Is dollar going to touch 180 PKR after IMF bailout?

[maithil]

Roughly a bit over USD 11 Billion, that's how much the PML(N) Government left in the coffers. Please also remember that PML genuinely believed that they would come into power again, they almost did, which is indicative of their comfort with the budget and the reserves.

As for the real demand for USD, yes that too is a factor but only for interbank transactions as all international (legal channel) payments are made through SWIFT.





Sadly, you have not considered the fact that we are importing things which we either don't or can't produce/manufacture. Our top 10 imports are:

01. Oil Products: 28.4%
02. Machinery (including Computers): 10.4%
03. Electrical Equipment: 7.2%
04. Iron/Steel (including Scrap from Ships etc.): 6.1%
05. Chemicals: 4.6%
06. Vehicles (including items assembled in Pakistan): 4.3%
07. Plastic/Items: 4.1%
08. Animal/Vegetable Fats, Oils etc.: 3.5%
09. Oil Sees: 2.4%
10. Cotton: 2.1%

Of the above, we CANNOT produce/manufacture items 1, 2, 3, 5, 6 and 9 which sums up to 57.3% of our total import. Out of import items at number 4, 7, 8 and 10 (15.8%), a good 8-10% are things which we cannot produce/manufacture and will need to import. These are things for which we simply have no local alternative.

Not just that, things which are being produced locally are sub par, of low quality and more expensive than the imports. This could also be because of higher cost of production (electricity and imported machinery, raw material etc.), monopoly and greed.

Coming to your example of chocolates, imported and local; imported chocolate will become more expensive with the rise in USD but so will the local chocolate as we import raw material (cocoa etc.) and machinery (including consumable/running/spare parts). Also, with the PKR losing its value, the local chocolate will further suffer because it's value will decrease with the same price and hence will have to increase. Worst of all, you can rest assured that the imported chocolate is of higher quality (ingredients, quality control, packaging, machinery etc.). Consider the 1.1 million (USD 8,570) Alto and compare it to its Japanese counterpart (USD 5,200) and you would be amazed at the difference in quality, comfort and safety of the cheaper Japanese version versus the more costly Pakistani version. With the difference in currency and other import strangulation policies, you are essentially forcing the common man to 'compromise' on his family's safety and luxury for a much more expensive but inferior vehicle/product/quality of life.

Not to mention the excise duty Government gets from imports. Contracting imports lead to contracting duty and hence impact on deficit gets subdued.

 

[Arsalan 345]

Previous governments used imf to maintain economy but this government decided a unique way.first it received 10 to 12 billion from friendly countries and remained sure that they don't need imf then after couple of months, reality check and Pakistan is now in deep trouble.problem is you can't blame previous governments for high rate of export and low rate of import.where is all the money that pti grabbed from friendly countries? Unfortunately there is no accountability.problems of textile industry and energy sectors were well known and common citizens thought that this government will invest money on these two sectors but unfortunately,they decided to use the money somewhere else and now we are in deep trouble.imf tried to bailout Pakistan twice but Asad Omar had his own conditions.this guy put Pakistan in deep trouble.rather than focusing on energy and textile sector,imran Khan primary focus is to put Nawaz Shariff in jail.after bailout,rupee value will drop and it means more trouble for averege income people.more price hikes means more people without food.i think Pakistan is in deep trouble just because of pti.previous governments injected money through imf but at least they didn't promise anything.if this situation continues,we might see no democratic system in Pakistan which is hard to believe but very much a reality.

 

[ps3linux]

Previous governments used imf to maintain economy but this government decided a unique way.first it received 10 to 12 billion from friendly countries and remained sure that they don't need imf then after couple of months, reality check and Pakistan is now in deep trouble.problem is you can't blame previous governments for high rate of export and low rate of import.where is all the money that pti grabbed from friendly countries? Unfortunately there is no accountability.problems of textile industry and energy sectors were well known and common citizens thought that this government will invest money on these two sectors but unfortunately,they decided to use the money somewhere else and now we are in deep trouble.imf tried to bailout Pakistan twice but Asad Omar had his own conditions.this guy put Pakistan in deep trouble.rather than focusing on energy and textile sector,imran Khan primary focus is to put Nawaz Shariff in jail.after bailout,rupee value will drop and it means more trouble for averege income people.more price hikes means more people without food.i think Pakistan is in deep trouble just because of pti.previous governments injected money through imf but at least they didn't promise anything.if this situation continues,we might see no democratic system in Pakistan which is hard to believe but very much a reality.

Frankly previous two Govts were the worst culprits for Pakistan's today's troubles. One example is Ishaq Dar sold Pakistan EuroBond with sovereign guarantees carrying an interest rate of 6.75% (If I remember right may be higher) they spend lavishly to market that bond along that b****d pious ex finance secretary , Reliance Energy in the same period floated its bond without sovereign guarantee carrying an interest rate of (I think) between 1.25-1.75%, that extra 5% we have to pay is what is adding to the trouble of Pakistan. While I have my thoughts about politicians has any one ever brought the bureaucracy to justice being accomplice to politicians, did finance secretary object to the financial agreements at that time which were against Pakistan's Interests, did auditor general raise any audit objection? no none, because they were all given benefits. So much corruption has been done that in 7 different agreements ranging from power to IT to water with different companies in china, incidentally the address of all different companies was located in one single room in a shithole building of shanghai china.

The other myth is SBP forex reserves, there are two types of reserves SBP dollar reserves and private banks dollars accounts (they belong to corporate, individuals and SBP or GoP has no claim on them) but being who our bureaucracy is both are reported as forex reserves, actually it is only the first ones.

There the other part, for previous Govts the indicators for economic stability were stock market indices and (artificial) exchange rate of dollar, had they devalued PKR inline with inflation and not done so much corruption we would not have been in so much economic trouble.

 

[The Accountant]

Roughly a bit over USD 11 Billion, that's how much the PML(N) Government left in the coffers. Please also remember that PML genuinely believed that they would come into power again, they almost did, which is indicative of their comfort with the budget and the reserves.

As for the real demand for USD, yes that too is a factor but only for interbank transactions as all international (legal channel) payments are made through SWIFT.





Sadly, you have not considered the fact that we are importing things which we either don't or can't produce/manufacture. Our top 10 imports are:

01. Oil Products: 28.4%
02. Machinery (including Computers): 10.4%
03. Electrical Equipment: 7.2%
04. Iron/Steel (including Scrap from Ships etc.): 6.1%
05. Chemicals: 4.6%
06. Vehicles (including items assembled in Pakistan): 4.3%
07. Plastic/Items: 4.1%
08. Animal/Vegetable Fats, Oils etc.: 3.5%
09. Oil Sees: 2.4%
10. Cotton: 2.1%

Of the above, we CANNOT produce/manufacture items 1, 2, 3, 5, 6 and 9 which sums up to 57.3% of our total import. Out of import items at number 4, 7, 8 and 10 (15.8%), a good 8-10% are things which we cannot produce/manufacture and will need to import. These are things for which we simply have no local alternative.

Not just that, things which are being produced locally are sub par, of low quality and more expensive than the imports. This could also be because of higher cost of production (electricity and imported machinery, raw material etc.), monopoly and greed.

Coming to your example of chocolates, imported and local; imported chocolate will become more expensive with the rise in USD but so will the local chocolate as we import raw material (cocoa etc.) and machinery (including consumable/running/spare parts). Also, with the PKR losing its value, the local chocolate will further suffer because it's value will decrease with the same price and hence will have to increase. Worst of all, you can rest assured that the imported chocolate is of higher quality (ingredients, quality control, packaging, machinery etc.). Consider the 1.1 million (USD 8,570) Alto and compare it to its Japanese counterpart (USD 5,200) and you would be amazed at the difference in quality, comfort and safety of the cheaper Japanese version versus the more costly Pakistani version. With the difference in currency and other import strangulation policies, you are essentially forcing the common man to 'compromise' on his family's safety and luxury for a much more expensive but inferior vehicle/product/quality of life.

Bro here again you are looking at the surface ... Ok let me challenge your whole statement, besides oil (which is something naturally occured) why we can't produce any of the item mentioned above?

Why can't you produce steel,, who is stopping you to restart steel mill and install more plants not only to fulfill local demand but also to export?

Why can't you manufacture machinery? IF you have steel industry and your workforce is cheaper than instead investing our excess money in real estate and trading business we should spend it on local manufacturing atleast of small machineries like stitching machines, motors, etc.

Why can't you manufacture vehicle ? We used to manufacture and export jeeps back in 60s ...

And similarly all the things we can manufacture ... Its our attitude that we invest in trading business and real estate and not on industries other than those which involves agriculture such as sugar and textile as they are tax heaven industries where your purchase is from informal sector ...

Devaluation will support start of such manufacturing however, its upto our business community to avail this opportunity ...

 

[ps3linux]

Bro here again you are looking at the surface ... Ok let me challenge your whole statement, besides oil (which is something naturally occured) why we can't produce any of the item mentioned above?

Why can't you produce steel,, who is stopping you to restart steel mill and install more plants not only to fulfill local demand but also to export?

Why can't you manufacture machinery? IF you have steel industry and your workforce is cheaper than instead investing our excess money in real estate and trading business we should spend it on local manufacturing atleast of small machineries like stitching machines, motors, etc.

Why can't you manufacture vehicle ? We used to manufacture and export jeeps back in 60s ...

And similarly all the things we can manufacture ... Its our attitude that we invest in trading business and real estate and not on industries other than those which involves agriculture such as sugar and textile as they are tax heaven industries where your purchase is from informal sector ...

Devaluation will support start of such manufacturing however, its upto our business community to avail this opportunity ...

Two major problems we made for ourselves.

First nationalized industry

Secondly made almost the whole nation property dealer, the most unproductive use of money, who would wait for RoI of 3 years in case of a value addition unit when he could double his amount by dealing in property files that too tax free.

 

[Mav3rick]

Bro here again you are looking at the surface ... Ok let me challenge your whole statement, besides oil (which is something naturally occured) why we can't produce any of the item mentioned above?

Why can't you produce steel,, who is stopping you to restart steel mill and install more plants not only to fulfill local demand but also to export?

Why can't you manufacture machinery? IF you have steel industry and your workforce is cheaper than instead investing our excess money in real estate and trading business we should spend it on local manufacturing atleast of small machineries like stitching machines, motors, etc.

Why can't you manufacture vehicle ? We used to manufacture and export jeeps back in 60s ...

And similarly all the things we can manufacture ... Its our attitude that we invest in trading business and real estate and not on industries other than those which involves agriculture such as sugar and textile as they are tax heaven industries where your purchase is from informal sector ...

Devaluation will support start of such manufacturing however, its upto our business community to avail this opportunity ...

You are speaking of things that we can 'potentially' do and I was speaking of things what we 'aren't' doing. It is not about what we can do but about what we are doing. Even to start your industry, to establish manufacturing, you need to import raw material and machinery. Even if we decide to start producing most of the things locally, it will take a lot of time, a lot of effort and a whole lot of USD to initiate that dream.

And since it will take a whole lot of USD to even start the production capability and capacity, a much lower USDKR ratio is in our favour. Once we have established the base and started production, we can gradually lower the PKR against USD to encourage export and discourage import but until then the higher USD is against all our interests.

Two major problems we made for ourselves.

First nationalized industry

Secondly made almost the whole nation property dealer, the most unproductive use of money, who would wait for RoI of 3 years in case of a value addition unit when he could double his amount by dealing in property files that too tax free.

Yeah that too, Bhutto's Nationalization drive ensured that the business community of Karachi, especially the Billionaires of those years (in relative terms to currency today) were left bankrupt overnight. This was done on ethnic basis but had consequences for their entire country, we just couldn't recover from that fully, ever.

 

[1Paki$tani]

Previous governments used imf to maintain economy but this government decided a unique way.first it received 10 to 12 billion from friendly countries and remained sure that they don't need imf then after couple of months, reality check and Pakistan is now in deep trouble.problem is you can't blame previous governments for high rate of export and low rate of import.where is all the money that pti grabbed from friendly countries? Unfortunately there is no accountability.problems of textile industry and energy sectors were well known and common citizens thought that this government will invest money on these two sectors but unfortunately,they decided to use the money somewhere else and now we are in deep trouble.imf tried to bailout Pakistan twice but Asad Omar had his own conditions.this guy put Pakistan in deep trouble.rather than focusing on energy and textile sector,imran Khan primary focus is to put Nawaz Shariff in jail.after bailout,rupee value will drop and it means more trouble for averege income people.more price hikes means more people without food.i think Pakistan is in deep trouble just because of pti.previous governments injected money through imf but at least they didn't promise anything.if this situation continues,we might see no democratic system in Pakistan which is hard to believe but very much a reality.

That is just load of crap. You cannot turn around economic situation just in eight months and when the problem is due to structural issue you cannot fix it in short terms.

when Musharraf took over in 1999 we had similar structural problem left behind by ppp and pml n (ishaq dar) and took many years to fix it and by 2005 Pakistan started see some strong benefit and economy started to grow at 7%. The benefit of Musharraf government meant that our exports continued to increase during PPP government until their policy kicked in and we saw a decline in our export.

It take few years for the benefit of policy to actually take effect.

 

[ps3linux]

You are speaking of things that we can 'potentially' do and I was speaking of things what we 'aren't' doing. It is not about what we can do but about what we are doing. Even to start your industry, to establish manufacturing, you need to import raw material and machinery. Even if we decide to start producing most of the things locally, it will take a lot of time, a lot of effort and a whole lot of USD to initiate that dream.

And since it will take a whole lot of USD to even start the production capability and capacity, a much lower USDKR ratio is in our favour. Once we have established the base and started production, we can gradually lower the PKR against USD to encourage export and discourage import but until then the higher USD is against all our interests.



Yeah that too, Bhutto's Nationalization drive ensured that the business community of Karachi, especially the Billionaires of those years (in relative terms to currency today) were left bankrupt overnight. This was done on ethnic basis but had consequences for their entire country, we just couldn't recover from that fully, ever.

To be honest bureaucracy is the real heart/the real engine which could make or unmake a country. It is them who have to take a longer view when it comes to planning for the country because they are there for almost 3 decades compared to a politician who is there for 5 years max. We have to select just one thing in which we will build capacity in the next 10 years, like Thailand did they are now the largest manufacturer of hardisks, any problem in thailand whole world will have to suffer a backlog in hardisk supply. Even if it is palm oil production over the next 10 years, we have approx 450 thousand acres of land where we can plant good quality palm if we start today 10 years down the road there would be no need to imprt edible oil, rather we will be exporting it either as edible oil or bio fuel.

It is just one example, we could do olive oil, kiwi fruit, avocados in crops. Even if we go for something like laser tech first ensure instead of useless graduation and MBA programs vocational training in that direction is started, with setup of production facilities. Grants to universities for research in the area, I mean research not plagiarism. Hell we could pick anything and plan for it in the next 10 years, 15 years 20 years.

Simple search from google:

"
about four years
It takes about four years for oil palms to produce fruits suitable for harvest. Each tree will then continue to produce fruit for up to 30 years, at which point they will have grown to around 40 feet tall
l" and we have 450,000 acres of land where we could plant them.

 

[1Paki$tani]

Bro here again you are looking at the surface ... Ok let me challenge your whole statement, besides oil (which is something naturally occured) why we can't produce any of the item mentioned above?

Why can't you produce steel,, who is stopping you to restart steel mill and install more plants not only to fulfill local demand but also to export?

Why can't you manufacture machinery?

You need energy and consistent supply of energy. You cannot have half-baked industry. When Musharaf took over and fixed due of the structural problems and we started to see increase in Manufacturing etc.

Back in 2007 Pakistan even exported at that time the world's largest sugarcane crushing machine to USA.

http://paktribune.com/news/Pakistan...st-sugarcane-crushing-mill-to-USA-168110.html

but we see decline in manufacturing due to lack of energy and consistent supply of GAS and Power. You cannot run business and export if you cannot fulfill international orders on time. That is what happened to our textile industry which shifted to Bangladesh.

So our primary objective should be to provide affordable and reliable electricity and other energy.

 

[Mav3rick]

To be honest bureaucracy is the real heart/the real engine which could make or unmake a country. It is them who have to take a longer view when it comes to planning for the country because they are there for almost 3 decades compared to a politician who is there for 5 years max. We have to select just one thing in which we will build capacity in the next 10 years, like Thailand did they are now the largest manufacturer of hardisks, any problem in thailand whole world will have to suffer a backlog in hardisk supply. Even if it is palm oil production over the next 10 years, we have approx 450 thousand acres of land where we can plant good quality palm if we start today 10 years down the road there would be no need to imprt edible oil, rather we will be exporting it either as edible oil or bio fuel.

It is just one example, we could do olive oil, kiwi fruit, avocados in crops. Even if we go for something like laser tech first ensure instead of useless graduation and MBA programs vocational training in that direction is started, with setup of production facilities. Grants to universities for research in the area, I mean research not plagiarism. Hell we could pick anything and plan for it in the next 10 years, 15 years 20 years.

Very well said.

You have pointed out a big problem with our Bureaucracy. The idiotic, decades old and obsolete system is producing donkeys instead of smart individuals. The process is so stupid that an MBBS Doctor will be placed in the Finance Ministry and some one with a Masters in Finance or Urdu will be placed in the Ministry of Health!!! And they are rotated every 3-5 years, a time by which they start understanding the system!!!

On top of it all, we have a quota system for the Bureaucracy which means we kill Merit for ethnic considerations. This again is a tragedy which everybody overlooks.

 

[ps3linux]

Very well said.

You have pointed out a big problem with our Bureaucracy. The idiotic, decades old and obsolete system is producing donkeys instead of smart individuals. The process is so stupid that an MBBS Doctor will be placed in the Finance Ministry and some one with a Masters in Finance or Urdu will be placed in the Ministry of Health!!! And they are rotated every 3-5 years, a time by which they start understanding the system!!!

On top of it all, we have a quota system for the Bureaucracy which means we kill Merit for ethnic considerations. This again is a tragedy which everybody overlooks.

My late father in law used to say I am a bureaucrat from the early 70's, wait till you see the 80's bureaucracy, in their hands this country will be in deep trouble.

Ok a true story Pak China is a *** (developmental finance institution), now this finance secretary has his incompetent nephew who couldn't make it to top tier or ivy league universities completed his masters from a third tier private university. After completion he is hired in Pak China in treasury deptt. Now this new MD takes over comes from china, he interviews all employees.

Upon finding the competence level of the boy, he transfers him as receptionist.

Now the nephew goes back and tell the uncle, uncle files a complaint to Chinese and the MD is changed over weekend, nephew is back to treasury.

Now this pious secretary finance has been accomplice to PPP, PMLN in all their corruption and now he gives us lectures through news articles on what is going wrong with the economy. Funny aint it.

 

[newb3e]

dollar @ 180 and oil @ 85+ would be a disaster for Pakistan i dont think our economy can survive that

 

[The Accountant]

You are speaking of things that we can 'potentially' do and I was speaking of things what we 'aren't' doing. It is not about what we can do but about what we are doing. Even to start your industry, to establish manufacturing, you need to import raw material and machinery. Even if we decide to start producing most of the things locally, it will take a lot of time, a lot of effort and a whole lot of USD to initiate that dream.

And since it will take a whole lot of USD to even start the production capability and capacity, a much lower USDKR ratio is in our favour. Once we have established the base and started production, we can gradually lower the PKR against USD to encourage export and discourage import but until then the higher USD is against all our interests.



Yeah that too, Bhutto's Nationalization drive ensured that the business community of Karachi, especially the Billionaires of those years (in relative terms to currency today) were left bankrupt overnight. This was done on ethnic basis but had consequences for their entire country, we just couldn't recover from that fully, ever.

Brother at the first step, why do you think that Government can keep the prices of dollars completely in control without dumping dollars from SBP in market?

Secondly to keep the dollar constant you need to take loan ... So you can still take the loan not to dump dollars in market but for investment in industry ...

Bro I request you to please research exchange rate setting mechanism first as what you are talking about is not the reality ....

Last but not the least all of this is happening that what we are doing is wrong and we will remain like this till we keep on doing the same things ... we need to support our manufacturing and exports and reduce our imports

You need energy and consistent supply of energy. You cannot have half-baked industry. When Musharaf took over and fixed due of the structural problems and we started to see increase in Manufacturing etc.

Back in 2007 Pakistan even exported at that time the world's largest sugarcane crushing machine to USA.

http://paktribune.com/news/Pakistan...st-sugarcane-crushing-mill-to-USA-168110.html

but we see decline in manufacturing due to lack of energy and consistent supply of GAS and Power. You cannot run business and export if you cannot fulfill international orders on time. That is what happened to our textile industry which shifted to Bangladesh.

So our primary objective should be to provide affordable and reliable electricity and other energy.

Energy situation is much better now and is expected to improve further

 

[ps3linux]

dollar @ 180 and oil @ 85+ would be a disaster for Pakistan i dont think our economy can survive that

If NOPEC succeeds completely and OPEC cartel is broken we are looking at oil at sub 40 level, otherwise 70 is coming soon.

Sorry OPEC basket broke 70 ceiling trading at 70.81.

Dollar altogether a different story, we'll sustain but the poverty level will skyrocket, middle class will have to give more "qurbanis", medicine will become more expensive, along edible oil and products of all import heavy industries.

 

[Dem!god]

In next 1-2 year pkr will be around 200-250 per dollar...so brace for it... There is chance of 40% to 100% devaluation of currency. Imo pak govt sholuld make the pkr free float and and not a managed currency.