IMF approves $1.1 billion loan for Pakistan

[Faiez]

How much do we export per year?

My observations are based on our family's export business.

What do you export and how much per year?

I don't have a business.

I don't have upto date stats on pakistan's trade balance.

But let me give you an example. A product costs rs.100 to manufacture and you are exporting it for $1.5, at a rate of 100rs:1dollar, you're making a rs.50 profit. Let's say dollar gets cheaper to 80rs/dollar. Now your selling price of $1.5 gets you only rs.120 in revenue reducing profits to just rs.20 from rs.50. Assuming cost of production remains same.

In this example your break even exchange rate turns out to be 66rs:1dollar. If the rate falls below that, you will have to raise the price of your product above $1.5, so you will get less price competitive.

I hope you get it.

hahahah

OK. With your village-street level knowledge, you win this argument.

Shabash.

you win bro.

p.s. I highly recommend that you learn something about developing countries. Study some. Do not remain arrogant.

I suggest you learn some economics, finance etc...Start by buying an introductory book on macroeconomics. You seem to have interest in these things, this will clear all misconceptions that you have.

 

[asquare]

you can't tell.

you can't even tell how dollars come to our markets.

That's sad to see.

As an economist, I can't understand what you're saying either. What do you mean 'how dollars come to our markets'?

If you mean a country can't print local currency and use it shore up foreign reserves beyond a point, I agree. However, in the absence of a balance of payment crisis, i don't see why Pakistan needs to go the IMF. You have reserves to fund your CAD for 5 years, that doesn't qualify as an impending crisis (of course the IMF will tell you that it does). A monetised fiscal expansion should achieve a lot of what is required, including the required depreciation of the rupee. You will have to bear some pain in the financial markets, but that is easily reversed once things look up. I don't see what sustainable gains the IMF loans will yield. Unlike in 2011-12, nor do I see any immediate emergency that they are required for.

 

[Faiez]

As an economist, I can't understand what you're saying either. What do you mean 'how dollars come to our markets'?

If you mean a country can't print local currency and use it shore up foreign reserves beyond a point, I agree. However, in the absence of a balance of payment crisis, i don't see why Pakistan needs to go the IMF. You have reserves to fund your CAD for 5 years, that doesn't qualify as an impending crisis (of course the IMF will tell you that it does). A monetised fiscal expansion should achieve a lot of what is required, including the required depreciation of the rupee. You will have to bear some pain in the financial markets, but that is easily reversed once things look up. I don't see what sustainable gains the IMF loans will yield. Unlike in 2011-12, nor do I see any immediate emergency that they are required for.

Exactly !

This is what I keep asking these geniuses how it will actually improve anything AT ALL ?

Rather this would have a negative impact on our exports and increases imports if this money comes into the market and lowers exchange rate. That would only worsen the balance of payments.

the only "emergency" is that the gov. wants to lower exchange rate to show that they have "improved" the economy. And the layman thinks it's a good sign if the exchange rate falls. he doesn't know how. but it's become a matter of national pride it seems. And not just here, worldwide people believe a stronger currency is a good indicator. Although it is if it's actually sustainable.

 

[SBD-3]

Did you Ever Files your Income Tax Return?

Did you ever Files it Correctly.?

I just recieved my tax payer card a few days ago.

 

[FaujHistorian]

....

If you mean a country can't print local currency and use it shore up foreign reserves beyond a point, I agree. .

In today's world, countries like Pakistan need to import huge amount of stuff for the 200 million population. At least $30 to $40 billion at current use, but it could balloon to twice that if the country wants to be more prosperous.

All that has to be paid via dollars (or gold or other hard currencies like pounds or euros).

It is a shame that "as an economist" you fail to understand this basic basic basic fact.

Read my posts in this thread again, to see I have listed ALL possible sources of dollar income.

But so many of you are doing behs brai behs. (argument for the sake of argument).



p.s May so called "economists" from thirld world refuse to think outside the theories taught in USA and UK. Poor guys fail to see the diff between US/UK/EU and their hard currencies, vs. soft currencies of India, Pakistan, and China etc.

 

[asquare]

In today's world, countries like Pakistan need to import huge amount of stuff for the 200 million population. At least $30 to $40 billion at current use, but it could balloon to twice that if the country wants to be more prosperous.

All that has to be paid via dollars (or gold or other hard currencies like pounds or euros).

It is a shame that "as an economist" you fail to understand this basic basic basic fact.

Read my posts in this thread again, to see I have listed ALL possible sources of dollar income.

But so many of you are doing behs brai behs. (argument for the sake of argument).



p.s May so called "economists" from thirld world refuse to think outside the theories taught in USA and UK. Poor guys fail to see the diff between US/UK/EU and their hard currencies, vs. soft currencies of India, Pakistan, and China etc.

What your reserves need to finance is not the total volume of imports but the difference between the dollar value of exports of goods and services and the dollar value of imports of goods and services, i.e., the current account deficit. This figure was $2.9 billion last year. This needs to be financed by either by inflows on the capital account (net financial inflows or asset purchases in dollars, of which the IMF loans are an example) or by official (Pakistani central bank) reserve transactions. This is universal and has nothing to do with hard or soft currencies (note, everything here is dollar denominated).

I was suggesting that a monetised fiscal expansion, could, pending structural reforms, be used to finance the deficit in the short run (this would also achieve the aim of achieving a depreciation of the rupee). It would prove inflationary, but I think that is the lesser evil.

I don't think what I have said is inapplicable to developing countries, but, in case I am wrong, I would love to know why.

 

[FaujHistorian]

What your reserves need to finance is not the total volume of imports but the difference between the dollar value of exports of goods and services and the dollar value of imports of goods and services, i.e., the current account deficit. This figure was $2.9 billion last year. .

Going around in circles bro.

Just the circles.

No need to show that you know some economic jargon.

We and every soft currency country needs dollars to balance the equation.

........................ Net inflow of dollars = Net outflow of dollars.
Note: dollar represent hard currency.

That's all.




When you cannot balance this eq, you go for more loans, credit lines, bonds etc. in what currency? Dollars.

yes baby! dollars.

 

[asquare]

........................ Net inflow of dollars = Net outflow of dollars.
Note: dollar represent hard currency.

Agreed. Except, temporarily, these dollars can be created out of thin air. The Pakistani central bank credits it's account with X Pakistani rupees (the same as printing money). These rupees are then exchanged for Y dollars. Clearly, this cannot be done forever, because it will prove highly inflationary- however it can (and always is) used as a temporary measure before the required structural adjustments are made. Additionally, this will cause a rupee depreciation, which I think is needed at the time.

There are two evils here 1) inflation and temporary financial instability brought about by the central banks 'creating' rupees 2) the arbitrary conditions that accompany IMF loans. My belief is that 2) should only be tolerated in the worst emergencies, which I think for the time being is not the case in Pakistan. While you and I can disagree about what methods are better, there can be no dispute on the mechanisms involved- those are just statements of fact.

Also, you accuse me of being unable to understand developing economies. I worked one street down form the IMF headquarters for the first three years of my working life. If I am ignorant about developing countries, you should see those guys.

 

[FaujHistorian]

Agreed. Except, temporarily, these dollars can be created out of thin air..

yes. off course. for temporary period, any magician can pull ONE dove out of a hat.

If you ask him to do this 24/7 and continue pulling 1000s, he can't. So please be real.

These are all short cut magcians hands.

Long term off course,

our nation must copy Turkish, Chinese, Indian, South Korean work ethic and social views.

if we want to have a viable economic future.

 

[black-hawk_101]

International Monetary Fund (IMF) has approved to make available a $1.1 billion loan for Pakistan which will be released in two installments. This brings total disbursements under the arrangement to SDR 2.2 billion - about $3.2 billion.

The Executive Board approved on September 4, 2013 an amount of SDR 4.393 billion - about $6.44 billion, or 425 per cent of Pakistan’s quota at the IMF. According to the Finance Ministry the loan was approved in executive board meeting of IMF in Washington. The first installment is expected to be released in the next few days. IMF has expressed confidence in Pakistan’s economic performance. The release of $1.1 billion to Pakistan would help the country cross the psychological barrier of having total foreign currency reserves of over $15 billion for the first time in two and half years.

A press release by the IMF representative in Pakistan said in completing the fourth and fifth reviews, the executive board also approved the authorities’ request for waivers of non-observance of performance criteria on the basis of the corrective measures taken, including prior actions on net domestic assets and on government borrowing from the State Bank of Pakistan. Following the Executive Board’s discussion on Pakistan, First Deputy Managing Director and Acting Chair David Lipton, in a statement said, “Macroeconomic conditions are improving, but significant risks to the recovery remain. The measures taken by the authorities to address short-term macroeconomic vulnerabilities and implement structural reforms are bearing fruit, but continued efforts are needed to make the economic transformation more sustainable.”

“Fiscal consolidation is broadly on track, but the authorities must be prepared to take further action to address possible revenue shortfalls. There is still ample scope for increasing tax revenues, especially through tax administration reforms. The government has reduced its reliance on central bank financing, but a robust organisational framework for public debt management needs to be implemented,” he said. The statement said that efforts to boost international reserves should continue, including through spot purchases and allowing greater exchange rate flexibility. Monetary policy remains prudent, focused on meeting program monetary targets and achieving a sustained reduction in inflation. Legislation to enhance central bank independence is crucial and should conform to international best practices. It should be complemented by enhanced communication of the central bank price stability objective, improved functioning of the interest rate corridor, and effective open market operations.

The IMF statement said that the financial sector remains stable and profitable. Ongoing financial sector reforms and remedial actions in the few banks that don’t reach minimum capital requirements will ensure the system’s continued health. “Structural reforms are progressing. Addressing the administrative constraints on the power sector’s regulatory framework, improving the operations and collections of energy companies, and electricity tariff reform should continue. The implementation of gas price rationalisation should move forward with the gas levy and more favorable producer prices to better allocate the current supply and encourage new production. Commitment to privatisation of public sector enterprises is strong, but potential difficulties are related to market conditions. Trade policy and business climate reforms are progressing.

The executive board, management and staff of the fund expressed their deepest condolences to the people of Pakistan for the loss of innocent life in the recent horrific attack on a school in Peshawar.

IMF approves $1.1 billion loan for Pakistan

Instead of taking loan on interest. Why not the Govt. just privatized all the Financial Institutions that are pending to be privatized? I am sure it will bring similar income in State Bank for GoP.

 

[AZADPAKISTAN2009]

Helicopter kharidne ke paise agaye alhamdulilah