Pakistan Rupee now at Rs 125.5 to a US dollar in Interbank Market

[Sugarcane]

That's their profit. The online rates you see are probably mid-rates - half-way between the buying and selling rates. Not to mention, they also charge small transaction fees above all that.

Looks like you don't have idea how open market operate.

 

[AyanRay]

Looks like you don't have idea how open market operate.

He does, just that he didn't explain it properly.The lower rate quoted is the ask rate, the rate at which you will sell it to the bank. The bid rate will be higher and the interbank rate somewhere in between

 

[BHarwana]

And what about the cost of production? Transportation? Wont that go up since the fuel price will increase now.

Yes they will go up but that could be tackled as fuel is heavily taxed in Pakistan and reducing the tax on fuel can help or giving fuel subsidy to export will also help. Cost of production will go up how? Like in textile sector the duties on chemicals are being reduced so they are being compensated. There are 1000 ways to keep production cost low as Pakistan has vast room of maneuverability there.

 

[AyanRay]

Looks like you don't have idea how open market operate.

He does, just that he didn't explain it properly.The lower rate quoted is the ask rate, the rate at which you will sell it to the bank. The bid rate will be higher and the interbank rate somewhere in between

Yes they will go up but that could be tackled as fuel is heavily taxed in Pakistan and reducing the tax on fuel can help or giving fuel subsidy to export will also help. Cost of production will go up how? Like in textile sector the duties on chemicals are being reduced so they are being compensated. There are 1000 ways to keep production cost low as Pakistan has vast room of maneuverability there.

Agreed, as most of Pakistan's export are of traditional items like textiles and food, cost wont go up significantly. Great boost to textile indeed am not sure about food though as price isnt the only criteria involved. But I guess it will increase the project cost of CPEC as most of the equipments are imported

 

[Novice09]

Great news Imports will go down.

Pakistani rice will become cheaper than Indian rice.

Bhai mere... How much do you export and how much do you import... economy is not that simple as you think...

 

[BHarwana]

Agreed, as most of Pakistan's export are of traditional items like textiles and food, cost wont go up significantly. Great boost to textile indeed am not sure about food though as price isnt the only criteria involved. But I guess it will increase the project cost of CPEC as most of the equipments are imported

Equipment is coming from China and power sector projects have already been allotted funds construction material is domestically produced. Oil Imports are going down as announced by PSO and coal is produced locally for electricity. High dollar price is the need of hour for Pakistan. All those people who suffer because of high dollar price should go blame PML-N Govt and don't vote for them. As they were running the country on Loans instead of increasing domestic production. SBP previously kept dollar price low artificially but now it a step in right direction. Export market will enjoy this news. Foreign brands will suffer yes I agree.

 

[Novice09]

Yes they will go up but that could be tackled as fuel is heavily taxed in Pakistan and reducing the tax on fuel can help or giving fuel subsidy to export will also help. Cost of production will go up how? Like in textile sector the duties on chemicals are being reduced so they are being compensated. There are 1000 ways to keep production cost low as Pakistan has vast room of maneuverability there.

That God...

 

[BHarwana]

Bhai mere... How much do you export and how much do you import... economy is not that simple as you think...

Bhai Meray it is very simple India devalued it's currency to tackle Pakistani export of rice and textile and IT and other competitive exports. Pakistan is just taking back the advantage. Pakistan has grown it's share in ME and Europe food market this is good news. it will reduce trade deficit and more import taxes are coming in as well. so yes it is that simple.

You want to go to micro economics be my guest. It will also help there as well.

@Major Sam

How to tackle the deficits


Let’s now turn to the instruments available to deal with the twin deficits. Scaling down the fiscal deficit, which is theoretically the best option, is politically very difficult to do.

While most people or groups may favour it, few, if any, are willing to pay personal price the reduced fiscal deficit entails in the form of curtailed allocations or higher taxes. Thus, the government has to look for indirect instruments.

One such instrument is monetary policy. Unlike fiscal expansion, monetary expansion lowers interest rates, while unlike fiscal contraction, monetary contraction increases interest rates. With a view to stimulating growth, the SBP had pursued an easy or expansionary monetary policy in recent years. From October 2015 till May 2016, a 6% policy rate was maintained. From June 2016 to December 2017, the policy rate was pegged at 5.75%, which was enhanced to 6% in January 2018.

In the May 2018 monetary policy statement, the policy rate was hiked by 50 basis points to 6.5%. The decision has been taken to curb domestic, including import, demand.

Increase in the discount rate signals a restrictive monetary policy. However, the monetary contraction may not be of much effect if fiscal expansion does not slow down.

Another instrument is letting the exchange rate depreciate to curb imports and encourage export demand. The government has already used this instrument thrice in recent months. But so far this has not helped in bringing down the trade deficit.

That said, there is generally a lag between depreciation and improvement in the trade balance as import and export orders are made well in advance. Therefore, we will have to wait for a few more months to gauge the impact of rupee depreciation on the trade deficit.


No one like depreciation because it hurts in short run but it helps in the long run.

 

[bafxet]

Exactly. The repayment is going to start by mid 2019 which is going to add to the debt burden.

And togeather with higher cost of crude this is the problem.

 

[Sine Nomine]

I did not even know when Sunday ended and when Monday started. I was honeywashed by a manatee

If you wouldn't have been one of founders of our resolve,i would have dispatched you to Ganga Desh.
Look at you,what if that was the very Monday,on which we would be commenceing our Action?
We would have been doomed,for sure.Pack your bag and go to ganga desh,i have booked a Resort for you on bank of Ganga.You would stay there and you would be keeping count of River waves.

 

[El Sidd]

If you wouldn't have been one of founders of our resolve,i would have dispatched you to Ganga Desh.
Look at you,what if that was the very Monday,on which we would be commenceing our Action?
We would have been doomed,for sure.Pack your bag and go to ganga desh,i have booked a Resort for you on bank of Ganga.You would stay there and you would be keeping count of River waves.

Douse me with gasoline and acid before you banish me to the ganglands

 

[Yaseen1]

only depreciating rupee will not increase growth only.for gtowth infrastructure , cheap electricity and fuel , skilled labour and law and order and political stability is necessary otherwise this will only increase debt on us and lead to destruction

 

[Sine Nomine]

Douse me with gasoline and acid before you banish me to the ganglands

You are not banished,but have been sent on Vacation.
Before going,eat as much as beef dishes you can our subjects over there are allergic to beef.
Over there a female maid would accompany you,only for releaveing you from domestic chores.
You would take a tank and a live nuke to defend her,incase someone tries to plunder her.
Good Luck.

 

[WarKa DaNG]

Indians are far more concerned than us

 

[El Sidd]

You are not banished,but have been sent on Vacation.
Before going,eat as much as beef dishes you can our subjects over there are allergic to beef.
Over there a female maid would accompany you,only for releaveing you from domestic chores.
You would take a tank and a live nuke to defend her,incase someone tries to plunder her.
Good Luck.

I am going to need that luck since my shiny white armour might not be enough to save here.
Any locations you want me to scout for our next step aptly coded 696969?