Pakistan's economic woes go from bad to worse ahead of polls: Bloomberg

[Devil Soul]

Pakistan's economic woes go from bad to worse ahead of polls: Bloomberg


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KARACHI: Five months before the general elections PML-N’s government is struggling to fix the failing economy.

The finance managers attempted to bring discipline by currency devaluation in December and by raising taxes in October to curb rising imports. Despite these moves both current account and trade deficits are hitting records while foreign exchange reserves continue to fall, Bloomberg stated in a recent analysis of Pakistan’s state of economy.

Pakistan’s external sector indicators “signal a crisis and are going from bad to worse,” Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC told Bloomberg.

“With elections around the corner, the government will simply kick the can down the road. The next government will face a balance of payments crisis and most likely go to the International Monetary Fund for yet another bailout,” he said.

The nation’s imports rose to a record last month despite the government increasing taxes on more than 700 items in October. With the tax on almost half those products reversed this month, the import bill remains under pressure.

Bloomberg reported that the economy is growing at 5.3 percent -- the fastest pace in a decade -- with import demand fueled by China’s financing of power plants and road projects under the China-Pakistan Economic Corridor (CPEC).

The current account deficit has continued to widen after a currency devaluation in December, putting further pressure on the rupee and pushing authorities to borrow more. The current account gap reached 4.7 percent of gross domestic product in the seven months ending January, compared with 3.5 percent a year earlier.

Pakistan’s foreign exchange reserves have continued to decline after the last IMF loan program ended in September 2016. But now, according to the report, economists are predicting that Islamabad will need a bailout package later this year to shore up its finances.

The State Bank of Pakistan (SBP) unexpectedly increased its interest rate for the first time in more than four years last month. The SBP chief Tariq Bajwa said the regulator is “pre-empting signs of the economy overheating and trying to keep inflation under control.”

Pakistan’s financial risk in January rose the most since Bloomberg started compiling data in 2015. Pakistan’s benchmark stock index has dropped 18 percent since a peak in May last year with foreigners selling shares after the country was upgraded to emerging market status by MSCI Inc.

Political turmoil following the ousting of former Prime Minister Nawaz Sharif in July spurred further drops, it said.
https://www.thenews.com.pk/latest/285834-pakistans-economic-woes-go-from-bad-to-worse-bloomberg

 

[ni8mare]

Pakistan Economic Woes Go From Bad to Worse Before Elections
By
Faseeh Mangi
February 26, 2018, 3:30 AM GMT+5:30 Updated on February 26, 2018, 2:15 PM GMT+5:30

• Imports rise to record in January as dollar reserves dwindle
• Nation’s financial risk increases along with rising deficits

Five months before national polls Pakistan’s government is struggling to fix its economy.

The South Asian nation of more than 200 million people devalued its currency in December and raised taxes in October to curb rising imports. Despite these moves both Pakistan’s current account and trade deficits are hitting records while foreign exchange reserves continue to fall.

Pakistan’s external sector indicators “signal a crisis and are going from bad to worse,” said Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC. “With elections around the corner, the government will simply kick the can down the road. The next government will face a balance of payments crisis and most likely go to the International Monetary Fund for yet another bailout.”

Below are five charts that highlight the problem:
Record Imports

The nation’s imports rose to a record last month despite the government increasing taxes on more than 700 items in October. With the tax on almost half those products reversed this month, the import bill remains under pressure. The nation’s economy is growing at 5.3 percent -- the fastest pace in a decade -- with import demand fueled by China’s financing of power plants and road projects valued at more than $50 billion as part of Beijing’s flagship Belt and Road trade route.


Widening Deficit

The current account deficit has continued to widen after a currency devaluation in December, putting further pressure on the rupee and pushing authorities to borrow more. The government raised $2.5 billion in November in an international debt sale. The current account gap reached 4.7 percent of gross domestic product in the seven months ending January, compared with 3.5 percent a year earlier, which is higher than annual forecast for 22 developing economies compiled by Moody’s Investors Service.

Dollar Reserves

Pakistan’s foreign exchange reserves have continued to decline after the last IMF loan program ended in September 2016. While the nation raised dollar-denominated debt in November to bolster reserves, outflows since then have almost wiped out that amount. Some economists are predicting the nation will need its 13th bailout since 1988 later this year to shore up its finances.

Rate Hike

Pakistan’s central bank unexpectedly increased its interest rate for the first time in more than four years last month. State Bank of Pakistan Governor Tariq Bajwa said the regulator is “pre-empting signs of the economy overheating and trying to keep inflation under control.”

Rising Risk

Pakistan’s financial risk in January rose the most since Bloomberg started compiling data in 2015. Pakistan’s benchmark stock index has dropped 18 percent since a peak in May last year with foreigners selling shares after the country was upgraded to emerging market status by MSCI Inc. Political turmoil following the ousting of former Prime Minister Nawaz Sharif in July spurred further drops.

 

[patman]

Hmm..So to meet the Chinese demands Pakistan is going to eat up its reserves.

 

[hussain0216]

Import bill is a necessity as infrastructure projects for CPEC continue

There is no way around this

If it was a frivolous unnecessarily growing import bill you could complain but as it is a absolute necessity that we complete the infrastructure and projects then this is a something we will have to deal with


Our politicians however are indeed useless when it comes to management economic or otherwise

 

[ziaulislam]

Import bill is a necessity as infrastructure projects for CPEC continue

There is no way around this

If it was a frivolous unnecessarily growing import bill you could complain but as it is a absolute necessity that we complete the infrastructure and projects then this is a something we will have to deal with


Our politicians however are indeed useless when it comes to management economic or otherwise

but there are smarter ways to deal with it
1. give export tax breaks (e.g china and virtually every other country, we instead tax them more and refusal in tax rebates)
2. smart funding, WB, AB, IDF etc are key partners, you absolutely need them as cheap source for foreign funding, instead of performing from good to excellent on their performance scale our performance is usually worst to satisfactory...result low funding, in many instance we simply refused the grant or refused to implement important transparency issues...THIS IS PURELY DUE TO CORRUPTION TO AN EXTENT THAT EVEN MORE LIBERAL ORGANIZATION LIKE ASIAN BANK ARE IRKED
examples of neglect are huge from jamshoro coal project to dasu dam to smart meters AB
3. cutting un necessary imports like wanting to import power at 7-8 rs rather than importing gas, automobile imports, steal industry, particular foods that can be grown home and list is huge

 

[Dalit]

This is what you get when you have an Indian appeaser as a government. Nawaz Sharif is too busy sending mangoes to his brother Modi. We need to ditch PML-N which has a terrible corruption record. They don't introduce proper tax reforms because they are part of the problem. Time has come to put Pakistan first. We need to stop this insane worshiping of political personalities and parties. It has done no good for Pakistan. There should be no single person or political party above Pakistan.

but there are smarter ways to deal with it
1. give export tax breaks (e.g china and virtually every other country, we instead tax them more and refusal in tax rebates)
2. smart funding, WB, AB, IDF etc are key partners, you absolutely need them as cheap source for foreign funding, instead of performing from good to excellent on their performance scale our performance is usually worst to satisfactory...result low funding, in many instance we simply refused the grant or refused to implement important transparency issues...THIS IS PURELY DUE TO CORRUPTION TO AN EXTENT THAT EVEN MORE LIBERAL ORGANIZATION LIKE ASIAN BANK ARE IRKED
examples of neglect are huge from jamshoro coal project to dasu dam to smart meters AB
3. cutting un necessary imports like wanting to import power at 7-8 rs rather than importing gas, automobile imports, steal industry, particular foods that can be grown home and list is huge

What about the Reko Diq fiasco? It is a whole list of fiasco's.

 

[hussain0216]

but there are smarter ways to deal with it
1. give export tax breaks (e.g china and virtually every other country, we instead tax them more and refusal in tax rebates)
2. smart funding, WB, AB, IDF etc are key partners, you absolutely need them as cheap source for foreign funding, instead of performing from good to excellent on their performance scale our performance is usually worst to satisfactory...result low funding, in many instance we simply refused the grant or refused to implement important transparency issues...THIS IS PURELY DUE TO CORRUPTION TO AN EXTENT THAT EVEN MORE LIBERAL ORGANIZATION LIKE ASIAN BANK ARE IRKED
examples of neglect are huge from jamshoro coal project to dasu dam to smart meters AB
3. cutting un necessary imports like wanting to import power at 7-8 rs rather than importing gas, automobile imports, steal industry, particular foods that can be grown home and list is huge

Yep absolutely

Our politicians are awful and worthless beyond words

We need to spend money to make money

So no one should panic at what's happening it is a absolute necessity to build the infrastructure for our nation going forward


But the corruption and lack of everything from our politicians is making everything worse whilst we build our nation

 

[ziaulislam]

and again..some how people cant even put the official figures up..so i wont comment any more
Total liquid foreign reserves of the country stand at dollars 19.18209 billion.

According to a weekly statement issued by State Bank of Pakistan on Thursday, the foreign reserves held by State Bank on February 02, amounted dollars 13.061 billion and the net foreign reserves held by the commercial banks were dollars 6.12203 billion.

and why is this cherry picking of figures, why suddenly moving to and fro from standard GDP ratios to total values and than back...like if you want to paint picture cant be neutral you need to be at least consistent

 

[Dalit]

and again..some how people cant even put the official figures up..so i wont comment any more
Total liquid foreign reserves of the country stand at dollars 19.18209 billion.

According to a weekly statement issued by State Bank of Pakistan on Thursday, the foreign reserves held by State Bank on February 02, amounted dollars 13.061 billion and the net foreign reserves held by the commercial banks were dollars 6.12203 billion.

and why is this cherry picking of figures, why suddenly moving to and fro from standard GDP ratios to total values and than back...like if you want to paint picture cant be neutral you need to be at least consistent

Don't expect positive coverage from American and Indian sources.

 

[ziaulislam]

What about the Reko Diq fiasco? It is a whole list of fiasco's.

i was more specific to funding organizations

AB, WB and IDF funding are prized because of their low cost but to get them you need transparency which is lacking..we have rate dvery worse in transparency..this shows how foolish people of pakistan are and that no matter how much i disagree with IK, i do agree about transparency being the number 1 reason for our poor growth...

in autocratic system you can grow despite corruption because of stability and other factors but in democracy you cannot afford this

the reason why i say its better to simply make Mr Sharif and Mr Zardari the king of Pakistan if our people cannot let go of this love ..there are very good seasonal politicians in PMLN and PPPP which are stuck, because of this love affair of people of Pakistan with personalities

 

[Dalit]

i was more specific to funding organizations

AB, WB and IDF funding are prized because of their low cost but to get them you need transparency which is lacking..we have rate dvery worse in transparency..this shows how foolish people of pakistan are and that no matter how much i disagree with IK, i do agree about transparency being the number 1 reason for our poor growth...

in autocratic system you can grow despite corruption because of stability and other factors but in democracy you cannot afford this

the reason why i say its better to simply make Mr Sharif and Mr Zardari the king of Pakistan if our people cannot let go of this love ..there are very good seasonal politicians in PMLN and PPPP which are stuck, because of this love affair of people of Pakistan with personalities

No doubt. We are a sick people. We don't look at the bigger picture. Every person is stuck in his little confined world. The bitter truth is that we have become an egocentric nation. I have had discussions with my relatives and every person has some sort of sick tale on offer. These are educated folks. They don't mind corruption as long as it is benefiting their street and neighborhood. The narrow mindedness is mind boggling.

 

[ziaulislam]

No doubt. We are a sick people. We don't look at the bigger picture. Every person is stuck in his little confined world. The bitter truth is that we have become an egocentric nation. I have had discussions with my relatives and every person has a some sort of sick tale on offer. These are educated folks. They don't mind corruption as long as it is benefiting their street and neighborhood. The narrow mindedness is mind boggling.

summary of political landscape of Pakistan is not that difficult to be honest..

we have fix areas like sindh(MQM urban +PPPP rural), central Punjab(PML Q/N/any Punjab based party), rural KPK(JUI, some ANP), Baluchistan(same people to winning party)

while swing areas of urban KPK(completely open to any party) and southern Punjab (more a PPPP vs PML battlefield)

arguably there are other pockets like hazara and parts of karachi and northern Punjab that can move but these are inconsequential in bigger picture

 

[American Pakistani]

Pakistan has to cut it's import bills, there is no way around it.

No need to import foreign cars, textiles/rmg's, food products, luxury goods etc. Similarly need to cut on borrowing any further loans. Exports should be given priority.

I don't know who is running the economy of this country, I've seen acute drop in Pakistani rm.garments here in the US in last 5 years, in all big stores.

 

[ziaulislam]

in summary, regional politics still is strong with no national interest..thus people voting more for identity rather than economy or development

 

[hussain0216]

Pakistan has a bright future, we have a major economic boost heading our way where wd will grow QUICK it is being held back by our own faults