False starts, faltering economy, how Asad Umar seems to be lying about the economy

[HammerHead081]

the problem is that we have INTENTIONALLY slowed down the economy by increasing interest rates and cutting PSDP. Why? Because that is the only way to contain current account deficit (by decreasing demand for imports).

so in a way what Asad Umar has said is correct. These policies have achieved the intended objective of containing current account deficit by slowing growth.

then comes the question... how do we start growing again without running into the same problem again?

The answer is exports, FDI and remittances.

the government has taken several steps to achieve this. Currency depreciation, tax incentives and lower energy prices for exporters , refunds, decreasing paper work etc etc.

but all this will take an year or two before having any significant effect on the economy.

Only level headed response in the whole thread.

 

[Riz]

Stop deviating from the topic. Read the article and tell me what is wrong with it?

Only thing wrong with this article is that it belongs to dawn news.. Anything related to geo jang news is bullshit . They are black mailers thugs and traitors .. No one believes them but only donkeys patwaris trust them

 

[maximuswarrior]

Only level headed response in the whole thread.

So now you admit that the article is BS?

Instead of posting rubbish use your own logic and don’t be biased.

 

[HammerHead081]

So now you admit that the article is BS?

Instead of posting rubbish use your own logic and don’t be biased.

What? Stop putting words in my mouth. Where did i admit the article is rubbish? I just commended the fact that the dude actually read the article and gave a level headed response saying how Asad Umar was right at that time.

 

[ajpirzada]

calm down guys... it is just an article

Khurram Husain writes good articles but I often find him too harsh when it comes to Asad Umar. One doesnt have to believe everything.

Chill!

 

[Imran Khan]

in paksitan economy and security ki halat hameesha nazuk dekhi hai

 

[Death Professor]

That editor is a well known and respected economist. Stop being a delusional PTI fan boy. You are no less than the patwaris if you behave like that.

No you are the one who is delusional. Pakistan military expenditure is about 11 B, India is around 70 B. Bangladesh which a lap dog of India even that country has military expenditure around 4 B. Pakistan had to counter terrorism, Pakistan had to face indian aggression, our defense budget is more than justified. We are investing least in our defense yet we expect miracles by our military.

Increasing tax collection or tax base or tax reforms although are much needed but those decisions lose votes. It can't happen in a democracy where 40% of your population is illiterate. Do you know how aggressive opposition is going to use it to their advantage. PTI doesn't have a majority, its a coalition government and coalition always demands sacrifices. Would have much easier to implement if we had same form of government as China. You could use 'danda' and not care.

Depreciating rupee more or increasing interest rates, aren't going to change much as we have seen their results. These are the terms of IMF and we already did some of those in september october last year. Our imports/exports wont change much as we have seen following the decisions taken by the government. Our businesses are incompetent, government gave them the time and the backing but still they couldn't deliver with the export numbers. Only way to fix the economy is inject money from outside, and that could be done through FDI, tourism, etc.

So all in all, you can't just peg all the burden on Asad Umar and PTI government. The are doing their best in the current situation.

 

[zn426]

Let me boil the article down for you here:
The cost of energy is increasing.
Cost of items used in agriculture is increasing.
The cost of capital has risen due to higher interest rates.

Given that agriculture is one of Pakistan's major industries, and most factories are built with borrowed money, yes, the economy will slow down because of structural inefficiencies in how the country has developed in the past. It will take time to resolve those structural problems-they are not an overnight fix.
One thing Pakistan does that many countries do not is require collateral on pretty much every loan (no unsecured borrowing). Perhaps changing that rule would bring tons of capital into the country.

 

[batmannow]

BACK in December 2018, Finance Minister Asad Umar was telling almost everyone he met that the economy has turned the corner, that improvements have begun to materialise, that green shoots are growing. For evidence, he would point to a few indicators, like the slide in reserves that had slowed mainly due to the arrival of the first billion from Saudi Arabia and rising offtake of credit from the private sector, which he pointed to as a sign of health returning to the economy.

In late December, he tweeted this: “Jul to October private sector credit offtake this year is Rs.360 billion vs only Rs.110 billion last year in the same period. Agriculture credit in Jul to Nov this year is Rs 212 billion, increase of 36pc vs Rs. 156 billion same period last year.”

And only a week earlier he had given an interview to Arab News in which he said: “I’m sure you would have heard (people say), ‘Business is not investing (in Pakistan) anymore’,” Umar said. “But if you look at private sector credit offtake — a useful metric to measure business investment — it was five times more in the first quarter of this year than in the first quarter of last year.”

In that same interview he drew a contrast between himself and his critics, and this is how the paper paraphrased him: “The minister said despite ‘doom-and-gloom’ scenarios painted by critics, he owed his optimism about Pakistan’s future to the fact that he was a ‘data-driven person’.”

There are numerous other places where the finance minister was trying to manufacture optimism using the same data points.

I’m using these two as examples only, but there are numerous other places where the finance minister was trying to manufacture optimism using the same data points. So in the telling of this tale the fact that credit disbursements to the private sector and agriculture were rising was a sign of economic dynamism returning.

But last week, looking at the same data, the State Bank arrived at the opposite conclusion. In its second quarterly report, it spoke of a “notable deceleration in economic activity” along with rising inflation. Moreover, in large-scale manufacturing (LSM), it said the contraction “became more pronounced” in the second quarter (October to December 2018) compared to the first quarter (July to September 2018).

In the first half of the fiscal year, from July to December, LSM actually contracted by 1.5 per cent compared to a growth of 6.6pc in the same period last year. Inflation similarly rose, and with the fiscal deficit continuing to rise even more sharply (driven by higher interest payments and “a sharp increase in defence expenditure”) controlling inflation is becoming even more challenging, it said. From a look at the data from the first half of the fiscal year, the State Bank further downgraded the economy’s growth rate by half a percentage point, saying it is now more likely to come in somewhere between 3.5pc to 4pc by the end of the year; the original target was more like 6.2pc.

So what do we make of the higher credit disbursements touted by the finance minister? How come he saw an economic turnaround at that time, but looking at the same data, the State Bank sees a “notable contraction” and further deceleration in the pace of economic activity? How does it explain a sharp increase in private-sector credit offtake in the midst of a contraction of industrial activity?

This is how: “This trend is largely due to the rising cost of imported inputs and higher energy prices on account of PKR depreciation and liquidity constraints owing to a higher level of unsold inventories (in POL, steel, autos, fertilisers, electronics and sugar sectors) along with circular debt in the energy sector.”

The report notes that while a few industries (power, textiles and cement) may have continued borrowing for capacity expansion (meaning investment), the majority of the credit offtake was not for investment purposes. Rather the higher credit disbursement to the private sector was a result of their costs rising sharply and they were borrowing to stay afloat. Far from being a sign of a return to health, the higher figure in this context is because of the intensifying struggle to stay afloat for industrial enterprises.

What about agriculture disbursements? The report first notes a sharp deceleration in the growth of major crops as well as the services sector connected to the handling of agriculture outputs, linking this to the shortage of water and rising prices of DAP fertiliser among other things. “Agriculture-credit disbursements decelerated from 39.4 percent during Q2-FY18 to 14.2 percent in Q2-FY19”, meaning the absolute figures may look high, but in fact there is a slowdown.

And why is the actual figure higher? Because of a 16.7pc increase in the price of fertiliser, along with an increase in the price of DAP fertiliser due to higher international prices that were compounded by the depreciation of the exchange rate.

So in agriculture the trend is similar to industry: farmers find themselves having to borrow more to stay afloat even as acreage under cultivation falls, major crop output declines, prices of inputs rise and a water shortage bites hard. The increased disbursement figures in both the industrial and agricultural sectors, far from suggesting the return of economic health, point towards a growing desperation to survive.

Earlier, the government was being attacked because the figures for the external debt showed a sharp increase. They argued back — correctly so — that the bulk of the increase was attributable to the depreciation of the exchange rate and not fresh borrowing. They were right. The two data points did not tell the story if looked at in isolation, outside of any context.

But then the finance minister turned around and did the exact same thing and started touting a recovery of some sort on the basis of two data points. Now, when those same two data points (agriculture and industrial credit disbursement) are looked at within their context, it turns out they tell a story opposite to what the finance minister tried to spin.

https://www.dawn.com/news/1472367

Yes ASAD UMER ,and seth dawood razaq faisal wada , and few more are those dirty virsus which are PTI from inside ?
Hope everyone remembers Usd been made freely floated just in a day by asad umer , while evn imran knew from TV?
Ali zaidi is also involved in that game while ,
Then after tht dawood razaq took the tender of the DAM project , while faisal wada was his coordinator and partner in that project , its really sad that imran khan is working hard diplomatic ly to bring investors and investment and he is getting succes , its must be aceepted that pakistan is standing tall since imran took power but he should not think that he would be given a free single party , to rule pakistan , he been pushed wrongly in a accidental path by some of its imature new , , , politicans who r just druming ihtesab but cant able to bring any good to a poor pakistani ?
Who has enough of stupid rehotics of nawaz and zardaris aressts and bails ?
This is time , PTI should lowers down super infilation , if not no matter what it says , ppls will move against it ?

 

[Peaceful Civilian]

We can't judge anyone within one year. Don't expect to clean garbage of 50 years in 6 months. Give him 5 years. Don't create hurdles. Let them bring tax reforms & policies.

 

[AZ1]

SBP's report only fortified the opinion held by many: that PTI - who may have a great foreign policy - are absolutely clueless about economics, and if not, totally unwilling to take the radical steps to fix it (i.e. think reducing defense expenditure, improving exports, doubling down to increase tax-base and collection, moving away from fossil fuel to solar power where possible, etc.)

IK needs to sack Asad Umar before it's too late.

ISLAMABAD - The Pakistan Muslim League-Nawaz (PML-N) government has broken all previous records of taking foreign loans, as it borrowed $40 billion from external sources during its four and half years tenure.

https://nation.com.pk/26-Dec-2017/government-got-record-40b-loans

PML-N govt took record loans that will take generations to pay, Senate

PML-N government adds to country's indebtedness | Business Recorder





Patwari samj rahey thei they will sleep and tomorrow all will forget. These taxes now is the reflection of the policy which PMLN did with the nation. Whole Pakistan will suffer. Now eat Orange train project.

 

[Fawadqasim1]

the problem is that we have INTENTIONALLY slowed down the economy by increasing interest rates and cutting PSDP. Why? Because that is the only way to contain current account deficit (by decreasing demand for imports).

so in a way what Asad Umar has said is correct. These policies have achieved the intended objective of containing current account deficit by slowing growth. Obviously no one likes this!

then comes the question... how do we start growing again without running into the same problem again?

The answer is exports, FDI and remittances.

the government has taken several steps to achieve this. Currency depreciation, tax incentives and lower energy prices for exporters , refunds, decreasing paper work etc etc.

but all this will take an year or two before having any significant effect on the economy.

Absolutely

 

[Indus Pakistan]

IK needs to sack Asad Umar before it's too late.

You don't hire and sack ministers every 8 months unless they do something unethical or fraud.

Read the article and tell me what is wrong with it?

Everything. A economy as large as Pakistan will like a huge ship take time to change direction. Summer 2018 just before PML-N government was sent packing everybody knew the economy was in serious bother and hurtling head first into the abyss. Since it has been only 8 months since PTI took over to recover from the mortal wounds inflicted by PML-N we can't expect change so fast. It would be another year at least before we can get a more clearer picture of what is going on. But as far as I am concerned even if PTI fail to perform on the economy they possibly can;t do worse then what PML-N did or Mr 10% did. So no reason to cry. I would agree though that economy is not PTI's forte but then whose is it? PML-N? PPP? Altaf Bhai?

What we know is PTI is doing very well on foreign policy as seen in the drumming of India, has very motivated policy to address the poor human indicators in Pakistan like education, poverty, health and is relatively less corrupt. That alone makes it way better package then all the other alternatives.

And Dawn is virulently anti army and anti PTI. Where is their 'much respected' Cyril Alemedia gone? Where and when did Dawn ever slice/dice Altaf bai's MQM when rotting bodies in 'bori bags when the smell was permeating into Dawn's offices? We did not heaer peep from like these contributors. Now they have all become critics. Fcuk em.

 

[Jf Thunder]

BJP Government "Anyone who asks proof of Balakot strike is anti national and should go to Pakistan."

Your behavior is no less than those pathetic Bhakts.

you didnt get the sarcasm in my post?
go read it again having sarcasm in mind

 

[Quwa]

SBP's report only fortified the opinion held by many: that PTI - who may have a great foreign policy - are absolutely clueless about economics, and if not, totally unwilling to take the radical steps to fix it (i.e. think reducing defense expenditure, improving exports, doubling down to increase tax-base and collection, moving away from fossil fuel to solar power where possible, etc.)

IK needs to sack Asad Umar before it's too late.

Unfortunately, each one of those is either politically untenable (e.g., imagine talking about defence expenditure now that India just literally attacked you) or requires expenditure in of itself, e.g., moving to green energy.

It's obvious that the current gov't is searching for a jackpot at the end of the rainbow by pinning hopes on the ExxonMobil search. If that comes through (a giant IF to be fair), then investors could look past the current and begin putting money in the hopes of profiting off the future (e.g. FDI, local investors stepping up, etc).

Minus that, the gov't is between a rock and a hard place. You could do something as radical as not honouring overseas payments until such a time you can afford them (i.e. not go into a deficit or BoP crisis to pay), but that takes a lot of courage and a lot more belt squeezing at home.