Pakistan’s external debt, liabilities increase 12.3% to $85b

[SunilM]

You are under a mistaken impression. In the first five months itself the Deficit has swelled to 15 billion dollars.

ISLAMABAD - Pakistan’s trade deficit swelled to $15 billion in just five months , putting further pressure on the foreign exchange reserves.



The country’s trade deficit was recorded at $15 billion during five months (July to November) of the current fiscal year as compared to $11.7 billion of the same period of last year, showing an increase of 28.6 percent. Trade deficit is widening due to higher growth in imports as against the exports of the country, data of Pakistan Bureau of Statistics (PBS) suggested on Monday.

Pakistan’s exports were recorded at $9 billion during July-November of the year 2017-18 as compared to $8.2 billion of the corresponding period of the last year, showing a growth of 10.49 percent. Meanwhile, the imports showed double growth than exports, as they went up by 21.1 percent and were recorded at $24.1 billion during first five months of the current financial year as against $19.9 billion of the same period last year.

The increase in trade deficit is putting further pressure on the foreign exchange reserves of the country. Currently, the foreign currency reserves held by State Bank of Pakistan (SBP) stand in the range of $15 billion after $2.5 billion were received through bonds in the first week of December 2017. The reserves are under pressure due to widening of current account deficit , which surged by 122 percent to $5.013 billion in the first four months (July-October) of the current fiscal year as compared to $2.259 billion of a year ago. The CAD is widening as higher imports growth offset the improvement in exports. The current account deficit is likely to touch $18 billion by the end of current fiscal year, which would further pressurise the reserves. Pakistan’s foreign exchange reserves had dropped by over $4.5 billion in the past one year due to fast drying up of foreign currency inflows.

The government seems failed in controlling soaring trade deficit of the country despite announcing measures to reduce imports and increasing exports. The Economic Coordination Committee (ECC) of the Cabinet had imposed and enhanced regulatory duty (RD) on around 731 items in a bid to discourage the surge in import bill. However, imports are still increasing.

According to the latest data of Pakistan Bureau of Statistics, Pakistan’s exports enhanced by 12.35 percent to $1.97 billion in November 2017 from $1.76 billion of November 2016. Meanwhile, the imports recorded a growth of 16.48 percent and reached $4.9 billion in November 2017 from $4.2 billion in the same period of the last year. Therefore, the trade deficit was recorded at $2.9 billion in November 2017 as against $2.45 billion of November 2016, showing an increase of 19.44 percent.


http://nation.com.pk/12-Dec-2017/trade-deficit-widens-by-28-6pc-to-15b-in-5-months

Also private credit offtake has nothing do with the present situation. By the end of the financial year the trade deficit will increase to a minimum of 30 billion dollars and your net reserves at 8 billion dollars now which cant support such a high deficit. And we are not even talking the 5 billion dollars of debt which is to be retired by June 2018.

 

[N.Siddiqui]

You are under a mistaken impression. In the first five months itself the Deficit has swelled to 15 billion dollars.

ISLAMABAD - Pakistan’s trade deficit swelled to $15 billion in just five months , putting further pressure on the foreign exchange reserves.



The country’s trade deficit was recorded at $15 billion during five months (July to November) of the current fiscal year as compared to $11.7 billion of the same period of last year, showing an increase of 28.6 percent. Trade deficit is widening due to higher growth in imports as against the exports of the country, data of Pakistan Bureau of Statistics (PBS) suggested on Monday.

This is due to discrepancy in imports and exports...That will be met partly with the 21 billion USD Pakistan gets in remittances and partly by SUKUK and maybe a IMF loan...this was going for the last many years, what is the big deal here.

Dollar reserves is relevant just for import finances and for debt financing. Pakistan economy, the manufacturing, the SME and LSM sector, the financial sector and services, health and housing, is not dependent on USD, it is just the government that needs it.

Pakistan tax to GDP ratio is low, about 3500 Billion rupees are collected as taxes while the government budget expenditures are in excess of 4500 Billion rupees. This is the crux of the problem....higher tax income, direct taxation, wider tax base is needed.

BTW this current government which just has few months left cannot go to IMF for any new package, IMF will decline it, a new government will cut a deal though.

 

[SunilM]

Where do you think the figure of 17 billion of deficit financing came from ? Imf official and Govt official discussed the issue and came to this conclusion. Question is where will you get this 17 billion dollars from?

Now lets see what the economist say

"The latest developments on the front of trade account are almost frightening and speak volumes about the emerging problems in the external sector account of the country. It may be recalled that trade deficit of the country which was less than dollar 20 billion in FY14 had surged to dollar 32.58 billion during 2016-17. The trend during the current year suggests that this deficit could be as high as nearly dollar 37 billion which would be about dollar 5.0 billion more than last year. Although home remittances and *** are also increasing, the rate of rise is not as robust as to cover the aggregate trade deficit with the result that current account deficit of the country could be substantially higher than last year's. The recent accrual of dollar 2.5 billion from Sukuk and Eurobonds will obviously not be sufficient to cover such a high level of deficit and the government of Pakistan may be forced to borrow more from the international market and foreign banks."

" It is quite clear that current account deficit of the country would widen further, and foreign exchange reserves held by the State Bank could dwindle to very low levels in the absence of a slew of corrective steps, forcing the country to negotiate a harsh conditionalities-laden programme with the IMF anytime soon."

https://fp.brecorder.com/2017/12/20171215327401/

And what will the IMF ask of Pakistan once it seek loans from it? PKR between 125-130. YES. What will be its effect on tariff for electricity. I mean your plants operate on imported fuel? What happens with increase in price of fuel? Increase in electricity tariff. How will that affect exports? What about the comman man? The High Inflation? Rise in cost of just about everything. But then if you think its just a passing phase..... well.... I meant this will be just the seventh time Pakistan approaches IMF. And yes its the comman man who will feel the brunt. And Pakistani govt already spends 65 % of its budget on debt servicing, by taking new loans all development will come to a halt. Its already too much in the first place.

You are right, IMF will discuss the package with the new govt only. In the meanwhile rupee will devalue further and inflation will rise. Also I have always advised that everyone should convert there rupee to dollars, its the chance of the lifetime.

 

[N.Siddiqui]

And what will the IMF ask of Pakistan once it seek loans from it? PKR between 125-130. YES. What will be its effect on tariff for electricity. I mean your plants operate on imported fuel? What happens with increase in price of fuel? Increase in electricity tariff. How will that affect exports? What about the comman man? The High Inflation? Rise in cost of just about everything. But then if you think its just a passing phase..... well.... I meant this will be just the seventh time Pakistan approaches IMF. And yes its the comman man who will feel the brunt.

Govt takes non-tariff steps to curb imports
Mubarak Zeb KhanUpdated October 21, 2017

ISLAMABAD: The government on Friday stepped up its efforts to discourage imports by linking clearances of goods with compliance to stringent regulations.

The new regulations will also apply to imports under the Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) as well.

In the first quarter (July-September) of this fiscal year, the trade deficit grew nearly 30 per cent year-on-year to $9 billion. Last year, the trade deficit touched $32bn, which was the highest in the country’s history.

The strolling to control the trade deficit, the government has moved from regulatory duties to non-tariff measures apparently to discourage imports. This step of non-tariff measures came to curtail imports after the imposition of regulatory duties on 26 new products (137 tariff lines) as well as hike in duty rates of 21 items (219 tariff lines).



Pakistan Exports on rise in FY 2017 – 18

ISLAMABAD: The exports from the country increased by 10.04 percent during the first four months of the current fiscal year compared to the corresponding period of last year.

The export from the country during July-October (2017-18) were recorded at $7.060 billion against the exports of $6.416 billion during July-October (2016-17), showing growth of 10.04 per cent according tolatest figures released by Pakistan Bureau of Statistics (PBS).



No denying the fact that this government financial hindsight has resulted in trade deficit and financial woes, with highest loans taken in the history of Pakistan, financial corruption and mismanagement, and one reason the finance minister is gone, the PM Nawaz is gone and this government is going in few months.

A caretaker government initially for few months with technocrats and the new government can pull the country out of this, a temporary phase by all accounts. The state is taking corrective measures, as its is said on auto pilot. The government is a failure, the state not.

 

[SunilM]

Yes, the exports have risen by 10.44 %, but at the same time imports have increased by 22%. So net the fiscal and current account deficit is increasing exponentially. Also imposition of RD has had no effect and thats why even after its imposition the deficit has increased by 30 % in the first 5 months. You will realize that the Pakistani economy is a consumption economy and apart from textiles and agricultural item needs to import everything else. So if RD is imposed then the end product for export becomes expensive and non competitive. Thats the reason that recently the RD imposed on cotton imported from India was removed cause it adversely affected exports.

I agree with you that this government has acted criminally and Ishaq Dar and SBP Chairman should be tried in a terrorist court for the worst kind of figure fudging. All you can now hope is that this govt is wrapped up as soon as possible.

 

[N.Siddiqui]

You will realize that the Pakistani economy is a consumption economy and apart from textiles and agricultural item needs to import everything else.

Pakistan is a consumer based economy...right, apart from textiles and agri everything needs to be imported...wrong.

Check this thread started by me about Pakistan SME and LSM sector and products made here in Pakistan, there is a misconception about it.

https://defence.pk/pdf/threads/made...following-products-are-all-local-made.510937/

Also go to the Pakistan economy section to get to know what are the main products of Pakistan, huge misconception about Pakistan that it produces only textiles and agriculture produce.

 

[SunilM]

Ok. lets try to make this easy for you. You may have the capability but that does not mean its used. Also reliance on that list is amateurish at best. Dar kept the rupee over valued. The side effect was that the economy became an import economy. Thats why you have such a high import bill. For example I completely believe Pakistanis are capable of manufacturing cosmetics, but still its imported. Ask yourself why? Cause of a ) taste b) price. The imports are still cheaper. So you may have some industry on paper or some so called list, but in practicality useless as far contributing significantly to the economy is concerned. Read article on the effect of FTA with China to enlighten yourself. There is a reason you import nearly 4-5 times the amount you export.

Here is another example :

"“I am not against devaluation but we must consider the impact on exports. It will increase the import cost but at the same it would also hurt exports since over 30pc of imported constituents are used to make our exportable products,” President and CEO of National Bank of Pakistan told Dawn."

I say again, there is a reason Pakistan removed all duty from import of cotton from India. Its not because you dont grow cotton, infact your farmers are protesting, but they cant offer the price India can. The end produce i.e textiles which by the way forms the majority of your exports would have become expensive had your bought this cotton locally.

Therefore what matters is your competitiveness in the global economy. Your exports have fallen from 25 billion dollars to 20 billion dollars while exports of your neighbors has increased. Pakistan requires to dwell over what has happened in the last five years rather than just gloss over the shortcomings due to which it will be approaching IMF for the 7th time now, the most by any country.

 

[N.Siddiqui]

There is a reason you import nearly 4-5 times the amount you export.

Not exactly...imports last fin. year was 49 billion USD and exports were 21 billion USD, so it was 2.5 times more the imports, there is about 6 billion USD of services exports not counted in tangible exports. Go though the thread I attached earlier.

Also most of the imports consists of power projects machinery, boilers to expensive GE generators, road construction heavy machinery, nuclear power plants, wind, solar plants machinery so on and so forth. This will end in coming days with the maturity of infra projects. Many power projects are up and running(10,000MW's) added recently, hence the talks of no load shedding, not true though, still load shedding in many areas.

Indians knowledge about Pakistan economy is pretty rudimentary.


Yes Pakistan do make local cosmetic brands but imports some intl' brands as well...it is about curbing the least important imports and keeping with the basics.

Your exports have fallen from 25 billion dollars to 20 billion dollars while exports of your neighbors has increased.

Check Indian exports for instance, 3 year back India was planning an export target of 500 billion USD in 2016-17, that has fallen to 262 billion USD last year, much bigger drop, a kind of free fall for Indian exports compared to Pakistan.


http://www.thehindubusinessline.com...oct-trade-deficit-balloons/article9959526.ece

 

[SunilM]

The 10,000 megawatts add to the import bill. Which will only increase from now on. Your plant are based upon RNLG and imported coal. This 'additional' capacity will require 'additional' imported fuel. So imports increase. Also a major portion of your import bill is Fuel products which will only keep increasing and with devaluation what happens to the import bill. Again try to understand what you are going through. With this devaluation fuel prices will spike. which means higher tariff. which results in loss of export. Also I think the people in charge of the Pakistani have shown 'rudimentary' knowledge of the economy. I mean they keep going back to IMF for a reason. or maybe they just dont want to face the truth these 'economy' specialist.

Also stop cherry picking. India's exports grew by 27% in September and 30% in November. Still this is not about India or its 400 billion forex reserves. This is about Pakistan approaching IMF. AGAIN. FOR THE SEVENTH TIME.

 

[N.Siddiqui]

India's exports grew by 27% in September and 30% in November.

27% increase after a drop of 50% of the total exports is nothing. Pakistan saved about 3 billion USD through RLNG imports compared to other fossil fuel imports, your basics are wrong here. You said neighbors exports are increasing, India exports are down more than 40%, Pakistan drop in exports are less than 20%, charity begins at home....

Check this...
https://www.thenews.com.pk/print/254374-pakistan-s-first-lng-terminal-saves-3b-in-two-and-half-years

India's exports grew by 27% in September and 30% in November. Still this is not about India or its 400 billion forex reserves.

Yea there is some drop in Pak exports not much, In India it was a major collapse a free fall, start looking at home, charity starts from home.

Understanding India’s export collapse

http://www.thehindubusinessline.com...indias-exports-are-falling/article9370929.ece

 

[SunilM]

As far as figures as considered. Don't mislead. Exports are increasing. Just that they wont meet the target set for 2020. So where were we. Pakistan approaching IMF again. Also, i.e if in the summer you are able to keep those furnace oil plants shut. There is load shedding in November. I see you using furnace oil plants and Rlng plants in the summer. Remember this is 'additional' capacity. Imports will only increase. the deficit will increase to 37 billion dollars this year up 5 billion dollars from the previous year.

 

[VCheng]

Pakistan’s economy is inching towards point of no return due to interference by the International Monetary Fund (IMF) into policy making, an official said on Saturday.

Let us keep one thing clear: going to IMF for a bailout is a choice being made here by Pakistan. There is no interference by IMF here.

 

[N.Siddiqui]

As far as figures as considered. Don't mislead. Exports are increasing. Just that they wont meet the target set for 2020. So where were we. Pakistan approaching IMF again. Also, i.e if in the summer you are able to keep those furnace oil plants shut. There is load shedding in November. I see you using furnace oil plants and Rlng plants in the summer. Remember this is 'additional' capacity. Imports will only increase. the deficit will increase to 37 billion dollars this year up 5 billion dollars from the previous year.

Sorry to burst you bubble...this is the reason I said charity begins at home, start looking at India and stop worrying about Pakistan...

India is borrowing more and more to pay its existing loans, and that could wreck development dreams

The government has set up a cell to manage India's public debt and expects better results than those achieved by the Reserve Bank and the Finance Ministry.

If debt is bad, taking new loans to pay back old ones has all the makings of a debt trap and the Indian government seems to be doing just that. India owed Rs 57,75,685 crores to internal and external lenders in the financial year 2014-2015 – a whopping 46% of the country’s gross domestic product. And it turns out that 77% of all long-term borrowings made by the government were actually used to pay back interest and principal on earlier borrowings rather than being spent on development expenditure.



https://scroll.in/article/818686/in...loans-and-that-could-wreck-development-dreams

 

[SunilM]

Let us keep one thing clear: going to IMF for a bailout is a choice being made here by Pakistan. There is no interference by IMF here.

Yes. I wanted to know what are the credible alternative instead of IMF.

Also Pluralist , no dated post. And this is not India Vs Pakistan. Let stick to the topic.

 

[N.Siddiqui]

Also, i.e if in the summer you are able to keep those furnace oil plants shut. There is load shedding in November. I see you using furnace oil plants and Rlng plants in the summer. Remember this is 'additional' capacity. Imports will only increase. the deficit will increase to 37 billion dollars this year up 5 billion dollars from the previous year.

Start looking inward, at home don't worry about Pakistan, this is beyond your prerogative....


India pays one of the highest interest rates in the world on its debt, but shows no signs of curbing its borrowing

India is in a tight financial spot
India's current financial situation is similar to someone who spends 70k per month, earns 50k per month, and uses his credit card to fund the remaining 20k. Clearly, it is not a good financial situation to be in. In 2015-16, India spent more than 1.4x what it earned, and borrowed money to finance the deficit. In fact, the situation is so bad that the government now has to borrow more money to pay off its old loans, a situation that is known as a debt trap.

To be fair, India's financial situation has improved somewhat in recent years. 5 years ago, it was spending around 1.65x what it earned. Indian politicians and policy-makers often refer to India's lower Debt-to-GDP ratio compared to western countries as a sign that things are not too bad. But they forget that other countries borrow money at a much lower rate compared to India, and while they can afford high debt, India can't.

http://thebroadline.com/india-pays-one-of-the-highest-interest-rates-in-the?utm_term=vumgfjoshk