Pakistani Economic Stress Watch

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Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 18 May 2018 16:47

X Posted on the Teroristan Thread

Investors face 35pc loss in stock value over the year

THE Pakistan Stock Exchange (PSX) has been quietly celebrating its undeclared status as the best performing market in the region in 2018 year-to-date.

Up to May 4, the return for CY2018 dished out by the local bourse was 10 per cent. The returns disbursed by other markets paled in comparison as most markets grew below three per cent: India and Malaysia 2.5pc and Sri Lanka 2.2pc.

But, showcasing the performance for a little over four months of 2018 portrays a misleading picture. Over the last year since the KSE-100 Index hit an all-time high of 53,123 points on May 25, 2017, the Index has tanked 9,267 points to close trading last Thursday at 43,856 points.

Last Thursday, the Index managed to find a foothold and climb a bit to snap a seven day losing streak, but that still leaves the KSE-100 Index with a loss of 17pc over the course of a year (based on the average loss calculated on the 100 shares that comprise the benchmark KSE-100 Index).

Local individual and institutional investors who have front row seats in the public acrimony between political rivals have jettisoned shares and are running for cover in risk-free investments

Looking at the price erosion in numerous stocks over the year, it is easy to conclude that investors have been ruined. Calculations by this writer show that average loss on most stocks this past year still stand at an alarming 35pc — twice the loss of 17pc represented in KSE-100 stocks.

For the comparison of investors’ return, it is pertinent to draw an analogy between the share prices of a sample of individual stocks over a year — from May 25, 2017 (the index peak) to the current levels.

Most low-priced shares have been favourites of small savers and the volume leaders on most trading days. With almost a half of their savings gone, it is the small investor who has yet again taken the brunt of the blow. (See table)

But if the PSX was striding forward even in the first four months of the current calendar year, the winning streak was snapped by the announcement of the federal budget on April 27; surprising all.

In order to present a populist budget, Finance Minister Miftah Ismail bent over backwards announcing incentives and tax exemptions which the PSX had been clamouring for over the past four years. The package for the capital market was loaded with tax incentives and exemptions.

The budget 2018-19 decreed reduction in corporate tax by one per cent for the next five years to scale it down to 25pc by the end of financial year 2023; phasing out the currently levied super tax at three per cent for companies and four per cent for banks by one per cent every year, and restoration of the major exemption of tax at five per cent on bonus shares.

At the conclusion of the budget speech, market participants showered praise on Mr Ismail for offering what they termed was a “market friendly” budget. And yet the market extended a cool response.

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In the seven trading sessions since the announcement of the budget, until last Wednesday, the market went on a losing streak with the KSE-100 Index poorer by 1,748 points, wiping out nearly four per cent of the year’s gains.

Disappointed market gurus started to find fault with the budget. Ignoring the massive incentives, the non-restoration of slab-wise regime of capital gains tax (CGT) and the status quo on tax on cash dividends was blamed for the market fall.

But investors’ worries have more to do with corresponding uncertainties: the balance of payments situation and the weakened growth outlook for Pakistan by the International Monetary Fund which revised the GDP growth rate down from 5.6pc to 4.7pc for FY19.

And above all, the bounties lavished in the budget were eclipsed by investors’ fear over the heated political atmosphere as the date for the appointment of a caretaker government followed by the general elections approaches.

Although most brokerage houses tend to mention the politically charged atmosphere in the country simply as “noise on the political front”, so as to keep their foreign clients pacified, the local individual and institutional investors who see the extent of the acrimony between political rivals, have jettisoned shares and are running for cover in risk-free investments.

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Pakistani Economic Stress Watch

Postby Peregrine » 19 May 2018 15:00

X Popsted on the Terroristan Thread

Pakistan receives $9.2b in foreign loans, but reserves still plunge

ISLAMABAD: Pakistan received $9.2 billion in new foreign loans during the first 10 months of the ongoing fiscal year, increasing cumulative borrowing by the PML-N government to over $44 billion in tenure of four years and 10 months.

Largely pulled by Chinese commercial loans and issuance of sovereign bonds, the disbursements of foreign loans touched $9.2 billion from July through April of this fiscal year, said officials in the finance ministry. In April alone, Pakistan received [/b]$1.6 billion as loans and three-fourths of it was contributed by two Chinese commercial banks,[/b] they added.

China’s share was $3.7 billion or 40.3%, indicating Pakistan’s heavy reliance on its northern neighbour. From July through April, China gave $1.5 billion as project financing and $2.2 billion in commercial loans. In April, Bank of China disbursed $200 million and the China Development Bank released $1 billion. Pakistan has already contracted a loan of $1 billion from the Industrial and Commercial Bank of China.

With the fresh borrowing of $9.2 billion, total foreign loans the PML-N government so far obtained during its third stint (July 2013 to April 2018) have now increased to a record $44.2 billion.

Most of these loans have been obtained to help boost foreign currency reserves, finance a bulging current account deficit and for budgetary support. A major chunk of $44.2 billion has been spent on non-productive areas of the economy, which has created issues for the government in managing the country’s external debt.

Pakistan’s external debt and liabilities have soared to a record $91.8 billion as of March-end, an increase of over 50% or nearly $31 billion in past four years and nine months, according to the State Bank of Pakistan (SBP). Out of total external debt and liabilities, the government’s public debt obligations including that of foreign exchange liabilities were $76.1 billion as of end March.

In the past four years and nine months, public debt-related obligations increased by 42.5% or $22.7 billion, showed the central bank data. In June 2013, the public external debt including foreign exchange liabilities was only $53.4 billion.

The public debt-to-gross domestic product (GDP) ratio has been estimated to peak to 70.1% by the end of fiscal year 2017-18 in June. This ratio is far higher than the sustainable levels for a country like Pakistan. High debt levels are consuming over 30% of the federal government budget on account of debt servicing cost.

For the outgoing fiscal year 2017-18, the government had initially budgeted $8 billion worth of foreign economic assistance. Due to the higher-than-estimated current account deficit, the finance ministry has now revised its estimates to nearly $11 billion.

The SBP also reported that the current account deficit widened to a 10-month record of $14.03 billion during July-April. It was higher by 50% or $4.7 billion over the previous fiscal year.

Despite obtaining heavy loans, the SBP and finance ministry have failed to retain gross official foreign currency reserves, which stood at $10.8 billion. Since the start of the fiscal year, the central bank has lost one third or $5.4 billion of its total reserves.

The International Monetary Fund (IMF) has predicted that in case of low disbursements, Pakistan’s foreign currency reserves may slip to $9.4 billion by June this year.

Out of $9.2 billion disbursements, about 70% or $6.4 billion were taken for non-project financing purposes. This included $2.5 billion sovereign bonds, $2.9 billion foreign commercial loans and $987 million financing by Islamic Development Bank for oil imports.

The project financing has been consistently declining in terms of its share in total foreign loans. Against Pakistan’s estimates of receiving around $1 billion from the World Bank, the Washington-based lender disbursed only $426.3 million in ten months. Pakistan had also hoped of receiving $1.1 billion from the Asian Development Bank (ADB) in fiscal year 2017-18, but actual disbursements from July through April remained at $646.2 million. The ADB disbursed $34.6 million in April for Peshawar metro bus project.

The only major project financing was coming from China that disbursed $1.5 billion in ten months, better than Pakistan’s estimates. Last month, China released $111 million for Lahore Orange Metro train project.

Bilateral economic assistance remained an important component. But now, almost the entire bilateral assistance has shifted towards China. From July through April, the bilateral assistance stood at $1.6 billion and 93.5% came from China. Only Japan gave $59.4 million followed by $22.5 million by Saudi Arabia.

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Pakistani Economic Stress Watch

Postby Peregrine » 20 May 2018 23:15

X Posted on the Terroristan Thread

Foreign currency reserves remain persistently on downhill course

KARACHI: Pakistan’s goods-import capacity has dropped to an alarming level of less than two and a half months after its foreign currency reserves fell to a four-year low of $10.79 billion on May 11 this year.

“Pakistan’s foreign exchange reserves are insufficient for two and a half months of imports,” JS Global Chief Commercial Officer Khurram Schehzad said while talking to The Express Tribune.

Precisely, Pakistan can import goods for a maximum of two months and one week with the help of current reserves. It needs roughly $4.58 billion for one month of imports to keep industries running and meet needs of consumers. In the Ten Months Period July 2017 to April 2018 Terroristan Imported "Goods and Services" to the tune of US$ 54,090 Billion!

“Reserves that cover three months of imports should be considered satisfactory,” he said.

Pakistan’s reserves have plummeted 40.47% to $10.79 billion on May 11, 2018 from a record high of $18.14 billion at the end of June 2016, according to data of the State Bank of Pakistan (SBP).

The reserves touched the peak after Pakistan borrowed $6.6 billion from the International Monetary Fund (IMF) under a 36-month Extended Fund Facility that ended in September 2016. A case of "Borrowing Money" and Terming them as "Reserves" i.e. Borrowing from Peter to pay Paul!

Since then, the reserves have been on the downtrend as economic managers have largely failed to find new markets to increase the country’s exports and restrict growing imports, which was the largest source of shrinking foreign exchange reserves.

Pakistan’s imports stood at $45.56 billion for first 10 months of the current fiscal year, which were more than double the value of exports that amounted to $20.55 billion.

The government let the rupee depreciate by around 9.5% in two rounds – 5% in December 2017 and 4.5% in March 2018 – in a bid to shore up reserves by encouraging exports and discouraging imports.

The move has helped a little bit in improving exports, but has failed to curb excessive imports and added to the country’s external debt.

Pakistan’s accumulated external debt rose $669.3 million due to weakening of the US dollar against other major international currencies and rupee’s depreciation against the US dollar in first half (Jul-Dec 2017) of the current fiscal year 2017-18, according to the SBP’s second-quarter report on the state of Pakistan’s economy.

The outgoing Pakistan Muslim League-Nawaz government has acquired $44.2 billion in external loans in the past around five years to keep foreign exchange reserves at appropriate levels. Loans have been received through the sale of Eurobond and Sukuk in international markets, Chinese financing, investments under the China-Pakistan Economic Corridor (CPEC), project financing and other international grants.

Schehzad said remittances sent home by overseas Pakistanis may increase slightly from the estimate of around $20 billion in FY18 after economies of oil-producing and exporting counties started improving on the back of higher crude prices that hit three-and-a-half-year high at $80 per barrel in the international market.

“However, the increase in remittances may not help take the reserves to higher levels as this may be offset by higher oil imports,” he cautioned.

Pakistan’s economy depends heavily on imported oil and liquefied natural gas (LNG) to fuel its industries as well as meet demand of domestic consumers. It meets almost three-fourths of energy needs through imports, which contribute close to one-third to the overall import bill.

Schehzad voiced hope that the tax amnesty scheme aimed at attracting dollars from overseas Pakistanis and efforts made to stop the leakage of reserves following the Financial Action Task Force’s (FATF) warning to put Pakistan on terror-financing watch list may help the country improve reserves in the near future.

However, if the reserves continue to weaken, Pakistan may be forced to go back to the IMF for a bailout package, analysts say. Same Ol' Wine in the Same Ol' Bottle!

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Re: Pakistani Economic Stress Watch

Postby Prem » 21 May 2018 02:07

Aik Inhe Kashmir ki Laaari Maar Gye
Baki Jo Bacchaa Thaa woh Mengai Maar Gye !


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Pakistani Economic Stress Watch

Postby Peregrine » 22 May 2018 02:35

X Posted on the Terrorisstan Thread

WITH THEIR SNOUTS IN THE TROUGH THE LOOT GOES ON!

Retirement benefits: Outgoing MNAs to win lucrative perks

ISLAMABAD: In a highly controversial move the outgoing federal government is all set to entertain the lawmakers even after their retirement by awarding lucrative perks and privileges, which are entitled to government servants of grade-22.

Recently the National Assembly passed a resolution for the formation of a forum to resolve the issues of former members of national assembly. Ex-MNA of Pakistan Peoples Party (PPP) Zamrud Khan was nominated convener of the forum.

Seemingly the parliamentary parties had no issue with this forum when resolution in this context was adopted by the House.

However, Pakistan Tehreek-e-Insaf (PTI) had their reservations over the person who was supposed to head the forum.

Minister for Parliamentary Affairs Sheikh Aftab Ahmed had moved the motion for setting up a forum headed by Zamrud Khan which would seek welfare of ex-MNAs.

While speaking to The Express Tribune Aftab elaborated the salient features of the forum and said that “ex-MNAs would be entitled to medical facilities” adding that the move also intends to give them “facility of rest houses after their retirement.”

He said the purpose of this forum is to give facilities to ex-MNAs that are enjoyed by the secretaries of grade-22. “The forum would monitor the day to day issues being faced by the ex-MNAs and it will attempt to address these issues,” Ahmad stated.

However, the financial impact of this forum could not be learnt by this correspondent.

PTI leader Dr Shireen Mazari told The Express Tribune that her party has no issue with the forum if it has no major financial implications.

While responding to a query why she had opposed the move she said it seemed that the ruling party had wanted to facilitate a single specific person by appointing him as the head of the forum.

“Let the ex-MNAs decide who they want to lead the forum instead of appointing someone directly out of way,” she added.

Jamiat Ulema Islam-Fazal’s (JUI-F) Naeema Kishwar Khan was of the view that during presentation of the resolution, “lawmakers were not informed about primal characteristics of the forum.”

This is pertinent to mention here that government employees go through certain criteria to become a grade-22 employee and for that they have to complete more than 30 years of service.

The grade-22 official is required to serve anywhere in the country as and when required during his/her service period.

The MNAs, on the other hand, are not government employees and representing the people is considered as an honour and not an employment.

Unlike a parliamentarian a government servant can be posted anywhere not only across the country but also AJK, G-B, FATA and its adjoining belt which is full of rugged mountains and hilly terrains.

Moreover, the parliamentarians are not supposed to report any higher authority as the civil servants do.

They follow a complete chain of command with outmost discipline and their Annual Confidential Reports are written by the superior on yearly basis.

Any official can be promoted or demoted on the basis of the performance evaluation reports. Besides, there is no specific criterion for the parliamentarians.

The government officials generally wait for decades for government accommodations but the parliamentarians are lodged in Parliament lodges and MNAs hostels in the heart of Islamabad.

What would be the financial implications of this decision is yet to be ascertained but perhaps it would not be lauded by the general public at large.

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Re: Pakistani Economic Stress Watch

Postby Vips » 22 May 2018 18:35

Haraam link: Is China making Pakistan a client-state with its ‘debt-book diplomacy’?

What is less well-advertised are the terms of the cooperation, and the costs. Many of the infrastructure projects are financed through debt. They are Chinese projects built for China’s geopolitical and economic advantage, but they will be ostensibly owned by the Pakistani state, so the Pakistani state will pay for them – with loans from China.

By June 2019, Pakistan will owe Beijing $19 billion. But the interest rate on those loans average an astronomical 7% per annum, payable over 25-40 years. According to experts’ calculations, the cost of servicing the debt owed to China will average $7 to 8 billion per year, for the next 43 years, starting from now. To begin with, that will be between 0.5 to 1% of Pakistan’s Gross Domestic Product (GDP). (This is just the interests on the borrowed amount for constructing the infra and power plants. Add to it the cost of maintenance and likely default in buying utilities at high rates built in the contract,and the amount/cost is much higher :lol: )

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Re: Pakistani Economic Stress Watch

Postby Suraj » 23 May 2018 23:03

Battered by China’s pricey trade ties, is IMF the only shelter for Pakistan’s debt-ridden economy?
We’re about two months away from elections in Pakistan — elections that are almost certain to be shrouded in controversy, one way or another. And, worryingly for Pakistan, it appears that the economy is weakening, just in time for the instability that might follow from the country’s turbulent politics. Under the outgoing government — led till last April by Nawaz Sharif, three times prime minister — the economy had appeared to be doing well. In fact, a new energy seemed to have infused Pakistan’s entrepreneurs and investors; in the last fiscal year, the economy grew at 5.8 percent, the fastest rate in 13 years.

That now appears set to change. Economists polled by Bloomberg worry that, in the coming year, growth will slow to 5.2 percent — a full percentage point below the government’s own optimistic forecast. The problem is that much growth in the recent past has been unbalanced, depending particularly on investment from China in the China-Pakistan Economic Corridor (CPEC) — a branch of Chinese President Xi Jinping’s world-spanning Belt and Road Initiative — and on Pakistani government spending that matches the CPEC’s aims. China’s big bet on Pakistan’s infrastructure has to be paid for somehow, in part through the purchase of Chinese heavy engineering and other inputs.

Those imports have helped swell Pakistan’s current account deficit by 50 percent, to a record high of over $14 billion. Pakistan’s central bank has devalued the currency twice but has felt that it has few options other than running down the country’s foreign-exchange reserves. Over the past fiscal year, a third of the reserves have evaporated. These are the classic signs of a fragile economy that is failing to tighten its belt where needed. To give the outgoing government some credit, it tried to correct course slightly in its annual budget last month, which cut infrastructure spending by 20 percent.

As the economists polled by Bloomberg point out, however, that’s going to affect growth going forward. Meanwhile, the government’s other expenditures — on wages, pensions and so on — went up by 20 percent. There’s an election on, after all. And, of course, the pampered Pakistan military had its budget raised by 20 percent. Many analysts expect that Pakistan is going to have to turn to the International Monetary Fund in a few months, particularly if its reserves continue to dwindle at this rate. Even the rabidly anti-Western opposition leader, Imran Khan, has reportedly admitted in private that he would approach the IMF for help if he’s elected.

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Re: Pakistani Economic Stress Watch

Postby A_Gupta » 29 May 2018 23:23

http://spearheadresearch.org/index.php/ ... lar-moodys
Amid risks associated with servicing external debt due to devaluation of currency, Moody’s Investors Service, one of top three global credit rating agencies, has forecasted that Pakistan’s rupee could shed value by another 7.75% and its worth may go as low as Rs125 to the dollar by June next year.

In its latest report, ‘Government of Pakistan – B3 stable, annual credit analysis’, Moody’s has taken a negative view of Pakistan’s external sector but remained upbeat about economic growth prospects due to the China-Pakistan Economic Corridor (CPEC).

The credit ratings agency also does not see any “significant surprises” in terms of the broader direction of macroeconomic and national security policies after the 2018 general elections, indicating towards limited options available to political parties to change the landscape.

It has forecasted that as against Rs116 to a dollar value by June this year, the nominal exchange rate could be Rs125 to a dollar by June 2019, implying a devaluation of 7.75%.

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Re: Pakistani Economic Stress Watch

Postby yensoy » 11 Jun 2018 11:09

More devaluation, apparently...
https://www.bloomberg.com/news/articles/2018-06-11/pakistan-s-central-bank-devalues-currency-sources-say

As I have said before, I am sad about this. It serves us better if they peg the PKR to the USD 1:1 and live the good life.

The big powers - deep state, PTI, PPP, PML - would have convinced the caretaker government to be the fall guy. Uncle Xi probably didn't dole out any return gifts in Qingdao as well, so here we are!
https://www.bloomberg.com/news/articles/2018-06-11/pakistan-is-said-to-devalue-rupee-for-third-time-since-december

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Re: Pakistani Economic Stress Watch

Postby arun » 11 Jun 2018 14:58

Following Bloomberg, Reuters put out article saying the Mohammadden Terrorism Fomenting Islamic Republic has devalued the PKR even as the Central Bank stays mum:

Pakistan rupee slumps 3.8 percent, in apparent fresh devaluation

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Re: Pakistani Economic Stress Watch

Postby A_Gupta » 19 Jun 2018 17:23

https://www.dawn.com/news/1414710/water-scarcity
Back in 2007, South Asia scholar Anatol Lieven had warned that water shortages pose “the greatest threat to the viability of Pakistan as a state and a society”. At the time, his warning may have seemed hyperbolic.

Today, with the existential threat posed by water stress coming into sharp focus, Lieven’s warning is sounding remarkably prophetic.

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Re: Pakistani Economic Stress Watch

Postby Manish_P » 21 Jun 2018 11:56

It's also one of the gravest threats to our security. Where do you think the great hordes of unwashed abduls make a beeline to, when the water runs out...

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Re: Pakistani Economic Stress Watch

Postby Trikaal » 21 Jun 2018 13:41

Manish_P wrote:It's also one of the gravest threats to our security. Where do you think the great hordes of unwashed abduls make a beeline to, when the water runs out...

They will only be target practice for BSF and army.

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Re: Pakistani Economic Stress Watch

Postby Manish_P » 21 Jun 2018 17:27

If they (women, children, old folks et al) are declared as enemy combatants, then yes perhaps.

Call me pessimistic, but somehow i doubt that happening... BTW can you tell me if all the Bangladeshis (since the past 50 years) and more recently the Rohingyas have been successfully sent back from our country?

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Re: Pakistani Economic Stress Watch

Postby Trikaal » 21 Jun 2018 18:46

No, there are still camps for rohingyas near delhi at least.

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Re: Pakistani Economic Stress Watch

Postby Manish_P » 21 Jun 2018 19:47

Not just Delhi. Not to mention Jammu, Assam, WB, Sir.

They are present in AP, Kerala, Karnataka, Tamil Nadu as well

Kerala

Telangana

Hyderabad

Bengaluru

Chennai

Bear in mind, these are just the 'official' ones...

But this is OT for this thread. No more from me, on this issue here.

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Re: Pakistani Economic Stress Watch

Postby arun » 21 Jun 2018 19:55


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Re: Pakistani Economic Stress Watch

Postby arun » 21 Jun 2018 20:03

1… FDI drops 26% to $238m in May 2018:

Express Tribune FDI

2… Pakistan’s current account deficit surges 43% to $15.96b:

Express Tribune CAD

3… Stocks tumble 644 points as Moody’s downgrades Pakistan’s outlook:

Express Tribune KSE-100

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Re: Pakistani Economic Stress Watch

Postby Supratik » 21 Jun 2018 23:39

Moody's have downgraded their rating of Pak from stable to negative.

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Re: Pakistani Economic Stress Watch

Postby anupmisra » 21 Jun 2018 23:41

Supratik wrote:Moody's have downgraded their rating of Pak from stable to negative.


Negative!! Stinks of malsophobia! Bakis demand restitution.

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Re: Pakistani Economic Stress Watch

Postby disha » 22 Jun 2018 12:57

Manish_P wrote:It's also one of the gravest threats to our security. Where do you think the great hordes of unwashed abduls make a beeline to, when the water runs out...


Saudi Barbaria?

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Re: Pakistani Economic Stress Watch

Postby Neshant » 22 Jun 2018 17:35

They will default on their debts sometime in the 2020 time frame.

-------

Pakistan Panic: 3rd Currency Devaluation In 2018 Sends Sovereign Risk Soaring Above Argentina, Ukraine

https://www.zerohedge.com/news/2018-06- ... ring-above

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Re: Pakistani Economic Stress Watch

Postby Vips » 23 Jun 2018 02:23

Only 125 pieces of pakistani toilet paper is available for One US$? Hain ji? Waiting for some more time before i can start to flush them with my pakistaniyat every morning.

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Re: Pakistani Economic Stress Watch

Postby Trikaal » 23 Jun 2018 06:10

Neshant wrote:They will default on their debts sometime in the 2020 time frame.

-------

Pakistan Panic: 3rd Currency Devaluation In 2018 Sends Sovereign Risk Soaring Above Argentina, Ukraine

https://www.zerohedge.com/news/2018-06- ... ring-above

The article is written by 'Tyler Durden'. This news source doesn't seem much reliable.

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Re: Pakistani Economic Stress Watch

Postby Neshant » 23 Jun 2018 07:47

Trikaal wrote:The article is written by 'Tyler Durden'. This news source doesn't seem much reliable.


https://en.wikipedia.org/wiki/Zero_Hedge

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Re: Pakistani Economic Stress Watch

Postby Neshant » 23 Jun 2018 07:48

The pakistani rupee is taking a dump.

Its been devalued 3 times this year .. with more to come.

https://www.xe.com/currencycharts/?from ... SD&view=1Y

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Re: Pakistani Economic Stress Watch

Postby Trikaal » 23 Jun 2018 10:29

Neshant wrote:
Trikaal wrote:The article is written by 'Tyler Durden'. This news source doesn't seem much reliable.


https://en.wikipedia.org/wiki/Zero_Hedge

Thanks! Pakistan Currency really is going down the drain.

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Re: Pakistani Economic Stress Watch

Postby Aditya_V » 23 Jun 2018 10:40

Still pretty high at INR : PKR at 1:1.78, it would be better if this ratio hits 1:2 quickly and match SL rupee soon.

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Re: Pakistani Economic Stress Watch

Postby Prem » 24 Jun 2018 02:19


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Pakistani Economic Stress Watch

Postby Peregrine » 29 Jun 2018 01:01

X Posted on Terroristan Thread

SBP's foreign currency reserves now stand at meagre $9.66b

KARACHI: Foreign exchange reserves held by the State Bank of Pakistan (SBP) decreased 5.86% on a weekly basis, falling below the $10-billion mark, according to data released by the central bank on Thursday.

Last week, foreign exchange reserves increased due to official inflows. However, this week reserves were back to the declining trend, sparking concern over Pakistan’s ability to meet future payment obligations and manage a bulging current account deficit.

On June 22, foreign currency reserves held by the central bank were recorded at $9,662.5 million, down $601.8 million or 5.86% compared with $10,264.3 million in the previous week.

The decrease has been attributed to external debt servicing and other official payments.

Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,243.9 million. Net reserves held by banks amounted to $6,581.4 million.

In April, the SBP’s reserves increased $593 million due to official inflows. Pakistan also raised $2.5 billion in November 2017 by floating dollar-denominated bonds in the international market in a bid to shore up official reserves.

A few months ago, the foreign currency reserves surged due to official inflows including $622 million from the Asian Development Bank (ADB) and $106 million from the World Bank. The SBP also received $350 million under the Coalition Support Fund (CSF).

In January, the SBP made a $500-million loan repayment to the State Administration of Foreign Exchange (SAFE), China.

Figures from the State Bank of Terroristan

Domestic Markets & Monetary Management Department - WEEK-END LEVELS1/

LIQUID FOREIGN EXCHANGE RESERVES (BILLION US$) : 22 - 06 - 2018

FUDGED RESERVES – SBP : 09.6625 – COMM BANKS : 06.5814 - TOTAL 16.2439

ACTUAL RESERVES - SBP : 03.8625 - COMM BANKS : 06.5814 - TOTAL 10.4439

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Neshant
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Re: Pakistani Economic Stress Watch

Postby Neshant » 29 Jun 2018 10:41

This raises a question.

If Pakistan approaches the IMF for a loan, who's debt gets paid back first - the IMF or China's?

I'm pretty sure IMF won't be handing Pakistan money to pay off loans from China.

It looks like China is going to end up owning a whole lot of these BRI roads, power stations and ports it's been building (at inflated costs) in Pakistan in lieu of the country's inability to repay. But then, wasn't that China's plan all along.

The "profits" or more the lack of profits from these BRI investments by China must have already been factored into the inflated cost of BRI infrastructure China has billed Pakistan for.

chetak
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Re: Pakistani Economic Stress Watch

Postby chetak » 29 Jun 2018 11:16

Neshant wrote:This raises a question.

If Pakistan approaches the IMF for a loan, who's debt gets paid back first - the IMF or China's?

I'm pretty sure IMF won't be handing Pakistan money to pay off loans from China.

It looks like China is going to end up owning a whole lot of these BRI roads, power stations and ports it's been building (at inflated costs) in Pakistan in lieu of the country's inability to repay. But then, wasn't that China's plan all along.

The "profits" or more the lack of profits from these BRI investments by China must have already been factored into the inflated cost of BRI infrastructure China has billed Pakistan for.


The hans would not have expected cash flows from the CPEC so early in the game, but their foray into pakiland has turned into a nightmare for them.

What has completely queered the pitch for them is the joker in the pack, Trump, who has so completely upended all their calculations that they are now floundering badly.

The han's internal economic situation, the gradual attrition of their traditional markets, rising wages and expectations of their own people which can no longer be denied nor brushed aside and so they must find quick solutions or be prepared to deal with a huge fallout.

Trump's trade war threat, India's steadfast refusal to allow the hans to infiltrate Indian markets via sly extensions of the CPEC through the BRI initiative from beediland and nepal and the increasing headwinds against the BRI initiative by many countries who have weighed and found wanting the milk of human kindness in the han "investments" in their own countries after seeing some spectacular examples of "economic benefits" accruing to srilanka and some central asian republics.

Xi being declared president for life comes with its own risks and consequences of failure. A bullet to the head is the usual han solution to people who fail to deliver and are then declared as "enemies of the state".

abhijitm
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Re: Pakistani Economic Stress Watch

Postby abhijitm » 29 Jun 2018 13:06

Neshant wrote:This raises a question.

If Pakistan approaches the IMF for a loan, who's debt gets paid back first - the IMF or China's?

I'm pretty sure IMF won't be handing Pakistan money to pay off loans from China.

It looks like China is going to end up owning a whole lot of these BRI roads, power stations and ports it's been building (at inflated costs) in Pakistan in lieu of the country's inability to repay. But then, wasn't that China's plan all along.

The "profits" or more the lack of profits from these BRI investments by China must have already been factored into the inflated cost of BRI infrastructure China has billed Pakistan for.

Each loan has purpose attached to it and must be used for that only. Otherwise it is money laundering.

China is providing 'loans' to pakis for their own projects so pak don't have to go to imf, thus they don't have to disclose terms of Chinese projects since those will be outside of IMF loan purview.

If pak default on chinese loan (and sure they will) then chinese banks will refinance or set different terms like what they did with Sri Lanka.

My guess is imf loans will be used to pay off bonds payout to creditors, pay forex for import items etc.

souravB
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Re: Pakistani Economic Stress Watch

Postby souravB » 29 Jun 2018 16:13

Guys and Girls, a very enlightening article I came across
the fatf grey list means more trouble for pakistan than you think
a particular interesting excerpt
In the case of China, one needs to go all the way back to April 2000 to understand Beijing’s attitude towards Pakistan. In that month, the anti-Taliban Northern Alliance had caught some Taliban fighters and gleefully paraded them in front of the cameras of the international media. Among those were several foreign fighters, including some men from the East Turkestan Islamic Movement (ETIM), a rebel group seeking the secession of China’s Muslim-majority western province of Xinjiang.

In that moment, China very politely issued what was effectively a veiled threat to Pakistan: rein in your proxies’ support of the Taliban, or else face the consequences. It was left implied that the military option was not being ruled out. Indeed, soon afterwards (June 2001), China announced the creation of the Shanghai Cooperation Organisation, which was meant to be a collaboration between China, Russia and the Central Asian republics against terrorists who had found refuge in the then-Taliban controlled Afghanistan. Pakistan’s applications for membership were pointedly refused for decades, and India’s application for observer status was accepted long before Pakistan’s.

Islamabad took away from this the lesson that, China cannot be directly threatened and in turn could even rely on Chinese support to prevent United Nations sanctions against them. This may have been true in earlier eras, but even under former President Jiang Zemin, it was clear that China wanted Pakistan to actively help them crush the militant movement in Xinjiang.


edited to make the post gender neutral

Manish_P
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Re: Pakistani Economic Stress Watch

Postby Manish_P » 30 Jun 2018 20:58

DAWN Link - Amnesty pulls in Rs 80bn tax amid massive response

With the curtain set to drop on the amnesty scheme by the end of the day (Saturday), nearly 5,000 people have filed returns declaring their foreign assets and deposited approximately Rs 80 billion in taxes till June 28, Dawn has learnt through knowledgeable sources.


So far, two single largest declarants of foreign assets were from Karachi and Peshawar. A Karachi-based person has deposited Rs 3.2 billion in tax on his foreign assets, while a woman hailing from Peshawar paid Rs 1.2bn, also on her foreign assets.

pankajs
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Re: Pakistani Economic Stress Watch

Postby pankajs » 01 Jul 2018 14:54

http://www.scmp.com/news/china/diplomac ... n-over-imf
China lends US$1 billion to Pakistan as speculation over IMF bailout grows

anupmisra
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Re: Pakistani Economic Stress Watch

Postby anupmisra » 01 Jul 2018 19:19

Neshant wrote:
If Pakistan approaches the IMF for a loan, who's debt gets paid back first - the IMF or China's?


Neither! Pakhanistan isn't in the habit of repaying debts. It rolls old ones into new. Both IMF and Chinistan know this. The reality is that both will never lend to pakhanistan on the same deal as none would want to be the subordinate debtor.

VKumar
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Re: Pakistani Economic Stress Watch

Postby VKumar » 02 Jul 2018 01:23

I wonder why Pakistan continues to call its currency as Rupee. Being a West Asian or Middle Eastern country, shouldn't they use the name as Dirhams or Riyals ? After all why use an Indian word all the time?

Peregrine
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Pakistani Economic Stress Watch

Postby Peregrine » 02 Jul 2018 03:21

X Posted on the Terroristan Thread

Amid upheaval, Rs857b wiped off Pakistan’s stock market

KARACHI: A transitional phase can be tricky, to say the least, and especially complicated when a leadership change is involved. Pakistan will not see one, two, or three, but four prime ministers change seats in just over a year. Three sat on the coveted title just during the recently-concluded fiscal year.

As Pakistan battled the change in leadership, the economy suffered, uncertainty prevailed and short-term measures were taken to address long-standing issues.

The stock market may not necessarily reflect performance of an economy as a whole, but does convey market sentiment; whether the outlook is positive or are there bumps on the road ahead.

In Pakistan’s case, the last 12 months were a tough ride for stock market participants who saw the country move towards a balance of payments crisis, higher inflation and interest rates as well as lower earnings of listed companies.

As a result, savings took a hit, investments were squeezed, and wealth was significantly reduced. In a nutshell, over Rs857 billion was wiped off Pakistan’s stock market in what was the worst year for the KSE-100 Index since the disastrous 2008-09 period when the global financial crisis hit.

After eight years of posting positive returns, the KSE-100 – a benchmark for market performance – ended with a 10% loss over the course of 12 months starting July 2017. The index fell from 46,565 to 41,911 during the year, but it doesn’t convey the story.

Additionally, a 10% retreat may only qualify as a correction, but in dollar terms an investor lost close to 22% on average since the rupee weakened, shrinking the amount even more.

Image

It makes Pakistan one of the worst performing markets in the world in FY18 with third consecutive year of foreign outflow, wrote Topline Securities in a year-ender note on the KSE-100.

“We attribute this below-par performance to increased political noise amid upcoming general elections, deterioration in the external account and continued foreign selling,” stated the brokerage house.

Foreigners were net sellers of $286 million, a lower number compared with FY17, but with the emerging market status, it surprised market followers especially when the expected inflow did not meet expectations.

Not one mutual fund posted a positive return with fiscal-year losses going as high as 24%. With such earnings, fund managers endured one of the toughest years since FY09. Even brokerage houses, which rely mostly on commission, saw their income squeeze as average traded volume plunged by 50% year-on-year to 175 million shares.

Cement, banks, oil and automobiles were among the worst-hit, and each had its own reason. But overall, what the stock market endured was a result of poor decisions, lack of political will to bring about meaningful change, and inconsistent policy ahead of the general elections. Add the change in leadership more times than expected and you have all the ingredients of a bearish run.

On the economic front, the rupee, the previous government’s long-standing symbol of strength and power, lost value due to falling foreign exchange reserves that remained under pressure due to mounting debt payment obligations and heavy imports.

Foreign shipments may have made their way into the country due to the China-Pakistan Economic Corridor (CPEC), and it may result in higher growth down the road, but the price is being paid by Pakistan at the moment.

In such a scenario, when individuals are uncertain and macroeconomic indicators fail to improve, the economy usually goes through a stagnation phase. This is the reason why most international agencies forecast a lower GDP growth for Pakistan next year.

Tax amnesty scheme

The previous government also pinned hope on the tax amnesty scheme, the single largest measure to attract inflows into the country and increase tax revenue, but with trust deficit and corruption – the major reasons why money flew out in the first place – at the same level, there is little reason to believe that it would change fate drastically.

Additionally, even if there is a one-time inflow of money, it may prove to be a short-lived reprieve with the import bill, debt repayments remaining Pakistan’s kryptonite.

Road ahead

Clarity may prevail after the general elections are held towards the end of the month, but a hung parliament with no clear majority may stall economic decision-making.

What Pakistan needs right now is a clear roadmap with decision-making being consistent and tough. If the power sector needs revamping, tough decisions will need to be made including significant crackdowns. If tax revenue is to be increased, then the Federal Board of Revenue (FBR) and provincial arms will have to adopt strictness and fairness.

The country’s security situation may have improved since 2013, but underlying issues have remained the same.

Additional Information :

1. PSX - Friday Jun 29, 2018 Closing Index : 41910.90
Market Capitalization : Rs 8,665,045,026,016 @US$ 1 = Rs.124.50 = US$ 70.60 Billion

2. S&P BSE SENSEX Friday Jun 29, 2018 Closing Index : 35,423.48
Market Capitalization : Rs 145,019.42 Billion @ US$ 1 = Rs 68.5753 = US$ 2,114.75 Billion

Thus with less than One Seventh the Economy, One Sixth the Population, One Thirtieth the Stop Market Cap and Officially One Seventh the Defence Budget, Terroristan is able to maintain One Half the Defence Personnel and Equipment as compared to India! Any Takers? :rotfl:
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anupmisra
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Re: Pakistani Economic Stress Watch

Postby anupmisra » 06 Jul 2018 05:52

Pakistan’s liquid foreign reserves increase due to inflows :roll:

Foreign reserves held by the State Bank of Pakistan amounted to $9,788.8 million. The net foreign reserves held by commercial banks to $ 6,596.9 million and the total liquid foreign reserves totalled to $16,385.7 million.

During the week ending 29 June 2018, SBP’s reserves increased by $126 million to $9,789 million, due to official inflows.

https://profit.pakistantoday.com.pk/201 ... o-inflows/


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