Engineered economic stabilisation may fool masses not investors

[313ghazi]

IK talked all big about bringing money back from Switzerland and UK. All the hot air went out of the balloon as soon as he came to power

He just for £190 million from the uk. Did you miss that news?

 

[k s ahmed]

He just for £190 million from the uk. Did you miss that news?

have we got it ?? uk will not give us back that easily ,peovided shrewd english nature. we must give something important in return,...we will talk once funds are actuallly in our hands.. uk might deduct 30 % of admin charges for example

 

[The Accountant]

Engineered economic stabilisation may fool masses not investors
Mansoor Ahmad
December 1, 2019

LAHORE: Macroeconomic indicators are important and genuinely trigger growth, but in engineered stabilisation one may fool masses not investors. Pakistan’s current reserves and current account surplus are artificially managed and so are ignored by investors.

Our reserves are going up at a slow pace because of two reasons; first is that the imports have been curbed to the extent that has stifled growth, the second and more worrisome reason is that foreign funds are investing in our treasury bills mostly of three months duration.

The central bank is paying 13 percent interest on these dollars coming in treasury bills. This is a very risky strategy and at one sign of panic this investment will vanish within three months.

This is not sustainable in the long run. The central bank is stubbornly keeping the interest rates high because these investments will evaporate as soon as the interest rates start coming down.

It is indeed tragic that we reduce our current account balance on the strength of workers’ remittances and reduction in imports. Exports played almost no role in this reduction.

Exports the world over determine the current account position of a country. If the exports are higher than imports then it is a matter of rejoicing for the nation. In Pakistan’s case the imports are still a billion dollar higher than exports. This government has failed to boost exports and is engineering ways to reduce current account deficit by reducing imports.

When this reduction includes raw materials used by local industry it means decline in productivity that is obvious from the 5.9 percent decline in the growth of large scale manufacturing. To put the economy on a sustainable growth path, we need to boost investment and exports. We need to eliminate corruption, nepotism and mismanagement, and ensure rule of law with speedy justice.

All these factors are plaguing our economy. The economic planners of this government used to call Ishaq Dar an accountant who was just interested in balancing the ledgers. Despite this, he managed decent growth in the economy.

Incidentally, this government too is balancing the ledgers of the economy. It asked the central bank to print tons of money in the last quarter of 2018-19 and did consume that money. Then it promised the International Monetary Fund (IMF) that it would not take money from the central bank, but would instead go for commercial loans. In the first quarter, the government collected Rs160 billion less than the targeted revenue.

Still, it achieved all IMF targets, especially that of primary fiscal deficit (that it over achieved) on the strength of notes that were printed by the central bank in the last fiscal.

Is it not an engineered achievement? The investors cannot be hoodwinked with such achievements and thus are staying away from our economy. They might come only if some unreasonable favours are granted to them.

The ground reality is that investment is elusive as entrepreneurs have lost confidence in the government. It takes U-turn on its promised policies.

Exporters were promised power tariff at US cents 7.5/unit without any add-ons. Power distributors are charging the additional government levies on this tariff.

Exporters were also assured that the 17 percent sales tax they paid at the time of purchasing input for exports goods would be refunded within 72 hours after realisation of export proceeds. Five months on, the refunds remain struck up.

The state provided sovereign guarantee to make payments to the independent power producers 45 days after submission of bill. Now, the state owes hundreds of billions of rupees to IPPs increasing the circular debt to new limits.

This government has also followed its predecessor governments in not honouring the sovereign guarantees given to the IPPs. Those IPPs are mostly on the verge of collapse, but are afraid to lodge protest.

They fear reprisals from the government on their other business interests if they lodged protests. The reputation of the government is not satisfactory as far as its conduct on dissenters is concerned.

Only recently the National Accountability Bureau was unleashed on many business houses. It was stopped on the interference of those who matter in Pakistan.

Exports are increasing at a snail’s pace, and that is not enough to even reach the 2016-17 level. Cotton, the major raw material for textiles is in short supply. There is uncertainty about the sowing area of wheat crop. Government in fact increased wheat support price twice to lure farmers to increase wheat cultivation area.

https://www.thenews.com.pk/print/57...c-stabilisation-may-fool-masses-not-investors

I read the first 2 paras and I want to slap this lier son of a B****.

What loan has to do with current account deficit? current account deficit has three main components:

Exports
Imports
Worker remittances from abroad.

Secondly curbing import will restrict growth in short term but as soon as we get local substitute it will not only create growth but much needed employment. Dont we know that our consumer goods are flooded with Chinese made cheap products due to artificially low exchange rates? From where these goods were coming and who was getting jobs?

Now alot of these imported goods will start manufacturing in Pakistan. For example my organization was buying shoes from China since last 3 years but now we have started buying from a local manufacturer. One of our competitor and biggest brand of menswear was buying man ready made suits from China but now he is working on his factory for stitching of suits within Pakistan.

Wakeup man? Are you enemy of Pakistan? Because you are doing a disservice to country by helping in spreading lies

 

[Salahuddin Ayyubi]

He just for £190 million from the uk. Did you miss that news?

No child. He didn't. Read the news fully. This was not the work of the PTI govt. This is the work of the supreme Court. Stop taking credit away from people who haven't earned it.

 

[313ghazi]

No child. He didn't. Read the news fully. This was not the work of the PTI govt. This is the work of the supreme Court. Stop taking credit away from people who haven't earned it.

BS. No government will ever recover funds, this is always done through the courts. The government provides the instruction and political backing. Some events cross terms and cross institutes and jurisdiction. Taking credit for it is just the way of politics.

 

[Rasengan]

Let me know when another country is actually invests equivalent to $61 billion CPEC investment under PM Khan's supervision. Until then, don't waste my time with meagre investment inflows.

The Chinese didn't invest inside Pakistan because of Nawaz Sharif. Their investment coincided with their vision of rolling out the One Belt One Road initiative. I don't support IK but you still need to get your facts right.