Ten questions

[niaz]

For all those who are arguing about why the Pk Rupee had to be devalued, here is an explanatory article. Whether anyone agrees with it or not depends upon him.


The devaluation factor
Shehryar Warraich
Special Report
April 14, 2019

• 
• 

The government has devaluated rupee up to 40 percent in less than a year which has hit the business sector hard

The value of rupee as against the US Dollar in December 2017 was Rs105. It has risen to Rs143 these days. It is stated to be the sixth currency devaluation since December 2017.

Economists believe factors like dwindling forex reserves, trade deficit, less manufacturing, growing imports, and political and economic uncertainty are keeping the rupee under great stress.

However, in October 2018, officials of the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance, Revenue, and Economic Affairs presided over by Senator Farooq H. Naik that depreciation of Pak rupee would help boost the country’s foreign exchange reserves with increase in exports and foreign remittances, and decline in imports, and current account deficit.

The SBP officials claimed that sharp devaluation of rupee injected a new life into the country’s economy because such policy increased foreign remittances by 13 percent, trade deficit narrowed by 1.6 percent and current account deficit shrank by 2.6 percent. In addition, the official said the real positive outcome would be felt in about a year.

Pakistan Bureau of Statistics shows that inflation rate in October 2018 was 6.78 percent which was 3.68 in April 2018. Contrary to the claims of SBP, inflation kept on increasing to 9.41 in March 2019 -- the highest rate since November 2013.

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

Through devaluation a government may be incentivised to encourage a weak currency policy if it has a lot of government-issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. For instance, if the domestic currency is devalued to half of its initial value, the $1 million debt payment will only be worth $500,000.

Chairman Pakistan Industrial & Traders Association Front (PIAF), Mian Nauman Kabir, challenges the claims made by officials of State Bank of Pakistan that devaluation would help in different ways. "Devaluation of the rupee failed to stimulate exports during the first five months (July-November) of the financial year 2018-19, as they grew by a meagre 1 percent to $9.12 billion against $9.04 billion in the same period last year. Moreover, there is a minor decrease in trade deficit in the last four months from Rs371.6 billion to 317.4 billion".

The inflation ratio is uncontrollable as prices increased for food & non-alcoholic beverages up to 8.22 percent; furniture & household equipment 9.51 percent; other goods & services 10.18 percent; recreation & culture 9.66 percent, clothing & footwear 7.21 percent, health 8.08 percent and restaurants & hotels 6.47 percent, he informs.

Former President Lahore Chamber of Commerce & Industry, Irfan Qaiser Sheikh, calls the devaluation policy nothing but a disaster for all sectors. People have lost Rs98 billion in a day when the current deflation policy hit the market. Devaluing of the currency cannot help boost exports but increases inflation and make the life of common people miserable.

"The government has devaluated rupee up to 40 percent in less than a year which has practically washed out the business sector in the country. Due to such policies, the International Monetary Fund (IMF) has predicted that Pakistan’s GDP growth rate will be reduced to 2.9 percent while inflation and unemployment will go up," he says.

World Economic Outlook 2019 states that unemployment in Pakistan will rise to 6.2 percent in the next fiscal year from the current 6.1 percent. However, the current account deficit is likely to go down to 4.3 percent in 2020 from the projected 5.2 percent during the on-going fiscal year.

President Forex Association of Pakistan, Malik Bostan, believes the policies of devaluating currency and reducing the ratio of subsidies on various services would certainly help the government to increase exports, decrease imports and collect more revenue and the outcome of all these efforts would bring down the trade deficit.

Irfan Qaiser Sheikh criticises the government, saying government’s policies do not favour investment in the manufacturing industry. "Devaluation means imports such as petrol, food and raw materials will become more expensive; this will reduce productivity of the manufacturing industry. Albeit, we should go for higher exports and lower imports, which is a definite way of reducing the current account deficit".

According to Nauman Kabir, devaluation can cause a decrease in real wages. This is because devaluation causes inflation. "Besides, devaluation increases debt burden of foreign-denominated loans when priced in the home currency. This is a big problem for a developing country like Pakistan as ongoing deficits are unsustainable in the long run and can lead to dangerous levels of debt which can cripple an economy. About 22 percent of our manufacturing industries have closed down because of the devaluation policy of the current government."

Also read: Editorial

Former United Nations Assistant Secretary General and Federal Minister for Finance and Economic Affairs, Dr. Hafiz A. Pasha, writes in his book, Growth and Inequality in Pakistan; Agenda for Reforms published in April 2019 that "The loss of export competitiveness of manufacturing sector of Pakistan has to be restored by maintaining the exchange rate at its true value and not allowing it to appreciate. Since domestic electricity and gas tariffs are above world prices the difference may be reflected in the duty drawback regime".

He also points out that "Pakistan fares very poorly in the international ranking of Ease of Doing Business. It stands at 136 out of 190 countries with a significant improvement of 11 places in 2018. The setting up a new entity requires ease of establishing and doing a business."

https://www.thenews.com.pk/tns/detail/567590-devaluation-factor

 

[Nilgiri]

For all those who are arguing about why the Pk Rupee had to be devalued, here is an explanatory article. Whether anyone agrees with it or not depends upon him.


The devaluation factor
Shehryar Warraich
Special Report
April 14, 2019

• 
• 

The government has devaluated rupee up to 40 percent in less than a year which has hit the business sector hard

The value of rupee as against the US Dollar in December 2017 was Rs105. It has risen to Rs143 these days. It is stated to be the sixth currency devaluation since December 2017.

Economists believe factors like dwindling forex reserves, trade deficit, less manufacturing, growing imports, and political and economic uncertainty are keeping the rupee under great stress.

However, in October 2018, officials of the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance, Revenue, and Economic Affairs presided over by Senator Farooq H. Naik that depreciation of Pak rupee would help boost the country’s foreign exchange reserves with increase in exports and foreign remittances, and decline in imports, and current account deficit.

The SBP officials claimed that sharp devaluation of rupee injected a new life into the country’s economy because such policy increased foreign remittances by 13 percent, trade deficit narrowed by 1.6 percent and current account deficit shrank by 2.6 percent. In addition, the official said the real positive outcome would be felt in about a year.

Pakistan Bureau of Statistics shows that inflation rate in October 2018 was 6.78 percent which was 3.68 in April 2018. Contrary to the claims of SBP, inflation kept on increasing to 9.41 in March 2019 -- the highest rate since November 2013.

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

Through devaluation a government may be incentivised to encourage a weak currency policy if it has a lot of government-issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. For instance, if the domestic currency is devalued to half of its initial value, the $1 million debt payment will only be worth $500,000.

Chairman Pakistan Industrial & Traders Association Front (PIAF), Mian Nauman Kabir, challenges the claims made by officials of State Bank of Pakistan that devaluation would help in different ways. "Devaluation of the rupee failed to stimulate exports during the first five months (July-November) of the financial year 2018-19, as they grew by a meagre 1 percent to $9.12 billion against $9.04 billion in the same period last year. Moreover, there is a minor decrease in trade deficit in the last four months from Rs371.6 billion to 317.4 billion".

The inflation ratio is uncontrollable as prices increased for food & non-alcoholic beverages up to 8.22 percent; furniture & household equipment 9.51 percent; other goods & services 10.18 percent; recreation & culture 9.66 percent, clothing & footwear 7.21 percent, health 8.08 percent and restaurants & hotels 6.47 percent, he informs.

Former President Lahore Chamber of Commerce & Industry, Irfan Qaiser Sheikh, calls the devaluation policy nothing but a disaster for all sectors. People have lost Rs98 billion in a day when the current deflation policy hit the market. Devaluing of the currency cannot help boost exports but increases inflation and make the life of common people miserable.

"The government has devaluated rupee up to 40 percent in less than a year which has practically washed out the business sector in the country. Due to such policies, the International Monetary Fund (IMF) has predicted that Pakistan’s GDP growth rate will be reduced to 2.9 percent while inflation and unemployment will go up," he says.

World Economic Outlook 2019 states that unemployment in Pakistan will rise to 6.2 percent in the next fiscal year from the current 6.1 percent. However, the current account deficit is likely to go down to 4.3 percent in 2020 from the projected 5.2 percent during the on-going fiscal year.

President Forex Association of Pakistan, Malik Bostan, believes the policies of devaluating currency and reducing the ratio of subsidies on various services would certainly help the government to increase exports, decrease imports and collect more revenue and the outcome of all these efforts would bring down the trade deficit.

Irfan Qaiser Sheikh criticises the government, saying government’s policies do not favour investment in the manufacturing industry. "Devaluation means imports such as petrol, food and raw materials will become more expensive; this will reduce productivity of the manufacturing industry. Albeit, we should go for higher exports and lower imports, which is a definite way of reducing the current account deficit".

According to Nauman Kabir, devaluation can cause a decrease in real wages. This is because devaluation causes inflation. "Besides, devaluation increases debt burden of foreign-denominated loans when priced in the home currency. This is a big problem for a developing country like Pakistan as ongoing deficits are unsustainable in the long run and can lead to dangerous levels of debt which can cripple an economy. About 22 percent of our manufacturing industries have closed down because of the devaluation policy of the current government."

Also read: Editorial

Former United Nations Assistant Secretary General and Federal Minister for Finance and Economic Affairs, Dr. Hafiz A. Pasha, writes in his book, Growth and Inequality in Pakistan; Agenda for Reforms published in April 2019 that "The loss of export competitiveness of manufacturing sector of Pakistan has to be restored by maintaining the exchange rate at its true value and not allowing it to appreciate. Since domestic electricity and gas tariffs are above world prices the difference may be reflected in the duty drawback regime".

He also points out that "Pakistan fares very poorly in the international ranking of Ease of Doing Business. It stands at 136 out of 190 countries with a significant improvement of 11 places in 2018. The setting up a new entity requires ease of establishing and doing a business."

https://www.thenews.com.pk/tns/detail/567590-devaluation-factor

This is the inelasticity argument I was making earlier basically. It (devaluation) is a big lever and causes lot of pain because simply you are forcing people on ground to pay extra on fuel and basic inputs (that are imported entirely and cannot be produced in Pakistan) that lot of consumer prices are reliant on.

When you ignore all the many smaller levers you can improve iteratively over longer time (and prevent bad situation from even occuring)....then you only have the big red button lever at the end...and that is basicall what PTI pulled, and any party would have pulled too.

What else can really be done...default on many or all loans?...and take huge long term credit rating hit? Pakistan is not an Argentina to be able to harness historical links with developed world (and neighbours) and stuff like that....despite what some might think about China/CPEC filling that role (they face lot of increasing problems on their liquidity too so dont have much time or commitment to large bailout pleas of others).

It is not a PTI vs PMNL vs PPP or whomever thing at all. People need to understand largely all the parties would do exact same actions if you replace them at different times because the powerbrokers simply play musical chairs with them. That includes all the loan dependence (and consumption and speculation bubble it created) because no oligarch/powerbroker wants to commit to sustained capacity investment and improvement.....because they are too used to cushy gigs they have and endless trough of a narrative that feeds and sustains it.

Pakistan cannot progress without deep introspection of its power structure and set up. Yet most people simply want to point fingers and blame some middle order power ppl (including PM/cabinet/visible-official govt) running charades. It is easy to....but easy doesnt change much in the end.

 

[CrazyZ]

For all those who are arguing about why the Pk Rupee had to be devalued, here is an explanatory article. Whether anyone agrees with it or not depends upon him.


The devaluation factor
Shehryar Warraich
Special Report
April 14, 2019

• 
• 

The government has devaluated rupee up to 40 percent in less than a year which has hit the business sector hard

The value of rupee as against the US Dollar in December 2017 was Rs105. It has risen to Rs143 these days. It is stated to be the sixth currency devaluation since December 2017.

Economists believe factors like dwindling forex reserves, trade deficit, less manufacturing, growing imports, and political and economic uncertainty are keeping the rupee under great stress.

However, in October 2018, officials of the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance, Revenue, and Economic Affairs presided over by Senator Farooq H. Naik that depreciation of Pak rupee would help boost the country’s foreign exchange reserves with increase in exports and foreign remittances, and decline in imports, and current account deficit.

The SBP officials claimed that sharp devaluation of rupee injected a new life into the country’s economy because such policy increased foreign remittances by 13 percent, trade deficit narrowed by 1.6 percent and current account deficit shrank by 2.6 percent. In addition, the official said the real positive outcome would be felt in about a year.

Pakistan Bureau of Statistics shows that inflation rate in October 2018 was 6.78 percent which was 3.68 in April 2018. Contrary to the claims of SBP, inflation kept on increasing to 9.41 in March 2019 -- the highest rate since November 2013.

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

Through devaluation a government may be incentivised to encourage a weak currency policy if it has a lot of government-issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. For instance, if the domestic currency is devalued to half of its initial value, the $1 million debt payment will only be worth $500,000.

Chairman Pakistan Industrial & Traders Association Front (PIAF), Mian Nauman Kabir, challenges the claims made by officials of State Bank of Pakistan that devaluation would help in different ways. "Devaluation of the rupee failed to stimulate exports during the first five months (July-November) of the financial year 2018-19, as they grew by a meagre 1 percent to $9.12 billion against $9.04 billion in the same period last year. Moreover, there is a minor decrease in trade deficit in the last four months from Rs371.6 billion to 317.4 billion".

The inflation ratio is uncontrollable as prices increased for food & non-alcoholic beverages up to 8.22 percent; furniture & household equipment 9.51 percent; other goods & services 10.18 percent; recreation & culture 9.66 percent, clothing & footwear 7.21 percent, health 8.08 percent and restaurants & hotels 6.47 percent, he informs.

Former President Lahore Chamber of Commerce & Industry, Irfan Qaiser Sheikh, calls the devaluation policy nothing but a disaster for all sectors. People have lost Rs98 billion in a day when the current deflation policy hit the market. Devaluing of the currency cannot help boost exports but increases inflation and make the life of common people miserable.

"The government has devaluated rupee up to 40 percent in less than a year which has practically washed out the business sector in the country. Due to such policies, the International Monetary Fund (IMF) has predicted that Pakistan’s GDP growth rate will be reduced to 2.9 percent while inflation and unemployment will go up," he says.

World Economic Outlook 2019 states that unemployment in Pakistan will rise to 6.2 percent in the next fiscal year from the current 6.1 percent. However, the current account deficit is likely to go down to 4.3 percent in 2020 from the projected 5.2 percent during the on-going fiscal year.

President Forex Association of Pakistan, Malik Bostan, believes the policies of devaluating currency and reducing the ratio of subsidies on various services would certainly help the government to increase exports, decrease imports and collect more revenue and the outcome of all these efforts would bring down the trade deficit.

Irfan Qaiser Sheikh criticises the government, saying government’s policies do not favour investment in the manufacturing industry. "Devaluation means imports such as petrol, food and raw materials will become more expensive; this will reduce productivity of the manufacturing industry. Albeit, we should go for higher exports and lower imports, which is a definite way of reducing the current account deficit".

According to Nauman Kabir, devaluation can cause a decrease in real wages. This is because devaluation causes inflation. "Besides, devaluation increases debt burden of foreign-denominated loans when priced in the home currency. This is a big problem for a developing country like Pakistan as ongoing deficits are unsustainable in the long run and can lead to dangerous levels of debt which can cripple an economy. About 22 percent of our manufacturing industries have closed down because of the devaluation policy of the current government."

Also read: Editorial

Former United Nations Assistant Secretary General and Federal Minister for Finance and Economic Affairs, Dr. Hafiz A. Pasha, writes in his book, Growth and Inequality in Pakistan; Agenda for Reforms published in April 2019 that "The loss of export competitiveness of manufacturing sector of Pakistan has to be restored by maintaining the exchange rate at its true value and not allowing it to appreciate. Since domestic electricity and gas tariffs are above world prices the difference may be reflected in the duty drawback regime".

He also points out that "Pakistan fares very poorly in the international ranking of Ease of Doing Business. It stands at 136 out of 190 countries with a significant improvement of 11 places in 2018. The setting up a new entity requires ease of establishing and doing a business."

https://www.thenews.com.pk/tns/detail/567590-devaluation-factor

Again there was no other choice.... because there was no forex. Complaining won't change that. No doubt that import oriented businesses were hit hard. But Pakistan imports many things it doesn't really need to. As far as I'm concerned the PKR should be kept as low as practical for as long as possible. I doubt Pakistan's grid electricity and gas are more expensive than Germany's. Germany is one of the largest exporters in the world.

 

[Norwegian]

If IK could become PM despite demonstrated acute lack of grey matter, then you can be a successful troll at least. You win, I lose. Have a nice day.

If your favorite donkey leader Nawaz Sharif can become prime minister three times, have some courage to enjoy Imran Khan's first term as PM.

People need to rise above the politics completely....this "patwari vs youthia" thing is what status quo powerbrokers

Not really. Patwaris genuinely want to bankrupt the country. They tried twice; first in 1998 and then in 2018 by deliberately setting Pakistan on import-led growth path. And both times it ended with Pakistan nearly going bankrupt after they were kicked from power by establishment.

Here you can listen to pathetic economic views of former PM of Pakistan Shahid Khaqan Abbasi. He too hails from @Chak Bamu's most favorite donkey party PMLN

https://twitter.com/x/status/1234436487170555904

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

All targets are met with devaluation. Exports are increasing, trade deficit shrinking. Now keep crying how bad this govt is.
Exports jump 13.6pc in February
Pakistan’s trade deficit contracts 27% to $15.7b

@Nilgiri @ziaulislam

 

[ziaulislam]

If your favorite donkey leader Nawaz Sharif can become prime minister three times, have some courage to enjoy Imran Khan's first term as PM.


Not really. Patwaris genuinely want to bankrupt the country. They tried twice; first in 1998 and then in 2018 by deliberately setting Pakistan on import-led growth path. And both times it ended with Pakistan nearly going bankrupt after they were kicked from power by establishment.

Here you can listen to pathetic economic views of former PM of Pakistan Shahid Khaqan Abbasi. He too hails from @Chak Bamu's most favorite donkey party PMLN

https://twitter.com/x/status/1234436487170555904

All targets are met with devaluation. Exports are increasing, trade deficit shrinking. Now keep crying how bad this govt is.
Exports jump 13.6pc in February
Pakistan’s trade deficit contracts 27% to $15.7b

@Nilgiri @ziaulislam

I believe its still seasonal...
Exports wont pick up substanitialy over the next 12-24 months..afterwards there is a possibility if govt doesnt delay SEZs

best case senrio they will hover around 4-5% on YoY bases which will be very good(if it happens)

 

[blueazure]

What else they can do if they dont do this. Kaam kay na kaaj kay dushman anaj kay. They are still living in their hypothetical world Jahan injection say hoorain dikhti hain , Sukoon qabar may ata hay aur interview ajkal sirf ghareeb logon ka hota hay aur riyasate madeena gayi tail lenay. Oyee kon log hain ye...

For all those who are arguing about why the Pk Rupee had to be devalued, here is an explanatory article. Whether anyone agrees with it or not depends upon him.


The devaluation factor
Shehryar Warraich
Special Report
April 14, 2019

• 
• 

The government has devaluated rupee up to 40 percent in less than a year which has hit the business sector hard

The value of rupee as against the US Dollar in December 2017 was Rs105. It has risen to Rs143 these days. It is stated to be the sixth currency devaluation since December 2017.

Economists believe factors like dwindling forex reserves, trade deficit, less manufacturing, growing imports, and political and economic uncertainty are keeping the rupee under great stress.

However, in October 2018, officials of the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance, Revenue, and Economic Affairs presided over by Senator Farooq H. Naik that depreciation of Pak rupee would help boost the country’s foreign exchange reserves with increase in exports and foreign remittances, and decline in imports, and current account deficit.

The SBP officials claimed that sharp devaluation of rupee injected a new life into the country’s economy because such policy increased foreign remittances by 13 percent, trade deficit narrowed by 1.6 percent and current account deficit shrank by 2.6 percent. In addition, the official said the real positive outcome would be felt in about a year.

Pakistan Bureau of Statistics shows that inflation rate in October 2018 was 6.78 percent which was 3.68 in April 2018. Contrary to the claims of SBP, inflation kept on increasing to 9.41 in March 2019 -- the highest rate since November 2013.

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

Through devaluation a government may be incentivised to encourage a weak currency policy if it has a lot of government-issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. For instance, if the domestic currency is devalued to half of its initial value, the $1 million debt payment will only be worth $500,000.

Chairman Pakistan Industrial & Traders Association Front (PIAF), Mian Nauman Kabir, challenges the claims made by officials of State Bank of Pakistan that devaluation would help in different ways. "Devaluation of the rupee failed to stimulate exports during the first five months (July-November) of the financial year 2018-19, as they grew by a meagre 1 percent to $9.12 billion against $9.04 billion in the same period last year. Moreover, there is a minor decrease in trade deficit in the last four months from Rs371.6 billion to 317.4 billion".

The inflation ratio is uncontrollable as prices increased for food & non-alcoholic beverages up to 8.22 percent; furniture & household equipment 9.51 percent; other goods & services 10.18 percent; recreation & culture 9.66 percent, clothing & footwear 7.21 percent, health 8.08 percent and restaurants & hotels 6.47 percent, he informs.

Former President Lahore Chamber of Commerce & Industry, Irfan Qaiser Sheikh, calls the devaluation policy nothing but a disaster for all sectors. People have lost Rs98 billion in a day when the current deflation policy hit the market. Devaluing of the currency cannot help boost exports but increases inflation and make the life of common people miserable.

"The government has devaluated rupee up to 40 percent in less than a year which has practically washed out the business sector in the country. Due to such policies, the International Monetary Fund (IMF) has predicted that Pakistan’s GDP growth rate will be reduced to 2.9 percent while inflation and unemployment will go up," he says.

World Economic Outlook 2019 states that unemployment in Pakistan will rise to 6.2 percent in the next fiscal year from the current 6.1 percent. However, the current account deficit is likely to go down to 4.3 percent in 2020 from the projected 5.2 percent during the on-going fiscal year.

President Forex Association of Pakistan, Malik Bostan, believes the policies of devaluating currency and reducing the ratio of subsidies on various services would certainly help the government to increase exports, decrease imports and collect more revenue and the outcome of all these efforts would bring down the trade deficit.

Irfan Qaiser Sheikh criticises the government, saying government’s policies do not favour investment in the manufacturing industry. "Devaluation means imports such as petrol, food and raw materials will become more expensive; this will reduce productivity of the manufacturing industry. Albeit, we should go for higher exports and lower imports, which is a definite way of reducing the current account deficit".

According to Nauman Kabir, devaluation can cause a decrease in real wages. This is because devaluation causes inflation. "Besides, devaluation increases debt burden of foreign-denominated loans when priced in the home currency. This is a big problem for a developing country like Pakistan as ongoing deficits are unsustainable in the long run and can lead to dangerous levels of debt which can cripple an economy. About 22 percent of our manufacturing industries have closed down because of the devaluation policy of the current government."

Also read: Editorial

Former United Nations Assistant Secretary General and Federal Minister for Finance and Economic Affairs, Dr. Hafiz A. Pasha, writes in his book, Growth and Inequality in Pakistan; Agenda for Reforms published in April 2019 that "The loss of export competitiveness of manufacturing sector of Pakistan has to be restored by maintaining the exchange rate at its true value and not allowing it to appreciate. Since domestic electricity and gas tariffs are above world prices the difference may be reflected in the duty drawback regime".

He also points out that "Pakistan fares very poorly in the international ranking of Ease of Doing Business. It stands at 136 out of 190 countries with a significant improvement of 11 places in 2018. The setting up a new entity requires ease of establishing and doing a business."

https://www.thenews.com.pk/tns/detail/567590-devaluation-factor

basically,,,, they have F**** up over devaluation


explain this to PTI lynch mobs like the @Norwegian

 

[ziaulislam]

basically,,,, they have F**** up over devaluation


explain this to PTI lynch mobs like the @Norwegian

everyoone was talkign about 200 i wonder why 155 seems over devaluation to people..
was PPP era over devaluation..was 1998 post-default over devaluation.

rupee value is what the value remains when there is no state bank intervention but this doesn't apply in panic.

state bank first let the rupee ran free and it was going at 165 WITHOUT INTERVENTION.. it then thought lets try 155..and Pakistan is having surplus even than at this moment but state bank has been given a target to get as much as reserves it can ..it cant play around.. which led to small buying from open market by state bank but how much is this undervalue probably not even 1-2% ..

again what surprises me is that you are shot in the back and you crying about the scar being few mm thicker than what it should be and praising the shooter and blaming the doctor..pretty fascinating to see Pakistani educated class talk about economics..since before I was born same person is looting this class but it seems its genetic and multigenerational..

For all those who are arguing about why the Pk Rupee had to be devalued, here is an explanatory article. Whether anyone agrees with it or not depends upon him.


The devaluation factor
Shehryar Warraich
Special Report
April 14, 2019

• 
• 

The government has devaluated rupee up to 40 percent in less than a year which has hit the business sector hard

The value of rupee as against the US Dollar in December 2017 was Rs105. It has risen to Rs143 these days. It is stated to be the sixth currency devaluation since December 2017.

Economists believe factors like dwindling forex reserves, trade deficit, less manufacturing, growing imports, and political and economic uncertainty are keeping the rupee under great stress.

However, in October 2018, officials of the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance, Revenue, and Economic Affairs presided over by Senator Farooq H. Naik that depreciation of Pak rupee would help boost the country’s foreign exchange reserves with increase in exports and foreign remittances, and decline in imports, and current account deficit.

The SBP officials claimed that sharp devaluation of rupee injected a new life into the country’s economy because such policy increased foreign remittances by 13 percent, trade deficit narrowed by 1.6 percent and current account deficit shrank by 2.6 percent. In addition, the official said the real positive outcome would be felt in about a year.

Pakistan Bureau of Statistics shows that inflation rate in October 2018 was 6.78 percent which was 3.68 in April 2018. Contrary to the claims of SBP, inflation kept on increasing to 9.41 in March 2019 -- the highest rate since November 2013.

Normally, governments apply three kinds of theories to justify their step of devaluating the currency: to boost exports, to shrink trade deficits, and to reduce sovereign debt burdens. According to this theory, exports are encouraged while imports discouraged. This happens because exports become cheaper and imports more expensive; it also favours an improved balance of payments trade deficit shrinks.

Through devaluation a government may be incentivised to encourage a weak currency policy if it has a lot of government-issued sovereign debt to service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time. For instance, if the domestic currency is devalued to half of its initial value, the $1 million debt payment will only be worth $500,000.

Chairman Pakistan Industrial & Traders Association Front (PIAF), Mian Nauman Kabir, challenges the claims made by officials of State Bank of Pakistan that devaluation would help in different ways. "Devaluation of the rupee failed to stimulate exports during the first five months (July-November) of the financial year 2018-19, as they grew by a meagre 1 percent to $9.12 billion against $9.04 billion in the same period last year. Moreover, there is a minor decrease in trade deficit in the last four months from Rs371.6 billion to 317.4 billion".

The inflation ratio is uncontrollable as prices increased for food & non-alcoholic beverages up to 8.22 percent; furniture & household equipment 9.51 percent; other goods & services 10.18 percent; recreation & culture 9.66 percent, clothing & footwear 7.21 percent, health 8.08 percent and restaurants & hotels 6.47 percent, he informs.

Former President Lahore Chamber of Commerce & Industry, Irfan Qaiser Sheikh, calls the devaluation policy nothing but a disaster for all sectors. People have lost Rs98 billion in a day when the current deflation policy hit the market. Devaluing of the currency cannot help boost exports but increases inflation and make the life of common people miserable.

"The government has devaluated rupee up to 40 percent in less than a year which has practically washed out the business sector in the country. Due to such policies, the International Monetary Fund (IMF) has predicted that Pakistan’s GDP growth rate will be reduced to 2.9 percent while inflation and unemployment will go up," he says.

World Economic Outlook 2019 states that unemployment in Pakistan will rise to 6.2 percent in the next fiscal year from the current 6.1 percent. However, the current account deficit is likely to go down to 4.3 percent in 2020 from the projected 5.2 percent during the on-going fiscal year.

President Forex Association of Pakistan, Malik Bostan, believes the policies of devaluating currency and reducing the ratio of subsidies on various services would certainly help the government to increase exports, decrease imports and collect more revenue and the outcome of all these efforts would bring down the trade deficit.

Irfan Qaiser Sheikh criticises the government, saying government’s policies do not favour investment in the manufacturing industry. "Devaluation means imports such as petrol, food and raw materials will become more expensive; this will reduce productivity of the manufacturing industry. Albeit, we should go for higher exports and lower imports, which is a definite way of reducing the current account deficit".

According to Nauman Kabir, devaluation can cause a decrease in real wages. This is because devaluation causes inflation. "Besides, devaluation increases debt burden of foreign-denominated loans when priced in the home currency. This is a big problem for a developing country like Pakistan as ongoing deficits are unsustainable in the long run and can lead to dangerous levels of debt which can cripple an economy. About 22 percent of our manufacturing industries have closed down because of the devaluation policy of the current government."

Also read: Editorial

Former United Nations Assistant Secretary General and Federal Minister for Finance and Economic Affairs, Dr. Hafiz A. Pasha, writes in his book, Growth and Inequality in Pakistan; Agenda for Reforms published in April 2019 that "The loss of export competitiveness of manufacturing sector of Pakistan has to be restored by maintaining the exchange rate at its true value and not allowing it to appreciate. Since domestic electricity and gas tariffs are above world prices the difference may be reflected in the duty drawback regime".

He also points out that "Pakistan fares very poorly in the international ranking of Ease of Doing Business. It stands at 136 out of 190 countries with a significant improvement of 11 places in 2018. The setting up a new entity requires ease of establishing and doing a business."

https://www.thenews.com.pk/tns/detail/567590-devaluation-factor

and how are we going to increase exports overnight?...

exports take decades of hard work to increase.
did Bangladesh, Vietnam and now African countries saw export rise overnight or after decades of a good environment and trust..?? what we did was we killed exports..?
the only metric you can use is whether the govt is giving land, utilities, ease of business and independent rupee to industry or not..but looking at exports growth will be stupidity, in fact it think they might drop further or arrest at best since they have been dropping rapidly since sharif Zardari combo took over..ironically they didn't drop in first 3 years of Zardari why?..you had work laid out for years for export boom ..

best case scenario is after 2 years of stability if utilities and business environment is friendly you get new industries which itself will take another 1-2 years to spun any production..so any meaningful exports in manufacturing is simply impossible, human resources, services and IT will take time too.

one thing is for sure..the boom and bust cycle started in 1985 by Mr sharif will not work, if this essence is not understood by people than they deserve what they get

 

[Norwegian]

basically,,,, they have F**** up over devaluation


explain this to PTI lynch mobs like the @Norwegian

Over devaluation? What did you want? Hyper inflation after default?

everyoone was talkign about 200 i wonder why 155 seems over devaluation to people..

Because they hate Imran Khan

 

[niaz]

By the basic laws of ’ Supply & Demand ‘ currency of any country where imports far exceed the exports and despite a very large inwards remittances; Current Account remains perpetually in the negative; will always be under pressure. Hence devaluation of Pak Rupee was unavoidable and inevitable, the only question was by how much?

However, now the water is under the bridge and no point crying over the spilt milk. My issue with the PTI government is its lack of clear direction. For example why it took so long to go to the IMF when it was clear from the start that there was really no other viable alternative? What happened to the PTI's pledges that were made before the election?

My wife has recently returned from Karachi, nearly all of her family live in the Defence Housing Society and had voted for PTI en-mass; they are deeply disappointed and complain that nothing has changed and Karachi remains as dirty and as crime-ridden as ever.

Finally proof of the pudding is in the eating, it is an undeniable fact that inflation has gone out of hand and even grade 20 middle pensioners (my brother) are finding it extremely difficult to make their ends meet. Can one imagine the plight of white-collar workers with school-going children earning about 35 - 40K Rupees per month? Naturally, families with even lower incomes are down in the dump.

Don’t you think that after more than 18 months in power, PTI's narrative should change; how long would we go on listening to the same old rhetoric of corruption by the previous govt's? I never had a lot of belief that PTI gov’t would do much better than PML-N or PPP because most of the ministers are the same but regrettably, thus far it is proving even worse.

 

[ziaulislam]

By the basic laws of ’ Supply & Demand ‘ currency of any country where imports far exceed the exports and despite a very large inwards remittances; Current Account remains perpetually in the negative; will always be under pressure. Hence devaluation of Pak Rupee was unavoidable and inevitable, the only question was by how much?

However, now the water is under the bridge and no point crying over the spilt milk. My issue with the PTI government is its lack of clear direction. For example why it took so long to go to the IMF when it was clear from the start that there was really no other viable alternative? What happened to the PTI's pledges that were made before the election?

My wife has recently returned from Karachi, nearly all of her family live in the Defence Housing Society and had voted for PTI en-mass; they are deeply disappointed and complain that nothing has changed and Karachi remains as dirty and as crime-ridden as ever.

Finally proof of the pudding is in the eating, it is an undeniable fact that inflation has gone out of hand and even grade 20 middle pensioners (my brother) are finding it extremely difficult to make their ends meet. Can one imagine the plight of white-collar workers with school-going children earning about 35 - 40K Rupees per month? Naturally, families with even lower incomes are down in the dump.

Don’t you think that after more than 18 months in power, PTI's narrative should change; how long would we go on listening to the same old rhetoric of corruption by the previous govt's? I never had a lot of belief that PTI gov’t would do much better than PML-N or PPP because most of the ministers are the same but regrettably, thus far it is proving even worse.

So would you prefered 200 rupees than
What was lack of direction to you seems to be slow adjustment to avoid hyperinflation

IMF demanded upfront adjustment as there money isnt free like 15b you got from the arabs.

You saw what happened when we signed IMF inflation hit 15%.
Imagine you signed that on year one. Inflation would have hit 50%

I am surprised why people are flip flopping ..

I am not saying which was right and wrong but it should be crystal clear that a signing an agreement when CAD is 800million$ a month vs 2 b$ month is like sky and ground..there is no comparison

 

[Gorgin Khan]

So would you prefered 200 rupees than
What was lack of direction to you seems to be slow adjustment to avoid hyperinflation

IMF demanded upfront adjustment as there money isnt free like 15b you got from the arabs.

When did arabs gave us 15 billion and that too for free ?

You saw what happened when we signed IMF inflation hit 15%.

Again it was not only due to signing the deal (there are multiple factors). If it was then why was the deal not signed when demands were met upfront before signing ?

Imagine you signed that on year one. Inflation would have hit 50%

If the demands were met upfront how can inflation hit 50 %?(Again this is your supposed figure just multiplying the problem itself). Do you have any idea what 50 percent inflation means specially in our case ? Of course google dont provide answer to these questions. It can bring down your whole system and economy like a house of cards.

I am surprised why people are flip flopping ..

Yes because i think those who are making decisions is only referring to google for understanding.

I am not saying which was right and wrong but it should be crystal clear that a signing an agreement when CAD is 800million$ a month vs 2 b$ month is like sky and ground..there is no comparison

For your information the current account deficit uptil feb was 15 billion dollars we are not yet finished with this year- Where did you get this 800$ million from ?

Your information about certain things is totally baffling (based on supposition) and lack of understanding of economics is certainly evident. Google can tell you what economics is ? Understanding it practically is a totally different ball game.

 

[niaz]

So would you prefered 200 rupees than
What was lack of direction to you seems to be slow adjustment to avoid hyperinflation

IMF demanded upfront adjustment as there money isnt free like 15b you got from the arabs.

You saw what happened when we signed IMF inflation hit 15%.
Imagine you signed that on year one. Inflation would have hit 50%

I am surprised why people are flip flopping ..

I am not saying which was right and wrong but it should be crystal clear that a signing an agreement when CAD is 800million$ a month vs 2 b$ month is like sky and ground..there is no comparison

Honorable Sir,

I heard Assad Omar on TV myself saying that Pakistan may have to go to the IMF. My point is that a couple of months' uncertainty about whether or not go to IMF were very harmful to the economy. I am not questioning the devaluation at all, however I am convinced that had PTI gov’t decided to go to IMF from the very first, devaluation would have been much less, maybe to Rs 140/- only.

My second point is that Fawad Chaudhry claimed:

“Housing sector launched by PTI gov't to create thousands of jobs: Fawad Chaudhry”

https://www.app.com.pk/housing-sector-launched-by-pti-govt-to-create-thousands-of-jobs-fawad-ch/

And Faisal Vawda declared:

“There will be so many jobs in Pakistan in 7-10 days: Faisal Vawda”

By that time Imran Khan was running from pillar to post to avoid going to IMF. In my humble opinion, it is outright dishonesty when federal ministers make such bombastic claims knowing full well the precarious economic situation of the country.

My final point is that sudden high inflation has made the cost of everyday necessities beyond the reach of Joe public, therefore PTI should stop its rhetoric of blaming everything on the previous gov’t and go all out to improve the lot of ordinary Pakistanis.

 

[Sine Nomine]

PTI should stop its rhetoric of blaming everything on the previous gov’t and go all out to improve the lot of ordinary Pakistanis.

Janabe Wala Yeah na hou ga,hum pichli sarkar kai sar daltey jayein gai theek usi tarah jesey pichli sarkar nai us sai pichli par dala.

 

[ziaulislam]

Honorable Sir,

I heard Assad Omar on TV myself saying that Pakistan may have to go to the IMF. My point is that a couple of months' uncertainty about whether or not go to IMF were very harmful to the economy. I am not questioning the devaluation at all, however I am convinced that had PTI gov’t decided to go to IMF from the very first, devaluation would have been much less, maybe to Rs 140/- only.

My second point is that Fawad Chaudhry claimed:

“Housing sector launched by PTI gov't to create thousands of jobs: Fawad Chaudhry”

https://www.app.com.pk/housing-sector-launched-by-pti-govt-to-create-thousands-of-jobs-fawad-ch/

And Faisal Vawda declared:

“There will be so many jobs in Pakistan in 7-10 days: Faisal Vawda”

By that time Imran Khan was running from pillar to post to avoid going to IMF. In my humble opinion, it is outright dishonesty when federal ministers make such bombastic claims knowing full well the precarious economic situation of the country.

My final point is that sudden high inflation has made the cost of everyday necessities beyond the reach of Joe public, therefore PTI should stop its rhetoric of blaming everything on the previous gov’t and go all out to improve the lot of ordinary Pakistanis.

All claims made by any PTI memebers should be taken by pinch of salt infact by any member of any party in pakistan.

I was talking from a purely academic point of view.

If pakistan had signed IMF deal early, IMF would have asked for greater spending cut, higher interests which would inevitable meant much higher devalaution and SUPER HIGH inflation. The reason is IMF doesnt has enough money for slower refrom.

Pakistan managed that slower reform in the first year when it slowly devalued to 135 than slowly increased interest rates, did major cuts and... in the reform process blew 10b dollars..it still cut down the current account deficit to half...
It was than at situation of 600-800m/month deficit down from 2b/month with interest rates adjustment already made but fisical deficit of 7%.
In other words IMF could technically even be avoided but for markets to settle and for reforms to be VALIDATED pakistan signed it..not for the money per say..

Half of the work was done yet this was most difficult program because the 800m$ deficit oer month is still 2-3x higher than anything before.(PPPP deficit was 200m/month, PMLN around 300m/month).

When it comes to rupee, rupee will never be a fix rate and will never be slow down rate untill we stop printing notes that WE DIDNT in 2019 simply because govt had no money to adjust to the interest rates(& thus fiscal deficit ran this high)
It is also impossible to accurately set a rate as market was in such high flux. Currently whats happening is state bank buying from market to avoid rupee appreication which people suspect is around 145 but this could well have been 160! There is no way to tell this before hand ...so now state bank should stop doing this and be neutral right? But it cant..it has to be proactive and build reserves. By the time its done with that rupee natural value will be at 150s anyway.

Every country devalues its rupee by 3-4% everyyear to keep inflation and investment high.

I refused to admit that an educated person cant understand simple numbers as 1. Current account deficit 2.state bank lending 3. Inflation, saving and investmennt. these numbers are straight forward.

Is it so hard to open state bank website check the trend of CAD in last 25 years and simply compare it to bengaldesh

Is it hard to check the interest rates, savings and investment and compare them to bangaldesh

Is the concept of paper rupee so hard? It existed for 100s of years ago. Is concept of productivity and state bank lending rocket science to comprehend.?

I dont think so.

I think its simply denial, people are angry and they are in denial, just like when patient is angry towards the doctor when he well knows who caused it and what will be the course of treatment

 

[El Sidd]

2020 will be the year of the NAUKRIYAN - PM Niazi circa Dec 2019.

Manhoos bache ki tarah jo ye shakhs ke moun se nikalta hai ulta hota hai.. aur barha sood ki shara'