Pakistani Economic Stress Watch

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Pakistani Economic Stress Watch

Postby Peregrine » 22 Nov 2017 22:27

X Posted on the Terroristan Thread

Here we go again!

Amid declining reserves, Pakistan set to start borrowing journey

ISLAMABAD: After a little over a year, Pakistan will today (Wednesday) hold road shows in the Middle East and the United States as it looks to borrow up to $3 billion by floating Islamic and conventional bonds.

The country, currently suffering from declining foreign exchange reserves, wants to finalise the bond issue on November 29 in New York.

The government is trying to tap the international debt markets at a time when there is excess liquidity and the benchmark interest rates are not too high. However, there is more domestic political uncertainty compared to September 2016, the last time Pakistan approached international markets for the bond issue. Former prime minister Nawaz Sharif was still at the helm and government continuity was not being seriously questioned. Also, instead of Finance Minister Ishaq Dar, Dr Miftah Ismail is now leading the Pakistani team.

Prime Minister Shahid Khaqan Abbasi has picked Ismail who is Special Assistant to PM on Economic Affairs. The other members of the team are Secretary Finance Shahid Mahmood and State Bank of Pakistan Governor Tariq Bajwa.

By choosing Ismail, the premier has indicated his preference amid noise to replace Dar who is facing corruption charges and a process has been initiated by an accountability court to declare him a proclaimed offender.

Pakistan is going to float the bonds in its largest transaction to take pressure off the central bank’s foreign exchange reserves that are depleting at a rapid pace. Earlier, the government borrowed $2 billion in 2014 through similar capital market transactions.

The central bank’s official foreign currency reserves have depleted to $13.6 billion due to mounting trade and debt related payments. The current account deficit widened to over $5 billion during July-October period of this fiscal year – higher by almost 122% over the same period of the last fiscal year.

Last time, Pakistan had floated Sukuk in September 2016 at the lowest interest rate of 5.5% but its September 2015 five-year Eurobond at 8.25% was the most expensive deal.

The road shows would begin from Dubai. The next stopover will be in London and after that the team will leave for the United States, said an official of the finance ministry.

Early this month, the federal cabinet had allowed borrowing of up to $3 billion from international debt markets by floating sovereign bonds and also waived off a dozen taxes to make deals attractive for investors. According to the summary approved by the cabinet, the finance ministry can float multiple bonds in the range of $2 billion to $3 billion.

The government wants to close the deal by November 29.

The government will try to float the bonds at “very optimal pricing” and the volume will also be flexible, depending upon the pricing, said finance ministry sources.

A consortium of banks have initially indicated that five-year Sukuk (Islamic bond), ten-year Eurobond and another 30-year Eurobond with combined proceeds of around $2 to $3 billion can be floated, according to the finance ministry.

The exact size will, however, be determined on the basis of market appetite and pricing, according to the summary signed by the finance secretary.

The government will pitch a minimum $1-billion Sukuk bond of five-year tenor, backed by a section of M3 motorways. It will also float a ten-year Eurobond and issuance of the 30-year bond would depend upon the response of the investors.

It could be for the second time that Pakistan will float a 30-year dollar-denominated Eurobond, but the decision to sell it will depend on the interest rates investors seek. Higher maturity bonds are issued at relatively higher interest rates.


Countries having credit rating like that of Pakistan successfully execute capital market transactions at an interest rate ranging from 6.875% to 7.125%.

Pakistan on Monday signed the legal agreement with a consortium comprising Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank, Deutsche Bank, Dubai Islamic Bank and Noor Bank for the Sukuk transaction.

It also signed the agreement with Standard Chartered Bank, Industrial and Commercial Bank of China, Citibank and Deutsche Bank for the Eurobond issue.


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Re: Pakistani Economic Stress Watch

Postby nachiket » 23 Nov 2017 01:50

Peregrine wrote:X Posted on the Terroristan Thread


The government will pitch a minimum $1-billion Sukuk bond of five-year tenor, backed by a section of M3 motorways. It will also float a ten-year Eurobond and issuance of the 30-year bond would depend upon the response of the investors.
[b]

How do pakis get away with using immovable infra like highways as collateral? If they default, what exactly are the lenders going to do with a section of a highway? Collect toll?

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Pakistani Economic Stress Watch

Postby Peregrine » 23 Nov 2017 02:44

Peregrine wrote:X Posted on the Terroristan Thread

The government will pitch a minimum $1-billion Sukuk bond of five-year tenor, backed by a section of M3 motorways. It will also float a ten-year Eurobond and issuance of the 30-year bond would depend upon the response of the investors.
nachiket wrote:How do pakis get away with using immovable infra like highways as collateral? If they default, what exactly are the lenders going to do with a section of a highway? Collect toll?
nachiket Ji :

Absolutely. The Lenders cannot "Roll the Road and Take it Home!"

As far as collecting Tolls : Can't think of anything else though "Collecting Tolls" might not be Easily as it Sounds.

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Re: Pakistani Economic Stress Watch

Postby Suraj » 23 Nov 2017 04:50

nachiket wrote:How do pakis get away with using immovable infra like highways as collateral? If they default, what exactly are the lenders going to do with a section of a highway? Collect toll?

This immovable infrastructure doesn't exist yet, by the way. It's due to open in 2018. They're simply temporarily giving up claims to the toll and debt servicing needs of those who lent capital for the construction of the motorway, in exchange for the ability to issue a bond at lower coupon rate on the basis of the additional revenue stream from the tolls. In effect, take loans, build road, screw the creditor and offer the road to a new creditor due to urgent forex needs, then later figure out how to make the original creditor of the road construction whole.

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Re: Pakistani Economic Stress Watch

Postby Vips » 23 Nov 2017 06:50

And then also get screwed by yet another arbitration law suit that will be filed and won by the Original creditor.He will win damages which will be at least 2X the projected profits plus interest.

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Re: Pakistani Economic Stress Watch

Postby abhijitm » 23 Nov 2017 09:27

I think returns are funded by a section of motorway toll. I doubt a motorway can be an acceptable collateral in sovereign bonds.

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Re: Pakistani Economic Stress Watch

Postby Suraj » 23 Nov 2017 10:07

abhijitm wrote:I think returns are funded by a section of motorway toll. I doubt a motorway can be an acceptable collateral in sovereign bonds.

There's no motorway. It's under construction. It was paid for by another loan from another creditor. They just handed over the as-yet-unbuilt-and-not-paid-for road to another guy. Only in TSP.

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Re: Pakistani Economic Stress Watch

Postby nachiket » 28 Nov 2017 00:36

Suraj wrote:
abhijitm wrote:I think returns are funded by a section of motorway toll. I doubt a motorway can be an acceptable collateral in sovereign bonds.

There's no motorway. It's under construction. It was paid for by another loan from another creditor. They just handed over the as-yet-unbuilt-and-not-paid-for road to another guy. Only in TSP.

But they got a new motorway and another lower rate loan with that motorway as collateral all without spending a dime of their own? What exactly is the downside for them?

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Re: Pakistani Economic Stress Watch

Postby Suraj » 28 Nov 2017 00:49

nachiket wrote:But they got a new motorway and another lower rate loan with that motorway as collateral all without spending a dime of their own? What exactly is the downside for them?

They still owe BOTH creditors. They're just mortgaging away current and future fixed assets to pay for future paper liabilities, effectively like selling off parts of your house to pay for your meals. It's dumb, but we're talking about TSP here.

The guy who paid for the road needs to be paid back. The guy they borrowed forex loan from also needs to be paid back. Neither of those responsibilities has disappeared.

Since they signed away the toll from the as yet unbuilt road to the second guy, they can't pay the first guy with that toll. So they need to hand him something else. And they are only getting a rebate on the forex bond coupon by offering some collateral - they still need to pay the creditors back too.

Of course they could find something else to pawn off down the line. That doesn't make their actions any smarter, or any more sustainable.

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Re: Pakistani Economic Stress Watch

Postby Shanmukh » 28 Nov 2017 01:12

@Suraj,
If the Pakistanis refuse/fail to pay up, can the creditor dynamite that section of the highway/bridge that has been pledged? Or is the poor creditor only limited to collecting tolls (assuming that anyone can collect anything in Pakistan) in that section of the highway/bridge?

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Re: Pakistani Economic Stress Watch

Postby Suraj » 28 Nov 2017 01:39

I don't understand the question. Why would any creditor willingly destroy collateral ??

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Re: Pakistani Economic Stress Watch

Postby Shanmukh » 28 Nov 2017 01:46

Suraj wrote:I don't understand the question. Why would any creditor willingly destroy collateral ??


When the only way to recover anything from the investment on the bridge is not by tolls (good luck to anyone collecting anything in Pakistan), current or future, but by selling (the section) of the bridge for scrap metal, it may make better business sense for the creditor to blow it up & transport the scrap elsewhere. It's not like they can take the entire bridge intact & pawn it elsewhere ........

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Re: Pakistani Economic Stress Watch

Postby Suraj » 28 Nov 2017 01:52

Sounds rather elaborate :) Most creditors with a lien on collateral would just sell it to someone else, take a haircut and move on. And if they're smart enough, not lend to the debtor again. TSP is just skilled at finding more fools to lend them money.

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Re: Pakistani Economic Stress Watch

Postby Kashi » 28 Nov 2017 05:58

Which creditor would be naive enough to fall for the Baki trap?

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Re: Pakistani Economic Stress Watch

Postby nachiket » 28 Nov 2017 06:10

So far, they haven't run out of creditors.

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Re: Pakistani Economic Stress Watch

Postby Kashi » 28 Nov 2017 07:03

I specifically meant in the context of motorway collateral. Of course, IMF, WB, ADB Islamic Bank etc are happy to lend since they get hefty interest payments in return and a captive market for their loans. Not sure if any of these loans have included immovable assets as collateral. Some loans nin the past did, but I cannot find them now.

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 28 Nov 2017 08:23

Kashi wrote:Which creditor would be naive enough to fall for the Baki trap?


A loan-to-own creditor.

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Re: Pakistani Economic Stress Watch

Postby abhijitm » 28 Nov 2017 09:34

On the same topic of pakistani bonds and pay one lender by borrowing from another strategy.
Murdering Pakistan with Debt Trap

Pakistan government has done three big international borrowing transactions in almost a year; two of them are discussed above and the third one is $1 billion worth of Sukuk bonds with 5-years maturity and borrowed at interest rate of 6.75%. Sukuk bonds are Islamic bonds backed by collateral and Government of Pakistan has pledged Islamabad-Lahore motorway for 5-years and that’s why interest rate is lower than that of Eurobonds transaction of $2 billion. Sukuk bonds were issued to restore lost trust of international investors after OGDCL transaction failed. Government is also planning to sell its shares in HBL, UBL, PIA, and PPL. Government of Pakistan has reported $20 billion in foreign reserves then why it is jumping into selling spree of national assets?

On 23 December, 2012 International Monetary Fund decided 0% interest on the loans of poor countries. Pakistan is repeatedly borrowing from national and international lenders to keep its economy going and has more than $67 billion of external debt to pay to different lenders and yet too excited to show the world that it is richer than the rich countries in the world. In comparison, Nigeria has issued bonds in secondary market at 7%, Egypt has issued its debt instruments at 6%, and interest rate of Middle East and other African countries is around 2.8%. Whereas, interest rate on 10-years US Treasury security is 2.05% as per 27th October 2015. Now imagine the difference between the annual yield rates of debt securities of US (trillion dollar economy) and Pakistan (billion dollar economy) 2.05% and 8.25% respectively and think about the health of both economies. We can totally mark the difference between trader’s government and democratic government. No doubt behaviors say it all.

Pakistan promised IMF to make reforms in energy sector to be able to borrow at 2-3% interest rate but failed to make any progress and that’s why Pakistan made a smashing entry to international debt market at interest rate as high as 8.25%.

Government officials say they have to repay maturing (2016) bond of same value issued in 2006 by then government. Question is why Pakistan isn’t generating revenue as a state? Why Pakistan has to borrow more to repay the maturing debt? Above all, the amounts of debt we are obtaining from different sources should be spent on jobs, education, cheap production of electricity, elimination of corruption, expansion of irrigation system, building of big dams, and state owned factories. Only this way Pakistan as a state can generate revenues and will be able to pay off its debts on its own. Borrowing more to pay the maturing debts will lead to debt trap that Greece is facing. Alarmingly, 47% of what Pakistan will generate as revenue will be used in debt payment.

We should be worried about Pakistan going into debt trap just like Greece. Greece has to borrow to pay for its previous loans and it is repeating this strategy for years. Pakistan is still better off paying its debts in time but this strategy would not work for long. We really need to mobilize our national assets to start generating profits so that we can be in a better position to pay off our debts from revenues rather than to borrow more to pay off previous debts. Pakistan is a money starved country but continuous borrowing isn’t the solution. Solution is progressive economic reforms, exploration of natural resources, and elimination of energy crises which is murdering our industries and hindering development.

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Re: Pakistani Economic Stress Watch

Postby Kashi » 28 Nov 2017 09:41

^^The user feedback from bennedose really stands out! :D

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Re: Pakistani Economic Stress Watch

Postby abhijitm » 28 Nov 2017 09:43

Sovereign bonds are most secured so lenders will not have problem buying those. It is headache of pakistan gov how to pay them back and they are floating more and more interesting bonds in the market to pay off previous lender.

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Re: Pakistani Economic Stress Watch

Postby abhijitm » 28 Nov 2017 09:51

Pakistani sukuk bond structure

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Re: Pakistani Economic Stress Watch

Postby Aditya_V » 28 Nov 2017 10:24

Basically an unsecured loan to a known absconder who has gotten many of the past debts written off

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Re: Pakistani Economic Stress Watch

Postby abhijitm » 28 Nov 2017 11:50

roads, airport as collateral is a hogwash. It is just a token arrangement to make the bond sukuk as in islamic borrowing.

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Pakistani Economic Stress Watch

Postby Peregrine » 08 Dec 2017 03:21

X Posted on Terroristan Thread

Foreign exchange: SBP's reserves decrease 6.55%, stand at $12.7b

SBP FIGURES : US$ Billions

24-Nov-17 - SBP : 13.5473 - COMMERCIAL BANKS 6.1459 - TOTAL : 19.6932

30-Nov-17 - SBP : 12.6605 - COMMERCIAL BANKS 6.0844 - TOTAL : 18.7449

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Pakistani Economic Stress Watch

Postby Peregrine » 08 Dec 2017 14:37

X Posted on theTerroristan Thread

Rupee suffers 4% fall in intra-day movement

Owing to foreign payment pressure and political uncertainty in Pakistan, and in the world, the rupee weakened 4% on Friday, with the inter-bank rate becoming Rs110 to the US dollar at one point of the currencies’ trade.

The inter-bank opened the day at Rs105.50 and touched Rs110 during the wee hours. It was trading at Rs108.50-Rs109 per US dollar 45-minutes before Friday break at 12.30pm.

“We are observing the situation… and will take action if needed,” spokesperson Abid Qamar of State Bank of Pakistan told to The Express Tribune on the phone.

The market is moving on its own fundamentals, there might be some payment pressure as well. If the situation doesn’t calm down, the central bank will take necessary action by the evening, he added.

The open market strictly followed movement in the inter-bank throughout its first session on Friday; the inter-bank market will resume at approximately 2:30pm.

President Forex Association of Pakistan Malik Bostan said there was no panic in the open market. “People have adopted the wait and see strategy following heavy losses sustained in July in a similar situation,” he said.

“It seems the International Monetary Fund (IMF) has mounted pressure to devalue the rupee,” he said, adding, “if this is the situation the government must take the nation into confidence.”

With the political canvas changing everyday, including Pakistan Peoples Party (PPP) joining hands with the Pakistan Awami Tehreek (PAT) to demand the resignation of Punjab Chief Minister Shehbaz Sharif, or with Jamaat-e-Islami (JI) planning a street protest against US President Donald Trump’s decision to recognise Jerusalem as Israel’s capital — political uncertainty is sure to have its affect on the market.

Earlier in July 2017, the rupee lost 3.19% to Rs108.25 per US dollar for one day only in the inter-bank, but intervention by the then Finance Minister Ishaq Dar helped it recover to Rs105.70 per US dollar the next day.

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Re: Pakistani Economic Stress Watch

Postby A_Gupta » 08 Dec 2017 20:05

https://www.moodys.com/research/Moodys- ... -PR_376650
Singapore, December 06, 2017 -- Moody's Investors Service ("Moody's") has assigned a rating of B3 to the Government of Pakistan's (B3 stable) US Dollar-denominated notes. The senior unsecured notes rank pari passu with all of the Islamic Republic of Pakistan's current and future senior unsecured external debt. The proceeds of the notes are intended for general budgetary purposes.

RATINGS RATIONALE

Pakistan's B3 issuer rating reflects a credit profile that balances robust growth potential and a relatively large economy, against low income levels, infrastructure constraints and very low global competitiveness. In recent years, the credit has been supported by an improved track record of reforms started under an International Monetary Fund (IMF) program, and a stronger outlook for infrastructure investment driven by the China-Pakistan Economic Corridor (CPEC) project. However, the government's high debt burden, very narrow revenue base, fragile external payments position and high political risk constrain the credit profile.

Pakistan's economy demonstrates relatively robust GDP growth, limited by supply-side constraints on the economy. While the scale of the economy is relatively large, Pakistan's per capita income is very low, indicating limited capacity to absorb negative shocks. Moving forward, implementation of the CPEC will, over time, partly address supply-side constraints through investment in power generation and transport infrastructure, thereby bolstering Pakistan's growth potential and competitiveness. However, security related issues and a weak track record of public project implementation suggest the pace of project execution will be relatively slow.

Pakistan's institutional strength is improving from a very low base, a reflection of significant traction on reforms under and following Pakistan's recent IMF program, which concluded in September 2016, along with improvements in transparency. Key IMF program goals included fiscal deficit reduction, strengthening of the monetary policy framework, resolving constraints in the energy sector, and state-owned enterprise reform. Continued government commitment to implementation of reforms would help reinforce fiscal and monetary policy discipline, thereby preserving recent macroeconomic stability gains and strengthening institutional effectiveness in the future. Such improvements would help support the sovereign credit profile through enhanced policy credibility and effectiveness.

Progress on these reforms balances key institutional constraints from factious relations between the executive, military and judicial branches of government. Institutional constraints are also reflected in Pakistan's very low rankings in the Worldwide Governance Indicators on government effectiveness, rule of law and control of corruption.

Other factors that drive Pakistan's sovereign credit rating are its very low fiscal strength and high susceptibility to event risk. Key fiscal and external credit metrics are weak intrinsically and relative to ratings peers. These factors are compounded by the country's very narrow revenue base, low savings and shallow capital markets, which hinder debt affordability and increase the debt burden. The material foreign currency portion of outstanding government debt (about 30% of total debt) also exposes the government's balance sheet to foreign exchange risks.


Moody's ratings definition (Wiki):
https://en.wikipedia.org/wiki/Moody%27s ... it_ratings

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Pakistani Economic Stress Watch

Postby Peregrine » 09 Dec 2017 01:23

X Posted on The Terroristan Thread

KSE-100 Index crashes to 17-month low amid political noise
KARACHI: Pakistan equities lost ground on Thursday with benchmark KSE-100 Index losing 1,123 points or 2.8 percent, falling below the 39,000 level to close at a 17?month low of 38,785 points. The KSE100 Index was 38,368 points on July 11, 2016.

TERRORISTAN STOCK EXCHANGE CHART
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Re: Pakistani Economic Stress Watch

Postby anupmisra » 09 Dec 2017 09:41

In talks with IMF, Pakistan agrees to depreciate rupee
https://www.dawn.com/news/1375449/in-ta ... iate-rupee

Amid a policy decision on Friday to allow rupee depreciation, Pakistan and an International Mone­tary Fund (IMF) delegation concluded the first round of discussions on the country’s economy.
A senior official told Dawn that the State Bank of Pakistan (SBP) would now let the currency exchange rate to adjust to market conditions after many months, rather years, of resisting expectations.


And, then this happened...

Dollar rises to Rs107 in ‘market-driven adjustment’
https://www.dawn.com/news/1375392/dolla ... adjustment

The exchange rate witnessed massive fluctuations on Friday as the dollar reached the intraday high of Rs109.50 in the interbank market.
Currency dealers were shocked during the early session as the dollar rate increased sharply. Most of them were clueless about the reason for the sudden jump in the rate as well as dollar demand.

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Re: Pakistani Economic Stress Watch

Postby Prem » 10 Dec 2017 06:52

Pookar of PKR going Bekar , Ik Cup Chai in Ik Hajar in new Pakambabwestan


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Re: Pakistani Economic Stress Watch

Postby khan » 10 Dec 2017 08:10

Does anybody know of a way to short the Pakistani Rupee from the USA?

It seems like a very lucrative long-term trade & has the added benefit of putting more pressure on their currency.

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Pakistani Economic Stress Watch

Postby Peregrine » 10 Dec 2017 16:03

X Posted on the Terroristan Thread

Opinion - Dr Farrukh Saleem

Capital suggestion: Reforms

Reform means the “improvement or amendment of what is wrong, corrupt or unsatisfactory”. Pakistan is at point A where there’s plenty that is ‘wrong’; corruption is rampant and governance is totally ‘unsatisfactory’. There are 193 member-states of the United Nations of which 123 are constitutional democracies. Of the 123 constitutional democracies, ours is one of the worst. Our political culture is all about ‘families’ whereby “several members of a family are involved in politics, particularly electoral politics. Members are related by blood or marriage; often several generations or multiple siblings are involved in politics.”

Dynastic politics and poverty coexist. Dynastic politics and illiteracy are correlated. Dynastic politics means reduced electoral competition among candidates as party tickets are awarded on the basis of loyalty rather than merit. What we need is competition in politics. What we need is merit in politics. We must move from Point A to Point B. How do we get from Point A to Point B?

To be certain, almost all institutions of the state have been captured – captured by a thousand families to extract private gains. The State Bank of Pakistan (SBP) is a captured entity. The Securities and Exchange Commission of Pakistan (SECP) is a captured entity. The Competition Commission of Pakistan (CCP) is a captured entity – captured to extract private gains. This is Point A. We must move as far away as possible from Point A. But, how do we move from Point A to Point B?

To be certain, our economy is dominated by cartels. We have a banking cartel, a cement cartel, a sugar cartel, an automobile cartel, a rental power cartel and an oil cartel. The banking cartel pays three to five percent to depositors but charges 8-24 percent on loans. The cement cartel has 21 members with annual sales approaching Rs100 billion. The CCP called it “anti-competitive behaviour” and cement manufacturers including DG Khan Cement, Lucky Cement and Maple Leaf as “habitual cartel offenders”.

Of the 41 sugar mills in Punjab, at least 20 are owned by politicians of the PML-N and PML-Q. No wonder the federal government has given a subsidy of Rs10.70 per kg. Our ex-president Zardari owns directly or directly Sakrand Sugar, Ansari Sugar, Mirza Sugar, Pangrio Sugar and Bachani Sugar. No wonder the Sindh government has announced an additional subsidy of Rs9.30 per kg. The automobile cartel that has sales of Rs130 billion there is massive “collusion and cartelization” (according to the CCP).

Yes, the National Accountability Bureau (NAB) was a captured entity – captured to safeguard private gains. To be sure, our current system of checks and balances has completely failed. Pakistan is at Point A. We must move as far away from Point A as possible.

Competition in politics. Subject specialists in governance. And autonomous, powerful institutions of accountability. This is point B. This is where we want to be. Food for thought: How will we move from Point A to Point B? Who will move us from Point A to Point B? Can we move from Point A to Point B by remaining within the confines of the constitution?

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Re: Pakistani Economic Stress Watch

Postby arun » 12 Dec 2017 10:09

X Posted from the Terroristan thread.

Bangladesh ranked at 111, well ahead of the Mohammadden Terrorism Fomenting Islamic Republic of Pakistan rank of 137, in the 149 country/admin territory Legatum Prosperity Index 2017.

By militarily detaching Bangladesh from the exploitative clutches of the Punjabi Military Dominated Deep State of the Mohammadden Terrorism Fomenting Islamic Republic back in December 1971, India has done a great service for Bangladeshi prosperity:

Legatum Prosperity Index 2017

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Re: Pakistani Economic Stress Watch

Postby Prem » 13 Dec 2017 00:07


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Pakistani Economic Stress Watch

Postby Peregrine » 13 Dec 2017 15:23

X Posted on the Terroristan Thread

Happy Days are Here Again - The Number of Terroristani Rupee Millionaires is Going through the Roof!

Dollar jumps to Rs112! :rotfl:

KARACHI/HOUSTON: The rupee continued to move on the downward trajectory on Tuesday, losing another 2.23 per cent to the US dollar in the interbank market, but analysts believe that there is still room for further depreciation.

The State Bank of Pakistan (SBP) quoted the rupee at Rs110.63 to a dollar compared with the previous closing of Rs108.41. In early session, it traded at Rs111.50. In open market, the rupee traded at 111.80/112. Thus, the dollar has gained Rs7 during the last three days.

Traders and dealers said the rupee was broadly lower as the currency’s fluctuation kept the market participants uncertain about whether there would be gradual increases or rupee would find stability at the 110 level.

The rupee, which has mostly traded in a tight range of 104-105 per dollar since December 2015, shed over five per cent in the past three sessions. “The central bank decided to let the currency find its equilibrium based on demand and supply,” Mohammad Sohail, chief executive officer at Topline Securities, said.

A currency dealer said it seemed the central bank continued with its policy to allow the adjustments in the exchange rate to help contain balance of payment pressures. Analysts said the rupee was likely to lose value further as it was overvalued by more than 10 per cent, indicating a room for further decline.

“The current price movement shows the unit to extend losses,” an analyst said. “The market is anticipating a new support level of 112 in near-term.” Another analyst said the rupee was unlikely to consolidate at the 115 level.

The government has so far adopted a strong rupee policy and converted the regime into an almost-fixed exchange rate – one that caused drop in exports and remittances. The rupee devaluation might be in line with the demand of the International Monetary Fund, which has always advocated a flexible regime to allay balance of payment difficulties.

Overvalued exchange rate discouraged exports, encouraged imports and kept the rupee cost of foreign debt servicing below what it should be under an appropriate level of the rate of exchange.

But, an analyst said the timing of depreciation is a bit unfortunate “as we’ve just floated Eurobond and no investor likes uncertainty”. The SBP’s withdrawal of support for the rupee was widely seen as a devaluation measure since the central bank is the most influential player in the thinly traded local foreign exchange market and controls what is widely considered a managed float system.

“Presently, the central bank is allowing the market to determine the rate, but it seems to be reversing the extreme volatility if any during intraday trading,” Muzzamil Aslam, chief executive officer of EFG Hermes Pakistan, told Reuters.

The central bank said after market hours on Friday that a weaker rupee would help the economy grow and ease balance of payment pressures, comments that market participants interpreted as SBP’s approval of a weaker rupee. “I see the rupee settling somewhere from 110 to 111, I think it would not be allowed to pass 112,” said Samiullah Tariq, director of research at brokerage firm Arif Habib.

Meanwhile, traders and currency dealers criticised the SBP for not removing the price cap and warned that speculators were active in the market, which could make the situation out of control, resulting in alarming price hike. They said the country was dependent on imports and the prices of imported items would increase by 8 to 20 per cent, as importers were going to face increased shipping, delivery and port charges.

Forex Association President Malik Bostan said the dollars price would increase alarmingly if the SBP did not intervene, adding that the federal bank must announce maintaining the dollar price at Rs110-112 otherwise the speculators would take advantage of the situation. On the other hand, oil prices slipped on Tuesday, retreating after an early surge to a two-year high when the United Kingdom’s biggest North Sea oil pipeline was shut, crippling the flow of global benchmark Brent crude.
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Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 13 Dec 2017 15:45

X Posted on the Terroristan Thread

Terroristan Trade deficit widens 29% to $15b, pressure on reserves to persist
ISLAMABAD: Pakistan’s trade deficit widened to $15 billion in the first five months of fiscal year 2018, suggesting that International Monetary Fund’s (IMF) apprehensions over the external sector are not baseless.
Trade results of the first five months have made this year’s $25.7-billion annual trade deficit target irrelevant, but the finance ministry is still not in the mood to portray the real picture of the external sector to the IMF.
The value of goods imported exceeded the value of those exported by $15.03 billion in July-November, reported the Pakistan Bureau of Statistics on Monday. Trade deficit during the first five months of the fiscal year was $3.33 billion or 28.6% higher than the same period of last year, said the national statistics agency.
After debt repayments in coming months, SBP’s own net reserves will be a mere $4.5 billion
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Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 13 Dec 2017 15:52

X Posted on the Terroristan Thread

Lo Kur Lo Baat!

Sartaj Aziz confident of Pakistan’s economic standing

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nash
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Re: Pakistani Economic Stress Watch

Postby nash » 13 Dec 2017 17:39

meanwhile, paki rupee gone to ~110 = $1 .... :(( :(( :(( :((

Vips
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Re: Pakistani Economic Stress Watch

Postby Vips » 13 Dec 2017 21:29

The Indian government needs to be very aggressive and proactive to counter the benefits that Porki exporters will get from the devaluation of the Paki toilet paper. Each dollar will bring in atleast Rs 10 in additional benefit to them due to the devaluation. GOI needs to increase duty drawback and other benefits to Indian exporters in Textiles, Cotton, Rice, Leather Goods and Sugar to start with.

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Re: Pakistani Economic Stress Watch

Postby Parasu » 13 Dec 2017 23:23

https://www.dawn.com/news/1376231/in-cp ... h-pakistan

In CPEC talks, Chinese drive a hard bargain with Pakistan


This is a misleading title for the piece. Basically the chinese are seeking assurance on their returns and practical expectations. Pakistanis are asking for availability of chinese funds as soon as possible and willing to give any concession, in return.
Once the funds are used, the Chinese are stuck and the real game starts.

Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 15 Dec 2017 02:45

X Posted on the Terroristan Thread

International Investment Position of Pakistan (BPM6) – Summary – As on End Period

2017 Q2 -US$ 99.4801 Billion

As we are in the Middle of December so IMO "End Period" for the above Statement must be End June 2017!

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