Is Pakistan’s economy headed towards sustainable and equitable growth? Ft. Miftah Ismail

[Norwegian]

Why did he defend Dar's policies in the interview?

Because once a Patwari always a Patwari

 

[Falcon26]

The problem with Pakistan’s economy is that the bigger it grows, the more current account deficit it faces. This phenomena has been going on for nearly four decades. Dr Atif Mian explained it succinctly today on a short twitter thread

@JamD @Bilal Khan (Quwa)

https://twitter.com/x/status/1487813257029197829

https://twitter.com/x/status/1487813258362998785

https://twitter.com/x/status/1487813262318129152

 

[Pak Nationalist]

The problem with Pakistan’s economy is that the bigger it grows, the more current account deficit it faces. This phenomena has been going on for nearly four decades. Dr Atif Mian explained it succinctly today on a short twitter thread

@JamD @Bilal Khan (Quwa)

https://twitter.com/x/status/1487813257029197829

https://twitter.com/x/status/1487813258362998785

https://twitter.com/x/status/1487813262318129152

That is what we have been talking about under this thread, or at least a few of us.

 

[CrazyZ]

The problem with Pakistan’s economy is that the bigger it grows, the more current account deficit it faces. This phenomena has been going on for nearly four decades. Dr Atif Mian explained it succinctly today on a short twitter thread

@JamD @Bilal Khan (Quwa)

https://twitter.com/x/status/1487813257029197829

https://twitter.com/x/status/1487813258362998785

https://twitter.com/x/status/1487813262318129152

This largely tied to energy imports. Last 4 decades we have not developed domestic energy sources (Hydro, coal....). Thar coal extraction need to go from 10 million tons to 100 millions of tons and used for energy, fertilizer, plastics production and use in industry. Transportation needs to be electrified (with more mass transit) with electricity coming from hydro and solar. We need to wean ourselves off of imported oil and gas.

That is what we have been talking about under this thread, or at least a few of us.

Energy prices were at all time lows during the height of the COVID pandemic due to lower demand and spat between KSA and Russia on cuts. Pakistani saw the benefits of what energy independence could bring.

Energy prices have spiked since then. Oil could go to $200 a barrel if Russia and Ukraine have at it...plus the Houthis keep hitting the gulf.

 

[Pak Nationalist]

This largely tied to energy imports. Last 4 decades we have not developed domestic energy sources (Hydro, coal....). Thar coal extraction need to go from 10 million tons to 100 millions of tons and used for energy, fertilizer, plastics production and use in industry. Transportation needs to be electrified (with more mass transit) with electricity coming from hydro and solar. We need to wean ourselves off of imported oil and gas.


Energy prices were at all time lows during the height of the COVID pandemic due to lower demand and spat between KSA and Russia on cuts. Pakistani saw the benefits of what energy independence could bring.

Energy prices have spiked since then. Oil could go to $200 a barrel if Russia and Ukraine have at it...plus the Houthis keep hitting the gulf.

The imbalances have become more critical. A country that once used to export its surplus agricultural produce now has a food import bill of 8 billion USD a year. As far as energy imports are concerned, gas reserves were to exhaust one day. The power mix is being changed which has reduced the requirement for expensive petroleum inputs for power generation. The way I see it, the real problem is more automobiles (from rickshaws to bicycles to cars) on the streets. Pakistan is today importing huge volumes of refined oil as well despite the domestic refinery's utilization at a mere 60%. On the one hand, we have a higher demand than before, on the other, we are not using domestic resources efficiently to save hard currency. Going on a tangent, I do not know why exactly why refineries are facing closures or running on low utilization rates/efficiencies. It has to do with the reduced take-up of Kerosene (a refinery process distillate) by the power sector. The storage facilities of refineries are getting filled quicker than these could be disposed of via exporting due to port congestion (I assume also limited availability of tanker ships due to global conditions). Resultantly, the refineries are either ceasing operation or running at low efficiencies. This is making the government import expensive refined oil as well.

 

[Patriot forever]

Dar was responsible for keeping PKR overvalued, not him (under him PKR was allowed to devalue in fact, do check). He was sworn in as the finance minister in the last year. Can't expect him to undo the incremental damage of 4 Dar years. Regardless, this interview was shared not for any political value but rather the discussion on what afflicts the Pakistani economy, how an ex-FM sees these afflictions, and dissection of the solutions he puts forth.

Miftah was responsible for the printing and low interest rate at the same time escalading the already deteriorating situation. He did nothing or even remotely cared about about putting in place the strict fiscal and monetary constraints that were needed but further opened the flood gates especially in FY 2018.
His half-hearted devaluation was of little use ( insufficient as sbp was still bleeding dollars massively along with no other supporting policy be it fiscal or monetary).

Raza Bakir and pti controlled it by completely halting the sbp borrowing and massive interest rate hike to mop off the excess liquidity, along with considerable devaluation.

Economy is not a one trick pony.

The reason I am saying this is to give a more hollistic view of things. Not everything can be viewed and judged in isolation. Everything is interconnected.

 

[Pak Nationalist]

This largely tied to energy imports. Last 4 decades we have not developed domestic energy sources (Hydro, coal....). Thar coal extraction need to go from 10 million tons to 100 millions of tons and used for energy, fertilizer, plastics production and use in industry. Transportation needs to be electrified (with more mass transit) with electricity coming from hydro and solar. We need to wean ourselves off of imported oil and gas.


Energy prices were at all time lows during the height of the COVID pandemic due to lower demand and spat between KSA and Russia on cuts. Pakistani saw the benefits of what energy independence could bring.

Energy prices have spiked since then. Oil could go to $200 a barrel if Russia and Ukraine have at it...plus the Houthis keep hitting the gulf.

Miftah was responsible for the printing and low interest rate at the same time escalading the already deteriorating situation. He did nothing or even remotely cared about about putting in place the strict fiscal and monetary constraints that were needed but further opened the flood gates especially in FY 2018.

His half-hearted devaluation was of little use ( insufficient as sbp was still bleeding dollars massively along with no other supporting policy be it fiscal or monetary).

Raza Bakir and pti controlled it by completely halting the sbp borrowing and massive interest rate hike to mop off the excess liquidity, along with considerable devaluation.

Economy is not a one trick pony.

Low-interest rate? Fixing interest rate is the purview of SBP (has been even before the SBP autonomy bill). He did allow the PKR to devalue which was a major departure from the Dar era. Have he had more time, he would have used this tool further.

Shaukat Tareen undertook even sharper macroeconomic adjustments. The result was chronically low growth of the first few PPP years. This is no big deal. You could freeze the economy to achieve the desired effect.

 

[Patriot forever]

Miftah was responsible for the printing and low interest rate at the same time escalading the already deteriorating situation. He did nothing or even remotely cared about about putting in place the strict fiscal and monetary constraints that were needed but further opened the flood gates especially in FY 2018.


Low-interest rate? Fixing interest rate is the purview of SBP (has been even before the SBP autonomy bill). He did allow the PKR to devalue which was a major departure from the Dar era. Have he had more time, he would have used this tool further.

Shaukat Tareen undertook even sharper macroeconomic adjustments. The result was chronically low growth of the first few PPP years. This is no big deal. You could freeze the economy to achieve the desired effect.

Exactly SBP was not autonomous and was interfered with, was not doind its job neither was the finance ministry on the fiscal side.


Currency and monetary policy is SBP domain, fiscal policy is finance ministry domain.

If the SBP is interfered with for political purposes that's what we end up with.

Let me give you an example if the minibudget was not passed ( fiscal domain) SBP forward guidance on the monetary side would not be the same as announced recently.

 

[CrazyZ]

The imbalances have become more critical. A country that once used to export its surplus agricultural produce now has a food import bill of 8 billion USD a year. As far as energy imports are concerned, gas reserves were to exhaust one day. The power mix is being changed which has reduced the requirement for expensive petroleum inputs for power generation. The way I see it, the real problem is more automobiles (from rickshaws to bicycles to cars) on the streets. Pakistan is today importing huge volumes of refined oil as well despite the domestic refinery's utilization at a mere 60%. On the one hand, we have a higher demand than before, on the other, we are not using domestic resources efficiently to save hard currency. Going on a tangent, I do not know why exactly why refineries are facing closures or running on low utilization rates/efficiencies. It has to do with the reduced take-up of Kerosene (a refinery process distillate) by the power sector. The storage facilities of refineries are getting filled quicker than these could be disposed of via exporting due to port congestion (I assume also limited availability of tanker ships due to global conditions). Resultantly, the refineries are either ceasing operation or running at low efficiencies. This is making the government import expensive refined oil as well.

Energy and Auto imports are the easiest thing to tax. Petrol in Pakistan is cheaper then other parts of Asia (excluding ME). The one knock I have on PTI is their opposition to mass transit. Considering the population density in our metros, electric rail and battery buses powered by domestic hydro or coal should be priorities.