Pakistan's exports declined by 24% in july 2022.

[Wood]

Sounds like a death spiral.... It's like step by step cutting off your arms, your legs, your neck..... To prevent a cancer from spreading....

This is not unique for Pakistan. Most developing countries want to import the capitalist goods (everything necessary for modern urban life) that are ideated and manufactured by more developed countries. Only resource exporting countries (like those in middle east) can afford to consume modern goods without being able to manufacture or ideate the products themselves. Other countries simply run deficits to feed their consumption habits and add very little value in the supply chain process.

How do you get out of this 'death spiral'? You can promote your country, stabilize its political environment and manage to get FDI. But this is not a permanent solution. It will only give you a short term respite. If investors do not make money and country remains unstable, they will move away.

The only long term fix that I can think of is for the country's population to become more educated in skills that the world needs for the future. This as you can understand will take a long time to realize. So when PTI or any other populist party comes to power saying that they will provide a socialist welfare society, people should be naturally suspicious of such claims.

 

[ziaulislam]

BoP is typically a result of twin deficit (fiscal and current account). Some countries are able to avoid BoP despite running twin deficits because of Capital Account surpluses (FDI is one way). Pakistan does not have that luxury. Pakistan's BoP episodes could be because:

a) Pakistanis have been given a lot of subsidies (fiscal deficit)
b) Have imported too much to consume for domestic or industrial needs (CAD)

I do not know about previous BoP scenarios that were faced by Pakistan. But this time, the problem was onset by fuel subsidies and CAD (Fitch estimated 4% CAD for Pakistan in February). The current administration is trying to combat this problem by cooling the economy.

I'm neither ignorant nor am I trolling. In fact, your bias for PTI is so deep that you are myopic about how things work. You'll resort to labeling people 'stupid' and claim that Pakistan's CAD was only set to be 2%. But when I show that Fitch (with all its economists dedicated for research) say that it was set to be 4%, you will run away

Fitch sees Pakistan’s current account deficit widening in fiscal 2022 on policy uncertainty

KARACHI: Fitch Ratings on Tuesday revised its projection for Pakistan’s current account deficit to 5.0 percent of the gross domestic product for the current 2022 fiscal year on near-term...

www.thenews.com.pk

Wait ..what are you talking about???

Weren't we talking about how exports have nothing to do with CAD and that more exports means more BoP crisis???

Let's stick to topic

 

[Wood]

Weren't we talking about how exports have nothing to do with CAD and that more exports means more BoP crisis???

Let's stick to topic

For Pakistan, more exports means more imports to sustain the exports. Trade deficit contributes to CAD which in turn contributes to the BoP crisis. I had to mention the fiscal component as well because readers should account for Imran's fuel subsidy program as another contributor for the BoP.

 

[TigerOfMysore]

Exactly what I expected and have been saying for months will happen. We are deep in the spiral.

 

[Ssan]

For Pakistan, more exports means more imports to sustain the exports. Trade deficit contributes to CAD which in turn contributes to the BoP crisis. I had to mention the fiscal component as well because readers should account for Imran's fuel subsidy program as another contributor for the BoP.

Dude- those sort of imports (that go to export industry) are not bad as you decrease your CAD (even if value addition is not that large).

Yes you slow down the domestic economy- reduce the domestic GDP growth to kill imports - that is another thing altogether.

I have never heard of killing your export industry to control CAD. That is some voodoo magic stuff.

Btw, a much more likely reason for the drop in imports and exports is the instability of the rupee and its rapid rise. In the short term this decreases both exports and imports.

 

[Wood]

Dude- those sort of imports (that go to export industry) are not bad as you decrease your CAD (even if value addition is not that large).

Yes you slow down the domestic economy- reduce the domestic GDP growth to kill imports - that is another thing altogether.

I have never heard of killing your export industry to control CAD. That is some voodoo magic stuff.

Btw, a much more likely reason for the drop in imports and exports is the instability of the rupee and its rapid rise. In the short term this decreases both exports and imports.

The government will not narrowly target the imports necessary for export industries to control CAD. This is exactly the type of populist rhetoric that I try to contest from PTI supporters. In reality, the GoP had placed restrictions on what it identified as luxury goods (like tea).

The impacts of sudden currency devaluation on the macro economy will directly affect all industries that rely on imports (including fuel) that are necessary to produce exports. The SBP will not be able to process LCs when currency reserves are close to depletion. The bank cannot spend what it does not have and preserve what it does have for essential imports (like fuel and food). Interest rates have also been hiked significantly. This is another well known monetary tool used by central bank to cool the economy. It will invariably affect your exports.

Bottom line: The government did what it had to do so prevent Pakistan's economy from going down. It had an expected corollary effect of reducing exports. PTI propaganda machine is using the expected outcome to accuse that government reduced exports

 

[AZ1]

https://twitter.com/x/status/1555570731932688384

The government will not narrowly target the imports necessary for export industries to control CAD. This is exactly the type of populist rhetoric that I try to contest from PTI supporters. In reality, the GoP had placed restrictions on what it identified as luxury goods (like tea).

The impacts of sudden currency devaluation on the macro economy will directly affect all industries that rely on imports (including fuel) that are necessary to produce exports. The SBP will not be able to process LCs when currency reserves are close to depletion. The bank cannot spend what it does not have and preserve what it does have for essential imports (like fuel and food). Interest rates have also been hiked significantly. This is another well known monetary tool used by central bank to cool the economy. It will invariably affect your exports.

Bottom line: The government did what it had to do so prevent Pakistan's economy from going down. It had an expected corollary effect of reducing exports. PTI propaganda machine is using the expected outcome to accuse that government reduced exports

bore na kar indian

 

[ziaulislam]

For Pakistan, more exports means more imports to sustain the exports. Trade deficit contributes to CAD which in turn contributes to the BoP crisis. I had to mention the fiscal component as well because readers should account for Imran's fuel subsidy program as another contributor for the BoP.

so you are saying a 3$ import of raw material that then translates into 4$ exports is bad because it means more imports...

what you mean is 4-3= -1 not 1
congrats on inventing new maths..

are you going to call it "woods law of inverse maths" or what?

 

[Wood]

so you are saying a 3$ import of raw material that then translates into 4$ exports is bad because it means more imports...

what you mean is 4-3= -1 not 1
congrats on inventing new maths..

are you going to call it "woods law of inverse maths" or what?

What are the $3 goods that have been restricted by GoP? The government policies to cool the economy have affected all sectors including the industries that contribute to export.

 

[ziaulislam]

View attachment 868214

What are the $3 goods that have been restricted by GoP? The government policies to cool the economy have affected all sectors including the industries that contribute to export.

hence why idiots shouldn't run the economy..

you want to cool down the economy and put it into recession because the word "cool" feels "cool"

 

[Wood]

hence why idiots shouldn't run the economy..

you want to cool down the economy and put it into recession because the word "cool" feels "cool"

If idiots run the economy with fancy rhetoric, then Sri Lanka type situation will follow. Pakistan was simply not able to pay to keep a overheated economy alive. The cooling was a necessity, not a choice.

 

[Wood]

too many nots is not good, makes no sense to most

Fixed the typo.

 

[Samlee]

Had Russian offers of cheap oil LNG wheat coal and fertilizer been accepted,as pti was planning CAD would not have widened that much and we could have maintained out gdp growth as well

 

[Ssan]

The government will not narrowly target the imports necessary for export industries to control CAD. This is exactly the type of populist rhetoric that I try to contest from PTI supporters. In reality, the GoP had placed restrictions on what it identified as luxury goods (like tea).

The impacts of sudden currency devaluation on the macro economy will directly affect all industries that rely on imports (including fuel) that are necessary to produce exports. The SBP will not be able to process LCs when currency reserves are close to depletion. The bank cannot spend what it does not have and preserve what it does have for essential imports (like fuel and food). Interest rates have also been hiked significantly. This is another well known monetary tool used by central bank to cool the economy. It will invariably affect your exports.

Bottom line: The government did what it had to do so prevent Pakistan's economy from going down. It had an expected corollary effect of reducing exports. PTI propaganda machine is using the expected outcome to accuse that government reduced exports

Bro my point in the previous post is to point out the error of your argument. The exports did not go down to control CAD. Exports being chopped down does not help CAD. Stopping imports for the export industry is also equivalent to shooting yourself in the foot.

This is not about populist rhetoric. It is about the fact that this govt (PDM) sucks and has screwed over the economy including the hard earned improvement in export industry that PTI accomplished. They don’t have dollars not because of oil or whatever- but because remittances have dropped by abt a billion a month. This is because overseas Pakistanis don’t trust them.

So frankly, you come off as totally partisan and biased my friend. Maybe go read your previous posts and understand what we are saying.

 

[Wood]

Bro my point in the previous post is to point out the error of your argument. The exports did not go down to control CAD. Exports being chopped down does not help CAD. Stopping imports for the export industry is also equivalent to shooting yourself in the foot.

This is not about populist rhetoric. It is about the fact that this govt (PDM) sucks and has screwed over the economy including the hard earned improvement in export industry that PTI accomplished. They don’t have dollars not because of oil or whatever- but because remittances have dropped by abt a billion a month. This is because overseas Pakistanis don’t trust them.

So frankly, you come off as totally partisan and biased my friend. Maybe go read your previous posts and understand what we are saying.

1) You have not yet understood what I'm trying to say. The government's primary agenda was not to cut down exports. The state simply implemented typical policies that will bring down the imports. This move will often have the expected - yet undesired - outcome of reducing exports. Reducing consumption in the economy by using such standard measures is colloquially called as cooling the economy. I did not invent this term. Here is my first post on the thread. I've said that economy was cooled to control CAD. I did not say that government set out to cut exports. It is in fact PTI supporters who illogically keep saying that GoP wants to cut down exports because they don't know any better

The economy was cooled on purpose to control CAD

https://twitter.com/x/status/1554159196240855047

2) If you are so sure that 'PDM sucks', then please tell us what policy moves that the current administration has made to have pushed the economy into this crisis within 3 months?! The only fault that I've seen so far is that PDM did not cut Imran's fuel subsidy as soon as they took office. This dug a bigger hole for Pakistan to climb out of. Besides this, I do not know of any major policy mishaps from PDM. PTI supporters have the delusional copium argument that remittances are down because PTI lost power. But SBP has repeatedly stated that remittances are up both on MoM and YoY terms. PTI supporters will then argue without any evidence that SBP cannot be trusted when presented with this evidence.

3) Why would an average Indian be biased for PDM and against PTI? The most that Indians can expect from Pakistan is a cessation of violence across LoC. Imran Khan's administration gave that gift already. So I have no reason to be biased against Imran's administration. I am however amused by the illogical arguments presented by PTI supporters here. It is a good pass time to call 'em out on what they say