Balance of payments worsens: Pakistan could knock at IMF’s doors in April

[ziaulislam]

There is more to it than meets the eye...all this balance of payments problems, rising trade deficits due to rising imports(many infra dev. related imports) rising debts was all there is the current government when Nawaz Sharif was at the helm of affairs...why IMF, Bloomberg, Moodi's, Fitch keeps on coming up with positive news and articles about Pakistan economy doing well, the debt is manageable and all sorts of kowtowing articles....lots of big business conglomerates in Pakistan supports Nawaz Sharif and his big cronies and clan...many gone now.


Express Tribune is owned by the Lakson(Lakhani group) a big supporter and partners in biz(also into tax evasions) with the Sharif and the clan...it is natural that they will make it look as things have gone for the worst with Nawaz gone...the same Express Tribune was coming up with all sorts of good vibes about Pakistan economy a fortnight ago before Nawaz Sharif was ousted....


http://www.lakson.com.pk/

https://en.wikipedia.org/wiki/Lakson_Group

https://www.bloomberg.com/research/stocks/private/person.asp?personId=29602801&privcapId=20334833

nawaz is not a magician or an angel or good luck charm, he is still in power..
the current status is not out of prediction, by some stupid logic Mr Dar increased the value of rupee and which caused this issue in the first place, secondly he super taxed all the industry especially the export textile industry which now cannot survive the low labour Bangladeshi competition

solution is reforms, low taxation, current finance sectery has said (but still not done) the right things

whether Pakistan goes to IMF or not is simply a choice, if it throws in expensive bonds it can avoid it, it will depend upon the restrictions from IMF, i would rather float 3-4 billion dollars in bonds, try to negotiate deferred oil payments with gulf countries, immediately release 300 billion rupees of refund held from textile industry, decrease taxation from 40% to 15%(highest in the whole world), increase export oriented agriculture,shrink the developmental budget if needed, immediate re start privatization process with steel mills, PIA and distributing companies

guess what this is exactly said by every expert but who is going to do it? even the govt fin sec says the same

CAD has been issue for last 5 years, but crisis are govt made first in 2008 when they supported abnormal prices than 2013 to defend a rupee and than in 2016-2018 when artificial rupee and high taxation were leveled while indian rupee dropped our improved

pakistan is the only country which tax exports higher...you cannot do that ..but well its people choice ..PML N zinda bad

 

[Nilgiri]

decrease taxation from 40%

Are you kidding me? 40%? How pervasive is this peak rate in your estimation?...surely it cannot be the effective rate applied to small and medium enterprise.

 

[Imad.Khan]

Aik baar phir Sher.

@Champion_Usmani @AdeelFaheem

 

[SunilM]

Fastest Depleting Dollar Reserves in Asia to Slump Even Further

(Bloomberg) -- Pakistan is depleting its dollar reserves at the fastest pace in Asia and may soon have a buffer that’s smaller than Cambodia, an economy that’s less than a 10th of its size.

Reserves have dropped by about a fifth in the past year to reach $13.5 billion in February, while in Cambodia they’ve increased a third to $11.2 billion in January, according to data from the International Monetary Fund. Pakistan’s reserves are expected to drop as much as $2.2 billion by June, according to Insight Securities Pvt.

Pakistan is facing a balance of payments crunch. Its current-account deficit has ballooned by 50 percent in the past eight months to $10.8 billion, fueled by rising imports as the economy grows close to 5 percent and Chinese funders add new power plants. With reserves coming under pressure, authorities devalued the currency for the second time in four months last week.

“Your hot money capital inflows are not coming in. Real conditions of the economy are that exports are not picking up,” said Turab Hussain, head of the economics department at the Lahore University of Management Sciences. “Bangladesh are the ones that are a stronger economy now.”

Once known as East Pakistan before being separated in 1971, Bangladesh’s reserves are now more than double those of Pakistan’s, with exports that exceed its South Asian counterpart. Both nations as well as Cambodia are competitors in global textile markets.

New Zealand and Kazakhstan are among other Asia Pacific countries with smaller economies but more reserves than Pakistan, according to data compiled by Bloomberg.

There’s no respite seen for Pakistan’s reserves with authorities deciding not to sell global bonds this month because of rising global interest rates. Zubair Ghulam Hussain, chief executive officer at Insight Securities, is forecasting a decline in reserves even after factoring in $2.5 billion in borrowing and excluding inflows from a planned tax amnesty that’s scheduled to be announced this month.

“There is no easy fix,” said Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC. “The solution lies in improving the business climate” to attract greater foreign direct investment inflows and implementing reforms to make exports more competitive globally, he said.


©2018 Bloomberg L.P.

Bloomberg

https://www.bloombergquint.com/mark...dollar-reserves-in-asia-to-slump-even-further

 

[AyanRay]

Fastest Depleting Dollar Reserves in Asia to Slump Even Further

(Bloomberg) -- Pakistan is depleting its dollar reserves at the fastest pace in Asia and may soon have a buffer that’s smaller than Cambodia, an economy that’s less than a 10th of its size.

Reserves have dropped by about a fifth in the past year to reach $13.5 billion in February, while in Cambodia they’ve increased a third to $11.2 billion in January, according to data from the International Monetary Fund. Pakistan’s reserves are expected to drop as much as $2.2 billion by June, according to Insight Securities Pvt.

Pakistan is facing a balance of payments crunch. Its current-account deficit has ballooned by 50 percent in the past eight months to $10.8 billion, fueled by rising imports as the economy grows close to 5 percent and Chinese funders add new power plants. With reserves coming under pressure, authorities devalued the currency for the second time in four months last week.

“Your hot money capital inflows are not coming in. Real conditions of the economy are that exports are not picking up,” said Turab Hussain, head of the economics department at the Lahore University of Management Sciences. “Bangladesh are the ones that are a stronger economy now.”

Once known as East Pakistan before being separated in 1971, Bangladesh’s reserves are now more than double those of Pakistan’s, with exports that exceed its South Asian counterpart. Both nations as well as Cambodia are competitors in global textile markets.

New Zealand and Kazakhstan are among other Asia Pacific countries with smaller economies but more reserves than Pakistan, according to data compiled by Bloomberg.

There’s no respite seen for Pakistan’s reserves with authorities deciding not to sell global bonds this month because of rising global interest rates. Zubair Ghulam Hussain, chief executive officer at Insight Securities, is forecasting a decline in reserves even after factoring in $2.5 billion in borrowing and excluding inflows from a planned tax amnesty that’s scheduled to be announced this month.

“There is no easy fix,” said Uzair Younus, a South Asia director at Washington-based consultancy Albright Stonebridge Group LLC. “The solution lies in improving the business climate” to attract greater foreign direct investment inflows and implementing reforms to make exports more competitive globally, he said.


©2018 Bloomberg L.P.

Bloomberg

https://www.bloombergquint.com/mark...dollar-reserves-in-asia-to-slump-even-further

Seems the prophecy has come true after all. All the dollars have gone down the drain due to CPEC (Naliyo se dollar niklenge).

 

[SunilM]

Seems the prophecy has come true after all. All the dollars have gone down the drain due to CPEC (Naliyo se dollar niklenge).

Many posters throw words like CPEC and figures of 60 Billion Dollars like its petty change. This is the reality. What is happening is Zero investment. Why ? Cause all this money is not coming to Pakistan, but staying in China who bring Chinese Labour with them and get tax exemptions. I must admit, Chinese have given themselves the deal of the century.

 

[El Sidd]

Duniya idhar se udhar hojae baniya apni dukaan saja kar rakhta hai

 

[On the Edge]

situation is looking bleak, but my question is what is the worse case scenario that could happen to Pakistan in coming months and years?

 

[SunilM]

situation is looking bleak, but my question is what is the worse case scenario that could happen to Pakistan in coming months and years?

You would think that Pakistan is already between a rock and a hard place but the people managing this country ensure that it remains a 'rentier state'. It was America from the 60s to the early 2000's and Now its China. Atleast the US gave Pakistan hard cash which was used by the civilian/military enterprise to their benefit, but with the Chinese, you dont't even get that!. I mean where are the billions on dollars in investment? Its barely a few hundred million dollars in FDI every year i.e between 200-300 million dollars.

I will give you a recent example : Shanghai Power committed to buying K-Electric
https://www.dawn.com/news/1397806/shanghai-power-committed-to-buying-k-electric

This is today's news. Just look at the content of the article. There is no application of mind at all. The focus ought to have been the attempt by the chinese company to put pressure on NRPRA to increase multi year tariffs on electricity before taking over, But they make it sound as if Shanghai electric is doing Pakistan a favour. Btw the Tariff in Karachi, If i am not mistaken is Rs 16 per unit which in itself is crazily high.

With all the socio economic indicators worsening its very bleak. Think about it like this. In 2013 6-7 billion dollars was required from the IMF as bailout, This time it would be not less than 20 billion dollars. And you can imagine the conditions IMF is going to impose upon Pakistan? It want a further devaluation of PKR to Rs 130 to a dollar. Imagine its consequences? Then it would seek imposition of even more taxes/cess. Increase in value of inputs like electricity, LNG etc due to increase in tariff. And so on an so forth......

Question is not the bleak outlook though. The real question is why there is no hue and cry on this repeated economic mismanagement since the 60s? Especially when the suffering is only increasing.

 

[On the Edge]

that's the problem, our fellow country men(common people who gather in Nawaz sharif jalsas, Khadim Rizvi gatherings) don't either know or understand that what is going on, we really don't have a choice except for Imran khan now, but we are yet to know how will he improve the economic situation, who will be on his finance team and how will they manage this mess that we are continuously in.
I guess the real responsibility lies with the PPP tenure where our exports really started taking hit due to lack of electricity/gas, and the terrorism which stopped the FDI, and our elite which always converts their earnings into USD and remits in their foreign accounts.

 

[SunilM]

that's the problem, our fellow country men(common people who gather in Nawaz sharif jalsas, Khadim Rizvi gatherings) don't either know or understand that what is going on, we really don't have a choice except for Imran khan now, but we are yet to know how will he improve the economic situation, who will be on his finance team and how will they manage this mess that we are continuously in.
I guess the real responsibility lies with the PPP tenure where our exports really started taking hit due to lack of electricity/gas, and the terrorism which stopped the FDI, and our elite which always converts their earnings into USD and remits in their foreign accounts.

Asad Umar is a ray of hope, provided he is given a free hand. The aawam will have to gupl the 'kadwa ghoot' to get out of the latest crisis.

 

[ziaulislam]

Rupee drop to 115 would be well within its real value as rupee was artificial propped up by our finance Secretary ..beyond 115 would be the real drop

 

[ziaulislam]

If you estimate the gain of dollar in regional markets like india and comapre it, this is what u will find

 

[SunilM]

If you estimate the gain of dollar in regional markets like india and comapre it, this is what u will find

Well Zia, we are both here and will have to wait and see, my Prediction is by that June 2018 Rs 120 and by the end of the year 125-130. And its not a difficult prediction since thats the IMF mandate which Pakistan has to follow. I agree with the IMF assessment i.e. 125-130 Pakistani Rupee to a dollar is Pkr's real value and atleast till date I have been right with my predictions.

Secondly, I don't like to make comparisons but India is suffering in its exports due to a strong Rupee which has been the trend lately:

The following chart shows how Asia’s currencies have been faring. It shows the unadjusted weighted average rate at which one country’s currency exchanges for a basket of currencies of trading partners and is an indicator of a country’s international competitiveness.

India, China exports most at risk from currency strength in Asia

https://economictimes.indiatimes.co...ncy-strength-in-asia/articleshow/63279701.cms

But this is not the point. The real issue at hand is that Pakistan's forex reserves are now 11.9 billion dollars i.e less than Cambodia's 12.1 billion dollars. You have to make a repayment of 3 billion dollars till June 2018. Therefore Pakistan has the fastest deteriorating forex reserves and currency in Asia. And PML-N is hell bent on screwing the economy just to show to its vote bank the consequences of "Mujhe jyu nikala". Its a dire situation IMHO.

 

[Śakra]

Well Zia, we are both here and will have to wait and see, my Prediction is by that June 2018 Rs 120 and by the end of the year 125-130. And its not a difficult prediction since thats the IMF mandate which Pakistan has to follow. I agree with the IMF assessment i.e. 125-130 Pakistani Rupee to a dollar is Pkr's real value and atleast till date I have been right with my predictions.

Secondly, I don't like to make comparisons but India is suffering in its exports due to a strong Rupee which has been the trend lately:

The following chart shows how Asia’s currencies have been faring. It shows the unadjusted weighted average rate at which one country’s currency exchanges for a basket of currencies of trading partners and is an indicator of a country’s international competitiveness.

India, China exports most at risk from currency strength in Asia

https://economictimes.indiatimes.co...ncy-strength-in-asia/articleshow/63279701.cms

But this is not the point. The real issue at hand is that Pakistan's forex reserves are now 11.9 billion dollars i.e less than Cambodia's 12.1 billion dollars. You have to make a repayment of 3 billion dollars till June 2018. Therefore Pakistan has the fastest deteriorating forex reserves and currency in Asia. And PML-N is hell bent on screwing the economy just to show to its vote bank the consequences of "Mujhe jyu nikala". Its a dire situation IMHO.

Wayyyy too much corruption in pakistan