The burn of hot money

[B.K.N]

We all bring Niazi.....What happen....to Nia Pakistan?

They are all useless...until unless we change f@cking system and bring presidential rule.

One patwari writes anti government article and all Imran Khan haters are saying PTI na mulk tabah kardia ha. And no new system is coming either PTI would rule Pakistan or noon league type parties.
Previous governments has destroyed Pakistan's economy Imran Khan is trying to improve.
And as far as propaganda of these lifafas is concerned the dogs bark but the caravan moves on

we need to force localised production and curb all unnessary/non-essential imports such as edible oil/feul/active parts for pharam etc

PTI government is the first government which is trying to decrease imports of Pakistan.

 

[American Pakistani]

There is NO other way but to reduce imports and increase exports and man power to foreign countries. The sooner people get this through their skulls the better for all. You keep buying foreign made stuff and demand govt to do everything? That's not possible.

 

[Mav3rick]

Perhaps the lopsided economics and increased prices are due to Pakistanis living beyond their means through cheap credit, tax evasion, IMF loans and circular debt. Over the decades of incompetence and Corruption ... Imran Khan isn't going to become an overnight miracle for all you woes ....

Now it's time to pay the piper in the form of higer prices and inflation... Which is a form of indirect taxation on labor.

You can't have you corruption-cake and eat it too... If you aren't a productive economy and just a consumer based economy you don't deserve a higher standard of life. Period.

Sorry... Truth hurts.

I don't know for how long PTI and her lovers will hide behind the farse of '70 years of .......' and other BULL CRAP none of which holds any water under any investigation!

That we are plagued by corruption is another story altogether but to sidestep the very fabric of meticulously planned (there is no other way to accept it) and engineered destruction of our economy through economic hitmen and massively flawed policies, is criminal; and that too is being kind. Further, it was the same Pakistanis who were coping superbly under the regime of the so called 'corrupt' mafia where everything was 200% better for common Pakistanis not more than 2-3 years ago!

There was NO IMF loan in the last 2 years of PML Government as Ishaq Dar had successfully negotiated an IMF program.....must I remind that PML assumed power transitioning from PPP which had exhausted Government coffers before relieving charge?

Most importantly, did PTI absolutely have to focus on destruction of economy and commerce to reign in on corruption? Have we made ANY progress on that front, the corruption/nepotism and incompetence I mean?

When I come across PTI support nowadays I seriously wonder whose paying the bills in that house because those who are paying their own bills are aware of how out of control the inflation is, and it is all because of inflated ego of 1 man..........and he is NOT a politician, in my opinion!

 

[RoadRunner401]

I can see that you have chosen Canada as your current location. With that, you can be excused for being so naive, otherwise the word would have been much harsher.

Why, because People in Canada don't pay any taxes? Why, because My family that lives in Hyderabad doesn't pay any taxes or bills, Are you someone special that's feeling this pain? My tax and utility bills have doubled and tripled.

It is simply because our Gas bill, our Electricity bill, our Grocery bill, our Taxes and everything else has gone up exponentially in the past 2 years and it does not take an accountant or economist to get this. All this while our salaries and revenues are going down. This is a situation which even the most critical opponents of PTI may not have expected and yet here we are with no sight to relief.

Oh, you mean PTI should have continued to borrow and subsidize imports by keeping rupee value artificially high, so you don't feel the pain of reality? Who do you think was going to pay back the billions borrowed, Aliens from MARS?

There is a joke going around, let me water it down for all audiences:

There was also joking going around where Pakistani were thinking that they can run the country with borrowed money and don't ever have to pay back the loan or taxes to cover the cost, well guess what bro the joke is over and reality here deals with it, like the rest of us are.

 

[guest9999]

Unfortunately, we had corrupt rulers, incompetent rulers and now stupids at helm of affairs, they surround themselves with cronies; cronies who inform all good only and the ruler they are not even bothered to check facts, have no propensity to read or learn. Exports is not something which could be increased overnight or even in 5 years time, it requires market study, education/vocational infrastructure, industrial base, Govt policies, interest rates and lot of other factors. Frankly while I am hopelessly optimistic about Pakistan, I have no qualms about competence of our bureaucracy/fauji/politicians and businessmen.

Sir, have you considered reaching out to IK to advise him, or rather "undo all the brainwashing he's received over the past few months"? You should have listened to his speech on NAB ordinance - he was tying it to wealth creation and businesses. I thought it was as if the "Rent Mafia" were puppeteering IK to say exactly what they wanted him to say.

I think this is an emergency - if there was any way to reach out to IK and warn him...

This is something which worries me deeply, IK doesn't have much time may be months powers be will change the face but the policies will remain the same "qoum ko kurbani deni paray gi" old song will be parroted again. The resentment and frustration is increasing and this is a dangerous situation.

Has establishment decided to remove PTI? Do you think this is why the recent vocal statements from disgruntled coalition partners - MQM, PML-Q, GDA? Any reason for this, did IK cross the establishment's red line - perhaps during Feb 27th standoff and IK's unilateral overtures?

 

[Mav3rick]

Why, because People in Canada don't pay any taxes? Why, because My family that lives in Hyderabad doesn't pay any taxes or bills, Are you someone special that's feeling this pain? My tax and utility bills have doubled and tripled.

People in Canada most certainly pay taxes, and you misunderstood me. My implication was that since you live in Canada and are immune from almost monthly inflation in Pakistan, largely due to nonsense fiscal policies of the incumbent Government; and because you are shielded from the actual situation, you can afford to still support PTI.

As for your family feeling the pinch of insane inflation, are they still supporting PTI?

Oh, you mean PTI should have continued to borrow and subsidize imports by keeping rupee value artificially high, so you don't feel the pain of reality? Who do you think was going to pay back the billions borrowed, Aliens from MARS?

You are in Canada so let me give you an example, from Canada: Most Canadians who buy houses rely on House loans, generally from lending institutions. They take a loan and build a house, the best they can afford, and pay for it over 20-30 years. The initial years of repayment is tough as there is a massive amount of interest on the entire principal amount, however, the pain recedes in the coming years as you progress financially and as the interest decreases because of decrease in the principal amount that you have paid over the years.

Basically, when you take a loan today, it may seem very large but over the loan repayment period, your economy will grow even larger and then the repayments will eventually start looking very small and manageable, so long as you are smart with your investment. The previous Government, despite being extremely corrupt, was very smart and they invested heavily in road networks and power generation......the 2 ingredients we had been missing for 10 years for our success in becoming a much larger and better economy. So, in the end, it would have been us Pakistanis, albeit much better off financially, who would have re-payed the loans.

There was also joking going around where Pakistani were thinking that they can run the country with borrowed money and don't ever have to pay back the loan or taxes to cover the cost, well guess what bro the joke is over and reality here deals with it, like the rest of us are.

I hope my explanation above is sufficient to put my point across. You may also be interested to know that we have always always returned loans and that we have been under debt ever since the 1965 war. Debt and loans are not bad things, when managed efficiently and effectively. It is merely presented as a sin by PTI to sell her own narrative all the while taking more loans in her first year than PML had taken in 3 years!

 

[Clutch]

I don't know for how long PTI and her lovers will hide behind the farse of '70 years of .......' and other BULL CRAP none of which holds any water under any investigation!

That we are plagued by corruption is another story altogether but to sidestep the very fabric of meticulously planned (there is no other way to accept it) and engineered destruction of our economy through economic hitmen and massively flawed policies, is criminal; and that too is being kind. Further, it was the same Pakistanis who were coping superbly under the regime of the so called 'corrupt' mafia where everything was 200% better for common Pakistanis not more than 2-3 years ago!

There was NO IMF loan in the last 2 years of PML Government as Ishaq Dar had successfully negotiated an IMF program.....must I remind that PML assumed power transitioning from PPP which had exhausted Government coffers before relieving charge?

Most importantly, did PTI absolutely have to focus on destruction of economy and commerce to reign in on corruption? Have we made ANY progress on that front, the corruption/nepotism and incompetence I mean?

When I come across PTI support nowadays I seriously wonder whose paying the bills in that house because those who are paying their own bills are aware of how out of control the inflation is, and it is all because of inflated ego of 1 man..........and he is NOT a politician, in my opinion!

My thoughts are Corruption has no excuses... Let all the corrupt burn in hell.

Simple.

 

[Norwegian]

Our economic managers are not just agents of IMF, they are the hitmen who not only sell their nation out but put the noose around the economic neck of the country. Being in the financial sector I know how the economy and the resources of this country are being plundered due stupid/incompetent leaders and corrupt economic managers and bureaucrats.

So taking loans from IMF more than 21 times out of desperate need to avoid bankruptcy is completely fine. You feel no embarrassment in that. But if they dare running this badly managed country, it is a very bad thing? What a BS load of contradiction!

Say I brought $100,000,000 (one hundred million) through SCRA and invested in a 6 months Government paper (Treasury bill, basically a zero coupon paper) carrying an interest rate of 13% p.a @ an exchange rate of Rs.160/dollar. I get 16 Billion PKR. Every one is happy that SBP forex reserves have increased by $100 million, thing are shown as hunky dory.

6 months down the road at maturity the 16 billion PKR is now, Rs.17.059 billion, interestingly the exchange rate is now Rs.155 to a dollar. How much dollar I am going to get at this exchange rate, lets see; $110.0623 million with no tax implications the return on investment is 20.12% p.a.

Oh really? Why didn't you take running inflation of 12 percent in this calculation? With 13 percent interest rate and 12 percent inflation, real interest rate (rate of return) is only 1 percent! This is how "smart" people like you fool the masses with your anti govt propaganda.

it practically destroys the economy inflation will not be coming down significantly anytime soon

How do you know that? Inflation is projected to fall by the end of this year.

Why PKR was depreciated way beyond PPP value, the PPP value can be anything between 145-152 PKR? depending upon various factors and weight

The reversal in exchange rate has benefited whom?

What is the impact of this high level of interest rate and inflation on the economy?

PKR was depreciated massively to curb the massive current account and trade deficit as inherited from the previous govt. As you can read from the news, it had desired effect.
https://nation.com.pk/30-Dec-2019/pakistan-s-current-account-deficit-to-narrow-down-to-2-4pc-imf

Basically in few years Pakistan will need even bigger begging bowl to repay debt.

Talking like a true patwari.

With each passing day, its getting clearer that imran khan is incompetent, dumb and a fool. I just hope he doesnt do too much damage is these 3 or so years. I hope we find a new political party where competent people are encouraged.

O really? Which party is that?

SBP should not have opted for this just to maintain reserves. We need structural changes.

Ok then. What are the alternatives? Spit it out.

Thanks. That was a very informative post. Enjoyed reading it.

Perhaps the current government was between a rock and a hard place and took the risk to pursue "hot money" to improve the reserves and account deficits... As a short term (desperate) strategy. ?

The thinking being the gamble of taking on "hot money" as a short term measure to bring some stability to the PKR and in then increase exports... So if and when there is an exodus of this "hot money" the productivity and GDP of Pakistan by then has improved???

Just a thought.

It wasn't an informative post. It was a complete lie, a calculation that didn't take major factor like inflation into account. As for the question of exodus of hot money in case interest rates goes down, we have a clear cut example of Egypt. There interest rates were cut from 19 percent to 12 percent, yet hot money remained stable at 45 billion dollars!

Anyhow, why is the interest rate so high? Why aren't import duties pushed higher...? I have NOT come across any PolicyPaper on mid term outlays/plans let alone long term...

Interest rates are set so high to curb inflation which is running at 12 percent.

You keep buying foreign made stuff and demand govt to do everything? That's not possible.

More importantly; buying foreign made stuff with loans from IMF and other financial institutions. And then arrogantly calling them imposed conspirators, economic hit men and whatnot when price of this reckless behavior is paid by common man.

 

[ps3linux]

Brother mine,

Firstly, welcome back..hopefully, you be fine!

WeaponisedFinance/IMF .... and then the plundering through Hotmoney is another form of EconomicHit/EconomicTerrorism....

As I have said before.... we need to force localised production and curb all unnessary/non-essential imports such as edible oil/feul/active parts for pharam etc... all the rest must be forced for local production....

Only focusing on export creates a very unbalanced economy... we have enormous room for growth based on internal consumption...

I do believe, as I have said it before... stockmarket is a whitewashing mechanism.... moneyluandered goes abroad...register a company...and then reinvest in Pakistan via recognised fund or local broker.... we have been here before....

Anyhow, why is the interest rate so high? Why aren't import duties pushed higher...? I have NOT come across any PolicyPaper on mid term outlays/plans let alone long term...

Don't mind my saying but the current FinMin and SBP don't inspire me much...looks like these are imposed!

You take good care!

Mangus

Thanks sir, travelling travelling and more travelling, did 200,000 Km last year along 15 countries and 37 cities, this year already over 5,000 km, will be adding 600 today.

With the exception of a few research pharmaceuticals we don't need to import anything but then again you know what is the real situations, multinational mafia, what is really needed is basic manufacturing meaning raw material manufacturing chinese and indians addressed this long time ago. As for edible oil if you start seeing a media campaign against PAR/NARC this means that the import lobby has started its campaign, our local olive production crossed 40,000 acres this year the day it crosses 250,000 acres we will be able to stop import of canola/palm and sunflower oil (if I am not wrong we are talking about an import bill in excess of 2.5 billion dollars),fuel is a big problem local discoveries are slow and demand is on the rise. I agree with your point only exports focus tends to create imbalance in economy, both local consumption and exports have to be planned together.

About stock market some other day, its nothing but BS.

As for curbing imports not once but dozens of times I have proposed certain measures to curb import of unnecessary items, I know Mr. Sheikh personally his brother and I worked together back in the day in the same line of business in states but somehow people either don't want to see the solution of the problem right in front of them are are unwilling to recognize the same.

Sir, have you considered reaching out to IK to advise him, or rather "undo all the brainwashing he's received over the past few months"? You should have listened to his speech on NAB ordinance - he was tying it to wealth creation and businesses. I thought it was as if the "Rent Mafia" were puppeteering IK to say exactly what they wanted him to say.

I think this is an emergency - if there was any way to reach out to IK and warn him...

Has establishment decided to remove PTI? Do you think this is why the recent vocal statements from disgruntled coalition partners - MQM, PML-Q, GDA? Any reason for this, did IK cross the establishment's red line - perhaps during Feb 27th standoff and IK's unilateral overtures?

As a matter of fact not just me but many others have tried, those who understand what is happening and what is likely coming unfortunately as is the case in our part of the world he too has surrounded himself with cronies who are harping the same old song. Many people have now started passing on the outlook to faujis! period.

Not remove but keeping in check may be a better word, he has done some blunder lately and powers be are unhappy, only major problem these days is alternate, the day an appropriate person who can face challenges the country is facing these days not only on domestic front but international front as well. Any overt move and the FATF, anyways it is unfortunate that people in my line of business cannot afford to be part of anyone's fan club like some of the retards I see on this board and elsewhere, things are not rosy but being a Pakistani I always have hope, we will come out of this mess eventually someday, but just not today.

Few good things too are happening like the project IK launched few days back on training of youth, Sania Nishtar's BISP revelations naming/shaming of people, Allama Iqbal SEZ Faisalabad.

 

[Norwegian]

Further, it was the same Pakistanis who were coping superbly under the regime of the so called 'corrupt' mafia where everything was 200% better for common Pakistanis not more than 2-3 years ago!

There was NO IMF loan in the last 2 years of PML Government as Ishaq Dar had successfully negotiated an IMF program.....must I remind that PML assumed power transitioning from PPP which had exhausted Government coffers before relieving charge?

Care to explain if things were going so great under your favorite previous govt, how come Pakistan incurred these massive trade and current account deficits?

And no, PPP didn't leave behind massive deficits like your favorite CHOR govt. PPP only left behind pretty manageable 3 billion dollar current account deficit, while your favorite CHOR govt left behind more than 18 billion dollar record deficit!

As for your family feeling the pinch of insane inflation, are they still supporting PTI?

What's wrong with this inflation? It has been more insane before. This is necessary and expected during this stablization phase.

The previous Government, despite being extremely corrupt, was very smart and they invested heavily in road networks and power generation......the 2 ingredients we had been missing for 10 years for our success in becoming a much larger and better economy. So, in the end, it would have been us Pakistanis, albeit much better off financially, who would have re-payed the loans.

So now you must pay back higher taxes to finance those roads and power generators built by previous "smart" govt. Why keep crying about tariff hikes and inflation then? There are no free lunches. Your smart previous govt built these for you at a much higher cost than what was necessary because of rampant corruption. Now you must pay the price for their "smartness". Stop crying and pay your bills!

It is merely presented as a sin by PTI to sell her own narrative all the while taking more loans in her first year than PML had taken in 3 years!

Flat lie. Where is the evidence? Taking currency devaluation and retirement of massive 10 billion dollar debt into account, PTI has taken less loan than previous govt last year

https://twitter.com/x/status/1202571921390493697

 

[Mav3rick]

My thoughts are Corruption has no excuses... Let all the corrupt burn in hell.

Simple.

I cannot agree as we have no alternate and because we don't live in a perfect world. However, I would rather have a corrupt but competent leader as opposed to an honest but incompetent leader. Currently, we are under the worst of both worlds, a Government led by an extremely incompetent and corrupt leader!

 

[The Accountant]

Hey guys good news, the situation has started improving on debt security investment as well.

Foreign Direct Investments in December 2019 Recorded at $486M which is 52% higher than same month last year.

Whereas from July to December 2019 FDI recorded at $1,340M which is 68% higher than same period last year.

These are not debt investments.

Portfolio Investments i.e. Debt securities during month of Dec 2019 have shown a NET OUTFLOW of 685M USD. Despite of those outflow, Reserves continued to improve & PKR further stabilized.

Source : SBP

 

[Mav3rick]

Care to explain if things were going so great under your favorite previous govt, how come Pakistan incurred these massive trade and current account deficits?

And no, PPP didn't leave behind massive deficits like your favorite CHOR govt. PPP only left behind pretty manageable 3 billion dollar current account deficit, while your favorite CHOR govt left behind more than 18 billion dollar record deficit!

Before I even begin to respond to your off-the point topics, I must remind you and others that being a Karachiite, those who know me on the forums are already aware, that I have always been an MQM supporter and so in no sane mind could I ever be a PML supporter. But when given the option to be Governed by the corrupt but competent PML or corrupt and incompetent PPP or extremely corrupt and extremely incompetent PTI, I would prefer the least of all evils i.e. PML. Now lets move forward.

In response to the posts, I was speaking about Government coffers being empty when PPP left and you decided to bring in CAD instead!!! Perhaps you have no idea what each is and so decided to pick up a point which, in your own opinion, would look favorable to your argument. Well, it does NOT! Let me explain.

CAD was simply because we were importing more than we were exporting. A reason for this is because during PPP (and perhaps during the later stages of Musharraf), not enough attention was paid to the growing need for stable power which resulted in massive shortfall thereby rendering a large part of manufacturing and industry in bad shape, unable to produce enough to keep our exports high. This was the reason for decline in exports during the last 10 years or so.

A large chunk of the imbalance between export and import was offset by remittances, the remaining had to be adjusted through loans. However, what is important to note is what our largest import bill was or the top 5-10 items on our import list due to which our imports were so high. I don't have time to search our top 5-10 items in the 2014 through 2017 bracket but this is the list of imports in 2018 which is almost 73.2% of our total imports:

1. Mineral fuels including oil: US$17.1 billion (28.4% of total imports)
2. Machinery including computers: $6.3 billion (10.4%)
3. Electrical machinery, equipment: $4.3 billion (7.2%)
4. Iron, steel: $3.7 billion (6.1%)
5. Organic chemicals: $2.8 billion (4.6%)
6. Vehicles: $2.6 billion (4.3%)
7. Plastics, plastic articles: $2.5 billion (4.1%)
8. Animal/vegetable fats, oils, waxes: $2.1 billion (3.5%)
9. Oil seeds: $1.5 billion (2.4%)
10. Cotton: $1.3 billion (2.1%)

Now, which of the above would you recommend NOT importing? It is not our imports which are flawed, it is merely our inability to increase exports and with surplus energy and stable power complemented by a large network of newly implemented road network we can start increasing our exports to someday overtake our imports.

What's wrong with this inflation? It has been more insane before. This is necessary and expected during this stablization phase.

So now you must pay back higher taxes to finance those roads and power generators built by previous "smart" govt. Why keep crying about tariff hikes and inflation then? There are no free lunches. Your smart previous govt built these for you at a much higher cost than what was necessary because of rampant corruption. Now you must pay the price for their "smartness". Stop crying and pay your bills!

The only thing wrong with the graph of inflation that you have posted is the fact that it is incorrect. With GAS (143% + 213%), Electricity (37%+), Petrol (30%), Diesel (40%), Cars (average 30%) etc., and other consumer items going up from 10's to 100's of times, how can any sane person accept the concocted graph showing a mere 13% inflation? Actual inflation would be closer to 40% or more.

And worst of the matter is that it is NOT the previous Government which is to be blamed but the current Government which rap** the economy by allowing spontaneous devaluation of the rupee to as low as Rs. 164 to a USD. The cost of imports, from petrol to diesel to computers and machinery and raw material etc., all shot up out of control. This was NOT the correct move to arrest imports which could have been arrested with mere increase of taxes on non-necessary items. The lower imports also directly effected the collection of taxes on these items and indirectly through lower output due to higher cost of business (again much more expensive machinery, spare parts and raw material etc.) dealt another blow to the Government's financial power.

Flat lie. Where is the evidence? Taking currency devaluation and retirement of massive 10 billion dollar debt into account, PTI has taken less loan than previous govt last year

https://twitter.com/x/status/1202571921390493697

Stop buying in the PTI BS and Lying. Here is a quick summary (from wiki https://en.wikipedia.org/wiki/National_debt_of_Pakistan):

"In 2008, external debt of Pakistan only increased by 22 percent in that period, from US$42.8 billion in 2008 to US$52.4 billion in 2013. During that period, external debt as a percentage of GDP decreased from 29.5 percent to 23.4 percent.

After 2013 Pakistani general election, Nawaz Sharif came to power. During their rule of five years, Pakistan's external debt increased from US$52.4 billion to US$76.3 billion, an increase of 46 percent, mainly due to sukuk bonds and China-Pakistan Economic Corridor.

As of March 2019, external debt of Pakistan is now around US$105 billion. Pakistan owes US$11.3 billion to Paris Club, US$27 billion to multilateral donors, US$5.765 billion to International Monetary Fund, and US$12 billion to international bonds such as Eurobond, and sukuk. About fifth of the external debt which is estimated around US$19 billion is owed to China due to China-Pakistan Economic Corridor.

You may also be interested in https://www.ceicdata.com/en/indicator/pakistan/external-debt

So, please stop believing the filth that spew out of PTI's mouth and the start praying for Pakistan to recover from the absolute nightmare that PTI has plunged Pakistan into.

 

[Clutch]

I cannot agree as we have no alternate and because we don't live in a perfect world. However, I would rather have a corrupt but competent leader as opposed to an honest but incompetent leader. Currently, we are under the worst of both worlds, a Government led by an extremely incompetent and corrupt leader!

I live in a country that is not corrupt. There is an alternative. Choosing acceptable evil , is still evil at the end of the day.

Hang the corrupt. May they all burn in Hell forever!

 

[Mav3rick]

I live in a country that is not corrupt. There is an alternative. Choosing acceptable evil , is still evil at the end of the day.

Hang the corrupt. May they all burn in Hell forever!

My friend, with that definition and sentence, you will hang 99% of the country, quite possibly. That is unless you define acceptable levels of corruption, from adulteration to adultery (financial to moral corruption) etc.

And I am surprised that you live in a country where there is no corruption, corruption is present worldwide, there are places where corruption is an epidemic whereas other places where the scale is minuscule.