SBP pumped $1.2 billion to defend rupee: WB

[Norwegian]

That's why Pakistan;s military believes that Ishaq Dar has laid down the mines for economy on purpose, it was not just incompetence or a mistake.

And yet they let him escape on PM's plane? Remember it was also Dar that screwed Pakistan's economy back in 1999 when Marshall law happened.

here are talk shows were anchors are yelling 'why government is not using the all time high foreign reserves to bring PKR exchange rate down?'

Are these anchors schooled by Ishaq Dollar Mafroor?

 

[S.Y.A]

Following is the chart of increase in Pakistani exports since 2018 (includes both goods & services). If you do not call it implementation, then what would you call it?

Source: Trading Economics


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thats in rupees my guy. how much in $? has it risen, gone down or stayed the same? our CAD is in $.

I don't know why Pakistanis are worried about the depreciation of PKR, It can stimulate exports and employment.

that only works for countries with a strong industrial base, not for countries like Pakistan with high electricity prices, imported machinery, and imported raw materials (all tied to the dollar, the higher it is, the more expensive all of these things become).

 

[TheSnakeEatingMarkhur]

You need cheap energy for that, something that is oblivious to successive governments.

Jab yaha energy cost ki jaga project elections se pehle banne pe focus hoga to kaha se laoge cheap energy bahi?

 

[Norwegian]

Jab yaha energy cost ki jaga project elections se pehle banne pe focus hoga to kaha se laoge cheap energy bahi?

thats in rupees my guy. how much in $? has it risen, gone down or stayed the same? our CAD is in $.

that only works for countries with a strong industrial base, not for countries like Pakistan with high electricity prices, imported machinery, and imported raw materials (all tied to the dollar, the higher it is, the more expensive all of these things become).

 

[TheTallGuy]

just a question, since we are pegging the Rs. to $ and situation worsening day by day..

is it possible to change to Rs. to Yuan...what will be the immediate effect first? and please explain long term effect..

@Crimson Blue

 

[Crimson Blue]

is it possible to change to Rs. to Yuan....

@Crimson Blue

I am sorry but I did not fully understand the question. Are you asking if it is feasible to make Yuan the standard currency in Pakistan or start using Yuan for imports?

 

[FuturePAF]

The WB said that a key factor driving the trade imbalance is the declining export competitiveness. The share of exports in GDP has been declining since the turn of the century, from 16% in 1999 to 10% in 2020. This falling export share has implications for foreign exchange, jobs, and productivity growth.
The main causes of the falling exports are high effective import tariff rates and limited export market access that tend to discourage exports. Second, the supporting services for exporters are inadequate, especially those for long-term financing of capacity expansions and market intelligence services to secure new export contracts. Third, the low productivity of Pakistani firms hinders them from successfully competing in global markets, according to the WB.

Third, the import content of domestically produced substitutes is high, and therefore any substitution away from imported and into domestic luxury goods will likely lead to an increase in imports of parts and components to produce the domestic versions.

What is the government and/or industry doing to address these issues. The entire nation should be oriented to address these issues, otherwise the hole will just get deeper and deeper.

Also, behaviors need to be disincentivized that allows the status quo to continue.

 

[S.Y.A]

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you have been spamming it time and again, it doesnt excuse IK and PTI's incompetence. i used to be a supporter of PTI, so its useless to show these figures to me.

 

[TheTallGuy]

start using Yuan for imports?

This was question all our reserves and international trading is done in US $ correct. Pakistan Rs. is pegged to US $ correct..so if there is possibility that Pakistan Rs to be pegged to Chinese Yuan what will be the immidiate and long term effect.

 

[Crimson Blue]

This was question all our reserves and international trading is done in US $ correct. Pakistan Rs. is pegged to US $ correct..so if there is possibility that Pakistan Rs to be pegged to Chinese Yuan what will be the immidiate and long term effect.

So USD is considered reserve currency of the world. What it means is that when Pakistan is importing Petroleum from S.A, Cotton from Central Asia, Steel from Australia etc, they want payments in USD so that they can buy the stuff they need for themselves. So Pakistan has to have enough USD in reserves to buy things she needs.
PKR is not pegged to a fixed USD exchange rate as a country would need a total trade surplus (means lots of USD in reserve) for that. You can read HERE for detailed explanation .

You can argue that Pakistan can trade with China in Yuan as China is the largest trading partner of Pakistan. Problem is that imports from China are 12 times larger than Pakistan's exports to China ($12 billion vs less than $1 billion in 2020). So how would Pakistan obtain all the Yuan currency to fund the imports from China? If Pakistan starts doing trade with China (or all other countries) in Yuan then demand for Yuan in Pakistani banks would go just as high as of USD demand right now and that would result in ongoing devaluing of PKR against Yuan as well.

However some countries can try exchange their goods for another desirable import item bypassing the need for USD. For example Mylasia is trying to procure fighter jets in exchange for her palm oil so that Malysia would not have to use her USD resrves.

The only answer to declining PKR value and resulting price inflation is to increase exports. Pakistan is relatively lucky that she does not have to increase the volume of exports to match or exceed her imports as foreign remittances can compensate for the trade deficit for up to $25-$30 billion a year. Pakistan's exports would just need to come within $20 billion of her imports . Currently Pakistan has $27 billion exports (goods) vs about $70 billion imports (goods) annually.

That's how I understand it. For me, issue is not USD exchange rate, its actually the lack of exports. According to a World Bank report in 2020, her exports (goods only) should be around $80 billion considering the size of Pakistan's GDP, however exports were only at $22 billion in 2018.