Pakistan Economy : Updates and Discussions

[Gautam]

Pakistan Fires Central Bank, Tax Body Chiefs Amid IMF Talks
By Kamran Haider and Khalid Qayum
May 4, 2019, 11:13 AM GMT+5:30 Updated on May 4, 2019, 12:45 PM GMT+5:30

• Prime Minister Imran Khan replaced finance minister last month
• 
  Top government leader says decision based on performance

Tariq Bajwa on March 18. Photographer: Asim Hafeez/Bloomberg

Pakistan’s government removed the governor of the central bank and the head of the tax authority amid the nation’s bailout negotiations with the International Monetary Fund.

Tariq Bajwa, chief of the State Bank of Pakistan, and Federal Board of Revenue Chairman Mohammad Jehanzeb Khan were fired because of their “performance,” Firdous Ashiq Awan, a special assistant to Prime Minister Imran Khan said by phone on Saturday. The removal of the two comes weeks after Finance Minister Asad Umar was asked to resign.

Former cricket star Khan faces growing criticism from economists and opposition parties for mishandling the economy and delaying the IMF bailout since coming to power in August in a controversial national election. While Khan has secured loans from friendly nations such as Saudi Arabia, the United Arab Emirates and China to help boost foreign reserves, the economy continued to falter amid balance-of-payments crisis and a depleted treasury.

Khan appointed Abdul Hafeez Shaikh as his finance adviser two weeks ago after forcing the then finance minister Umar to resign in a cabinet reshuffle. Shaikh is now leading a team that is negotiating the 13th IMF support program since the 1980s. While the talks with the IMF stalled twice in the past over various disagreements, such as the exchange rate policy, Shaikh said Friday he wants to develop a “reasonable” IMF plan.

‘Bitter Pills’

It seems Shaikh “wants like-minded people in his team to implement the IMF-led reform process,” Mohammed Sohail, chief executive of Topline Securities Pakistan Ltd., said from Karachi. “You need to take bitter pills like increasing taxes, energy prices and privatization. These things haven’t been done yet. They are the toughest ones and need a strong will and bold measures.”

Awan said the Prime Minister will choose from three people proposed by the finance ministry for the governor’s position by Monday, while Shaikh will appoint the tax chief. State Bank of Pakistan’s Bajwa said he was in Islamabad for talks with the visiting IMF team when he was asked to resign, Dawn newspaper reported.

Pakistan’s credit score was downgraded by S&P Global Ratings in February, which cited weak economic outlook and the delay in securing an IMF bailout. The rupee weakened 26 percent in 2018, and the benchmark KSE-100 Index declined for a second straight year to the lowest level in three years.

— With assistance by Faseeh Mangi
(Updates with analyst comment in fifth paragraph.)

https://www.bloomberg.com/news/arti...tral-bank-tax-authority-chiefs-amid-imf-talks

 

[Gautam]

8m people may go below poverty line in next two fiscals

Khalid Mustafa - May 3, 2019

ISLAMABAD: About 800,000 to one million people have got unemployed because of slow down in the economy, whereas four million people have gone down the poverty line so far and in next two fiscal years, about 8,000,000 people are feared to go down below poverty line.

Dr Hafeez Pasha, a distinguished economist of the country, an interview with The News painted the future outlook of the country’s economy after joining the three-year IMF loan program.

He said that since the GDP growth will stay in current and next financial years at about 3 percent and after that it may grow to 4 percent, which will cause increase in unemployment and about 8,000,000 people will go down below the poverty line.

“More importantly, inflation is feared to reach a peak double-digit rate in 2019-20 particularly due to the continuing depreciation of rupee and higher indirect tax burden. And it will stay high single-digit the next two years and the target is to bring it down to below 5 percent from 2021-22 onwards,” he said.

Dr Pasha mentioned that the current financial year will end up with almost 7 percent budget deficit. This time, he said, the debt servicing will eat up mammoth amount of Rs2.6 trillion and the defence budget will also increase given the situation on eastern and western borders.

The federal government has almost 42 ministries and divisions and 206 are attached departments and autonomous bodies in the presence of the 18th Amendment. Pasha said the government should reduce its ministries and attached department with a view to curating the running expenditures.

To a question, he said, if the country faces any political upheaval that may lead to instability, then Pakistan’s economy will be the most vulnerable with far reaching adverse impacts on the countrymen.

“I wish Pakistan does not experience any kind of political expediency,” he said, mentioning 126 days sit-in during the Nawaz Sharif government which had inflicted huge loss to the economy. Since then, Pakistan’s stock exchange dwindled by 35 percent, resulting in mammoth loss of $30 billion.’

He said that in next two years, Pakistan need to pay back $40 billion loan which looks horrible given the economic situation of the country. This government has so far borrowed $9.4 billion which include $4.4 billion from China, $3 billion from Saudi Arabia and $2 billion from the UAE. The said loan from the three countries is deposited with the State Bank of Pakistan as reserves. Dr Pasha said that China is the only hope left with Pakistan as if Beijing agrees to rollover its almost $20 billion loans for three years’ time, it will provide breathing space to the government. He said once Pakistan goes into IMF programme, then the country may get $6-8 billion loan which will be in fact $3-5 billion as some of the amount will be consumed to pay back the previous loans to the Fund. However, by joining the IMF, other international financial institutions (IFIs) such as World Bank, Asian Development Bank and Islamic Development Bank will provide concessional loan of about $6-7 billion.

Dr Pasha said had Prime Minister Imran Khan raised the issue of rollover of the loan with Chinese leadership during the recent visit, it would have given the substantial leverage while holding parleys with the IMF. He hoped that the prime minister must have taken up this vital issue with Chinese top leadership.

In case Pakistan succumbs to IMF demand seeking revenue generation up to Rs700 through taxation in 2019-20 budget, it will tantamount to playing havoc with the economy as people will not pay more when the growth will be in the lowest ebb. “This will suffocate the country’s economy,” he said.

Dr Pasha said the government should generate more revenue of Rs650 billion in next two financial years. He said that government can increase more revenue of Rs 100 billion through the mobile cards. He also drew the attention towards the low hanging fruit in the provinces. He said it is high time to start collecting the income tax on agriculture and generate revenue through increase in property tax on immovable property.

He said that just Rs 2 billion is collected per annum through income tax on agriculture as against the income tax of Rs 1,500 billion from the sectors of economy. He said the agriculture is the 20 percent of the GDP, but its contribution towards tax revenue is just at Rs 2 billion. Dr Pasha mentioned that property tax in Mumbai, India of about Rs 100 billion is collected, whereas in Pakistan just Rs 16 billion is collected under the head of property tax. “These are the areas where tax authorities need to work and can easily earn revenue of Rs 100 billion on these two accounts,” he said.

Dr Pasha also disclosed that water tax (Abiana) stands at Rs 135 per acre in one year whereas the expenditure of the government (irrigation department) on one acre stands at Rs 3,000. He said in Punjab alone, the water tax of Rs 2 billion is collected per annum, whereas the government expenditure stands at Rs 50 billion.

Talking of current account deficit, Pasha said it exceeded 6 percent of the GDP and is likely to be close to 4.5 percent of the GDP in 2018-19. He said there is need for a sharp reduction in this deficit to almost 2 percent of the GDP by 2021-22.

Mentioning the tax-to-GDP ratio, he said that it hiked to 13 percent of the GDP by 2017-18. However, he said, due to slow growth in tax revenues in 2018-19 it is likely to fall below 12.5 percent of the GDP in 2018-19. Maximum effort will have to be made to boost tax revenues in 2019-20 by over 1 percent of the GDP. This effort will need to continue until the tax-to-GDP ratio rises to 16 percent by 2023-24. He said that various studies, including those by UNESCO, have estimated the tax revenue potential of Pakistan at 16 percent of the GDP. Over the next five years period, the great challenge will be to raise the tax-to-GDP ratio by 3.5 percent of the GDP.

Highlighting the salient features of the home-grown macroeconomic framework finalised by himself (Dr Hafeez Pasha), and Dr Shahid Kardar, he said the government needs to contain imports and to this effect the government has so far reduced the import by $3.5 billion which will be further reduced by $5-6 billion by June 30, 2019. “The rupee has been depreciated by 16 percent up to now in 2018-19. Today, there is no significant overvaluation of the rupee. Luxury goods imports have been restricted by the imposition of large regulatory duties and 100 percent cash margin requirements. However, their coverage is only 6 percent of imports currently,” he said.

The approach adopted is to ensure that in the future there is no significant overvaluation of the rupee. He said that a 15 percent real depreciation of the rupee is envisaged during 2019-20 and 2020-21. Simultaneously, it is proposed to widen the coverage of the cash margins of up to 30 percent. Imports of major essential goods like POL products, fertilisers, medicines, pulses and edible oil should not be subject to cash margin requirements. In addition, it is proposed to raise the maximum import tariff from 20 percent to 25 percent to provide more protection to domestic industry.

About exports, he said many steps have already been taken to promote exports. These include depreciation of rupee, lower power tariffs, duty exemption on imported inputs for exports, issuance of promissory notes against refunds due and an export incentive scheme. However, despite these wide-ranging measures there has been no visible improvement in exports. It appears that exporters have largely opted initially for increase in their rupee profit margins. As such, the benefit of the devaluation has only been passed on partially to buyers in the form of lower dollar prices.

8m people may go below poverty line in next two fiscals

 

[Gautam]

IMF economist Dr Reza Baqir appointed SBP governor for 3 years

Sanaullah Khan | Dawn.comUpdated May 04, 2019

Dr Reza Baqir has been with the IMF since 2000. — Photo courtesy The British University In Egypt (bue.edu.eg)

President Arif Alvi has approved the appointment of Dr Reza Baqir, a long-time economist with the International Monetary Fund (IMF), as the governor of the State Bank of Pakistan (SBP) for a period of three years, a notification issued by the Finance Division said on Saturday.

The senior economist of Pakistani origin will replace Tariq Bajwa, who was unexpectedly removed from the post on Friday along with the Federal Board of Revenue (FBR) chairman.

A notification said the federal government in pursuance of a federal cabinet decision had accepted the resignation tendered by Bajwa as the central bank's governor on May 03 "with immediate effect".

"The President of Pakistan is pleased to appoint Dr Reza Baqir as Governor State Bank of Pakistan for a period of three years from the date he assumes office," a subsequent notification read. It said the terms and conditions of his appointment will be notified later with the president's approval.

Who is the new SBP head?

The IMF website lists Dr Baqir as the Fund's current Senior Resident Representative for Arab Republic of Egypt.

It wasn't immediately clear whether he would relinquish his post at the global lender before taking charge of the SBP governor office.

He had previously served as the Head of Mission for Romania at the IMF following his appointment in January 2016, according to the Centre for Economic Research in Pakistan.

As per his executive profile posted by Bloomberg, Dr Baqir has been with the IMF since 2000 as the head of the Debt Policy Division,

A graduate of Harvard University, he later obtained a PhD in economics at the University of California, Berkeley.

The new SBP governor has worked with the World Bank, the Massachusetts Institute of Technology and the Union Bank of Switzerland.

SBP governor shown the door

Tariq Bajwa had confirmed to Dawn on Friday that he was asked to resign while he was in Islamabad for talks with the IMF that are supposedly "progressing" according to prime minister’s adviser on finance Hafeez Shaikh, who has recently replaced finance minister Asad Umar.

But when asked if this change and the removal of the FBR chairman during the IMF talks might send a negative signal to the markets, Shaikh said: “I hope the markets are going to look at our actions and decide. They have to see the totality of the actions and our policies.”

It was unclear how the change of such senior and important officers will affect the talks with the IMF.

Both men seemed to have been taken by surprise, as FBR chairman Jahanzeb Khan was scheduling meetings for Saturday till late Friday night when the news of his departure flashed across news TV screens.

Similarly, Bajwa was participating in what many consider the last leg of negotiations with IMF before the finalisation of a programme.

Both Bajwa and Khan are Grade 22 officers of the Pakistan Administrative Service, though the former was appointed after his retirement. There was little indication in the days leading up to the removal about unhappiness with Bajwa's performance. However, about the FBR head, both former finance minister Umar and Prime Minister Imran Khan had given public statements expressing their disappointment over his performance.

Sources in the finance ministry, who were privy to the developments, had told Dawn that the FBR chairman was viewed by PM Khan as "a mediocre person", lacking dynamism, and was held largely responsible for the lackluster revenue performance since his appointment. The FBR is on course to register one of the highest shortfalls of its history by the close of this fiscal year, anticipated to come in above Rs 350 billion.

The sources said the recently appointed finance adviser agreed with the prime minister’s views, and seemed to be moving to bring in his own team to manage the country’s finances.

Both the SBP governor and the FBR chairman are key players in any IMF programme. The governor is actually one of the signatories to any programme, and the FBR chairman is tasked with meeting the revenue target that usually lies at the heart of any programme.

IMF economist Dr Reza Baqir appointed SBP governor for 3 years - DAWN.COM


IMF taking over ?

 

[LoneWolfSandeep]

IMF economist Dr Reza Baqir appointed SBP governor for 3 years

Sanaullah Khan | Dawn.comUpdated May 04, 2019

Dr Reza Baqir has been with the IMF since 2000. — Photo courtesy The British University In Egypt (bue.edu.eg)

President Arif Alvi has approved the appointment of Dr Reza Baqir, a long-time economist with the International Monetary Fund (IMF), as the governor of the State Bank of Pakistan (SBP) for a period of three years, a notification issued by the Finance Division said on Saturday.

The senior economist of Pakistani origin will replace Tariq Bajwa, who was unexpectedly removed from the post on Friday along with the Federal Board of Revenue (FBR) chairman.

A notification said the federal government in pursuance of a federal cabinet decision had accepted the resignation tendered by Bajwa as the central bank's governor on May 03 "with immediate effect".

"The President of Pakistan is pleased to appoint Dr Reza Baqir as Governor State Bank of Pakistan for a period of three years from the date he assumes office," a subsequent notification read. It said the terms and conditions of his appointment will be notified later with the president's approval.

Who is the new SBP head?

The IMF website lists Dr Baqir as the Fund's current Senior Resident Representative for Arab Republic of Egypt.

It wasn't immediately clear whether he would relinquish his post at the global lender before taking charge of the SBP governor office.

He had previously served as the Head of Mission for Romania at the IMF following his appointment in January 2016, according to the Centre for Economic Research in Pakistan.

As per his executive profile posted by Bloomberg, Dr Baqir has been with the IMF since 2000 as the head of the Debt Policy Division,

A graduate of Harvard University, he later obtained a PhD in economics at the University of California, Berkeley.

The new SBP governor has worked with the World Bank, the Massachusetts Institute of Technology and the Union Bank of Switzerland.

SBP governor shown the door

Tariq Bajwa had confirmed to Dawn on Friday that he was asked to resign while he was in Islamabad for talks with the IMF that are supposedly "progressing" according to prime minister’s adviser on finance Hafeez Shaikh, who has recently replaced finance minister Asad Umar.

But when asked if this change and the removal of the FBR chairman during the IMF talks might send a negative signal to the markets, Shaikh said: “I hope the markets are going to look at our actions and decide. They have to see the totality of the actions and our policies.”

It was unclear how the change of such senior and important officers will affect the talks with the IMF.

Both men seemed to have been taken by surprise, as FBR chairman Jahanzeb Khan was scheduling meetings for Saturday till late Friday night when the news of his departure flashed across news TV screens.

Similarly, Bajwa was participating in what many consider the last leg of negotiations with IMF before the finalisation of a programme.

Both Bajwa and Khan are Grade 22 officers of the Pakistan Administrative Service, though the former was appointed after his retirement. There was little indication in the days leading up to the removal about unhappiness with Bajwa's performance. However, about the FBR head, both former finance minister Umar and Prime Minister Imran Khan had given public statements expressing their disappointment over his performance.

Sources in the finance ministry, who were privy to the developments, had told Dawn that the FBR chairman was viewed by PM Khan as "a mediocre person", lacking dynamism, and was held largely responsible for the lackluster revenue performance since his appointment. The FBR is on course to register one of the highest shortfalls of its history by the close of this fiscal year, anticipated to come in above Rs 350 billion.

The sources said the recently appointed finance adviser agreed with the prime minister’s views, and seemed to be moving to bring in his own team to manage the country’s finances.

Both the SBP governor and the FBR chairman are key players in any IMF programme. The governor is actually one of the signatories to any programme, and the FBR chairman is tasked with meeting the revenue target that usually lies at the heart of any programme.

IMF economist Dr Reza Baqir appointed SBP governor for 3 years - DAWN.COM


IMF taking over ?

Increasing back channel contact capability with IMF, to work out favorable deal, by recruiting more of existing IMF employees.
Plus trying to get more capable economists on board, to somehow escape the hangman noose.

 

[Gautam]

Increasing back channel contact capability with IMF, to work out favorable deal, by recruiting more of existing IMF employees.
Plus trying to get more capable economists on board, to somehow escape the hangman noose.

Will it do any good ? Given that no matter who is in charge, changing the economic fate of the country would mean taking some very harsh steps which will be politically hard to sell and bringing structural changes to the economy which will be unacceptable to the army.
It just seems like a short term lobbying effort and nothing long term.

 

[Notsuperstitious]

Pakistanis of all ages believe in magic wands. During the CPEC hysteria, they were talking so big without asking the basic questions

Why no competition?
Why are terms secret?
Do we need this?
Who has ratified the benefits projections?

And when I tried talking to some of them (out of self interest of course, I don't want China buying up Pakistan) they accused me of jealousy.

Here's the thing Pakistanis, there is no substitute to hard work and common sense. Riding on a big brother to make miracles happen only works for those in power. In a crowd someone is selling miracle medicines or something that sounds too good to be true, what do you do, keep a hand on your wallet and get away. If something sounds too good to be true but you are not allowed to ask questions, use that sodding brain for a second.

 

[Gautam]

Petrol price hike inevitable: Dr Shehbaz Gill

Last Updated On 05 May,2019 06:55 pm

All efforts being made to pull the country out of economic crisis under the leadership of PM Imran.

LAHORE (Dunya News) – Punjab spox Dr Shehbaz Gill on Sunday expressed that petroleum prices in Pakistan are less then UK, China, Turkey and India.

He added that in India petrol price stands at 145 Pakistani rupees, in China at 153, in UK at 221 while in Turkey at Rs 187.

Gill said PML-N regime imposed 52.6 % tax on petroleum products which was reduced to 23.6 % by PTI government. Spokes person to CM Punjab added that increase in prices of petroleum products has been made due to rise of prices in international market an due to increase in exchange rate of dollar.

Gill said the current increase was necessary to strengthen economic situation, adding that all efforts were being made to pull the country out of economic crisis under the leader ship of PM Imran Khan.

The spox further said that a huge portion of Pakistan’s import bill, that is billions of dollars, is spent to import oil products.

Criticizing the opposition Gill said PML-N and PPP should tell people about looted money in their tenures despite lower prices of oil and dollar instead of shouting at current situation.

Petrol price hike inevitable: Dr Shehbaz Gill

 

[BlackOpsIndia]

Gill said PML-N regime imposed 52.6 % tax on petroleum products which was reduced to 23.6 % by PTI government.

I may have missed the news but when did PTI reduced taxes on Petrol and that too of this magnitude! From starting I have been hearing cry babies crying to increase taxes and have done that a few times.

He added that in India petrol price stands at 145 Pakistani rupees, in China at 153, in UK at 221 while in Turkey at Rs 187

Someone should ask this jackass if Pakistan's purchasing power is at same level as of India and other countries mentioned?
Taxes are imposed taking in account the purchasing power of people not because some other country have such and such price.

 

[Notsuperstitious]

Pakistanis, Google "Kenya China debt" in news.

Its just a mental exercise so that you are in good shape to defend your title at the annual world mental gymnastics games.

 

[Gautam]

LOLwa
How bad has the situation in Pakistan got to be for them to ask for money from "Modi ka yaar".

EXCLUSIVE: Pakistan May Release Corrupt Former Prime Minister From Prison To Get His $1 Billion, Lawyer Says

 

[LoneWolfSandeep]

LOLwa
How bad has the situation in Pakistan got to be for them to ask for money from "Modi ka yaar".

EXCLUSIVE: Pakistan May Release Corrupt Former Prime Minister From Prison To Get His $1 Billion, Lawyer Says

Pakistan Prospective
So basically its a story of Corrupt investigating the corrupt, then corrupt is jailed & new corrupt want a cut with the investigator agency, having failed to secure a corrupt deal the new corrupt wants a direct deal with old corrupt in jail, to get some of the corrupt money back & make a cut.

Broadsheet Prospective
They investigate for corrupt, with old corrupt, they are screwed by Pakistani corrupt, and lose out on $600million in fees & expenses. The owner files bankruptcy & sells the company, the old owner tried to leaf out of corrupt Pakistanis & creates a new company by same name to get $2million, but the pro corrupt see though the corrupt & old owner kills himself being broke & ruined by Pakistan corrupt. New owner company under 25% clause find $1billion of old corrupt. But the Pakistani corrupt screw them too for all expenses & investigative expenses, including reward. Awaiting new suicide & another bankruptcy filing.

Summary
New corrupt is more sophisticated than old corrupt - Naya Pakistan

 

[BlackOpsIndia]

Partial benefits of "Game Changer" CPEC.

Economy suffers major setback in FY19, growth rate slows to 3.3pc - Newspaper - DAWN.COM

Inshallah Pakistan will reap full benefits soon from this game changer.

 

[suny6611]

all the IMF changes r in PKR ................ how is it going to help their $ needs ?

 

[Gautam]

Ghabrana nahi hai Ghazis. Immy bhaijan sab thik kar denge.

Imran sees good times ahead
by Staff Report , (Last Updated 37 mins ago)

PM urges people to ‘stay strong’ in face of rising inflation

–Says govt has to raise gas, electricity prices as power sector can’t borrow any more money

ISLAMABAD: Prime Minister Imran Khan on Friday urged citizens to “stay strong” in the face of rising inflation and promised that the country “will make it through this time”.

Imran was speaking at the groundbreaking ceremony of the Mother and Child Hospital in Rawalpindi.

“It is absolutely true that right now, our people are [facing] difficulties. Power is expensive, gas is expensive. I understand that inflation [is rising],” acknowledged the prime minister.

“But what I want you to understand is this: why do prices rise? It is because power and gas sectors are indebted. When our government came to power, debts [of both sectors] had risen to Rs1,300 billion. You only have two ways [to tackle debt]: either you take more loans — and our power sector is already so indebted that we cannot borrow anymore money — and so we have to raise prices.”

He said that the people will have to “live in difficulty” until the government “fixes the system” and repays the country’s debts.

Prices of basic commodities have been raised multiple times since the Pakistan Tehreek-i-Insaf came into power. The latest increase in food prices came just before Ramzan. Prices of petroleum products also saw a massive hike last week, causing the price of petrol to increase by Rs9.42 and kerosene by Rs7.46 per litre.

In his speech, the prime minister promised that his government would try its best to “fulfill the basic needs of the people”, adding that the government has started Ehsas programme to mitigate sufferings of common people. “The provision of basic facilities to people is among fundamental responsibilities of the government,” he said.

He said that the government will provide loans to young people so they can start businesses, provide cows and buffaloes to residents of rural areas, and issue health cards to poor people so they can access medical care. He pointed out that the shelter homes, that were introduced in Lahore and Peshawar, were growing in number and were providing shelter and food to people who could not afford to pay rent.

Imran also announced that work on the Naya Pakistan Housing Scheme was underway.

Imran Khan said the government has launched health insurance card and added that the government was trying to improve existing health facilities and establish new hospitals.

He said shelter homes were established across Pakistan, where people, especially labourers and travellers— will get free food and shelter.

Earlier, Punjab Chief Minister Usman Buzdar said Sehat Insaf Card scheme will soon be introduced in Rawalpindi. He said Rs157 billion have been provided for 473 development projects in Rawalpindi Division.

The chief minister said Rawalpindi Institute of Cardiology will be upgraded to a centre of excellence for heart-related diseases along with a facilitation centre for rehabilitation of patients suffering from paralysis.

Railways Minister Sheikh Rasheed said the hospital will have 11 operation theatres to facilitate the people.

Imran sees good times ahead

 

[Pundrick]

He definitely has good support from army otherwise by now anti-social elements would have taken over from the govt. he looks like a best chance for pakistan to come out of the economic crisis or at least stand against it. If pakistan comes out of this crisis it will be a miracle for many economists and a good case study, it is anyway a case study of 'How not to destroy a economy'.

The people looks like have accepted the 1st step i.e. to accept inflation, next will be to build a tax compliant society.

 

[Gautam]

Per capita income shrinks 8.2% in PTI’s first year
By Shahbaz Rana, Published: May 12, 2019

PM Imran Khan. PHOTO: PID

ISLAMABAD: The per capita income has shrunk by 8.2% to three year’s lowest level of $1,516 during the first year of the government of Prime Minister Imran Khan, which has also failed to address two structural problems of Pakistan’s economy – low investment and saving rates.
In terms of size of the national economy, the investment ratio stood at 15.4% in the current fiscal year, which was even lower than last fiscal year’s level and also the lowest level in three years. The Pakistan Tehreek-e-Insaf (PTI) government missed the investment-to-Gross Domestic Product annual target of 17.2%.

Both the public and private investment went down in the first year of the PTI government, suggesting that private investors were not showing their trust in the government.

The savings-to-GDP ratio target was also missed that remained at 11.1% of GDP. But the silver lining was that the savings were slightly better than the previous fiscal year due to relatively low current account deficit projected for the current fiscal year. The gap between total investments and savings is financed through foreign savings. The results are based on the working of the National Accounts Committee (NAC) that approved the provisional economic growth rate of 3.3% for the fiscal year 2018-19, ending on June 30. The PTI government has now missed the annual targets of economic growth, national savings, and investment.

Failure to achieve these crucial targets has limited the government’s ability to spend on deteriorating infrastructure and social sectors from its own resources. This has inevitably increased the government’s reliance on external and domestic sources to meet its requirements, resulting in mushroom growth in public debt in the past five years. The provisional estimates suggest that the per capita income shrank by 8.2% to $1,516. It was lower by $136 when compared with the revised per capita income estimates of $1,652 for the last fiscal year.

The per capita income is worked out by dividing the total national income with the number of people. Last time, in the fiscal year 2015-16, the per capita income had been recorded at $1,529.

The total size of the national economy is now estimated at $291 billion for this fiscal year – down from $315 billion a year ago. The size of the national economy in US dollar terms has also shrunk by nearly 8%. In rupee terms, the per capita income stood at Rs200,693 – up by 14%. The investment-to-GDP ratio stood at just 15.4% against a target of 17.2%, said the sources. The ratio was worse than last year’s revised rate of 16.7%, they added. The government’s inability to increase investment as a percentage of the total size of the national economy remains its biggest failure on the economic front, suggesting that the PTI government has not yet begun its journey towards addressing structural imbalances.

The private investment that had been recorded at 10.3% of GDP in the last year has also slipped to 9.8%, according to the Pakistan Bureau of Statistics (PBS) working. The government had a target to increase private investment to 10.8%. The public investment also shrank to 4% of GDP – down from 4.8%, due to steep cut in development spending by the federal and provincial governments. Fixed investment remained at only 13.8% of GDP in the fiscal year 2018-19 against the target of 15.6%. It was down by 2% from last year’s level.

Savings increased to 11.1% of GDP – far below the target of 13.1%. In the last fiscal year, savings were recorded at 10.4% of GDP.
Due to low savings and investment ratios, Pakistan’s current account deficit is now projected to widen to 4.3% of GDP – better than last year’s level of 6.3%. These figures of investment and savings would be officially published in the Economic Survey of Pakistan 2018-19, likely to be unveiled on June 10.

Pakistan has one of the lowest investment and saving rates in the region and the world, obstructing progress towards a sustainable inclusive economic growth path.

Published in The Express Tribune, May 12th, 2019.

Per capita income shrinks 8.2% in PTI’s first year | The Express Tribune

 

[LoneWolfSandeep]

Per capita income shrinks 8.2% in PTI’s first year
By Shahbaz Rana, Published: May 12, 2019
View attachment 6562
PM Imran Khan. PHOTO: PID

ISLAMABAD: The per capita income has shrunk by 8.2% to three year’s lowest level of $1,516 during the first year of the government of Prime Minister Imran Khan, which has also failed to address two structural problems of Pakistan’s economy – low investment and saving rates.
In terms of size of the national economy, the investment ratio stood at 15.4% in the current fiscal year, which was even lower than last fiscal year’s level and also the lowest level in three years. The Pakistan Tehreek-e-Insaf (PTI) government missed the investment-to-Gross Domestic Product annual target of 17.2%.

Both the public and private investment went down in the first year of the PTI government, suggesting that private investors were not showing their trust in the government.

The savings-to-GDP ratio target was also missed that remained at 11.1% of GDP. But the silver lining was that the savings were slightly better than the previous fiscal year due to relatively low current account deficit projected for the current fiscal year. The gap between total investments and savings is financed through foreign savings. The results are based on the working of the National Accounts Committee (NAC) that approved the provisional economic growth rate of 3.3% for the fiscal year 2018-19, ending on June 30. The PTI government has now missed the annual targets of economic growth, national savings, and investment.

Failure to achieve these crucial targets has limited the government’s ability to spend on deteriorating infrastructure and social sectors from its own resources. This has inevitably increased the government’s reliance on external and domestic sources to meet its requirements, resulting in mushroom growth in public debt in the past five years. The provisional estimates suggest that the per capita income shrank by 8.2% to $1,516. It was lower by $136 when compared with the revised per capita income estimates of $1,652 for the last fiscal year.

The per capita income is worked out by dividing the total national income with the number of people. Last time, in the fiscal year 2015-16, the per capita income had been recorded at $1,529.

The total size of the national economy is now estimated at $291 billion for this fiscal year – down from $315 billion a year ago. The size of the national economy in US dollar terms has also shrunk by nearly 8%. In rupee terms, the per capita income stood at Rs200,693 – up by 14%. The investment-to-GDP ratio stood at just 15.4% against a target of 17.2%, said the sources. The ratio was worse than last year’s revised rate of 16.7%, they added. The government’s inability to increase investment as a percentage of the total size of the national economy remains its biggest failure on the economic front, suggesting that the PTI government has not yet begun its journey towards addressing structural imbalances.

The private investment that had been recorded at 10.3% of GDP in the last year has also slipped to 9.8%, according to the Pakistan Bureau of Statistics (PBS) working. The government had a target to increase private investment to 10.8%. The public investment also shrank to 4% of GDP – down from 4.8%, due to steep cut in development spending by the federal and provincial governments. Fixed investment remained at only 13.8% of GDP in the fiscal year 2018-19 against the target of 15.6%. It was down by 2% from last year’s level.

Savings increased to 11.1% of GDP – far below the target of 13.1%. In the last fiscal year, savings were recorded at 10.4% of GDP.
Due to low savings and investment ratios, Pakistan’s current account deficit is now projected to widen to 4.3% of GDP – better than last year’s level of 6.3%. These figures of investment and savings would be officially published in the Economic Survey of Pakistan 2018-19, likely to be unveiled on June 10.

Pakistan has one of the lowest investment and saving rates in the region and the world, obstructing progress towards a sustainable inclusive economic growth path.

Published in The Express Tribune, May 12th, 2019.

Per capita income shrinks 8.2% in PTI’s first year | The Express Tribune

I had predicted some time back, shrinkage of purchasing power, decreasing per capita GDP for Pakistan, even as GDP grows by 2-3%.
I had also predicted that in next 2-3 years, they will lose about a decade of progress, due to combination of factors. And on this report from Pakistan it states in 1 year, they have already gone back to 3 years earlier lvl, in line to my prediction.. This rate will likely increase further, in coming 2 years, they will fall back by a decade. That's the minimum time required for them to stabilize the economy. If they can do that miracle somehow.

Here high inflation vs growth figure (10%-3% = 7%) will decrease local buying power of citizen for goods grown inhouse - shrinkage in GDP in PPP terms.
While fall in PKR vs $ will make the GDP size shrink in Nominal terms. Nominal GDP shrinkage, adjusted with 3% increase but 15-30% decrease in dollar terms.
Combined fall in PPP & Nominal GDP for Pakistan, translates to earlier years lvl of goods buying capacity & Per capita income in $ terms, reached few years back. Hence economy going back a decade atleast, every 2-3 years.
Now this spells further doom for a highly debited economy, which has low revenue collection, Translates to same $ Debt (if none new added), becoming bigger, as value of local currency has shrunk Vs Dollar - So I said - Plus ever ballooning debt in $ terms

 

[Gautam]

Pakistan Stock Exchange experiences bloodbath, benchmark sheds 937 points in intra-day trading

Dawn.com, May 13, 2019

The Pakistan Stock Exchange (PSX), a day after the government announced a $6bn International Monetary Fund (IMF) package, experienced a bloodbath on Monday, with the benchmark KSE-100 Shares Index shedding 937 points — a loss of more than 2.7 per cent — during intra-day trading.

Trading opened at 34,716 points and showed an upward activity for a few minutes before adopting a negative trajectory for the rest of the session.

The market closed at 33,900 points down 816 points or 2.4 per cent. The benchmark touched a day's high at 35,228 points up 512 points during first few minutes of the session. It touched a day's bottom at 33,779 points down 816 points or 2.4pc near the end of the session.

As many as 89.9 million shares of the benchmark companies, worth Rs4.7 billion, changed hands during the session.

The K-Electric Limited (KEL) led the most active stocks as 9.8 million shares changed hands. Its shares lost 5.69pc of their value. The Maple Leaf Cement (MLCF) followed with 7.1m shares whereas its shares lost 4.98pc of their value. The Bank of Punjab (BoP), Pakistan International Bulk Terminal Ltd (PIBTL) and Unity Foods Limited (UNITY) followed with 6.8m shares, 6.5m shares and 4.7 m shares changing hands. Their shares also lost value by 6.5pc, 8.2pc, and 8.4pc respectively.

Mohammad Faizan, an analyst and head of foreign institutional sales at the Next Capital Limited, held the tough conditions attached with the IMF bailout package responsible for bearish rule at the bourse.

"As a result of the attached conditions by the IMF, heavy taxation is to be slapped on the consumers to improvise the target collection by a further PKR650-700bn triggering further inflationary pressures and slowing down economic growth."

He added that daily traded value for the 100 Index increased to $33.6mn from $10.9mn in the previous session.

Another senior analyst Ahsan Mehanti also shared the same views. "Investors fear impact of prior actions and agreed conditions in the upcoming budget, leading to increase in taxes and utility prices to obtain a 39-month Extended Fund Facility (EFF) for $6b," the analyst said.

"The agreement is subject to IMF Board approval and timely implementation of economic policies to resolve low growth, high inflation, high indebtedness and weak external position," he added.

Pakistan Stock Exchange experiences bloodbath, benchmark sheds 937 points in intra-day trading - Business - DAWN.COM

 

[Gautam]

Pakistan reaches agreement with IMF, to receive $6 billion over 3 years

Dawn.com | Khaleeq Kiani, Updated May 12, 2019

The technical teams of the government and the International Monetary Fund (IMF) have reached an agreement on a bailout package for Pakistan, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday.

"After months of discussions and negotiations, a staff-level agreement has been reached between Pakistan and the IMF," he said while speaking on state-run PTV News.

Dr Shaikh revealed that Pakistan would receive $6 billion worth of assistance under the IMF programme over a period of three years.

In brief: the Pakistan-IMF accord

• Pakistan to receive $6 billion over three years
• Islamabad to also receive $2-3bn from World Bank, ADB, etc.
• Finance adviser hints at raising prices in some areas "to recover costs"
• Decisive policies and reforms necessary for growth: IMF
• IMF says 'market-determined exchange rate' to help the financial sector

He said the staff-level agreement, which must still be approved by the IMF board of directors in Washington, would show that effective reforms were underway in Pakistan.

Examine: Why Pakistan will go to the IMF again, and again and again

“The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US $6 billion," an IMF press release quoted IMF Mission Chief for Pakistan Ernesto Ramirez Rigo as saying.

Dr Shaikh said IMF is an international institution whose primary job is to assist member countries who are in an "economic difficulty". He said the government could not have bridged the financing gap of $12 billion on its own that he said was created by a weak economy.

Besides the IMF assistance, Pakistan will also receive additional funds worth nearly $2-3 billion from institutions like the World Bank and Asian Development Bank, the adviser revealed.

Asked to share the conditions that Pakistan has agreed to as part of the agreement, Dr Shaikh said there were many things desired by the Fund that the government already saw as being in the country's interest; they include aligning expenditure with resources, improve the functioning of loss-making state-owned enterprises, curtail the subsidies available to the wealthy classes and tax the rich segments.

"These structural changes are in our interest if we want to take our people in the direction of prosperity and improve their quality of life," the adviser said.

He said because the government wants to send "a signal of financial discipline" and resolve fiscal challenges, the programme would entail raising prices in some areas in order to recover the costs.

"However [...] the government is focused on not putting too much burden on the common man," Dr Shaikh said. Explaining his point, he said that if power tariff is increased under the IMF programme, it will not affect consumers utilising less than 300 units, "and this includes 75pc of electricity consumers". For the same reason, the government is allocating an additional Rs50 billion for an electricity subsidy in the upcoming budget.

Under the programme, the government is also allocating an additional Rs80 billion for social safety programmes like Ehsaas and the Benazir Income Support Programme in order to minimise the burden on the common man, the adviser said.

Asked whether this would be Pakistan's last IMF programme, Dr Shaikh said: "It depends on how successfully we as a country implement this programme and approach it as a reform or structural change programme instead of a mere revenue-earning programme."

Decisive reforms necessary: IMF
The facility aims to support Pakistani authorities’ "strategy for stronger and more inclusive growth by reducing domestic and external imbalances, removing impediments to growth, increasing transparency, and strengthening social spending", the IMF statement said.

It said financing support from Pakistan’s international partners will be "critical to support the authorities’ adjustment efforts and ensure that the medium-term programme objectives can be achieved".

Rigo in his statement added: "Pakistan is facing a challenging economic environment, with lacklustre growth, elevated inflation, high indebtedness, and a weak external position. [...] The authorities recognise the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty. In this regard, the government has already initiated a difficult, but necessary, adjustment to stabilise the economy, including thorough support from the State Bank of Pakistan. These efforts need to be strengthened.

"Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation."

The IMF mission chief emphasised that in addition to the EFF, "a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources".

Rigo said the forthcoming budget for FY2019-20 is "a first critical step" in the fiscal strategy of the PTI government. "The budget will aim for a primary deficit of 0.6 per cent of GDP supported by tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration," he added.

Noting that inflation in Pakistan "disproportionately affects the poor", the IMF official said the State Bank of Pakistan will focus on reducing inflation and safeguarding financial stability.

"A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy," he said.

“An ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards. Priority areas include improving the management of public enterprises, strengthening institutions and governance, continuing anti-money laundering and combating the financing of terrorism efforts, creating a more favourable business environment, and facilitating trade."

A government official told Dawn that in the first year beginning on July 1, Pakistan will have to generate additional tax revenues of about Rs600bn, raise about Rs100bn from higher-end power consumers, privatise at least two power LNG plants worth over Rs280bn ($2b) and stop haemorrhaging of other public sector entities. These three big agenda items would provide about Rs1 trillion fiscal adjustment during the first year, including a one-time recovery of about Rs280bn from sale of two LNG plants in Punjab.

Energy Minister Omar Ayub Khan told Dawn that Rs98bn additional cost of power would be recovered from consumers at a rate of under Re1 per unit increase in tariff for consumers using more than 300 units per month. He said the government took a firm stand to protect low-end consumers using less than 300 units per month for whom an additional subsidy of Rs52bn would be earmarked in the budget, raising the total power sector subsidy to Rs216bn.

He said the flow of circular debt would be brought down to zero by Dec 31, 2020 while the existing stock of about Rs606bn would be reduced through sale of two LNG power plants and issuance of more bonds

Lengthy bailout talks
Islamabad and a visiting IMF mission had kicked off technical level talks on April 29 to sort out details of the proposed bailout package over the next 10 days. The two sides were scheduled to conclude a staff-level agreement on Friday, but the talks were extended into the weekend, with the finance ministry reporting "good progress" in the discussions.

The finance ministry had approached the IMF in August 2018 for a bailout package, whereas last month, the then finance minister Asad Umar announced that the two sides had — more or less — reached an understanding on a package for bailing out the country’s ailing economy.

“In the next step, the IMF will send its mission to Pakistan in the next few weeks to work out technical details. But in principle, we have reached an agreement,” he had said. However, Umar was removed from the post in a dramatic move and was replaced with Dr Shaikh — an internationally renowned economist.

Dr Shaikh served as the finance minister from 2010 to 2013 during the PPP government's rule. During his tenure as federal minister, Dr Shaikh completed 34 sale transactions worth Rs300 billion in banking, telecom, electricity, and manufacturing.

Subsequently, an IMF employee, Dr Reza Baqir, was appointed governor of the State Bank of Pakistan to serve for a three-year term. The chairman of the Federal Board of Revenue was also changed in a sudden move.

Pakistan reaches agreement with IMF, to receive $6 billion over 3 years - Pakistan - DAWN.COM

 

[_Anonymous_]

Pakistan reaches agreement with IMF, to receive $6 billion over 3 years

Dawn.com | Khaleeq Kiani, Updated May 12, 2019

The technical teams of the government and the International Monetary Fund (IMF) have reached an agreement on a bailout package for Pakistan, Adviser to Prime Minister on Finance, Revenue and Economic Affairs Dr Abdul Hafeez Shaikh announced on Sunday.

"After months of discussions and negotiations, a staff-level agreement has been reached between Pakistan and the IMF," he said while speaking on state-run PTV News.

Dr Shaikh revealed that Pakistan would receive $6 billion worth of assistance under the IMF programme over a period of three years.

In brief: the Pakistan-IMF accord

• Pakistan to receive $6 billion over three years
• Islamabad to also receive $2-3bn from World Bank, ADB, etc.
• Finance adviser hints at raising prices in some areas "to recover costs"
• Decisive policies and reforms necessary for growth: IMF
• IMF says 'market-determined exchange rate' to help the financial sector

He said the staff-level agreement, which must still be approved by the IMF board of directors in Washington, would show that effective reforms were underway in Pakistan.

Examine: Why Pakistan will go to the IMF again, and again and again

“The Pakistani authorities and the IMF team have reached a staff level agreement on economic policies that could be supported by a 39-month Extended Fund Arrangement (EFF) for about US $6 billion," an IMF press release quoted IMF Mission Chief for Pakistan Ernesto Ramirez Rigo as saying.

Dr Shaikh said IMF is an international institution whose primary job is to assist member countries who are in an "economic difficulty". He said the government could not have bridged the financing gap of $12 billion on its own that he said was created by a weak economy.

Besides the IMF assistance, Pakistan will also receive additional funds worth nearly $2-3 billion from institutions like the World Bank and Asian Development Bank, the adviser revealed.

Asked to share the conditions that Pakistan has agreed to as part of the agreement, Dr Shaikh said there were many things desired by the Fund that the government already saw as being in the country's interest; they include aligning expenditure with resources, improve the functioning of loss-making state-owned enterprises, curtail the subsidies available to the wealthy classes and tax the rich segments.

"These structural changes are in our interest if we want to take our people in the direction of prosperity and improve their quality of life," the adviser said.

He said because the government wants to send "a signal of financial discipline" and resolve fiscal challenges, the programme would entail raising prices in some areas in order to recover the costs.

"However [...] the government is focused on not putting too much burden on the common man," Dr Shaikh said. Explaining his point, he said that if power tariff is increased under the IMF programme, it will not affect consumers utilising less than 300 units, "and this includes 75pc of electricity consumers". For the same reason, the government is allocating an additional Rs50 billion for an electricity subsidy in the upcoming budget.

Under the programme, the government is also allocating an additional Rs80 billion for social safety programmes like Ehsaas and the Benazir Income Support Programme in order to minimise the burden on the common man, the adviser said.

Asked whether this would be Pakistan's last IMF programme, Dr Shaikh said: "It depends on how successfully we as a country implement this programme and approach it as a reform or structural change programme instead of a mere revenue-earning programme."

Decisive reforms necessary: IMF
The facility aims to support Pakistani authorities’ "strategy for stronger and more inclusive growth by reducing domestic and external imbalances, removing impediments to growth, increasing transparency, and strengthening social spending", the IMF statement said.

It said financing support from Pakistan’s international partners will be "critical to support the authorities’ adjustment efforts and ensure that the medium-term programme objectives can be achieved".

Rigo in his statement added: "Pakistan is facing a challenging economic environment, with lacklustre growth, elevated inflation, high indebtedness, and a weak external position. [...] The authorities recognise the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty. In this regard, the government has already initiated a difficult, but necessary, adjustment to stabilise the economy, including thorough support from the State Bank of Pakistan. These efforts need to be strengthened.

"Decisive policies and reforms, together with significant external financing are necessary to reduce vulnerabilities faster, increase confidence, and put the economy back on a sustainable growth path, with stronger private sector activity and job creation."

The IMF mission chief emphasised that in addition to the EFF, "a comprehensive plan for cost-recovery in the energy sectors and state-owned enterprises will help eliminate or reduce the quasi-fiscal deficit that drains scarce government resources".

Rigo said the forthcoming budget for FY2019-20 is "a first critical step" in the fiscal strategy of the PTI government. "The budget will aim for a primary deficit of 0.6 per cent of GDP supported by tax policy revenue mobilisation measures to eliminate exemptions, curtail special treatments, and improve tax administration," he added.

Noting that inflation in Pakistan "disproportionately affects the poor", the IMF official said the State Bank of Pakistan will focus on reducing inflation and safeguarding financial stability.

"A market-determined exchange rate will help the functioning of the financial sector and contribute to a better resource allocation in the economy," he said.

“An ambitious structural reform agenda will supplement economic policies to rekindle economic growth and improve living standards. Priority areas include improving the management of public enterprises, strengthening institutions and governance, continuing anti-money laundering and combating the financing of terrorism efforts, creating a more favourable business environment, and facilitating trade."

A government official told Dawn that in the first year beginning on July 1, Pakistan will have to generate additional tax revenues of about Rs600bn, raise about Rs100bn from higher-end power consumers, privatise at least two power LNG plants worth over Rs280bn ($2b) and stop haemorrhaging of other public sector entities. These three big agenda items would provide about Rs1 trillion fiscal adjustment during the first year, including a one-time recovery of about Rs280bn from sale of two LNG plants in Punjab.

Energy Minister Omar Ayub Khan told Dawn that Rs98bn additional cost of power would be recovered from consumers at a rate of under Re1 per unit increase in tariff for consumers using more than 300 units per month. He said the government took a firm stand to protect low-end consumers using less than 300 units per month for whom an additional subsidy of Rs52bn would be earmarked in the budget, raising the total power sector subsidy to Rs216bn.

He said the flow of circular debt would be brought down to zero by Dec 31, 2020 while the existing stock of about Rs606bn would be reduced through sale of two LNG power plants and issuance of more bonds

Lengthy bailout talks
Islamabad and a visiting IMF mission had kicked off technical level talks on April 29 to sort out details of the proposed bailout package over the next 10 days. The two sides were scheduled to conclude a staff-level agreement on Friday, but the talks were extended into the weekend, with the finance ministry reporting "good progress" in the discussions.

The finance ministry had approached the IMF in August 2018 for a bailout package, whereas last month, the then finance minister Asad Umar announced that the two sides had — more or less — reached an understanding on a package for bailing out the country’s ailing economy.

“In the next step, the IMF will send its mission to Pakistan in the next few weeks to work out technical details. But in principle, we have reached an agreement,” he had said. However, Umar was removed from the post in a dramatic move and was replaced with Dr Shaikh — an internationally renowned economist.

Dr Shaikh served as the finance minister from 2010 to 2013 during the PPP government's rule. During his tenure as federal minister, Dr Shaikh completed 34 sale transactions worth Rs300 billion in banking, telecom, electricity, and manufacturing.

Subsequently, an IMF employee, Dr Reza Baqir, was appointed governor of the State Bank of Pakistan to serve for a three-year term. The chairman of the Federal Board of Revenue was also changed in a sudden move.

Pakistan reaches agreement with IMF, to receive $6 billion over 3 years - Pakistan - DAWN.COM

Eid Mubarrak in advance.

@safriz ; @zarvan

That's 6 billion USD to the PA. I'm sure we'd see better results on the LoC, very soon. Meanwhile, dung and firewood will ensure your carbon footprint is minimalist. And donkeys are as always aplenty in Pakistan. Depending on what you wish to do with them.