Pakistani Economic Stress Watch

[Trikaal]

Trikaal Ji :

Herewith the Rate of the US Dollar compared with various World Currency :

Foreign Currency Units per 1 U.S. Dollar, 1950-2018

Please note the U S Dollar Rate with that of the currencies of India and Terroristan.

In 1950 the Terroristani Rupee was worth about 1.44 Indian Rupees.

Now the Terroristani Rupee is worth ONLY 0.46 Indian Rupee!

Terroristan is in a "BOTTOMLESS PIT" It will NEITHER become fiscally responsible NOR more stable countrly!

Miracles can surely be "Hoped and Prayed for". Whether Allah will oblige or not - I KNOW NOT!

Cheers

Thank you Peregrine Ji, you are one of the most active members here and track the situation regularly. Do u really think high Pkr rate will affect Pakistanis? They will buy lesser ACs, TVs, Cars, perhaps even less food. But Pkr rates will never douse their desire for Jihad. On the contrary, I am afraid it will only provide Jihadis with more fodder from destitute families. We needed the funding to dry out completely which sadly has been postponed now.

[A_Gupta]

Not saying money spent in Pakistan is benign. But it is less dangerous, than e.g., China giving outright grants to Nepal, for instance. Or spending billions on more aircraft carriers instead of Pakistan. etc. That is, a less efficient way of containing India is to fund Pakistan and its corrupt army.

[Peregrine]

Trikaal Ji :

Herewith the Rate of the US Dollar compared with various World Currency :

Foreign Currency Units per 1 U.S. Dollar, 1950-2018

Please note the U S Dollar Rate with that of the currencies of India and Terroristan.

In 1950 the Terroristani Rupee was worth about 1.44 Indian Rupees.

Now the Terroristani Rupee is worth ONLY 0.46 Indian Rupee!

Terroristan is in a "BOTTOMLESS PIT" It will NEITHER become fiscally responsible NOR more stable country!

Miracles can surely be "Hoped and Prayed for". Whether Allah will oblige or not - I KNOW NOT!

Cheers

Thank you Peregrine Ji, you are one of the most active members here and track the situation regularly. Do u really think high Pkr rate will affect Pakistanis? They will buy lesser ACs, TVs, Cars, perhaps even less food. But Pkr rates will never douse their desire for Jihad. On the contrary, I am afraid it will only provide Jihadis with more fodder from destitute families. We needed the funding to dry out completely which sadly has been postponed now.

Trikaal Ji :

Sir Ji - The Situation will be another Humongous SNAFU i.e. Situation Normal All F...ed Up. The Rich won't be bothered, the Middle Class will be irked - they will grumble - and the Poor will be "urged" by the "Mullahs" to pray to Allah for Relief!

This might lead to "Destabilization" and possibly lead to more Jihadi Activity. I fear it may lead Terroristan to use its Jihadis as fodder from destitute families as well as its "sleepers" cells in India.

Indeed the Indian Government should create more defences at the Indo-Terroristani Border so as to reduce the Jihadis activities.

We must keep an eye at Terroristan's 2019-2010 Budget and Economic Survey which might give a clue to Terroristani intentions.

Note : The Terroristani GDP - March 2019 - is about US$ 273 Billion calculated at US$ 1 = PKR 140.70

Cheers

[Bart S]

Jihadis as fodder has nothing to do with how poor they are. The cause of Jihadis attacking India is neither poverty nor religion but 100% TSP army. Without the latter, none of the other things would matter.

What this economic distress does is reduce their ability to spend on military without in turn causing further economic burden on their population and increasing alienation of provinces and ethnic groups that are not Pakjabi. It also has a psychological effect in that the differential with Bangladesh and India punctures the Paki propaganda that they were superior or even on par, something that their army and elites have been able to brainwash them about till a few years ago.

[Trikaal]

Jihadis as fodder has nothing to do with how poor they are. The cause of Jihadis attacking India is neither poverty nor religion but 100% TSP army. Without the latter, none of the other things would matter.

What this economic distress does is reduce their ability to spend on military without in turn causing further economic burden on their population and increasing alienation of provinces and ethnic groups that are not Pakjabi. It also has a psychological effect in that the differential with Bangladesh and India punctures the Paki propaganda that they were superior or even on par, something that their army and elites have been able to brainwash them about till a few years ago.

Poor are the most susceptible to radicalization, exception are always there ofc(Osama himself being an example).

I disagree with ur assumption of military ability to spend being stifled. On the contrary, I think the loan provides them with just enough to keep the masses fed(barely) while keeping their original army income (from taxes and resource sales) safe and sound for that much longer. It is during loan periods that their purse strings are loser. Also, we should remember the Paki mentality of being ready to eat grass to get parmanu bamb. These are a moronic breed that should not be assumed to possess rationality.

Finally, yes. The superiority propaganda will take a beating. Ut has been taking a beating for quite some time now. But the wonderful thing about propaganda is that if one fails, u start to propagate another. If superiority doesn't work, they will use existential threat as one. Regardless, propaganda will always be there and aam abduls will dance and die to its tune.

We need to think of this conflict as one of resources. No matter how high the fodder gets on teachings or propaganda, without resources he is nothing better than a bodybag. It's the gun and the suicide vest that makes him dangerous. And I am afraid IMF just provided them with a couple more years before which they are forced to choose between roti and bullet.

[Peregrine]

Bart S Ji : Your Post - 27 May 2019 20:39 & Trikaal Ji : Your Post 27 May 2019 - 21:08

I think - in light of the following - any further increase in the Defence Budget might hamper the Terroristani Army's Terroristic Attacts against India and that could be the reason for I'm the Dim "begging" our PM Modi of the "so called" Peace Talks :

Govt to pay Rs3.6 trillion on defence, debt servicing - February 7, 2019 - February 7, 2019

Against the stated defence budget of Rs1.1 trillion, the finance ministry told the NFC that by the end of fiscal year 2019, Rs1.676 trillion would be spent on defence that is equal to 31.5% of the federal budget. This is the second biggest charge on the budget after debt servicing.

The Rs1.676-trillion defence expenditures are inclusive of pensions, strategic nature expenses and special military packages, according to the finance ministry’s presentation.

Similarly, against Rs1.842-trillion budgeted cost of debt servicing, the finance ministry told the provinces that the debt servicing would consume minimum Rs1.95 trillion, or 36.6%, of the total budget. The central bank’s decision to increase interest rates also put additional burden of roughly Rs500 billion on the finance ministry due to high cost of borrowing.

The cumulative spending on these debt and defence has been projected at Rs3.621 trillion, or 68.2%, of the budget by the finance ministry.

Seemingly Modi Ji has got I'm the Dim by Immy's Short and Curlies!

Cheers

[Bart S]

Poor are the most susceptible to radicalization, exception are always there ofc(Osama himself being an example).

Not necessarily, radicalization (and not poverty) leads to radicalization. See Sri Lanka or ISIS for e.g. Even the Atchinson educated elite like Moeed Pirzada, Ezaz Haider etc are rabid nutjobs, and they are not just putting on an act for the media. The idea that poverty is what leads to terrorism is a left-wing theory which was probably cooked up for them to justify their thought process, and that has been thoroughly debunked. In fact radicalization in Pakistan is basically a threat to them more than us, it is the existence of the Pak army and direction of jihadis towards India that makes it a threat for us.

Pakistan is already heavily radicalized and some more poverty is not going to radicalize them anymore than they are today. In fact it might make some of them resent the Pakistani state and turn their radicalization in that direction. Lets say Pakistan needs 10,000 top-tier jihadis to be a threat to India. Christine Fair did some actual studies into the recruiting and training process (based on which her latest book was written) and she figured that only 1 out of 10 or so make it to become a top-tier jihadi. So that means that Pakistanis need about 100,000 radicalized jihadis to form a recruiting pool, and the reality is that they probably already have 50 million at least.

I disagree with ur assumption of military ability to spend being stifled. On the contrary, I think the loan provides them with just enough to keep the masses fed(barely) while keeping their original army income (from taxes and resource sales) safe and sound for that much longer. It is during loan periods that their purse strings are loser. Also, we should remember the Paki mentality of being ready to eat grass to get parmanu bamb. These are a moronic breed that should not be assumed to possess rationality.

My point is not that the military will end up spending less. In fact they might not. But it does raise the cost for them and puts them in a difficult choice where they can either continue eating up all the resources (in which case internal strife will intensify) or cut back. Seeing the public there whine about rising costs, when in fact many costs including petrol are much lower than India, it is clear that they have been using foreign loans to subsidize commodities for their public, to keep them happy on crumbs while the military and civil elite steal the rest. The situation now is that they cannot subsidize that anymore and people are angry, it will get only more fun as the IMF terms and austerity kicks in, since people are even now beginning to question military spending.

We need to think of this conflict as one of resources. No matter how high the fodder gets on teachings or propaganda, without resources he is nothing better than a bodybag. It's the gun and the suicide vest that makes him dangerous. And I am afraid IMF just provided them with a couple more years before which they are forced to choose between roti and bullet.

Please look up the IMF details. They are getting 6 billion $, half of which will be withheld to pay back existing debts owed, and the other half is supposed to be released in tranches over 3 years. There is also a bunch of tough conditions that they are supposed to meet upfront, in addition to clearing the FATF meet, before the IMF will give them a dime. This money is barely enough to tide them over for a couple of months.

What the IMF really gets them, money/loan wise, is a 'letter of comfort' that lets them borrow from the WB and ADB. But even there, they will only get a few billion dollars that will be directly disbursed based on various projects.

The real threat of the IMF loan to us, is that they are being forced to reform. But the jury is still out on that one, and their track record at that has been very poor to say the least. Being pathological liars and dishonest to the core, it is probably just a matter of time before they go back to their old ways.

[banrjeer]

Not saying money spent in Pakistan is benign. But it is less dangerous, than e.g., China giving outright grants to Nepal, for instance. Or spending billions on more aircraft carriers instead of Pakistan. etc. That is, a less efficient way of containing India is to fund Pakistan and its corrupt army.

10 billion usd paki outstanding loan is not much for the Chinese. The hope is that the actual liability is more than the 10 bill on paper since their commitment is longer.

[Peregrine]

S&P BSE SENSEX

Index Current : 39,749.73 - Pt. Change : +66.44 - % Change : +0.17

Market Capitalization of BSE Listed Co. (Rs.Cr.) : 154,583.0578 - $ 1 / 69.6750

Market Capitalization of BSE Listed Co. (U S $.) : 2,218.63 Billion

P S E]

Current Index : 34,949.28 – Change : -748.09 - % Change : -2.14%

Market Capitalization of PSE Listed Co. (Rs.Cr.) : 7,086.404489400 - $ 1 / T R : 150

Market Capitalization of PSE Listed Co. (U S $.) : 47.24 Billion

B S E : P S E : : 46.97 : 1

Pakistan Stock Exchange CEO Richard Morin resigns - Talqeen Zubhairi

Pakistan Stock Exchange (PSX) chief executive officer Richard Morin on Tuesday resigned from his post.

Cheers

[JTull]

Pakistan Stock Exchange (PSX) chief executive officer Richard Morin on Tuesday resigned from his post.

The probably didn't pay him last month's expat package ransom in dollars!

[khan]

Pakistan Stock Exchange CEO Richard Morin resigns - Talqeen Zubhairi

Pakistan Stock Exchange (PSX) chief executive officer Richard Morin on Tuesday resigned from his post.

Cheers

This could be a canary in a coal mine type situation, maybe some politically connected folks over-leveraged themselves and now there is massive bad debt in the system.

For it to directly affect the exchanges, and force an exchange CEO out, the problem would have to be very bad - so bad that, not only does it affect the banks that have bad loans on their books, but even market participants are not sure if their trade will settle (i.e. they will receive cash from their counter-party after the stock is sold).

What I am describing are very fundamental cracks in a market economy. This is what will follow if bad debts are simply swept under the rug & zombie banks kept alive. If that domino will not fall because banks are kept alive artificially, this type of capital market collapse will come after banks stop lending money to deadbeats - because all participants are insolvent, but holding huge position that are underwater.

[Peregrine]

Cheers

[Aditya_V]

I hope Pakistan shuts power to All Indus tires and offices, this can ensure adequate power to Mosques adn residences during Ramzan.

[Peregrine]

S&P BSE SENSEX

Index Current : 39,831.97 - Pt. Change : +329.92 - % Change : +0.84

Market Capitalization of BSE Listed Co. (Rs.Cr.) : 1,54,43,363.95 - $ 1 = I R 70.0600

Market Capitalization of BSE Listed Co. (U S $.) : 2,204.31 Billion

P S E

Current Index : 35,974.79 – Change : 15.36 - Percent Change : 0.04%

Market Capitalization of PSE Listed Co. (T. Rs.) : 7,240,437,774,504 – U S $ 1 = T R 150.00

Market Capitalization of PSE Listed Co. (U S $.) : 48.27 Billion

B S E : P S E : : 45.67 : 1

Cheers

[deejay]

BSE Market Cap is approx 500 Billion dollars short of Indian GDP of approc 2.7 Trillion dollars. That is approx 80% of GDP.

I hear Paki GDP is 280 Billion dollars and PSE as stated above is 48 Billion dollars market cap. That is approx 20% of Paki GDP. What is the strange story here. Is most of Paki economy non listed, ie in Pvt fauji hands?

Sorry, moi no economist.

[Uttam]

BSE Market Cap is approx 500 Billion dollars short of Indian GDP of approc 2.7 Trillion dollars. That is approx 80% of GDP.

I hear Paki GDP is 280 Billion dollars and PSE as stated above is 48 Billion dollars market cap. That is approx 20% of Paki GDP. What is the strange story here. Is most of Paki economy non listed, ie in Pvt fauji hands?

Sorry, moi no economist.

Market Cap is a measure of asset value, whereas GDP is a measure of earnings. In general, Asset value is a function of future earnings. If future earnings are expected to grow and have less risk, the asset value is high.

Though, market cap is for stock market and GDP is for the country, the above relation is still loosely relevant.

In case of NaPak, this shows that investors either do not expect future growth in earnings or find the economy too risky, or both. The lower MkCap/GDP is also a sign of less formalization of the economy.

[deejay]

Thank You Uttam JI.

[chaitanya]

S&P BSE SENSEX

Index Current : 39,831.97 - Pt. Change : +329.92 - % Change : +0.84

Market Capitalization of BSE Listed Co. (Rs.Cr.) : 1,54,43,363.95 - $ 1 = I R 70.0600

Market Capitalization of BSE Listed Co. (U S $.) : 2,204.31 Billion

P S E

Current Index : 35,974.79 – Change : 15.36 - Percent Change : 0.04%

Market Capitalization of PSE Listed Co. (T. Rs.) : 7,240,437,774,504 – U S $ 1 = T R 150.00

Market Capitalization of PSE Listed Co. (U S $.) : 48.27 Billion

B S E : P S E : : 45.67 : 1

Cheers

Peregrine-ji, I enjoy seeing these posts from you, but for the benefit of our paklurks, wouldn't it make sense to include the NSE market cap as well? That will automatically make that ratio double

[Peregrine]

S&P BSE SENSEX

Index Current : 39,831.97 - Pt. Change : +329.92 - % Change : +0.84

Market Capitalization of BSE Listed Co. (Rs.Cr.) : 1,54,43,363.95 - $ 1 = I R 70.0600

Market Capitalization of BSE Listed Co. (U S $.) : 2,204.31 Billion

P S E

Current Index : 35,974.79 – Change : 15.36 - Percent Change : 0.04%

Market Capitalization of PSE Listed Co. (T. Rs.) : 7,240,437,774,504 – U S $ 1 = T R 150.00

Market Capitalization of PSE Listed Co. (U S $.) : 48.27 Billion

B S E : P S E : : 45.67 : 1

Cheers

Peregrine-ji, I enjoy seeing these posts from you, but for the benefit of our paklurks, wouldn't it make sense to include the NSE market cap as well? That will automatically make that ratio double

chaitnya Ji :

I believe that a sizable number of Indian Companies are members of both i.e. BSE and NSE.

Cheers

[dhyana]

Pakistan to stay on FATF's greylist (DNA India)

Pakistan is certain to stay on the greylist when the next meet of Financial Action Task Force or FATF, an official from FATF member countries told WION on Wednesday.

FATF's Asia-Pacific Group (APG) which met in China in mid may wasn't impressed by Pakistan's action on terror financing.

Being in FATF’s grey list has caused a loss of $10 billion to Islamabad and if Islamabad fails to take any concrete action on terror, it might be put on the blacklist.

Unfortunate that they get a reprieve from the blacklist, but perhaps expected as it's the 'safe' way to presumably keep holding their feet to the fire.

[Kashi]

China taking over as the chair of FATF ensures that there will be no blacklisting.

[Peregrine]

PRESS NOTE ON PROVISIONAL ESTIMATES OF ANNUAL NATIONAL INCOME, 2018-19 AND QUARTERLY ESTIMATES OF GROSS DOMESTIC PRODUCT FOR THE FOURTH QUARTER (Q4) OF 2018-19

GDP : 19,010,164 CRORES = 190,101.64 @ / I R = 69.4825 - GDP = $ 2,735.96 BILLION

POPULATION : 1.332 BILLION - PER CAPITA GDP = US$ 2,054.02

Cheers

[Peregrine]

What would happen if inflation touches 50-60% and PKR falls to 200 vs Dollar. I would think there will be streams of refugees towards India. How would be react in such a scenario?

Given they way they are Islamised , they will probably fight and go westwards through Afganistan, Iran , Turkey to Europe by hook or crook, Some firing by BSF will keep them in check.

Aditya Ji :

Sorry Aditya Ji, the Terroristanis and the Bong Bong Deshis have been entering India along with Drugs into India especially on the Punjab Border with great impunity!

I bet that the Kartarpur Corridor will bring a whole lot of Drug and Currency Smugglers as well as Terrorists of the Khalistani ILK into India!
Cheers

[Peregrine]

Govt to revive PSM through public-private partnership - Zafar Bhutta

ISLAMABAD: The government has taken another U-turn in its efforts to resume operations of the sick Pakistan Steel Mills (PSM) and has pressed ahead with the plan of reviving the mill through public-private partnership.

The expert group had observed that the revival of PSM was technically possible through a phase-wise approach targeting first the downstream hot-rolled coil/cold-rolled coil (HRC/CRC) operations with a parallel revamp and retrofitting of upstream equipment. This would help in restoring the 1.1-million-ton-per-annum production capacity of the mill, followed by its expansion to three million tons, it said. The experts recommended the exploitation of domestic iron ore and coal reserves for their consumption in PSM by offering supportive fiscal incentives and a regulatory package to mining companies.

Cheers

[Peregrine]

Pakistan eyes borrowing of $12.3 billion in FY20 - Shahbaz Rana

ISLAMABAD: Pakistan is eyeing obtaining record foreign loans of over $12 billion in the upcoming fiscal year on the strength of an International Monetary Fund (IMF) programme, but it will still face a financing gap due to the requirement of building foreign currency reserves and $10.7 billion in debt repayments.

The Ministry of Finance has estimated the receipt of $12.3 billion from bilateral and multilateral lenders, commercial banks, issuance of Eurobonds and the IMF in fiscal year 2019-20, according to sources in the ministry.

The estimated fresh borrowing will be nearly one-fifth or $1.9 billion higher than the outgoing fiscal year’s revised estimate of $10.3 billion worth of external inflows. Pakistan has not planned to take fresh SAFE deposits from China in the new fiscal year as against $2 billion obtained in the outgoing year.
However, the country’s gross external financing requirement has been estimated at a minimum $19 billion, excluding the additional needs to shore up the foreign currency reserves to a level that are sufficient to finance three months of imports, said the sources.



The government has estimated a record $10.7 billion in debt repayments in fiscal year 2019-20 while another $8.3 billion will be needed to finance the current account deficit, they added. The current account deficit has been projected at 3% of gross domestic product (GDP). Some of the needs will be met through nearly $2.5 billion in foreign direct investment, privatisation proceeds of $2 billion and private-sector borrowings.

But the real challenge will be how to increase the central bank’s foreign currency reserves to close to $13 billion from the anticipated level of around $7 billion by the end of this month. The reserves currently stand at $8 billion, which are not sufficient to provide cushion for even two months of imports.

After including the central bank’s buffer requirement, there will still be a financing gap of $6 billion to $7 billion in the next fiscal year, according to the sources.

Pakistan and the IMF have announced a staff-level agreement for a $6-billion 39-month loan package, which will be supported by budgetary assistance from the World Bank and the Asian Development Bank. But all these inflows will be insufficient to provide comfort to the Q-block dwellers.

Out of the $6 billion, Pakistan will receive $2 billion from the IMF in the next fiscal year, subject to successful completion of quarterly reviews. Against $2 billion inflows, the government will return the IMF $750 million on account of repayment of previous loans, said the sources.

Similarly, the government still has a plan to borrow $2 billion from foreign commercial banks. But the new borrowings will not be sufficient to repay the $4.4-billion maturing commercial bank loans, the finance ministry sources said. Most of the $4.4-billion commercial loans will be returned to Chinese financial institutions, mainly Industrial and Commercial Bank of China and China Development Bank. Pakistan also plans to float $3 billion worth of Eurobonds in the next fiscal year as against $1.6 billion in repayments on account of Eurobonds, they added.

Bilateral outflows will be higher than inflows in the next fiscal year. As against total bilateral inflows of $1 billion, the outflows will stand at $1.8 billion, according to the ministry officials.

Pakistan will return $654 million to China against the fresh inflow of $553 million. Similarly, the repayment to Saudi Arabia will amount to $161 million against new loans of $51 million, the sources said.

Pakistan will repay $390 million worth of Japanese debt as against projected fresh borrowing of $35 million. Inflows from multilateral creditors would exceed outflows. Pakistan has estimated the receipt of $4.2 billion from these creditors against $2.2 billion in repayments. The ADB is expected to lend $1.6 billion while it will be repaid $1 billion in maturing debt. The World Bank may extend $1.3 billion in new loans against $800 million worth of maturing debt.

The lending from the ADB and the World Bank would pick up due to the restoration of budgetary support.

The Islamic Development Bank is expected to extend $1.1 billion in fresh loans. Pakistan will return $244 million to the IDB in the next fiscal year. Meanwhile, the World Bank board of directors on Friday approved $465 million in loans for two projects to support higher education and expand sustainable electricity trade between Central Asia and South Asia, according to the local office of the World Bank.

Both projects form part of the priority areas identified in “Pakistan@100: Shaping the Future”, a flagship initiative that identifies frontier interventions for Pakistan to become an upper middle-income country by 2047, said World Bank Country Director for Pakistan Illango Patchamuthu.

The $400-million Higher Education Development in Pakistan project will strengthen tertiary education to produce skilled, innovative and enterprising graduates. It will strengthen partnerships with the industry for strategic research and develop data-driven governance of tertiary education.

The Central Asia-South Asia Electricity Transmission and Trade project (CASA-1000) will enable sustainable electricity trade between Afghanistan, Kyrgyz Republic, Pakistan and Tajikistan. The project will use $65 million in additional financing to complete Pakistan’s infrastructure part of the CASA-1000 project. It will help meet the growing energy demand in Afghanistan and Pakistan, by transferring surplus summer hydroelectric power from the Kyrgyz Republic and Tajikistan.

Cheers

[suryag]

What a massive Ponzi scheme in making

[Aditya_V]

Any idea how the Paki Rupee has recovered to 146, it is disturbing to see such a rise.

[A_Gupta]

Any idea how the Paki Rupee has recovered to 146, it is disturbing to see such a rise.

Every day is not Eid.

According to currency dealers, the increasing inflows of remittance in connection with Eidul Fitr have supported the local rupee in the market. According to them, the majority of inflows came from Saudi Arabia and other Gulf countries, including the United Arab Emirates (UAE).

https://www.dawn.com/news/1485695

[yensoy]

Don't worry, once the Hajj season starts all the forex will vanish without a trace with dollars being in short supply and PKR numbers crossing 160 even.

[chaitanya]

I believe that a sizable number of Indian Companies are members of both i.e. BSE and NSE.

Thanks for that, I had no idea... I always assumed that it would be something like the NYSE/NASDAQ listings. Here is more info for others if interested.

[Peregrine]

S&P BSE SENSEX

SENSEX GALLOPS OVER 40,000.

Index Current : 40,267.62 - Pt. Change : +553.42 - % Change : +1.39

Market Capitalization of B S E Listed Co. (Rs.Cr) : 1,56,14,416.92 - $ 1 / 69.4300

Market Capitalization of B S E Listed Co. (U S $.) : 2.248.94 Billion

P S E

Current Index : 35,505.29 – Change : -469.50 - Percent Change : -1.32%

Market Capitalization of PSE Listed Co. (Rs.Tr.) : 7,147,657,560,436 - $ 1 / T. R, 149.30

Market Capitalization of PSE Listed Co. (U S $.) : 47.88 Billion

B S E : P S E : : 46.99 : 1

Cheers

[Peregrine]

IMF wanted 600bps interest rate hike: Asad Umar

KARACHI.: It is no secret that when the Pakistan Tehreek-e-Insaf (PTI) government came to power, the country was facing a balance of payments crisis. There was talk of an immediate bailout from the International Monetary Fund (IMF) to deal with the dilemma, but even then the process took nearly 10 months to finalise.

Cheers

[Peregrine]

DEBT DEBT GLORIOUS DEBT NOTHING QUITE LIKE IT FOR COOLING THE BLOOD - SO FOLLOW ME FOLLOW DOWN TO THE HOLLOW AND THERE LET US WALLOW IN GLORIOUS DEBT



Debt servicing to hit record Rs2.8 trillion - Shahbaz Rana

ISLAMABAD: The government may allocate over Rs4 trillion for debt and defence spending in the upcoming budget as the cost of debt servicing will hit a record Rs2.8 trillion.

This is mainly due to the International Monetary Fund’s (IMF) demand to increase the interest rate and shift budgetary borrowing to commercial banks.

For the next fiscal year, defence budget has been estimated at Rs1.270 trillion, higher by Rs170 billion or 15.4% over the original budget for the outgoing fiscal year, said sources in the finance ministry.

The Rs1.270 trillion worth of defence expenditure is exclusive of military pensions, strategic nature expenses, and special military packages, according to the ministry officials.

The ministry is also considering whether to fully reflect all the expenditures in the next fiscal year, that will increase the budget deficit to 7.8% of gross domestic product (GDP) or Rs3.4 trillion, excluding provincial savings, the sources said.

It is yet to be seen whether the finance ministry presents the next year’s budget at a parity of Rs150 to a dollar or Rs171 to a dollar, which is the rate under the IMF’s framework by June next year.

The base of the exchange rate will have a direct bearing on the cost of external debt servicing and defence spending.

If the government fully reflects the expenditures, size of the next year’s budget will cross Rs6.8 trillion, higher by 25% over the original budget of the current financial year, said the sources.

This is despite the fact that Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh has vowed to unveil an austerity budget on June 11. The single largest drain on the budget is the cost of debt servicing.

Finance Ministry Spokesman Dr Khaqan Najeeb was not available for comments.

The additional cost of debt servicing will be more than the amount that the government will collect by slapping additional taxes on the people, including low-income groups. The government has proposed an Rs5.550-trillion tax collection target for the Federal Board of Revenue (FBR).

Cumulative spending on debt and defence has been projected at Rs4 trillion for the fiscal year 2019-20, starting July, according to the sources. The Rs2.8 trillion debt servicing cost is higher by Rs760 billion or nearly 42% over the current fiscal year, they added.

The domestic debt servicing cost has been projected at nearly Rs2.5 trillion, higher by Rs710 billion or 41%. The external debt servicing cost is projected at Rs320 billion, up to Rs50 billion. But this cost will go up further due to nearly 15% exchange rate depreciation in the next fiscal year.

From July, Pakistan will adopt a market-driven flexible exchange rate regime.

The sources said the debt cost would shoot up due to the increase in interest rate by the State Bank of Pakistan, shifting of the government borrowing from the central bank to commercial banks and issuance of bonds against the federal government’s debt that it owed to the central bank. All the three measures are being taken on the IMF’s instructions.

Pakistan and the IMF have reached a staff-level agreement for a $6-billion bailout package but its approval from the IMF’s Executive Board is subject to implementation of agreed actions in the new budget.

As part of the IMF conditions, the SBP has already increased the interest rate by 1.5% to 12.25%. This single factor has massively increased the cost of debt servicing.

The IMF has also asked the finance ministry to borrow from commercial banks instead of the central bank for budget financing. Now, the banks will borrow from the central bank and will make money by lending the same amount to the federal government. This will increase the federal government’s interest cost by another 1%.

The sources said the IMF has also forced the government to issue domestic bonds against the debt stock of over Rs4.5 trillion that it owes to the central bank. Banks are likely to be the clients of these bonds.

The sources said the defence budget for the new fiscal year could be Rs1.270 trillion, which will be around 2.9% of GDP. In addition to the defence budget, the armed forces will get another $1.5 billion or Rs250 billion under the Armed Forces Development Programme, said the sources.

For the outgoing fiscal year, the defence budget was Rs1.1 trillion but the finance ministry told the National Finance Commission that by the end of the fiscal year 2019, Rs1.676 trillion would be spent on defence. This is the second biggest expenditure in the budget after debt servicing.

The Rs1.676-trillion defence expenditure is inclusive of pensions, strategic nature expenses, and special military packages, according to the finance ministry’s presentation.

After including the expenses next year as well, the defence spending will be close to Rs1.9 trillion, said the sources. At US$ 1= Tr Rs 150 the amount will be US$ 12.67 Billion - at US$ 1 = Tr Rs 171 the amount will be US$ 11.1 Billion - That's one for the Birds!!

Cheers

[souravB]

Pakis are spending almost 5% of their GDP on defense. True NATO ally.

[sudhan]

Peregrine Ji,

I would like to add a bit more context to their budget quagmire..

Their last budget had a spending outlay of PKR 5.9 trillion.. We could assume that their current spending will be around 15% higher..

That would bring it to PKR 6.8 trillion = $45.34 billion

Defence + Debt servicing = PKR 4 trillion = $26.67 Billion

The Pindi walas can take a bite out of the already think pie anytime... as noted in the article above..

The Rs1.270 trillion worth of defence expenditure is exclusive of military pensions, strategic nature expenses, and special military packages, according to the ministry officials.

Rest of development budget for a nation > 200 million people will be less than PKR 2.8 trillion = $18.67 Billion

Provided the lunatics from pindi dont stick their dirty fingers in the pie again..

As a comparison, India spends 4.6% of its GDP on education alone.. (that is over a $ 100 b)

Pakistan is truly a land of punishment..

[yensoy]

How can their defence budget be higher by only 15.4% in rupee terms when PKR has fallen by over 25%? They should be encouraged to spend at least 25% more, or even 30% more since their fighting men deserve the finest and fairest of all.

[Peregrine]

Inflation up 9.1% in May - Shahbaz Rana

ISLAMABAD: In line with expectations, the inflation rate edged up to 9.1% in May, which raised questions over the SBP move to increase the key discount rate to 12.25% to meet a condition of the IMF.

Cheers

[A_Gupta]

Walletinvestor.com prediction of USD to PKR rate:

[UlanBatori]

Back around 2000 Pakistan had only 143 million terrorists (I mean, pakistanis). Today more than 200 million despite so many soosai bummers? They sure are doing SOMETHING a lot more and better than India, hain? Fortunately they're 90% inbred.

[Trikaal]

Against $2 billion inflows, the government will return the IMF $750 million on account of repayment of previous loans, said the sources.

Pakistan also plans to float $3 billion worth of Eurobonds in the next fiscal year as against $1.6 billion in repayments on account of Eurobonds, they added.

Bilateral outflows will be higher than inflows in the next fiscal year. As against total bilateral inflows of $1 billion, the outflows will stand at $1.8 billion, according to the ministry officials.

Pakistan will return $654 million to China against the fresh inflow of $553 million. Similarly, the repayment to Saudi Arabia will amount to $161 million against new loans of $51 million, the sources said.

Pakistan will repay $390 million worth of Japanese debt as against projected fresh borrowing of $35 million. Inflows from multilateral creditors would exceed outflows. Pakistan has estimated the receipt of $4.2 billion from these creditors against $2.2 billion in repayments. The ADB is expected to lend $1.6 billion while it will be repaid $1 billion in maturing debt. The World Bank may extend $1.3 billion in new loans against $800 million worth of maturing debt.



The Islamic Development Bank is expected to extend $1.1 billion in fresh loans. Pakistan will return $244 million to the IDB in the next fiscal year. Meanwhile, the World Bank board of directors on Friday approved $465 million in loans for two projects to support higher education and expand sustainable electricity trade between Central Asia and South Asia, according to the local office of the World Bank.

So in summary, everyone except China and Saudi Arabia lend more than they get. Everyone of them is betting on this Ponzi scheme paying out at the end. I can't believe I am saying this but it seems like it is China and Saudi Arabia that are the smart ones. They are the only ones reducing their liability.