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Pakistani Economic Stress Watch

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Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 11 Mar 2017 17:52

X Posted on the STFUP Thread

Remittances from Saudi, Gulf countries decline 14.9%

KARACHI: In a worrying development for the country’s economic managers, overseas Pakistani workers sent $1.48 billion in February 2017, down 6.9% compared with the same month of the previous year, according to data released by the State Bank of Pakistan (SBP) on Friday.

Total remittances in the first eight months (July to February) of fiscal year 2017 have come down by 2.5% to $12.36 billion from $12.68 billion in the same period last year.

Remittances play a major role in stabilising Pakistan’s external sector, as they make up almost half the import bill and cover deficit in the trade of goods account.

Pakistan’s remittances, like many other developing countries, have come under pressure due to world economic slowdown mainly because of low crude oil prices. However, the situation in Pakistan is considered more problematic because of pressure on foreign exchange reserves.

Country-wise details for the month of February 2017 show that inflow of remittances from Saudi Arabia – the country that hosts the largest diaspora of Pakistanis (about 2.2 million) in the world – came down to $404.4 million compared with $475 million in February 2016.

According to Saudi media, the Kingdom of Saudi Arabia has deported more than 39,000 Pakistanis in the last few months. Analysts say job losses due to record low oil prices and growing security concerns are some of the major reasons why the kingdom is fast deporting foreigners.

This can create problems for Pakistan as it may receive low remittances in the coming months.

Money coming from GCC countries (including Bahrain, Kuwait, Qatar and Oman) declined to $168.2 million in February 2017 from $197.6 million in February 2016.

Similarly, remittances from the European Union declined to $31.7 million from $35.4 million.

However, money coming from the United Arab Emirates remained stagnant at $320.24 million in February 2017 from $320.37 million in the same month of the previous year. Remittances from the US decreased to $177.76 million from $182.17 million.

Remittances from the United Kingdom also declined to $170.55 million in February 2017 from $179.65 million in February 2016.

The combined remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during February 2017 increased to $144 million compared with $131.6 million received in February 2016.

Pakistan received remittances amounting to $19.9 billion in 2015-16, up 6.4% from the previous year.

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Pakistani Economic Stress Watch

Postby Peregrine » 12 Mar 2017 04:56

Pakistan’s trade deficit reaches record high

ISLAMABAD: Pakistan’s trade deficit widened to a record high of $20.2 billion during the eight months of the ongoing fiscal year, an amount $5.2 billion higher than the deficit recorded in the comparative period of the previous year and equivalent to the annual projections for the entire fiscal year.

The trade deficit, gap between exports and imports, widened to $20.2 billion during July-February, reported the Pakistan Bureau of Statistics (PBS) Saturday.

The ballooning deficit may expose vulnerabilities of Pakistan’s economy, as financing such a huge gap in the midst of falling remittances and stagnant foreign direct investment has become a challenge for the federal government. This will increase more reliance on expensive foreign borrowings.

The deficit is close to the $20.5-billion target that the Finance Ministry had fixed for fiscal year 2016-17, ending on June 30.

Nose-diving exports and skyrocketing imports are the reasons behind the deficit, the highest level recorded in the first eight months of any fiscal year in the country’s history.

The trade deficit during the first eight months of this fiscal year was 34.3% higher than the gap recorded in the same period of the last fiscal year.

Exports and imports

Exports plunged 3.9% to only $13.3 billion during July-February, $541 million less than the exports made in the comparative period of last year. In comparison, the import bill increased 16% to $33.5 billion in the same period. In absolute terms, the import bill was $4.6 billion higher than the previous year.

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Exports in eight months were just 53% of the annual target of $24.8 billion, which shows that like the previous three years the government would not be able to achieve its annual export target. This comes despite the government giving two-bailout packages to exporters in the last 12 months.

These packages were given without addressing the root causes – the high cost of doing business and lack of an enabling environment. In its four budgets, the PML-N government levied an unprecedented Rs1.2 trillion in new taxes on every kind of trading, business and banking activity. It also slapped various surcharges on electricity and gas, increasing the cost of doing business for the industries.

Although import details for February would be available after one week, the first seven-month data showed that a major reason behind the surge in import bill was the import of machinery under China-Pakistan Economic Corridor

During the July-January period of the fiscal year, Pakistan imported $6.9 billion worth of machinery, 42.3% higher than the previous year. The machinery imports was the single largest charge on the import bill followed by petroleum products imports that stood at $5.8 billion in seven months.

The imports were three-fourth of the annual projections, suggesting that the country will have a larger than $45.2 billion import bill at the end of the fiscal year.

This would mean a higher trade and current account deficit.

Remittances that remained an important source of financing the external account are on a decline due to changing economic conditions in the Gulf countries. Overseas Pakistani workers remitted $12.36 billion in the first eight months, which were about 3% less than the previous year.

Pakistan’s current account deficit widened by 90% in the first seven months (July-January) of 2016-17, standing at $4.72 billion compared with $2.48 billion in the same period of the previous year. The State Bank of Pakistan has not yet released the current account results for the month of February.

Annual results

On an annual basis, the trade deficit was alarmingly 87.9% more than the comparative period. The trade deficit last month increased to $2.8 billion, which in absolute terms was $1.3 billion more than the deficit recorded in February 2016.

Exports in February this year stood at $1.63 billion, showing contraction of 8.3% when compared with the results of last year, according to the PBS. In absolute terms, exports were down by $148 million. However, growth in imports jumped to 35.5%, as the bill grew to $4.5 billion in February this year. The import bill was $1.2 billion more than last year.

Monthly results

Even on a monthly basis, the trade deficit widened to 4.5% in February over January. In absolute terms, the trade deficit was $2.8 billion. The exports were down by 8% while imports grew at 5.9%.

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Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 19 Mar 2017 15:09

X Posted on the STFUP Thread

The economy - Capital suggestion

Pakistan’s internal economy is rupee denominated and our external economy is dollar denominated. Pakistan’s external economy comprises the entire stream of dollar inflows and dollar outflows. Here’s the record on imports or dollar outflows: Our imports have gone up from $35 billion a year five years ago to nearly $45 billion a year. That’s an increase of 28 percent in five years.

Red alert: Our exports – or dollar inflows – have gone down from $25 billion a year five years ago to $20 billion a year. That’s a decrease of 20 percent in five years. And on top of all that, dollars coming back to Pakistan from Pakistanis working abroad are also trending downwards. No wonder our current account deficit – which is the sum of all dollar inflows and outflows – deteriorated by over 90 percent during the first seven months of the current fiscal year (compared to the same period last year).

Red alert: Our foreign exchange reserves – built up largely by high interest rate loans – are falling; and falling fast. Over the past few months, reserves have fallen from around $19 billion to a current level of under $17 billion. If the trend continues – especially when international oil prices have doubled over the past year – we would be forced to go back to the IMF by early-2018.

Yes, the China-Pakistan Economic Corridor (CPEC) is now being presented as the panacea – a solution to all our difficulties including falling exports and declining foreign exchange reserves. Red alert: Assuming that some $35 billion of Chinese loans is utilised for energy projects, Pakistan’s annual financing burden will go up to $5.3 billion a year plus an insurance premium of $2 billion upfront.

Pakistan’s external, dollar-denominated economy is moving from bad to worse. Yes, the State Bank of Pakistan (SBP) has now moved in to bring some stability to the worsening external, dollar-denominated economy by imposing a 100 percent cash margin for imports of 404 non-essential, non-oil import items. What that means is that the Government of Pakistan has no policy remedy and the SBP has therefore jumped in with an administrative measure. History has it that administrative measures work – if they do – only over the short term.

Rewind back to early-2013 when foreign exchange reserves had started falling like nine pins-and within a few months we had to rush to the IMF for a 36-month, $6.4 billion Extended Fund Facility (EFF). Red alert: We are back to where we were in early-2013 with one big difference – our external debt servicing load is now twice as heavy. Imagine: over the next 14 months Pakistan must pay back $6.5 billion in principal plus interest.

To be certain, our march back to yet another IMF rescue package has begun. The external sector of our economy is weakening by the day. Yes, the Economic Coordination Committee (ECC) of the cabinet has shown “concern over the widening of the current account deficit” but the government lacks either the capacity or the will-or both-to turn the tide via a policy response. Yes, the SBP held a meeting with the heads of all major banks in the country to “improve their capacity to control money laundering” in the amount of $10 billion a year but that’s the farthest that the SBP is willing to go.
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Re: Pakistani Economic Stress Watch

Postby Prem » 22 Mar 2017 05:59


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Re: Pakistani Economic Stress Watch

Postby arun » 27 Mar 2017 15:19

Article on CPEC aka Conning Pakistan to Enrich China titled “Pakistan wrestles with growing 'Chinese corridor' debt” in the Nikkei Asian Review:

March 27, 2017 11:00 am JST

Pakistan wrestles with growing 'Chinese corridor' debt

Analysts say burden of economic agreement with Beijing may be unsustainable

TOM HUSSAIN, Contributing writer

ISLAMABAD -- Two international lending institutions and Pakistan's central bank have raised concerns about the debt burden of a huge China-led infrastructure program on the country's improving but fragile finances.

Surging Chinese imports for the initiative, known as the China-Pakistan Economic Corridor program, have complicated Pakistan's balance of payments problems during its second year of economic recovery following a decade of conflict with Taliban insurgents and their al-Qaeda allies.

Chinese machinery imports for power generation and transport infrastructure will reach $27.8 billion in the fiscal year ending in June 2021. The CPEC aims to build roads, railroads and energy infrastructure across Pakistan.

The Pakistan government has said that further projects costing $16 billion are expected to be implemented by 2030, while preparations are continuing for additional elements following negotiations in December that expanded the program's overall cost to $55 billion from $46 billion.

Pakistan and China have been close diplomatic and defense allies since the 1960s. Underlining the broadening of the relationship through CPEC, a 90-member honor guard from the People's Liberation Army participated in Pakistan's national day military parade in Islamabad on March 23 -- the first appearance by Chinese troops.

However, the World Bank and the International Monetary Fund have both expressed concerns about the financial strains caused by the CPEC program. "Sovereign guarantees associated with the CPEC project [will] elevate fiscal risks over the medium-term," the World Bank said in its Global Prospects Report for 2017, published in January.

In October, the IMF said the execution of CPEC projects would create a surge in foreign direct investment and other external funding inflows, but the import requirements of these projects "will likely offset a significant share of these inflows, such that the current account deficit would widen."

In a further illustration of international concern, the global credit ratings agency Fitch said on Feb. 6 that Pakistan's "increasing gross external financing needs could increase the country's vulnerability to shifts in investor sentiment." Fitch affirmed its non-investment grade "B" rating for Pakistan's sovereign debt, with a stable outlook.

The State Bank of Pakistan, the central bank, has been more cautious on the impact of CPEC, but warned in a monetary policy statement in January that "going forward, with the risks to the external sector, the need of financial inflows would grow further."

Prominent local economists have also expressed serious concerns. Hafiz Pasha, a former finance minister, and Ashfaq Hassan, a former adviser to the Finance Ministry, have estimated that CPEC loans will add $14 billion to Pakistan's total public debt, raising it to $90 billion by the fiscal year ending June 2019.

"The government policy of short-term borrowing is risky and at a high cost," Pasha said, speaking on a local television in January.

Noting that Pakistan has extended sovereign guarantees to CPEC project loans and subsequent profit repatriations, Pasha and Hassan projected that debt servicing payments would rise to $8.3 billion in the fiscal year ending in 2019, widening the current account deficit to 4% of gross domestic product from less than 1% in the fiscal year ending June 2015, the year before CPEC was agreed.

Without an improbable increase in exports to at least $36 billion by the fiscal year ending June 2019, from the currently stagnant level of $24 billion, Pakistan would have to request renewed balance of payments support from the IMF by the year ending June 2019, they said.

Alarmist

Mohiuddin Aazim, an independent economic analyst based in Karachi, said the projections by Pasha and Hassan were alarmist because they classified borrowing for CPEC power projects as public debt, while the government and multilateral lenders consider it to be private debt held by independent power producers.

"Foreign debt servicing in case of energy projects will be a responsibility of Chinese companies that will come and set up energy production units, so this should not create additional debt servicing burden on the part of Pakistan," Aazim said in an interview. "The much-feared increase in our import bills would be compensated by a simultaneous increase in foreign direct investment that these Chinese and other foreign companies will bring in."

Finance Minister Ishaq Dar has also played down concerns about Pakistan's indebtedness. In an article published by local English-language newspapers on Jan. 31 he said external debt servicing obligations would not average more than $5 billion a year up to the fiscal year ending in June 2021.

However, economists using Ministry of Finance data have predicted that the external account deficit will soon widen to unsustainable levels, requiring renewed balance of payments support from the IMF.

"Debt servicing and fuel imports for the new power plants will increase external payment obligations quite substantially in the next three years," said Sakib Sherani, CEO of Macro Economic Insights, an Islamabad-based consultancy. "While Pakistan's current [foreign exchange] reserves position is adequate, it is likely to need to head to the IMF by 2019 at the latest," Sherani said.

To strengthen its foreign exchange buffer, Pakistan negotiated fresh foreign loans totaling $25 billion in the three fiscal years ending in June 2016, while spending $11.95 billion on external debt servicing, the Finance Ministry reported in October. Total foreign public debt increased to $57.7 billion from $48.1 billion, at a cumulative growth rate of 6.3% a year. In the three-year period ending June 2016, the ratio of net debt to GDP remained unchanged at 60.2%, while the fiscal deficit was reduced to 4.6% of GDP from 8.2%.

Since returning to the international capital markets in 2014, after a seven-year absence, Pakistan has issued Eurobonds and sukuk (Islamic bonds) worth $4.5 billion to build up its foreign currency reserves. A $1 billion five-year sukuk issued in October was priced at a historically low yield of 5.5%, compared with 6.75% for an identical issue in November 2014. Foreign-exchange reserves peaked at $23.5 billion in October, but fell to $21.82 billion in the week ending Feb. 10.

The concerns about CPEC come as optimism about Pakistan's economic future rises on the back of cooling domestic conflict and growing consumer demand. Pakistan offers investors a market of about 200 million consumers in which about 70% of the population is 30 or younger.

Coupled with a surge in domestic consumption that followed the decisive phase of the conflict in 2014 and 2015, CPEC will push Pakistan's GDP growth to between 4.9% and 5.3% in the fiscal year ending June 2017, according to recently upgraded forecasts by multilateral lenders and ratings agencies.

In its Global Prospects Report, the World Bank revised its projection for Pakistan's GDP growth in 2016-17 to 5.2% from 5%. It said CPEC-associated improvements in energy and infrastructure, as well as recovering agricultural output and external demand for exports, would push growth to 5.5% in the fiscal year ending in June 2018 and 5.8% in the fiscal year to June 2019.

However, in a separate outlook report published in November, the World Bank warned: "Pakistan's continued growth is not guaranteed."

The bank added: "In the short- to medium-term, sustained progress on energy reforms, CPEC implementation and widening the tax net will be important. Without these structural reforms and other efforts to improve the investment climate, Pakistan's rate of investment will remain weak and its consumption-driven growth will eventually slow down."


For article click web link below:

Pakistan wrestles with growing 'Chinese corridor' debt

Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 28 Mar 2017 16:18

Fully Posted on the Analyzing CPEC Thread - Thank you China for giving a "Loving Hug" to the Clapistani Textile Industry!

A tale of two textile cities — one in China and one in Pakistan
ISLAMABAD: The month of February featured tales of two textile cities.
The first news came from Islamabad where the Economic Coordination Committee (ECC) approved a grant of Rs12 million to facilitate the wind-up process of Pakistan Textile City Limited, which was inaugurated with much fanfare in 2011 at Port Qasim Karachi. This textile city never produced a single meter of cloth.
The second was a textile city, announced recently, not in Pakistan but China. The Xinjiang Textile Park was inaugurated in the border province of China-Pakistan. Xinjiang now grows 60% of Chinese cotton. Only in 2016, 22 new enterprises were opened in Aksu Textile Park in southern Xinjiang, producing 10 million meters of cotton cloth with 800,000 spindles every year.
The Pakistan Textile City Limited envisioned to produce 80,000 new jobs, and created only administrative jobs in the headquarters.
Already, the Karachi Chamber of Commerce and Industry (KCCI) has shown serious concerns over “threats of further losing its market share to China”.
The chamber, in its report, said, “Setting up of the textile park at Xinjiang will give a heavy blow to Pakistani textile exports.”
In 2015, I made a presentation in the PIDE Annual Conference, on how Lawrencepur Brand, Pakistan’s premier brand of clothing, was forced to move its operations from Pakistan to China. Yes, Lawrencepur is now made in China.
I am ready to believe that all Chinese goods will just move from the north to south to be shipped around the world. I am also assuming that the take-over of the Pakistan Stock Exchange by Chinese and intense manoeuvres by Chinese industrialists to buy big Pakistani textile firms will also be good.
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Re: Pakistani Economic Stress Watch

Postby menon s » 28 Mar 2017 18:30

Excerpts from Vajpayee's poem...written in 63. Is a strike reminder over the future of Pakistan.

"Aazadi Anmol Na Iska Mol Lagao
Per Tum Kya Jano Aazadi Kya Hoti Hai Tumhe Muft Main Mili Na Kimat Gai Chukai
Angrejo Ke Bal Per Do Tukde Paye Hain Maa Ko Khandit Kerte Tumko Laaj Na Aayi"

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Pakistani Economic Stress Watch

Postby Peregrine » 29 Mar 2017 04:54

X Posted on the STFUP Thread

Pakistan’s policies do not support economic growth

LAHORE: Pakistan’s policies do not support its economic growth and the country must institute widescale reforms as growth can be achieved by ensuring a robust macro-economy, policies that stimulate investment and better governance, said a report launched by the Institute for Policy Reforms (IPR) on Monday.

Economic growth is the key to creating more jobs, providing better living standards and reducing poverty.

An increase in economic gap with other countries could affect Pakistan’s regional position, the report said, explaining how high-growth economies transformed their nations through favourable policies.

In 1960, South Korea had a gross domestic product (GDP) per capita three times that of Pakistan. Today, its per capita income is 22 times more.

“Business as usual is no longer an option. Each year an additional two million people enter the job market and by 2030, Pakistan’s population will touch 260 million, more than half of which will be in cities,” the report said.

According to the findings, Pakistan does not generate enough savings for investment in future growth. There is major infrastructure deficit and low private investment, while spending on worker skills, education and other human needs is paltry.

The macro-economy does not support growth. These factors have locked the economy in a low or moderate growth trap. Pakistan’s small manufacturing sector produces low value-added goods and contributes just 14% to the GDP. Governance often burdens businesses, political economy favours the influential and resource allocation is inefficient.

Solution

The report also offered a plan for reforms. To begin with, Pakistan must increase government revenue to enable it to provide public goods and reduce external borrowing. Steps are needed to increase domestic savings.

High growth economies consistently invest over 25% of GDP, including 7% in infrastructure. They spend another 8% on health and education.

Pakistan too must aim for investment of at least 25% from the present 15% of GDP. It must increase the share in GDP of export-oriented manufacturers to become part of the global value chain.

Public investment must focus on high-priority projects in the areas of power supply, transmission, distribution and water storage and efficiency.

It must also strengthen agriculture research and extension services. Investment in skills and education must increase, the report said.

Urban centres are important drivers of growth, hence, to promote economic activity, they must have reliable power, gas and water supply, mass transit systems as well as high-class Wi-Fi. Air, sea and dry ports must be brought up to global standards.

The report said an export-oriented trade policy would stabilise the external account. Of special importance are transit trade and border facilitation.

“The tariff structure must support export-led growth. We need to attract FDI in export sectors.”

The IPR report suggested that the government should review its power policy to improve the energy mix and the generous incentives to investors.

It must also reduce line and billing losses. Businesses need to have reliable power supply at competitive rates. Acquisition of land for productive purposes must be made easy for businesses and development organisations.

Availability of trained workforce is the difference between a firm’s success and failure, stated the report, adding the government must cooperate with the industry for skills development.

It should set aside the needed financial and organisational resources. Present set-up needs a complete overhaul.

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Pakistani Economic Stress Watch

Postby Peregrine » 05 Apr 2017 00:15

X Posted on the STFUP Thread

Pumps closed as Karachi runs short of fuel

KARACHI: Fuel shortage and long queues at petrol stations were witnessed in Karachi Tuesday afternoon as pumps ran short of fuel.

They were shut down due to non-supply of petrol and diesel as oil tankers associations went on strike against the imposition of 16% sales tax.

Panic spread in the metropolis as motorists flocked the fuel stations in search of the scarce petrol and diesel. Most of the petrol pumps had discontinued selling fuel. Those still selling petrol and diesel had large queues of cars and motorcycles as well as people trying to obtain fuel in bottles.

Earlier, the chairperson of All Pakistan Oil Tankers Owners Association, Akram Durrani, had told The Express Tribune that the strike will continue until the government revisits the 16% sales tax.

“The strike will not end until the government announces taking back the decision of [sales] tax,” he said.

Later, Durrani said they have called off the strike following the government’s assurance over reconsidering its decision and resolving the issue in Islamabad. He added that they are now going to get their tankers loaded to resume the supply of petrol and diesel to fuel stations.

Pakistan State Oil (PSO), the largest oil marketing company with a market share of over 50%, had earlier announced in a statement that “the company is striving hard to ensure that the supply of petroleum products continues across the country without any hitches.”

Though the strike is not against PSO and the company has no stake in the matter, PSO’s supply chain is vigilant of the situation, the statement added.

PSO reiterated its commitment to maintaining uninterrupted fuel supply to meet the country’s fuel and energy needs under all circumstances.

Pakistan is a net importer of oil. It meets 25% of its needs through local resources, while the rest of the 75% requirement is met through imports.

Karachi, having two seaports, plays a crucial role in the import and supply of oil to the upcountry.
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Pakistani Economic Stress Watch

Postby Peregrine » 08 Apr 2017 14:53

X Posted on the STFUP Thread

X Posted on the PESW Thread

To repay Eurobond debt, Pakistan likely to borrow $750m from China
ISLAMABAD: Pakistan may borrow another $750 million as a short-term foreign commercial loan from China, ironically to pay back the Eurobond debt incurred during the rule of Gen (retd) Pervez Musharraf, also underscoring that the country is no more able to retire its debt from own resources.

Due to the relatively low cost of borrowing from foreign commercial banks, the government is considering taking another commercial loan to return $750 million Eurobond debt, said sources in the Ministry of Finance.
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Pakistani Economic Stress Watch

Postby Peregrine » 12 Apr 2017 01:29

X Posted on the STFUP Thread

Trade deficit widens to historic level

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ISLAMABAD: In what is seen as a dangerous development for Pakistan’s external sector, the monthly import bill crossed $5 billion for the first time in March, which took the nine-month trade deficit to $23.4 billion – also a new record.

The gap between imports and exports stood at $23.38 billion in the July-March period of current fiscal year, which was 38.8% or $6.53 billion more than the comparative period of previous year, stated Pakistan Bureau of Statistics (PBS) on Tuesday.

It was the highest-ever trade deficit recorded in the country’s history for the nine-month period.

The main reason behind the ballooning deficit was constant double-digit growth in imports and contraction in exports. The nine-month trade gap was $2.9 billion more than the fiscal year’s annual deficit target of $20.5 billion, set by the Ministry of Finance.

Exports fell 3.1% to only $15.1 billion during July-March 2016-17, which were $478 million less than the shipments made in the comparative period of last year.

Imports, however, increased 18.7% to $38.5 billion in the same period. In absolute terms, the import bill was $6.6 billion higher than the previous year.

“This is an alarming situation and the government should immediately call an emergency meeting of the federal cabinet to discuss the deteriorating external sector,” commented Dr Ashfaque Hasan Khan, former economic adviser to the Ministry of Finance.

He said the trend showed that the import bill would cross $50 billion for the first time and the worrisome element was the contraction in exports.

Exports in the first nine months were about 61% of the annual target of $24.8 billion while imports reached 85% of the annual projection of $45.2 billion.

Slower-than-projected export earnings show that like previous three years the government will not be able to achieve its annual export target this time again. This comes despite the fact that the government has given two bailout packages to the exporters in the last one year.

These packages had been given without addressing root causes of the persistent decline in exports – high cost of doing business and a lack of enabling environment.

In its four budgets, the PML-N government has levied an unprecedented Rs1.2 trillion in new taxes on every kind of trading, business and banking activity. It also slapped various surcharges on electricity and gas, increasing the cost of doing business for the industries.

In its latest statement on the state of Pakistan’s economy, the International Monetary Fund (IMF) has asked Islamabad to remain “vigilant” about the external sector, which is facing problems. However, it gave the warning only after the end of its three-year $6.6 billion bailout package.

However, the Ministry of Finance in a statement said on Tuesday the government was cognisant of the challenges on the external side, which were more related to the weak global economic environment that not only affected Pakistan’s exports but other emerging economies were also facing the same issue.

It claimed that the negative impact on exports was bottoming out as from July to February some months showed growth on a yearly basis.

The delay in receipt of the Coalition Support Fund also affected the external sector, the ministry said, adding the government had taken a number of policy measures, which were likely to help increase exports.

The ministry attributed the increase in imports to the expanding economic activities.

However, independent economists said the ballooning trade deficit had exposed vulnerabilities of Pakistan’s economy as financing such a huge gap in the midst of slowing foreign remittances and low level of foreign direct investment had become a challenge for the federal government.

This would mean a higher trade deficit and higher current account deficit. The IMF recently revised its current account deficit projection for Pakistan from 1.5% of gross domestic product (GDP) to 2.9%.

Likewise exports, worker remittances were also on the wane, standing at $14 billion in the first nine months, which were about 3% less than the previous year.

March data

On an annual basis, the trade deficit in March was 77.4% more than the comparative period of previous year and the main reason was the record imports of goods valuing $5.1 billion.

The trade deficit last month increased to $3.2 billion, which in absolute terms was $1.4 billion more than the deficit recorded in March 2016.

Exports in March stood at $1.8 billion, showing a small growth of 3.6% compared to last year, according to the PBS. In absolute terms, the exports were up by just $63 million.

However, the growth in imports jumped to 41.2% as payments grew to $5.1 billion in March. The import bill was $1.5 billion more than last year.

Even on a monthly basis, the trade deficit widened 15% in March over February.

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Re: Pakistani Economic Stress Watch

Postby Prem » 25 Apr 2017 22:34

https://tribune.com.pk/story/1392572/bo ... eeks-700m/

Borrowing spree to continue as Pakistan now seeks $700m

ISLAMABAD: Pakistan is seeking $700 million for balance of payments’ support in the next two months from the Asian Development Bank (ADB) and France, loans that are aimed at offsetting pressure from the external account that has come under strain due to a growing trade deficit.
The finance ministry is in negotiations with the Manila-based lending agency to seek two policy loans, each of $300 million, in the name of Public Sector Enterprises (PSEs) Reforms-tranche-II and Sustainable Energy Sector Reforms-tranche III, said sources. A $100-million loan by the French Development Agency (AFD) France is also pegged with the $300-million ADB energy sector loan, they added.The government is trying hard to receive both these loans before June-end aimed at supporting foreign exchange reserves that have been on the decline since expiry of the International Monetary Fund (IMF) programme in September last year.

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Pakistani Economic Stress Watch

Postby Peregrine » 26 Apr 2017 16:54

X Posted on the STFUP THREAD

Pakistan’s external account gap to reach $11.5bln in three years

ISLAMABAD: Pakistan’s external account financing gap is likely to touch $11.5 billion by 2019/20 and the government may resort to the International Monetary Fund (IMF) to avert possible payment default on foreign obligations, economist Ashfaque Hassan Khan said on Tuesday.

Khan forecast that the financing gap would reach $6 billion in 2016/17, $6.5 billion in 2017/18, $10.1 billion in 2018/19 and $11.5 billion in 2019/20. “Pakistan would not have other option but to seek fresh bailout package from the IMF,” he said, addressing a pre-budget seminar, organised by Comsats Institute of Information and Technology.

Khan, former advisor to the finance ministry alleged that the finance minister Ishaq Dar brought changes into the definition of debt through the last year’s finance bill. The Fiscal Responsibility and Debt Limitation Act (FRDLA) 2016 excluded certain headings from the domain of the debt, which is inconsistent with the definition, being used by the State Bank of Pakistan as well as the IMF and the World Bank.

He projected that the country’s external debt would reach $110 billion by 2019/20 or 365 percent of exports, $97.8 billion in 2018/19 and $88.5 billion in 2017/18. With a changed definition in accordance with the FRDLA 2016, Khan said the external debt stood at $57.5 billion, while it amounted to $73 billion in accordance with the previous and ‘acceptable’ definition.

Hafiz Pasha, ex-finance minister, said the optimism about the economy is not correct as the economic situation would be again heading back to the level of 2013 when the Pakistan Muslim League (Nawaz) took reins of power. The external debt touched $73 billion and the current account deficit is widening, resulting into drawdown of foreign currency reserves, Pasha added.

On China-Pakistan Economic Corridor (CPEC), he said that there is no need to discriminate against local companies by providing incentives to Chinese companies. Pakistan’s exports to China slumped 45 percent in the last three years, while imports increased 35 percent because of the faulty trade regime, Pasha said. India is the ultimate beneficiary of wrong policy prescription.

He further said agriculture sector has largely been ignored. The PML-N government announced agriculture package of Rs341 billion, but IMF stopped its implementation. Shahid Hafiz Kardar, ex-governor of State Bank of Pakistan said the country's exports are declining and the current account deficit jumped to $6.5 billion during the first nine months of the current fiscal against $4.9 billion a year ago. The widening current account deficit resulted into drawdown of foreign exchange reserves of $1.8 billion.

Kardar said the fragmented policies are negatively affecting exports and the IMF program caused more damage to the country’s export earnings because the cost of input for exports has gone up manifold.

The overvalued exchange rate also caused damage to exports, he said. Pakistani rupee appreciated one percent but currencies of many comparable economies devalued. Indian currency depreciated 30 percent, Malaysian 38 percent and Indonesian 38 percent.

Sakib Sherani, a renowned economist said only 0.24 percent of the country’s population are filing their income tax returns. “Only one in 400 individuals files their returns,” Sherani said. “The personal income tax contributes one percent of GDP in Pakistan, while in India it is 2.7 percent of GDP.”

He further said the development funding to the tune of Rs 22 billion resulted into achievement of one percent growth in 2004. The same percentage point of growth would now require Rs115 to Rs120 billion in development spending.
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Re: Pakistani Economic Stress Watch

Postby RohitAM » 26 Apr 2017 21:32

At this rate, in about five years, we can change the official name of Pakistan to "Kangaalistan". I doubt that even China doesn't have the economic bandwidth to take over Pakistan in its entirety - the bad debt "black hole" which its nationalized banks exist in would not be able to sustain the heavy and increasing external debt Pakistan is suffering from.

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Re: Pakistani Economic Stress Watch

Postby Prem » 26 Apr 2017 21:46

in 5 years or so,Chinese might ask Paki to hand over GB area in exchange for debt relief.

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Re: Pakistani Economic Stress Watch

Postby Peregrine » 01 May 2017 20:40

Prem wrote:in 5 years or so,Chinese might ask Paki to hand over GB area in exchange for debt relief.
Prem Ji :

I think Clapistan will become Pakjiang.
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Re: Pakistani Economic Stress Watch

Postby Neshant » 04 May 2017 06:48

Surely they already know they are not going to get back the money they spend there.

The 50 billion number looks fake. More like 1 to 3 billion if at all is what they have spent.

No country would ever sink that much money into a project with negative returns from day 1 onwards.

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Re: Pakistani Economic Stress Watch

Postby Gagan » 04 May 2017 07:46

$50 billion is proabably the pay back amount.
The chinese may spend <5 billion eventually.

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Pakistani Economic Stress Watch

Postby Peregrine » 04 May 2017 20:33

:shock: China helped Pakistan avert currency crisis with $1.2bn loans: FT

ISLAMABAD: China helped Pakistan stave off a currency crisis with $1.2bn loans, the Financial Times reported on Tuesday.

State-backed Chinese banks have twice come to the rescue of the nuclear-armed state with $900m in 2016 and $300m in the first three months of this year, the newspaper quoted officials as saying.

The loans demonstrate the perilous fragility of Pakistan’s stocks of foreign currency, depleted in recent months by rising imports and falls in exports and remittances from Pakistanis abroad, it said.

Commenting on the geopolitical importance of the loan, the report said China’s financial help also underlines an increasingly close relationship at a time of strains between Pakistan and the US.

Beijing is preparing to invest at least $52bn in Pakistan to build a highway, energy pipelines, power-generation facilities and industrial parks from the western port of Gwadar on the Gulf to the Chinese border to the north.

‘But despite its expected benefits, the China-Pakistan Economic Corridor (CPEC) infrastructure project is set to further deplete the foreign currency stocks, needed to pay contractors and suppliers.’

Figures from the State Bank of Pakistan (SBP) show the country had $17.1bn of net reserves at the end of February, down from $18.9bn at the end of October and a peak of $25bn several years ago.

This has forced the country to seek emergency loans from outside sources to repay older loans made in foreign currencies.

The report added: “Of the $1.2bn from the Chinese institutions, $600m came from the government-run China Development Bank and $600m from the state-owned Industrial and Commercial Bank of China, the only mainland bank with a branch in Pakistan. Policy banks such as CDB often act on behalf of the central bank”.

One Pakistani official told the FT: “China keeps a very close eye on our economic trends and they’re happy to come to our help wherever needed.”

But experts warn that Pakistan is likely to have to return to institutions such as the International Monetary Fund, to which it sought recourse in 2013, for further support.

Vaqar Ahmed, deputy executive director of the Sustainable Development Policy Institute in Islamabad, said: “Technically speaking we should have gone back to the IMF in January, but ministers are likely to try and wait until after the election [for parliament planned for 2018].”

One member of the ruling Pakistan Muslim League-Nawaz told the Financial Times ministers were loath to turn to the IMF until after the election in an effort to limit the political fallout.

“The IMF is a politically volatile issue in our country. If we go to the IMF to deal with our needs, that will send a very negative political signal and the opposition [parties] will use that against the government,” the person said.

It was only last year that Pakistan cleared the IMF debt incurred in 2013, a repayment that led policymakers in Islamabad and abroad to express optimism about prospects for economic stability.

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Re: Pakistani Economic Stress Watch

Postby Prem » 05 May 2017 00:00

Pakistan eyes $2.5 billion a year from ADB
https://tribune.com.pk/story/1401380/pa ... -year-adb/

YOKOHAMA: Pakistan is looking at greater financial assistance from the Asian Development Bank (ADB), said the country’s finance minister, as it hopes to achieve 7% economic growth by fiscal year 2018-19.Annual allocation for Pakistan, under the ADB’s infrastructural financing package, is currently $2 billion a year, which Finance Minister Ishaq Dar said was requested to be enhanced, keeping in view the country’s increasing needs.“I have asked them to reconsider the package, keeping in view the infrastructure needs of the country,” Dar told The Express Tribune on the sidelines of the ADB Board’s 50th Annual Meeting in Yokohama, Japan. “This will significantly help boost the country’s gross domestic product and help us achieve our FY19 target of 7%.”Dar said he had convinced ADB officials to increase Pakistan’s annual allotment to $2 billion last year in Frankfurt, and voiced confidence that the package would be enhanced by another $500 million.“There have been several productive meetings with ADB President Takehiko Nakao, and Pakistan’s annual fund allowance could increase to $2.5 billion.”

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Re: Pakistani Economic Stress Watch

Postby RohitAM » 08 May 2017 23:49

Yeah, and more than half of that money will go into enhancing jihadi-producing training centres and associated infrastructure. Someone should tell the Pakis that when the ADB says that the loan is for infrastructure development, it is for the building or improvement of public infrastructure supposed to benefit the common man, not the bearded, suicide-vest-wearing-and-machine-gun-brandishing mad man with his hormones raging for the "72" in heaven.

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Pakistani Economic Stress Watch

Postby Peregrine » 09 May 2017 02:16

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Moody's says Pakistan's external debt will increase to $79 billion by June-end

ISLAMABAD: Moody’s Investors Service has predicted that Pakistan’s external debt will grow to $79 billion by June this year, higher than initial estimates suggested, and the country’s weak fiscal strength will weigh in on its ability to afford the ever growing debt burden.

In its latest report, Moody’s Investors Service – the international credit rating agency – said that Pakistan’s challenges include a relatively high general government debt burden, weak physical and social infrastructure, a fragile external payments position and high political risk.

By the end of fiscal year 2016-17, Pakistan’s external debt will increase to $79 billion out of which the public sector component will be $77.7 billion, according to Moody’s. The forecast for the outgoing fiscal year is much higher than what was earlier assessed on the basis of data released by the State Bank of Pakistan.

The central bank had shown total external debt and liabilities at $74.2 billion by the end of December 2016. This included $64.5 billion external debt.

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Moody’s report has shown external debt at $64.4 billion by the end of fiscal year 2013. If the debt grows to $79 billion, it means that an additional $14.6 billion in debt has been added in the past four years alone.

The PML-N government is facing criticism for increasing the country’s debt burden, which is a direct result of low levels of exports and foreign direct investment.

The government’s narrow revenue base weighs on debt affordability and the level of external public debt poses a moderate degree of credit risk, according to the report. Meanwhile, exports and remittance inflows have slowed and capital goods imports have risen, resulting in renewed pressure on the external account.

Moody’s assessed Pakistan’s fiscal strength at negative “(-) Very Low”, which it said was hindering debt affordability and increases the debt burden. It said Pakistan’s limited tax base restricts its fiscal space, while low savings and shallow capital markets hinder stable domestic financing of sizeable budget deficits.

“Very Low (-)” score is below the indicative score of “Very Low”, which reflects that the material foreign currency portion of outstanding government debt (about 30% of total debt) exposes the government’s balance sheet to greater foreign exchange rate risks than currently captured by scorecard metrics,” it said.

The government’s debt burden has steadily increased in the past four years from 63.5% of GDP to 66.5%, Moody’s said. “At 66.5% of GDP, the debt stock is higher than the 52.6% median for B-rated sovereigns and remains a constraint on Pakistan’s fiscal strength.”

Moody’s has retained Pakistan’s position at B3 rating.

“Approximate 30% of foreign currency debt does expose the sovereign (Pakistan) to marked changes in the cost of refinancing debt should the currency weaken abruptly,” according to the report.

Debt affordability metrics, which include interest payments as a percentage of revenues and GDP, have been high in Pakistan relative to the median for B-rated sovereigns, which is a key constraint on the sovereign credit rating.

The credit rating agency acknowledged that Pakistan was addressing this weakness by lengthening debt maturities, through increasing the share of permanent debt and reducing that of floating debt.

However, it said that foreign remittances have so far declined 2.4% and “if remittances continue to decline, it would likely have a negative credit impact by dampening consumption and widening the current account deficit”.

Moody’s has also assessed Pakistan’s susceptibility to event risk as “High,” driven by political risks and government liquidity risks stemming from high gross borrowing needs, due to the government’s large rollover requirements.

It said that large fiscal deficits and a reliance on short-term debt have contributed to very high gross borrowing requirements, which is a key rating constraint. At 32% of GDP, Pakistan’s gross borrowing need in 2017 is the largest among all rated sovereigns, after Egypt.

Like external debt, Moody’s has also projected higher budget deficit for the outgoing fiscal year. “We expect that the fiscal deficit will widen further to about 4.7% of GDP in fiscal year 2017 and 5% in FY 2018 despite the government’s intention to advance fiscal consolidation.”

The National Assembly had approved the budget deficit target at 3.8% of the GDP, which the finance minister has already termed unachievable.

At 4.7% of GDP, budget deficit forecast is even higher than the International Monetary Fund’s (IMF) estimates of 4.5%.

The Moody’s said that the wider deficit will be driven by revenue shortfalls due to political pressure to keep current temporary tax breaks in place for the agricultural sector and exporters, and reluctance to increase the sales tax on petroleum products amid rising global oil prices.

In addition, the need to increase development spending – particularly related to CPEC power infrastructure investments – combined with political pressure to maintain power subsidies in advance of the 2018 general election, will likely weigh on the deficit, it added.

The rating agency has also said that the reforms agenda initiated under the IMF programme could be stalled ahead of elections. “We believe structural reforms to PSEs will continue to face political opposition in parliament and through potential labour strikes, therefore, we do not expect the government to follow through with an ambitious post-IMF programme structural reform push in advance of the 2018 general election.”

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Pakistani Economic Stress Watch

Postby Peregrine » 10 May 2017 19:13

X Posted on the Analyzing CPEC Thread

Pakistan's repayments on CPEC to peak at $5b in 2022: chief economist

ISLAMABAD: Pakistan’s debt and other repayments on China’s “Belt and Road” initiative will peak at around $5 billion in 2022, but will be more than offset by transit fees charged on the new transport corridor, says the Pakistan government’s chief economist.

China has pledged to invest up to $57 billion in Pakistan’s rail, road and energy infrastructure through its vast modern-day “Silk Road” network of trade routes linking Asia with Europe and Africa.

Officials expect a huge uptick in trade between the two nations once Pakistan’s Arabian Sea port of Gwadar is functional and work on motorways is finished allowing goods to cross the Himalayas to and from China’s western Xinjiang province.

The China-Pakistan Economic Corridor (CPEC), a flagship “Belt and Road” project, has been credited with helping revive Pakistan’s sluggish economy, but investors have raised concerns that Pakistan’s currency could come under severe pressure once debt repayments begin and Chinese firms start taking profits home.

Nadeem Javaid, who advises Prime Minister Nawaz Sharif’s government and works closely on the CPEC programme, told Reuters that such fears are misplaced as Islamabad would earn vast fees from charging vehicles moving goods from and to China.

Javaid said the Gwadar-Xinjiang corridor should be operational from June next year, and Pakistan expects up to 4% of global trade to pass through it by 2020.

“The kind of toll tax, rental fees that the Pakistani system will gain is roughly $6-$8 billion a year,” Javaid, chief economist at the planning ministry, said in an interview. “By 2020, I expect we will get this much momentum.”

He said China has huge incentives to transport oil and other goods bound for its western regions through Pakistan as the Gwadar-Xinjiang corridor shaves some 9,500 miles (15,000 km) off other traditional routes.

It doesn’t take long to imagine the savings on the many millions of litres of fuel, he said.

Risk to balance of payments?

Investors are watching Pakistan’s ballooning current account deficit, which widened by more than 160% to $6.1 billion in the nine months to March, largely due to imports of machinery for big CPEC projects.

Javaid said debt repayments and profit repatriation from CPEC projects will begin in 2019, totalling about $1.5-$1.9 billion, and rising to $3-$3.5 billion by the following year.

“It would be low in the beginning, and in 2022 it will peak at around $5 billion – not more than that,” said the chief economist, adding that the government does not think it likely that Pakistan will face a balance of payments crisis.

The last such crisis in 2013 saw Islamabad turn to the International Monetary Fund for help.

Javaid said the CPEC should boost economic growth, which he expects to hit 5.2% in 2016-17. Exports should also pick up once CPEC power projects totalling 7,000 megawatts come online and reduce the often crippling energy shortages.

Deepening political and military ties between Pakistan and China have helped closer financial integration, too, with Chinese companies starting to buy Pakistani firms and land.

Javaid said the two countries have also discussed using a currency swap agreement between their central banks to create a mechanism to avoid any third currency in international transactions.

“If some mechanism is going to be finalised on that, it will work as a buffer or a cushion that’s going to basically avoid or prevent any kind of default that could happen in unforeseen circumstances.”

But he added, “It’s only a contingency arrangement in case something bad happens.”

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Pakistani Economic Stress Watch

Postby Peregrine » 16 May 2017 19:59

Market watch: KSE-100 plunges 574.68 points after MSCI reclassification

KARACHI: The KSE-100 – a benchmark for market performance – plunged 574.68 points on Tuesday, as index-heavy stocks and profit-taking dragged the benchmark below the 52,000 level.

The decline comes after the Pakistan Stock Exchange (PSX) was upgraded to the Emerging Markets status earlier in the day, with investors looking to reposition their portfolios after the addition and deletions of stocks in the MSCI Pakistan Index.

At close, the Pakistan Stock Exchange’s (PSX) benchmark KSE 100-share Index recorded a fall of 574.68 points or 1.1%, to end at 51,813.19.

Overall, trading volumes rose to 378 million shares compared with Monday’s tally of 352 million.

Shares of 397 companies were traded. At the end of the day, 154 stocks closed higher and 218 declined while 25 remained unchanged.

The value of shares traded during the day was Rs23.4 billion.

Engro Polymer was the volume leader with 42.4 million shares, gaining Rs0.30 to close at Rs31.48. It was followed by Dost Steels Limited with 41.7 million shares, gaining Rs0.77 to close at Rs14.97 and Dewan Farooque Motors with 20.2 million shares, gaining Rs2.60 to close at Rs54.6.

Meanwhile, 33 companies were added to the MSCI Pakistan Index with six of them forming the large-cap and 27 featuring in the small-cap index.
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Pakistani Economic Stress Watch

Postby Peregrine » 17 May 2017 22:32

X Posted on the STFUP Thread

Market watch: KSE-100 continues to fall as investors book profit
KARACHI: After snapping its winning streak on Tuesday, the KSE 100-share Index fell further in the wake of intense profit-taking.
At close on Wednesday, the Pakistan Stock Exchange’s (PSX) benchmark KSE 100-share Index recorded a fall of 301.78 points or 0.58% at 51,511.41.
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Re: Pakistani Economic Stress Watch

Postby A_Gupta » 17 May 2017 23:17

At 32% of GDP, Pakistan’s gross borrowing need in 2017 is the largest among all rated sovereigns, after Egypt.


!!!!!!

(As a comparison, India's gross borrowing need for 2017-18 is around Rs 6 lakh crores on a GDP at current prices of projected to be 153 lakh crores for a gross borrowing need of 3.9%).

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 18 May 2017 16:51

Current account deficit swells 204.7pc to $7.247bln in 10 months
Double century!!

Pakistan’s current account deficit widened more than two times to $7.247 billion during the first 10 months of the current fiscal year of 2016/17, the central bank said on Wednesday, mainly due to subdued exports and growing imports.
The State Bank of Pakistan (SBP) recorded the current account deficit at $2.378 billion in the July-April period of 2015/16.
“Within a current account shortfall, a fundamental problem lies with a huge growth in imports ranging from oil to non-oil, which have been doubled due to overvalued local currency”

And...SeePack must be mentioned in all paki economic news. After all, the chinis will bail out the pakis from all messes.

The SBP took an administrative measure to curtail a growing trade deficit by imposing 100 percent cash margin on import of consumer and luxury items in February. Yet, the measure couldn’t offset the impact of growing imports related to infrastructure development projects under the $57 billion China-Pakistan Economic Corridor (CPEC).
Analysts said though CPEC is expected to foster Pakistan’s long-term economic growth, it is expanding the current account deficit. The CPEC imports are likely to increase as nearly half of its total investment has been allocated for power generation projects. A continued surge in imports of capital goods – machinery and equipment – will keep trade account under pressure, they added.


https://www.thenews.com.pk/print/204967 ... -10-months

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Pakistani Economic Stress Watch

Postby Peregrine » 25 May 2017 16:10

X Posted on the STFUP Thread

Economic Survey: GDP growth rate at 5.28%, size of economy increases to $304bn

ISLAMABAD: The Economic Survey for 2016-17 unveiled by Finance Minister Ishaq Dar today recorded the GDP growth rate at 5.28 percent, increasing the size of the economy at $304 billion and per capita income at $1,629 during the outgoing financial year.

The minister provided an overview of the economic progress made in recent years in Pakistan. He highlighted the main features of the comprehensive reforms agenda undertaken by the present government, which has resulted in macro-economic stability and a 10-year high growth rate of 5.28 percent.

The minister will present the budget for FY 2017-18 tomorrow (Friday) on the floor of the National Assembly. In his budget speech, the minister will provide details of the revenue, expenditure and relief measures envisaged for the next fiscal year.

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Re: Pakistani Economic Stress Watch

Postby yensoy » 25 May 2017 19:33

Peregrine wrote:X Posted on the STFUP Thread

Economic Survey: GDP growth rate at 5.28%, size of economy increases to $304bn

ISLAMABAD: The Economic Survey for 2016-17 unveiled by Finance Minister Ishaq Dar today recorded the GDP growth rate at 5.28 percent, increasing the size of the economy at $304 billion and per capita income at $1,629 during the outgoing financial year.


Pak population growth rate: 2.1%
US $ inflation rate: 1.9%

So 4% points of 5.28% growth goes towards staying in the same position, net per capita growth is just around 1.38%.

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Pakistani Economic Stress Watch

Postby Peregrine » 25 May 2017 20:17

X Posted on STFUP Thread

Pakistan Economic Survey 2016-17

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Pakistani Economic Stress Watch

Postby Peregrine » 30 May 2017 15:05

X Posted on the STFUP Thread

$1 billion China loan to retire foreign liability

ISLAMABAD: Amidst worsening external debt servicing indicators, the federal cabinet has decided to obtain $1 billion loan from a Chinese bank to retire a liability of almost similar amount – including Eurobond debt incurred during the rule of Gen (retd) Pervez Musharraf.

The decision to obtain yet another major loan from a Chinese institution comes at a time when the debt servicing-related payments to China have grown almost three times during the past one year.

In its second last meeting, the federal cabinet had approved signing a foreign commercial facility agreement of $1 billion with the China Development Bank, according to official documents.

It will be the second time in the current fiscal year that the China Development Bank would extend the credit to help Pakistan meet its foreign debt-related obligations.

Earlier, the China Development Bank gave $700 million at an interest rate equivalent to 4.44% for a period of three years, showed the documents.

The fresh loan will be utilised for balance of payments and budgetary support, according to the Ministry of Finance.

While addressing the launching ceremony of the Economic Survey of Pakistan last week, Finance Minister Ishaq Dar had said that in June Pakistan would be retiring two foreign loans of $1.05 billion – including $750 million Eurobond.

Without disclosing the source of borrowing, Dar said the government had made arrangements for returning both the loans next month.

In 2007, the Musharraf government had issued 10-year bonds at a 6.875% interest rate, maturing this week.

Pakistan has been struggling to maintain its official foreign currency reserves that it has built largely by obtaining expensive foreign loans during the past four years.

The government’s failure to enhance exports and attract foreign investment complicated the matters for it. The official reserves of the SBP stood at $16.1 billion – including $3.9 billion short-term borrowings. By excluding short-term borrowings, the central bank’s reserves are around $12 billion.

From July through March of the current fiscal year, Pakistan’s external debt servicing – including interest payments – consumed $3.9 billion, according to the Economic Survey of Pakistan.

The nine-month debt servicing ate up 24.2% of our export receipts – the highest figure during the past 14 years, suggesting worsening of the external debt indicators.

Not only that, the nine-month debt servicing was equivalent to 10.3% of Pakistan’s foreign exchange earnings of this period –also the highest ratio during the last 14 years, showed the Economic Survey.

Since the size of the economy expanded this year, external debt servicing in terms of the total size of Gross Domestic Product was 1.3% of GDP in nine months.

During the last fiscal year, the debt servicing cost was 1.5% of GDP.

From July through March, Pakistan paid $893.5 million to China on account of principal amount as well as interest on that. The figure was almost 286% more than $311.5 million that Pakistan had paid to China during the last fiscal year 2015-16.

For FY2016-17, the government had budgeted $8 billion in foreign loans, but the figure may cross the $11 billion mark, sources said. If the revised borrowing plan materialises, this will be the highest-ever borrowing in a single year in the country’s history.

For the outgoing fiscal year, the government had budgeted $2 billion loans from foreign commercial banks. But the revised estimates show that the figure may go up to $3.7 billion. About 62% of foreign commercial loans – $2.3 billion to be precise – are coming from Chinese financial institutions alone.

The Industrial and Commercial Bank of China has already given $300 million at 3.94% interest rate for two years. Pakistan also hopes to receive $300 million from the Bank of China.

With fresh borrowings, the Chinese contribution in Pakistan’s official foreign currency reserves held by the SBP would increase to $2 billion.

In addition to the borrowings from China, Pakistan also obtained $315 million from the Noor Bank of the United Arab Emirates. However, the Noor Bank borrowings are relatively cheaper than the Chinese loans. The Noor Bank has given $315 million at an interest rate equivalent to 4.22% for two years.

Growing China-Pakistan Economic Corridor-related imports, decline in exports, absence of the Coalition Support Fund and slowdown in remittances have compounded the government’s external sector woes.

These factors pushed the current account deficit to $7.4 billion in the first ten months of this fiscal.

A recent report of Moody’s International has forecast Pakistan’s total external debt growing to $79 billion by the end of this fiscal.

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 31 May 2017 16:50

KSE-100 falls 800 points on Emerging Markets inaugural day

...led by commercial banking stocks owing to the market's harsh reaction to its first day of exposure to the MSCI Emerging Markets index.
Panic selling was witnessed at the Pakistan Stock Exchange
...concerns for unexpected foreign outflows ahead of the MSCI Emerging Markets upgrade
274.37 million shares changed hands by the end of the session, with a total worth of nearly Rs50.27 billion.


A half billion dollars loss in value. That's it? 800 points drop!!

https://www.dawn.com/news/1336541/full- ... ugural-day

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 31 May 2017 16:58

Surgeries under mobile phone light

Unbridled loadshedding has created problems for people especially surgeons who are forced to operate upon patients under makeshift arrangements.
As Ghazi Medical College’s teaching hospital plunged into darkness due to erratic generators on Tuesday, surgeons had to conduct two operations under the light of mobile phone cameras during loadshedding.
a doctor said the operation theatres must have independent power supply system


Pathetic conditions in a land hell bent on spending 25% of its budget on defense! But got to hand it to the surgeons. Bravo.

https://www.dawn.com/news/1336479/surge ... hone-light

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 31 May 2017 17:07

Food imports to cost more

The government has enhanced regulatory duty to a maximum of 25 per cent on imports of essential eatables
The move may cause higher than anticipated import-led inflation in the next fiscal year


So, that's how you finance deficit income to pay for defense and debt service. Did you say "Inflation"? What's that?

https://www.dawn.com/news/1336379/food- ... -cost-more

anupmisra
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Re: Pakistani Economic Stress Watch

Postby anupmisra » 01 Jun 2017 21:04

anupmisra wrote:KSE-100 falls 800 points on Emerging Markets inaugural day
https://www.dawn.com/news/1336541/full- ... ugural-day


More carnage today. Carnage at stock market as benchmark index loses 1,800 points

The Pakistan Stock Exchange has ended Thursday’s session on a negative note, with the benchmark KSE-100 index losing 1,810.76 points, or 3.58 per cent, by the close of the trading session to reach 48,780.81
Panic selling continued amid concerns over unexpected foreign outflows after MSCI Emerging Markets upgrade and pressure in global crude prices on supply glut risks


https://www.dawn.com/news/1336747/carna ... 800-points

yensoy
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Re: Pakistani Economic Stress Watch

Postby yensoy » 01 Jun 2017 22:31

^^^^ and USD-PKR exchange rate continues to hover around 104. Wonder what's keeping it rock steady?

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Pakistani Economic Stress Watch

Postby Peregrine » 01 Jun 2017 22:49

yensoy wrote:^^^^ and USD-PKR exchange rate continues to hover around 104. Wonder what's keeping it rock steady?
yensoy Ji :
The SBP Rate is US$ 1 = Pak Rs 104.9642. This is due to Phinanse Minister Dar's Hi Jinxes.

The Market Rate is Pak Rs 106.10.

A number of Clapistani Opinion Makers have suggested a rate of Pak Rs. 112 - 118. I believe the IMF & WB have been suggesting a Rate Rate of Pak Rs. 115 to 120.

The Official Rate is kept by Dar at 104-105 so that the Elites don't have to pay by the Bucket load for Imported Goods.
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Re: Pakistani Economic Stress Watch

Postby Peregrine » 01 Jun 2017 23:00

anupmisra wrote:KSE-100 falls 800 points [u]on Emerging Markets inaugural day
https://www.dawn.com/news/1336541/full- ... ugural-day
More carnage today. Carnage at stock market as benchmark index loses 1,800 points
The Pakistan Stock Exchange has ended Thursday’s session on a negative note, with the benchmark KSE-100 index losing 1,810.76 points, or 3.58 per cent, by the close of the trading session to reach 48,780.81
Panic selling continued amid concerns over unexpected foreign outflows after MSCI Emerging Markets upgrade and pressure in global crude prices on supply glut risks
https://www.dawn.com/news/1336747/carnage-at-stock-market-as-benchmark-index-loses-1800-points
anupmisra Ji :

The PSX has closed from a High of 53,127.24 to the latest 48,780.81 i.e. a Fall of 4,346.43 Points which is nearly Eight Per Cent! Clapistan the Land of Booming Stock Market. Or is it?
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Re: Pakistani Economic Stress Watch

Postby Atmavik » 01 Jun 2017 23:04

yensoy wrote:^^^^ and USD-PKR exchange rate continues to hover around 104. Wonder what's keeping it rock steady?


Paki H&D only. It should be at least 120 but that will make immy go berserk so dar is using Sialkot stats meAn while making there exports uncompetitive

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Re: Pakistani Economic Stress Watch

Postby Gagan » 01 Jun 2017 23:13

Pakis are in 400% boistrous mood and loudly declaring that they are amongst the top 10 rapidly developing economies, and that they are about to become a member of the G-20!


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