That was needed to get out of the acute position. Like a blood transfusion. Of course that is a symptom but it has to be addressed. Once that is done work on structural reforms can began. But that will take few years. And we are inspired by India which lived off on aid and crawled along like a slug - Hindoo growth rate.
Try to understand, what i am saying is that you are being a sold a lie as far as far as the economy is concerned and successive governments including IK's are playing a part in it. For example lets talk about the foreign exchange reserves. Asad Umar had the audacity to say that the immediate balance of payment crisis has been taken care of, which is a lie and nothing more since all you have received is 1 Billion dollars after 3 trips. And even that 1 Billion dollars has to be returned in 1 year. Now once you go through the articles I setout herein under you will understand the quagmire the economy is in....
Troubles ahead: Balance of payments crisis appears far from over
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The current gross official $8.2 billion reserves are largely maintained by taking short-term loans from commercial banks and taking Chinese and Saudi deposits under the currency swap arrangements.
As of September this year, the central bank borrowed $7.22 billion from commercial banks under the forward and currency swap arrangements, according to data that SBP released on Wednesday.
The central bank was required to return $1.5 billion within one month, $3.2 billion in two months and remaining $2.6 billion up to one year, according to the official data.
In addition to this, SBP owes $3 billion to China, $1 billion to Saudi Arabia and $700 million to other sources, according to the sources. Around $453 million were to be repaid to the IMF in this fiscal year, which will be a direct charge on the SBP reserves.
This has resulted into negative $4 billion foreign currency reserves.
The $7.22 billion loans have been obtained by the central bank from commercial banks under F-25 and F-3 circulars, taking benefits of the foreign currency deposits of Pakistanis as well as foreign nationals, according to the sources in the banking sector.
The loans obtained under F E-25 circular are also shown part of both the central bank and commercial banks’ reserves. This is tantamount to double-booking of the currency reserves. Few months ago, Dr Asfhaque Hasan Khan, now a member of the Economic Advisory Council, had also termed the SBP’s foreign currency swaps deal as double booking. He had suggested that the swaps should have been excluded from the commercial banks’ reserves.
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https://tribune.com.pk/story/1856330/2-troubles-ahead-balance-payments-crisis-appears-far/
Do read the full article its a treasure trove of facts. What does it say :
1) That SBP has no money of its own in its account, its all currency swap and loans from commercial banks, which money finally belongs to Individual Depositors. The Actual forex with SBP is 8.2- 7.2 Billion i.e 1 Billion dollars. Thats an amount which will cover import bill of a few days and not even a month.
2) If we include the Commercial loans/ Currency swaps also, The Forex reserves are currently 4 Billion dollars in the negative.
3) The monthly gap i.e CAD is around 1 to 1.5 Billion dollars a month. Which means every month Forex reserves will get reduced by 1 Billion dollars atleast apart from Debt repayment. This apart from the fact that short term liability is around 12 Billion US dollars.
4) The trade Deficit is huge and even after all the devaluation decreased by a measly 1.63 % in the first quarter. Export growth has stagnated to 2 -3 % for the current fiscal which is pathetic considering the start devaluation.
"The country’s
trade deficit has recorded
at $8.9 billion during July-September period of the ongoing financial year as against $9.01 billion of corresponding period of previous year, showing a minor decline of 1.61 percent."
https://nation.com.pk/11-Oct-2018/trade-deficit-cut-by-1-63pc-in-first-quarter
5) No headway in $1bn China market access package
"Adviser to Prime Minister Abdul Razzak Dawood announced the export package from China after PM Imran Khan made a four-day visit to Beijing and Shanghai during the first week of November.
According to sources familiar with the matter,
the ‘market access’ announcement was earlier misunderstood by Pakistan as Beijing’s willingness to allow purchase of goods on state level to extend benefits to the country. Following the PM’s visit to China, Islamabad expected that China will purchase additional surplus quota of wheat, sugar, rice and other agriculture commodities which are currently subject to restrictions.
However, unconfirmed reports claim that
the Chinese authorities have informed the government that any package from Beijing will be a part of the second phase of the China-Pakistan free trade agreement (FTA).
https://www.dawn.com/news/1448903
So the Chinese are telling you to give China a favorable FTA if you want additional 1 Billion in trade. And inreturn Chinese will seek an additional 5 Billion. So the trade deficit will only increase. Also show the incompetence of Asad Umar and the who Pakistani economic team or as I was saying they were just lying to the aawam since they had been shouting at the top of their voices before the TRIP of securing billions from Chinese Birader.
6) While they mislead the general public, SBP has dropped the GDP growth to 4 % in FY 19. This is a central bank figure which is a little over optimistic and real growth will be around 3-3.5 % keeping in mind the fact that interest rates have been increased to 10% and will be further increased to 12% as demanded by the IMF.
https://arynews.tv/en/sbp-raises-policy-rate-by-150-stability/
Growth will retard completely due to this apart from the fact that devaluation will stroke inflation which will cross that double figure mark by next month and should settle around 12% which will kill the purchasing power of the general public. Now in this backdrop how will PTI generate 1 crore jobs ? Its next to impossible. Hence IK is telling everyone to indulge in poultry farming.
7) With the devaluation, the economy has contracted to around 230bn, i.e the size of the economy around the early 2000's, with such major contraction and no stability whatsoever in the currency market, The real economy could contract even further which will bring more misery to people.
8) With IMF becoming an inevitable option and the strict conditions imposed by them where development budged it slashed and subsidies reduced further, leave alone building new houses for them, the govt would do well to ensure they can take care of the marginalized most hit by the effects of inflation. For example after having increased gas prices, another increase is sought
IMF conditions: SNGPL requests Ogra to increase gas prices
To fulfill the condition of the International Monetary Fund (IMF), the Sui Northern Gas Pipelines Limited (SNGPL) has requested the Oil and Gas Regulatory Authority (OGRA) to further increase gas prices.
Hike in gas tariff will put burden of Rs91 billion on consumers.
The SNGPL authorities have requested Rs215 and Rs103 per cubic foot hike hike in the prices of gas and liquefied natural gas (LNG) respectively as Rs91 billion are required for the current fiscal year.
The authorities further stated that losses due to gas theft will also be recovered from the consumers.
Ogra will hear SNGPL’s plea on December 10 and if approval is given, new prices will be applicable from 1st July.
https://dunyanews.tv/en/Pakistan/468574-SNGPL-request-Ogra-gas-price-hike-IMF-conditions
