Pakistan’s trade balance negative with 84 nations

[LOGICAL BOSSS]

Why wouldn't the Pakistani rupee be depreciated to encourage exports ?

Already depreciated to bottom still 50%low compared To India what level you expect? Free?

 

[A_Poster]

Purchasing power will be eroded. It is a fine tight rope to walk. If there is enough surplus liquidity it is doable...(hence why China has managed it quite well and also India to lesser extent)....but Pakistan does not have the forex and tax base to do that without suffering major consequences. The margin elasticities of say textiles (input/output cost differentials) also could very well hurt Pakistan given Pakistan is already in dire need of capital good replacement.

Maybe after CPEC (and assuming enough buffers are created and enough economical injection by the Chinese into capital goods with hopefully low depreciation) there can be a more confident foreign monetary strategy by Pakistan.

@farhan_9909 @LA se Karachi @Arsalan @django

Also imports would become dearer, thus bringing balance to where it was in dollar term (even if quantities of import and export change), unless there is import substitution.

Degradation of currency works only when you have exportable goods and services which are in high demand overseas, and your aim is to boost industries and provide employment. It does not work when you have nothing to export or fulfill gap created by lack of imports or your exports depend on imported raw material.

 

[Nilgiri]

Also imports would become dearer, thus bringing balance to where it was in dollar term (even if quantities of import and export change), unless there is import substitution.

Degradation of currency works only when you have exportable goods and services which are in high demand overseas, and your aim is to boost industries and provide employment. It does not work when you have nothing to export or fulfill gap created by lack of imports or your exports depend on imported raw material.

Yep thats what I meant with the margin elasticities. Pakistans basket of goods in both areas are not conducive for this kind of monetary strategy....neither do they have enough liquidity in forex to back it up.

 

[Nike]

Purchasing power will be eroded. It is a fine tight rope to walk. If there is enough surplus liquidity it is doable...(hence why China has managed it quite well and also India to lesser extent)....but Pakistan does not have the forex and tax base to do that without suffering major consequences. The margin elasticities of say textiles (input/output cost differentials) also could very well hurt Pakistan given Pakistan is already in dire need of capital good replacement.

Maybe after CPEC (and assuming enough buffers are created and enough economical injection by the Chinese into capital goods with hopefully low depreciation) there can be a more confident foreign monetary strategy by Pakistan.

@farhan_9909 @LA se Karachi @Arsalan @django

They can propose Forex reserve swapping bilateral agreement with China to create some buffer in their forex reserve.


Indonesia had doing so with Japan, South Korea and China, so our Central Bank can "let" the market to depreciate our Rupiah to attract investor and made our product much more competitive. Sure the move had made our Dollar nominal GDP look much smaller than it should be, but is always important thing to notes, the economy of any Country is run at local currency not in US dollar, so as long as the economy (in local currency) keep growing at healthy pace, the depreciation against Dollar will only hurt at most minimum effects.

 

[Talwar e Pakistan]

I've noticed that almost every country has a negative trade balance...

 

[Indus Pakistan]

I am not economist but my lay observation is Pakistan does not have industrialists or real industry. Pakistan just has rapacious parasite rentier class that lives off elite patronage. This rentier class is singularly incapable of competing with outside world and only is "king" inside Pakistan because of state monopolies designed to keep the leaches well fed. The export figures merely expose this racket.

The only real moneymakers in Pakistan are -

(i) manpower export/ex-pat workers/diaspora. It is we from abroad who bring dollars and pounds into Pakistan and create demand that the rentier class harvest with their licence monopolies.

(ii) the foreign aid/grants and loans which mostly means renting out the country's strategic location to geopolitics.

Example: Between July-April 2016 the figure is $16 billion. Therefore it is safe to assume it is going to clock $21 billion by July 2016. It is estimated equal amount is remitted by Hawala transefers. So the real figure could be as high as $42 billion a year. Think about that?

In Indian context thast would be 42 times 6.5 = 273. Can you guys imagine India being pumped with $273 billion dollars a year from remittances? Can you imagine the demand that would create. Then you can imagine the so called industrialits creating cartel to meet that demand in near monopoly. That is Pakistan for you. This explains why despite the export figures and appalling statistics when people go to Pakistan see they a middle income country. Huge housing estates, cars, shopping malls all feeding off the remittances.

Link > http://tribune.com.pk/story/1100856/overseas-pakistanis-send-16-billion-in-remittances-up-5-25/

 

[VCheng]

Remittances by expat Pakistanis from the Middle East to Pakistan are likely to drop in the long term:

 

[Indus Pakistan]

likely to drop in the long term:

That's true statement but are you just a carrier of bad news? Even if it is bad news you never suggest solutions etc.

Spreading negatives at PDF about Pakistan for just sake of it - is that what makes you tickle?

 

[coffee_cup]

Facts are facts. That is all I see. Always.

You seriously need to take part in some sort of positive thinking seminars.

In the long run this blind hatred that makes you see only negative stuff is going to consume you.

@Topic: Systematic corruption as pointed out by Kaptaan is a real cancer. Would be interesing to read some expert opinions about how this monster can be controlled and Pakistani economy could be brought on track.

 

[VCheng]

Yep thats what I meant with the margin elasticities. Pakistans basket of goods in both areas are not conducive for this kind of monetary strategy....neither do they have enough liquidity in forex to back it up.

Pakistan simply consumes more than it produces. That is why the PKR remains on a steady trend of devaluation, short periods of false shoring notwithstanding. That alone is a good measure of its overall trade balance in the long term.

 

[Acknowledge]

In Indian context thast would be 42 times 6.5 = 273. Can you guys imagine India being pumped with $273 billion dollars a year from remittances? Can you imagine the demand that would create. Then you can imagine the so called industrialits creating cartel to meet that demand in near monopoly. That is Pakistan for you.

There would probably be revolution in India if that happens and Maoists would gain power.

India is a decent enough manufacturing country (coming in the tier 3 manufacturing level though in top 10 globally) and very high in Services, and yet there is still a massive issue politically on unemployement in India.

[ Fortunately our new govt is slowly dismantling the old regime of license, permit and obnoxious labour laws (the kind that would make a communist Soviet Union proud) because of which India is not able to reach its potential in manufacturing. They are facing tremendous opposition but Govt. prevailing bit by bit. ]

I can see though that were this to happen, the Govt or Establishment would need to keep the populace constantly under pressure of some threat so that they continue to obsess about security instead of other issues. It explains quite a bit in Pakistan.