Let me start off by saying very explicitly that I am neither your enemy nor your ill-wisher; And I am unable to respond in kind to your comments, I will merely respond to the technical (or not so technical points) in your post. I would also seriously recommend that you get out of Twitter/Youtube mindset and use your own reasoning.
You ask me where GDP has decreased in PKR when GDP world over is established in USD, this again is naivety because of your political affiliation rather than logical thinking. Furthermore, when Dar was Finance Minister, we needed to import more than we could export at that time. We were importing Oil, Machinery (heavy CPEC related imports including) & Electronics, Chemicals, Metals, Weapons (JF-17's, Chinese Subs etc.), Vehicles etc. We were importing more because we needed imported machinery, electronics, chemicals and raw material to establish CPEC related projects amongst other projects. One of the most important requirement for any export oriented country is power which we were facing acute shortage of ever since Musharraf's exit. We needed a lot of power projects and today we have surplus energy generation capacity. Now is the time to import more machinery, electronics, raw material etc., and establish industry which is capable of producing export goods in short to medium term.
Again, please stop trusting Twitter and Facebook posts which are usually posted by fanboys, paid resources or supporters of one political party or the other. Instead research reliable open sources such as ADB, WB, IMF etc. Pakistan's economy has actually shrunk in relative sense.
Let me give you an example: The budget for Military was Rs. 1,227 billion in 2019 which has been jacked up to Rs. 1,289 billion in 2020. In reality the allocation has increased but in relative terms (considering all our major military procurements are in USD; local currency is used only for salary, benefits etc.) it has shrunk as USD in 2019 was around 140 whereas it is around 156 in 2020 which leaves us with a budget of USD 8.76 Billion in 2019 vs USD 8.26 Billion in 2020.
Do you understand how currency is manipulated in Pakistan? How big is the open market? How could Dar or anyone else manipulate PKR? Also, do you know how much we were importing under Dar? If you put 2 and 2 together, Dar wasn't merely supporting PKR against USD by flooding the market with USD, he was also actively supporting an import based economy while importing Oil, Machinery, Electronics, Chemicals, Metals, Military Equipment, Vehicles etc. and magically he was also ensuring a higher reserve than anyone else ever did (Rs. 20 Billion when Dar was disqualified in 2017).......so, seriously, does it make sense when PTI waalas claim that Dar was artificially managing USD to the disadvantage of Pakistan?
The real question is, how expensive was electricity under Dar and PML. When you consider the fact that sovereign guarantees, international stock (bond) maturity, repayments etc., are all tied to the USD; does it not automatically become apparent that a lower USD would mean less payments externally?
Basically, when people buy into the PTI lies (and there are dozens of major lies by Imran Khan, the master of U-Turn/Munafiqat) they automatically assume all PTI claims to be factual, however ridiculous they may be.
Electricity, gas, petrol, medicine etc., are all very very expensive under the incumbent because of their lies, stupidity, inability, incompetence, nepotism and corruption. What saddens me the most is that Imran Khan the munfiq-e-aala can still blame the previous governments for all the ills today and his followers believe him. I mean I too was an avid supporter of MQM back in the day but I started calling Altaf Hussain a drunk a*****e as far back as 2005.
You speak of CD, do you even realize that it was Rs. 1,126 billion under PML and considerably lower under Dar but has spiked up to Rs. 2,400 Billion by now? It was Rs. 2,150 billion till June 30th, 2020! But you still blame PML.
Anyway, even now all is not lost. We need to offer tax subsidies to export oriented industries to offset the higher cost of business, strengthen the PKR to a sweet spot where our exports are competitive yet critical imports not too cumbersome etc.
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Your knowledge about basic economics is very poor bro. You are only copying propaganda without any substantial reasoning.
Here is an article for you to read upon and understand some basics.
Currency games!
BR Research 17 Nov 2020
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The PKR/USD breached 158 level yesterday. Most treasuries were of the view that PKR/USD could cross 170, when it was north of 165. Forces of demand and supply are driving currency movements since July 2019. The currency has hovered in the band of 154-168 since then.
The sentiment is positive today and it can take rupee back to 150. Some say this should happen to bring the dollars from the lockers into the market. But this would put pressure on the current account. Exporters are already uneasy on the currency appreciation. If the PKR goes on appreciating, at some point they may lose orders. The SBP should look at the market holistically and intervene accordingly.
The objective of SBP should be to build reserves – and that would happen when the current account is in good shape, capital/financial inflows keep on coming, and exchange companies are the net seller. If the PKR appreciates too much, these three factors can shift poles. Rupee below 155 could not necessarily be beneficial.
The current account is in surplus in the last four of the five months. Till the time oil prices hover around $40-45/barrel and remittances remain at a run rate of $2.2-2.3 billion per month, the current account is in control. The economic activities are picking up and these grow faster with currency appreciation. If the currency appreciates too much, this can bounce back in the form of higher imports and lower exports.
The word on the street is that exporters are fully booked till June 2020. Many exporters are operating at full capacity and they are in the process of expansion. There are some advantages of currency appreciation for exporters, as they are importing cotton and other raw material at better prices, the expansion cost is going to be lower in PKR. But the core business margins are squeezing for some. The reason exports are at full potential or they are in expansion is that they don’t have any loss due to overvalued currency (as was the case in 2014-18).
In fact, the currency is now under-valued. And it should be kept undervalued for some time. It is the inertia of the past few years of overvaluation. The undervalued currency may help in building much needed reserves through achieving surpluses in current and capital/financial accounts. The cash holder of foreign currency in local markets may sell and that should help SBP in reducing its forward/swap liabilities.
One of the reasons, the exporters are in expansion phase and are getting big orders, is the undervalued currency. One of the reasons cash holders are net sellers (as per exchange companies’ representatives) for the past 16 months is undervalued currency as well.
The party should not be over. The reserves are built in the process; but are not enough. Prior to COVID, SBP reserves were at $12 billion and then the toll fell substantially and now it is back to similar levels. The comfortable level is nothing below $20 billion. There is some journey to cover for the SBP before they can sit and relax.
Many say that Pakistan should focus on services exports. Many say that foreign exchange regime should be fully flexible, on the premise that if the money flow is seamless, investment, services exports and goods exports will grow through promotion of goods and services abroad. By doing this, the incentive to keep flows outside through under and over invoicing would die. But for opening up of the regime, it would require a certain level of reserves, for making SBP to lose control as the depth would be enough to absorb any external crisis.
Thus, for moving towards fully flexible exchange rate and foreign exchange movement markets, reserves need to be built. For that, open market should keep on selling and interbank market should be in surplus. And too much appreciation can undo it.
The SBP’s stated policy is of adaptation of flexible exchange rate as a buffer against external shocks, with SBP intervention in the foreign exchange market limited to prevent disorderly market conditions and a possible exchange rate overshooting but not suppressing a trend. This would mean that the SBP may not intervene for the PKR to appreciate further. This means the PKR in the short term may go below 155.
It all depends on flows. The exchange companies are selling $10-12 million a day. This along with current account surplus is helping SBP to lower its forward/swap liabilities - down by $919 million in October and a similar run rate is continued in this month. Some say that $6-7 million foreign currency is being surrendered by cash holders every day.
According to money market people, this conversion can increase further. But for that, government has to give some cushion to informal foreign currency holders in the form of amnesty scheme or something. “They want to sell, but they don’t have an option”, added Malik Bostan, a key money market figure. Government should come up with a way to bring this money back into the system as this would help in gaining reserves.
The PKR/USD breached 158 level yesterday. Most treasuries were of the view that PKR/USD could cross 170, when it was...
www.brecorder.com
Again I ask are you an importer? Or are you a beneficiary of past system who wants to move capital abroad?
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