are not affected.
HerbertPervert
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Exactly. Where was Ishaq Dar getting the dollars to overvalue the rupee? The foreign exchange reserves! All those billions gone into thin air for what? Temporary relief from inflation?
Which will come anyway at the expense of subsidized increasing imports, declining exports. Yet as this current account deficit grows, the loans you need will get bigger and bigger.
Then as the CAD could no longer be financed, they resorted to shutting down imports. This included raw materials for manufacturing. So many factories shut down. Decrease in exports, manufacturing, and increase in joblessness.
Let's not forget the brilliant geniuses at the establishment brought him back on a VIP jet to destroy Pakistan's economy for the third time! They were confident Dar could bring the value of the rupee up! These matric pass fools running the establishment are still living in the 80's. They have no idea how the modern economy functions.
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Meengla
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You are sort of rambling but still your 'outsiders' view is more relevant than the PTI or Noon League fanbois' opinions here. You are being neutral.
I don't think PDM caused the current disaster. Things were set in motion long before this discredited group of politicians came to power. And they came to power through a DOMESTIC constitutional process, and not by some 'foreign conspiracy' as was very dangerously, and falsely alleged by Imran Khan. You can justifiably say that those in PDM are discredited blah blah and they did 'horse trading' blah blah but that is not something unique to Pakistan.
Where the PTI fanbois fail is that they don't see that the same ruling class had Pakistan matching India, if not ahead, well into the 1980s. The same ruling class whose members were part of Noon League, Q-League, Musharraf League, PPP League are now form of Imran Khan's League. So what is different this time? A guy who buttress his credentials because he lived in 'the West' and is a born again Muslim after lifelong Harampai?? Because perhaps a person who is not personally corrupt the leader? To this day I don't consider Imran Khan to be financially corrupt, despite all the noise about 'Toshakhana' because that's a small matter. But neither do I consider General Zia ul Haq to be corrupt despite me hating that guy. It is the wisdom in a ruler which I would admire more.
Personal propriety doesn't often translate to wise leadership. Imran Khan had every chance to come back to power after the April 2022 NCM move against him but he and his Speaker blatantly and unnecessarily disregarded the Constitution of Pakistan and since his ouster, instead of waiting for the next elections, he has been a 'DeRh Hushyaar' as they say in Karachi (Clever by Half) by continuing to cause mayhem inside Pakistan.
Imran Khan is mostly responsible for the economic crises facing Pakistan because of his policies about the IMF loans and because of his chaotic politics since April 2022. The PDM politicians maybe this or that but they were in power for most of Pakistan's history--as they were in power via PTI too because it is the same ruling class-- and yet Pakistan wasn't as bad as now. Knowing Imran Khan's dictatorial, entitled, arrogant nature from watching him as a cricketer in the 1980s, it is not a surprise that this spoilt, sheltered, protected brat would do anything to get what he wants.
Indos
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The situation is worsen by IK policy to see the Vote of No Confident as illegal and his order to his party to leave the parliament.
He act as if the world will be ended soon when his party is kick out from power. We can learn from other parliamentary system in UK, Israel, and Malaysia where this short term and fragile administration are something normal there and should be seen as part of the democracy (read : part of Parliamentary democracy).
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If political stability is maintained after IK ousted from power through legal process, Pakistan could be in better position to face double economic pressure coming from US The Fed policy and Russian/Ukraine war.
His push has also been reacted with the same push under current leader. If IK accept previous defeat in parliament and be more patience, he will not likely be treated like what we are seeing Today
Corruption could have never taken us to the point where we are now. It is our straight -up bad policies designed specifically to favour the elites . I mean I can’t agree more with the fact that we have given considerable subsidies on fuel but not on public transport . In the end , if someone is to blame the elites who are in control of Pakistan for 75 years and knew that the economy is deteriorating but selfishly choose to fund their luxuries.
Dude, you don’t get it. Let’s assume that IK would have been polite and gone in to the wind gently. Us overseas Pakistanis, would have taken that as a cop out and completely lost all hope for Pakistan.
the remittances failing the day after IK was removed has nothing to do with political instability. Overseas Pakistanis are not affected by that. We don’t trust the corrupt coterie of thugs represented by he PDM. It’s very simple.
Okay so remittances fall, what do you do if you have any competence? Roughly what Miftah Ismail did btw. Sure you will have to cut growth, rupee will go up shut at least you would have some stability. Miftah had done that already.
But then the establishment decided, that no, let’s bring back the wrecking ball Dar. Who literally will control the rupee rate illegally as he has always done. What you see right now isn’t the result of political instability but the deep incompetence of the ruling elite.
HerbertPervert
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Daronomics: The fallacy of fixing currency price
With the decline in the Pakistani rupee’s value in recent weeks and now Ishaq Dar’s return as finance minister, discussions around a fixed exchange rate have emerged once again.
Like Reagonomics, or Thatcheronomics, we have our own version: Daronomics, where the obsession to have an overvalued PKR outweighs all other economic and social needs resulting in an accelerated stimulus, which gives birth to a consumption-led boom, followed by a crash when supply of the foreign currency to prop up the PKR dries up.
In his previous stint as the finance czar from 2013 to 2017, Dar used the central bank to pump dollars into the market with the aim to keep the greenback’s value artificially around Rs90.
But this approach is problematic because fixing prices has never worked. On the contrary, the longer prices remain fixed, the worse the consequences are later. Whether it is a price floor, or a price ceiling, market forces eventually prevail. We have seen it happen time and again, but no lessons have ever been learned.
The obsession with fixing the PKR’s price, whether against the US dollar or other currencies, has been a top political priority despite the consequences such a strategy might have. A currency’s value is driven by the country’s ability to generate adequate foreign exchange, whether through exports, remittances, investments, or more borrowing. As the foreign currency’s supply goes up, its value declines while the PKR’s value rises.
Pakistan’s exports do not really have a competitive or comparative advantage which makes sustainable and robust growth in export proceeds a distant dream. Overseas Pakistanis effectively send more in remittances than what the entire country earns through exports. Given the country’s overall environment, foreign direct investment has remained embarrassingly low and is not likely to increase anytime soon.
The bonanza of low-cost to almost free cash during the last decade due to close-to-zero interest rates for the dollar and other major currencies led to easy availability of credit. As a result, Pakistan capitalised on it for almost four years by maintaining PKR-USD parity in a close range, which at one time was almost 25 per cent overvalued in terms of the Real Effective Exchange Rate.
One major disadvantage of an overvalued currency is that exports become uncompetitive in the international market, which leads to a drop and consequently increases the overall trade deficit. During the years that the exchange rate was ‘fixed’, consumption was driven by imports, which in turn, were financed by more dollars.
However, over the last few weeks, central banks around the world have rapidly hiked interest rates as the US Federal Reserve adopted a hawkish monetary policy. As a result, investors have ditched risky assets and gravitated towards the safer dollar, thus increasing demand for the greenback. The rise in demand then led to a jump in the dollar’s value against various developed and emerging market currencies.
The US dollar index, which measures the dollar’s value relative to six global currencies, has surged by almost 15pc since the beginning of this year and the greenback has risen to a 20-year high. Its movement has been so drastic that even the pound and the euro have slumped to all-time lows in recent days.
In such a macro environment where major currencies are tumbling, the PKR does not stand a chance when the country’s reserves are down to less than 5pc of its GDP and more than half of its revenue is spent to service local and external debt.
If those at the helm want the PKR to appreciate, it would mean they want an overvalued rupee, which would have a debilitating effect on exports. More importantly, it would make imports cheaper, thereby escalating demand for dollars to satiate the appetite for consumption — all during a time when the cost of borrowing in dollars has substantially increased.
In the aftermath of the devastating floods, the country’s fiscal and external position is already strained. The stress is so severe that there have been talks of debt moratoriums and reprofiling of external debt to provide some breathing space to the economy, so more resources can be allocated for rehabilitation and reconstruction.
However, the narrative that is being spun of aiming for a considerably appreciated PKR does not logically work for a country that wants its external debt reprofiled. In such a scenario, there exists a possibility that any concessions given will simply be wasted on appreciating the value of the PKR, instead of building back better or making structural changes.
If the same narrative and eventual policy discourse come into effect, we may have a few months of import-driven and consumption-oriented growth. Similar to how a spurt of ecstasy travels through an addict’s vein only to be followed by a disastrous collapse, a politically driven economic policy would eventually lead to a scenario where we may have to go to the International Monetary Fund yet again and get another bailout after having wasted precious foreign currency and concessions all the while obsessing over an overvalued PKR.
With foreign reserves standing at dangerously low levels coupled with the conditions of the ongoing IMF programme, under which Pakistan has agreed to a market-based currency exchange regime in addition to a State Bank free from the government’s strong-arm tactics, it appears that the incoming finance minister’s hands are tied. But in his first comments after taking over the helm, Dar has minced no words in conveying that he believes the rupee is “undervalued”.
For Pakistan, the choice is clear.
We can either reform and restructure the economy and reduce dependence on import-driven consumption, or we can go through another very short growth cycle and collapse yet again with even more debt than before.
With the decline in the Pakistani rupee’s value in recent weeks and now Ishaq Dar’s return as finance minister, discussions around a fixed exchange rate have emerged once again.
Like Reagonomics, or Thatcheronomics, we have our own version: Daronomics, where the obsession to have an overvalued PKR outweighs all other economic and social needs resulting in an accelerated stimulus, which gives birth to a consumption-led boom, followed by a crash when supply of the foreign currency to prop up the PKR dries up.
In his previous stint as the finance czar from 2013 to 2017, Dar used the central bank to pump dollars into the market with the aim to keep the greenback’s value artificially around Rs90.
But this approach is problematic because fixing prices has never worked. On the contrary, the longer prices remain fixed, the worse the consequences are later. Whether it is a price floor, or a price ceiling, market forces eventually prevail. We have seen it happen time and again, but no lessons have ever been learned.
The obsession with fixing the PKR’s price, whether against the US dollar or other currencies, has been a top political priority despite the consequences such a strategy might have. A currency’s value is driven by the country’s ability to generate adequate foreign exchange, whether through exports, remittances, investments, or more borrowing. As the foreign currency’s supply goes up, its value declines while the PKR’s value rises.
Pakistan’s exports do not really have a competitive or comparative advantage which makes sustainable and robust growth in export proceeds a distant dream. Overseas Pakistanis effectively send more in remittances than what the entire country earns through exports. Given the country’s overall environment, foreign direct investment has remained embarrassingly low and is not likely to increase anytime soon.
The bonanza of low-cost to almost free cash during the last decade due to close-to-zero interest rates for the dollar and other major currencies led to easy availability of credit. As a result, Pakistan capitalised on it for almost four years by maintaining PKR-USD parity in a close range, which at one time was almost 25 per cent overvalued in terms of the Real Effective Exchange Rate.
One major disadvantage of an overvalued currency is that exports become uncompetitive in the international market, which leads to a drop and consequently increases the overall trade deficit. During the years that the exchange rate was ‘fixed’, consumption was driven by imports, which in turn, were financed by more dollars.
However, over the last few weeks, central banks around the world have rapidly hiked interest rates as the US Federal Reserve adopted a hawkish monetary policy. As a result, investors have ditched risky assets and gravitated towards the safer dollar, thus increasing demand for the greenback. The rise in demand then led to a jump in the dollar’s value against various developed and emerging market currencies.
The US dollar index, which measures the dollar’s value relative to six global currencies, has surged by almost 15pc since the beginning of this year and the greenback has risen to a 20-year high. Its movement has been so drastic that even the pound and the euro have slumped to all-time lows in recent days.
In such a macro environment where major currencies are tumbling, the PKR does not stand a chance when the country’s reserves are down to less than 5pc of its GDP and more than half of its revenue is spent to service local and external debt.
If those at the helm want the PKR to appreciate, it would mean they want an overvalued rupee, which would have a debilitating effect on exports. More importantly, it would make imports cheaper, thereby escalating demand for dollars to satiate the appetite for consumption — all during a time when the cost of borrowing in dollars has substantially increased.
In the aftermath of the devastating floods, the country’s fiscal and external position is already strained. The stress is so severe that there have been talks of debt moratoriums and reprofiling of external debt to provide some breathing space to the economy, so more resources can be allocated for rehabilitation and reconstruction.
However, the narrative that is being spun of aiming for a considerably appreciated PKR does not logically work for a country that wants its external debt reprofiled. In such a scenario, there exists a possibility that any concessions given will simply be wasted on appreciating the value of the PKR, instead of building back better or making structural changes.
If the same narrative and eventual policy discourse come into effect, we may have a few months of import-driven and consumption-oriented growth. Similar to how a spurt of ecstasy travels through an addict’s vein only to be followed by a disastrous collapse, a politically driven economic policy would eventually lead to a scenario where we may have to go to the International Monetary Fund yet again and get another bailout after having wasted precious foreign currency and concessions all the while obsessing over an overvalued PKR.
With foreign reserves standing at dangerously low levels coupled with the conditions of the ongoing IMF programme, under which Pakistan has agreed to a market-based currency exchange regime in addition to a State Bank free from the government’s strong-arm tactics, it appears that the incoming finance minister’s hands are tied. But in his first comments after taking over the helm, Dar has minced no words in conveying that he believes the rupee is “undervalued”.
For Pakistan, the choice is clear.
We can either reform and restructure the economy and reduce dependence on import-driven consumption, or we can go through another very short growth cycle and collapse yet again with even more debt than before.
Few points.
$16 bn were in forex reserves, the highest left over by any government. What did PDM do? Kept on with the subsidies and basically did nothing to control the situation.
They had the mandate to remove oil subsidies, increase electricity prices, control imports, try to restore confidence, control government expenses (they actually did the opposite).
When the Pakistanis saw them giving themselves NRO 2, the public and potential investors knew nothing will come out of these crooks.
Choice is clear, everyone comes under the rule of law, no NRO and let justice take its course.
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