ADB sees economic recovery in Pakistan

[Patriot forever]

The chart I posted wasn’t actually in reply to your comments, but yes you have read it correctly. My purpose was to show that money supply growth was well managed and no money printing was used as some form of monetary stimulus.

OT: One of the biggest lessons from this latest crisis should be the importance of central bank independence. Which is practised everywhere in the world, and guarded with utmost importance. It should be codified in our laws that SBP operates without political interference, and SBP should be given a strict mandate of sustaining price stability, with secondary considerations of output. Finance ministers and governments should have no say.

Well if we look at the graph, we have to couple the linear graph (in end of tenure of Plmn and start of pti) with interest rate. In Plmn it was a lot less around 8% than in pti which hit 14%. So major portion was spent in interest payment as compared to government spending (monetary stimulus) in Plmn end days. Otherwise it would show a spike. Interest payment is a huge component of budget.

Yes central bank absolute independence is a must but it comes at a cost of political capital. A lot of major reforms in that direction has been taken ultimately we will achieve that.

 

[Patriot forever]

I disagree, do you know what it means to ‘print money’? Or how it is done? Please show me money supply growth during that period, and point out wherever it is you think the government printed money.

Money creation is done through the banking system NOT through the fiscal channel. This is basic economics. Also, the main effect of money supply growth besides increased output is large increases in prices. Here’s a basic if not completely realistic relationship:



(I don't completely agree with this theory, but even so, its predictive effects are usually valid given a few constants and assumptions).

Secondly, here's Pakistan's money supply (M3) over the last 10 years:

View attachment 696304

The growth in that era was steady, no big spike. In fact, the only real spike has come recently. And if your theory about money printing for fiscal stimulus and spending were true (it certainly isn't true), then the effect on inflation in that era would be opposite of what was actually observed. The inflation rate was decreasing steadily throughout those years.

CAD grew because our import bill grew. When you try and actively grow the economy beyond the means with which it can manage sustainably, by employing policies like overvaluing PKR. You make imports much cheaper and exports less competitive, this may lead to lower inflation and higher temporary purchasing power, and therefore consumption driven growth. We were also importing quite a lot more due to CPEC, including machinery and capital.

All together it was these policies that cased CAD. It has nothing to do with money printing etc.


Boom and bust is fine, it's just a consequence of fluctuations in economic conditions. My objection was to the use of the word 'artificial'. To say that bad policy was malicious and not just stupid or misguided is a big step, and I don't agree. Based on my assessment it was stupidity.

By the way the IMF thing actually doesn't support your argument, it supports the opposite. They knew to go to the IMF. If they really wanted to cause a crisis, they would have made no preparations to go to the IMF. Along the same reasoning when PTI came in, my only issue with their early performance was that they waited too long before committing to an IMF bailout .

Boom and bust is not fine sir, it's outcome is completely opposite of sustained organic growth.
In a bubble growth (like in our case) it always reverts back to baseline when the artificial stimulus is removed (rupee subsidy against dollar), on the other hand everything for example inflation as well as currency jumps once the masking is removed to what would have been it's eventual outcome (instead of natural increase over a period of time).

To conclude we were left in shock because of economic recession, high inflation and low currency value.

 

[ziaulislam]

why?



Ashfaque Hasan? I don't take everything he says seriously. He was of the opinion not to go to imf ever. For going late dollar hit 160, wonder what would have happened if we never went to imf?

and he was right that dollar will hit 200, and Pakistan didn't go to IMF immediately, it burned through 15b dollars of friendly country aid while adjusting the interest rate and spending..

by the time pakistan signed with IMF the CAD was 7b$ vs 24b dollars at start of govt!

to be honest then the only reason we really did go (as 7b CAD was difficult but MANAGEABLE), was to get international confidence and to tap into AB-WB-IIB-IDF funds

Well if we look at the graph, we have to couple the linear graph (in end of tenure of Plmn and start of pti) with interest rate. In Plmn it was a lot less around 8% than in pti which hit 14%. So major portion was spent in interest payment as compared to government spending (monetary stimulus) in Plmn end days. Otherwise it would show a spike. Interest payment is a huge component of budget.

Yes central bank absolute independence is a must but it comes at a cost of political capital. A lot of major reforms in that direction has been taken ultimately we will achieve that.

as i said before everyone knows what PMLN did..
the one that deny it are simply getting part of pie, be they be importers, biryani eaters or kabza mafia

I disagree, do you know what it means to ‘print money’? Or how it is done? Please show me money supply growth during that period, and point out wherever it is you think the government printed money.

Money creation is done through the banking system NOT through the fiscal channel. This is basic economics. Also, the main effect of money supply growth besides increased output is large increases in prices. Here’s a basic if not completely realistic relationship:



(I don't completely agree with this theory, but even so, its predictive effects are usually valid given a few constants and assumptions).

Secondly, here's Pakistan's money supply (M3) over the last 10 years:

View attachment 696304

The growth in that era was steady, no big spike. In fact, the only real spike has come recently. And if your theory about money printing for fiscal stimulus and spending were true (it certainly isn't true), then the effect on inflation in that era would be opposite of what was actually observed. The inflation rate was decreasing steadily throughout those years.

CAD grew because our import bill grew. When you try and actively grow the economy beyond the means with which it can manage sustainably, by employing policies like overvaluing PKR. You make imports much cheaper and exports less competitive, this may lead to lower inflation and higher temporary purchasing power, and therefore consumption driven growth. We were also importing quite a lot more due to CPEC, including machinery and capital.

All together it was these policies that cased CAD. It has nothing to do with money printing etc.


Boom and bust is fine, it's just a consequence of fluctuations in economic conditions. My objection was to the use of the word 'artificial'. To say that bad policy was malicious and not just stupid or misguided is a big step, and I don't agree. Based on my assessment it was stupidity.

By the way the IMF thing actually doesn't support your argument, it supports the opposite. They knew to go to the IMF. If they really wanted to cause a crisis, they would have made no preparations to go to the IMF. Along the same reasoning when PTI came in, my only issue with their early performance was that they waited too long before committing to an IMF bailout .

no need to disagree....

just check state bank lending pattern over last three years

i hope you know what state bank lending is..

and dont my word for it..

go to state bank own website, you can even check the data released before 2018, if youthink PTI has anything to do with current state bank

screw me once shame on you, screw me twice shame on me, screw me thrice i should die of shame, scre me four times..well thats where we are

 

[Mav3rick]

I refuse to accept that someone can have lower IQ then 60(7 yrs old) and is on this forum.
Even a 7yrs will tell you why pakistan is like this..
Qaraz ley ka leya aur nakli note chap leya..

Ironically PMLN or state bank of pakistan doesnt deny state bank lending(note printing) or heavy expensive eurobonds...but their jayalas and matwalas try their best...

Why..simply because they are eating part of the cake that starts with billions and ends with biryani plate

So Pakistan was printing 'nakli' notes? That about sums up your own IQ. Kind of pointless for me to stoop that low again and waste my time.

Oh, so if it wasn't for PML_N appointed judges and PML_N senators standing in the way of PML-N government Pakistan wouldn't have been bankrupt.. It all makes sense now!

You mean kinda like Bhutto appointed Zia-ul-Haq and Nawaz Sharif appointed Pervaiz Musharraf? I hope this is sufficient explanation.

 

[PakAlp]

https://twitter.com/x/status/1091567443418460160

Why would Pakistan government allow imports of food items if we can grow just about anything in Pakistan. I visited many super stores in AJK and most of the items are imported. Tissue papers, sweets, cornflakes, shampoo etc.

 

[Norwegian]

infact, even if you have to take loans to offset the CAD which is there because of your larger imports of machinery, equipment and raw material that you need to establish an industrial base which you would eventually cut back into CAS when that industry start manufacturing and exporting then it is not a BAD deal. It takes time, patience, stability and unity.

So you say your favorite PMLN govt went from 20 billion USD trade deficit to 37 billion deficit because they imported machinery for export. Okay now that machinery is imported, where is that corresponding export growth to offset the trade imbalance?

I partially agree here, but Ishaq Dar era economic policy had one major failing, and that is the use of reserves to peg PKR at a way overvalued rate. This both deteriorated CAD, and destabilised us financially. If it was not for that, there would be no question that the previous PML tenure showed superior economic indicators and that even the high CAD was in part a sign of some major capex and industrial development.

You call these superior indicators?

Sir to sum up your post it is a sugar coated way of saying 'it was an artificial boom and bust cycle' as soon as any measures were taken to curb CAD as well as setting rupee parity to attain macro economic stability the indicators would fall off the cliff. Inflation would sky rocket as rupee was no longer artificially overvalued and would fall back to it's true level ( which was artificially masked, but actual depreciation happened in Plmn tenure) , imports become expensive which the nation was made addicted to, even raw material import prices would jump exponentially with ripple effect in LSM, not to mention oil and energy sector largely dependent on imported fuel.

PLMN should be given credit for the bust part of the cycle as well, which PTI is currently taking the slack for. Nice way of giving half picture.

What we are witnessing now is organic growth and not at the expense of macro economic stability as previously.

You pump money in by SBP printing spree as well as subsidize imports, consumption increases inflating your GDP figures. You destroy your country for political gain.

You can't fight these people. They are too much into Darnomics religion

I refuse to accept that someone can have lower IQ then 60(7 yrs old) and is on this forum.
Even a 7yrs will tell you why pakistan is like this..
Qaraz ley ka leya aur nakli note chap leya..

Ironically PMLN or state bank of pakistan doesnt deny state bank lending(note printing) or heavy expensive eurobonds...but their jayalas and matwalas try their best...

Why..simply because they are eating part of the cake that starts with billions and ends with biryani plate

But but Nawaz Sharif is the Bestest PM ever! Right?

Where did I sugar coat anything? And also no I don’t agree, this was not whatever you mean by ‘artificial’ boom and bust cycle. If you mean to say that it was a deliberate sabotage, then I disagree. My own assessment judging by the policies and their aims is that it was incompetence and misjudgement.

So you call losing 7 billion USD on PKR overvaluation mere incompetence? How forgiving of you

Govt spent $7 billion to keep rupee overvalued against the U.S dollar

ISLAMABAD: A member of the Economic Advisory Council (EAC) has said the government spent $7 billion in last few years to keep the rupee overvalued against the US dollar.The member of EAC has sough

profit.pakistantoday.com.pk

Besides, if you’re going to claim it was deliberate, then you need a giant weight of evidence. Try convincing any economist of your theory, even the government’s own economic advisors wouldn’t give it the time of day.

It was deliberate. Everyone in the ministry warned him even state Bank officials. But he forced his way

Ishaq Dar was warned about holding an artificial exchange rate: Deputy Chairman Senate - Mettis Global Link - News

Speaking to Karachi Chamber of Commerce and Industry, Deputy Chairman Senate, Salim Mandviwala, stressed that the Ex-Finance minister Mr. Ishaq was warned not to artificially maintain the dollar-rupee exchange rate. Ignoring those warnings, the government continued to pump about 7 to 8 billion...

mettisglobal.news

My summary for Ishaq Dar era is simple, those policies of overvaluing PKR had probably good intentions, and burning reserves they may have felt it was worth it. But it was a bad policy in hindsight and has cost us. Current government policy has rightly tried to reverse some of the damage done.

Overvaluation of PKR was done with good intentions? Are you sure you are not a Patwari?

Everything comes at a price, even a stable rupee

Speaking analogically, the SBP does not have enough water to spray on the flames of uncertainty that engulf the rupee.

www.dawn.com

CAD grew because of state bank lending done for heavy spending ..

Basically the govt printed fake money spent it on highways and ultimately when people got that money rupee had to devlaue but it didnt..people spent that money on imports


So it always start with print fake notes and drop the interest rate which creates a fiscsl space of 1-2 trillion rupees

Even PTI had to do it first 2 yrs while it tried to close that 2 trillion gap

No sir..
It wasnt..
This has been done three times before..
And will be done again in 2028..
They knew what they did but did it anyway for heavy spending means more votes
Ps
Right here on this forum i was predicting we will be back to IMF in 2016 when pakistan started printing notes
Ishaq hassan predicted it in early 2017

Simply because this is the oldest play book
Zimbabwe to afgahnistan to pakistan

Everyone likes to print notes

Exactly. Economy was booming during pmln due to import consumption. There was nothing revolutionary and great about it.

 

[ziaulislam]

So Pakistan was printing 'nakli' notes? That about sums up your own IQ. Kind of pointless for me to stoop that low again and waste my time.


You mean kinda like Bhutto appointed Zia-ul-Haq and Nawaz Sharif appointed Pervaiz Musharraf? I hope this is sufficient explanation.

Lol..

Before i lecture you on economics...
go and google state /central bank lending..

If you still dont understand there can be only one of two reasons
1.your IQ is less then 7 yrs old. You dont even know how currency works !
2. Or you are a patwari..that is something we cant fix

 

[Norwegian]

Lol..

Before i lecture you on economics...
go and google state /central bank lending..

If you still dont understand there can be only one of two reasons
1.your IQ is less then 7 yrs old. You dont even know how currency works !
2. Or you are a patwari..that is something we cant fix

These patwaris lurk here 24/7 lecturing us how great their Darnomics religion was without understanding anything about macroeconomics

 

[MilSpec]

This is solid.
Its based on exports.
Not imports.
I am a common man. And few years back i am buying American Garden soya sauce, and hince ketup, imported cheese, imported olive oil, imported pickles, mash rooms, eating imported tin fruits.
Even using corn in cans/tins.
Wtf. Pmln has subcidised imports so much that we are buying imported stuff. And destroying our country. No other country does that. This is cardinal sin. Usually countries took offence if people or government ask people to buy imported stuff when local is avalible.
Now I am so conscious and always buy pakistan or made in pakistan. Sometimes you have to compromise on quailty but sometimes. Even if I buy something imported that is expansive and now double expansive due to tax, I feel OK, because its going to government not waste.
Change your mind.

If you are buying "hince ketup" you have other problems my friend.

 

[Pakistansdefender]

If you are buying "hince ketup" you have other problems my friend.

Yar jub main likh raha tha mujhe pata tha spelling nhn sahi. But I Didn't bother to go and correct and depend upon your intellect that you would ignore as you understand what I want to say.
But pakistanis have this problem. To point out every single issue like this. Good for you if you have free time to waste.

 

[MilSpec]

Yar jub main likh raha tha mujhe pata tha spelling nhn sahi. But I Didn't bother to go and correct and depend upon your intellect that you would ignore as you understand what I want to say.
But pakistanis have this problem. To point out every single issue like this. Good for you if you have free time to waste.

Koi nai, Mai mazaak kar raha tha. Free time to hain, issi liye to forum pe threads pad raha hu.

 

[ziaulislam]

https://imgur.com/muSb5Te

The 100 years old play book of germans..print money...
Nawaz & ishaq are genius

 

[Mav3rick]

Lol..

Before i lecture you on economics...
go and google state /central bank lending..

If you still dont understand there can be only one of two reasons
1.your IQ is less then 7 yrs old. You dont even know how currency works !
2. Or you are a patwari..that is something we cant fix

First, please explain to me how they were printing nakli notes and then we can proceed to other points.

And it would be real ironic that you would lecture me on central bank matters........would you like to visit the State Bank sometime? Tea on me in BPRD office.

After tea, you can decide what intellect level you are on finance and commerce related matters.

 

[ziaulislam]

First, please explain to me how they were printing nakli notes and then we can proceed to other points.

And it would be real ironic that you would lecture me on central bank matters........would you like to visit the State Bank sometime? Tea on me in BPRD office.

After tea, you can decide what intellect level you are on finance and commerce related matters.

And told you state bank lending or central bank lending is a technical term for printing notes

Is that martian?????
You think we have hyperinflation because state bank has tight monetary policy

Doenst matter what u do ..where you are..even if you are our state bank head ...ludricous things are ludicrous...

If doctors tell u jump from airoplane doesnt make it less suicdal