Monday, April 22, 2019

Asad Umar's Exit: Causes and Effects on Pakistan Economy

Who removed Pakistan Finance Minister Asad Umar and why? What was expected of him? Did he fail to deliver it? What are the qualifications of Dr. Hafeez Shaikh who has been picked to replace Asad Umar? Is he better suited to deliver a deal with IMF and other international financial institutions?

Pakistan's Current Account Deficit. Source: Trading Economics

What are Pakistan's biggest economic issues now? Budget deficits? Trade deficits? Current account imbalances? Lack of exports? Lack of domestic savings and investments? Low FDI? What must the new economic team do to address short term and long term problems with Pakistan's economy that are forcing the nation to seek 13th IMF bailout in last 40 years?

Pakistan's External Debt. Source: Wall Street Journal


ALKS host Faraz Darvesh discusses these questions with Misbah Azam and Riaz Haq (www.riazhaq.com)

https://youtu.be/Axo8V-HNuHA






Related Links:

Haq's Musings

South Asia Investor Review

Pakistan's Debt Crisis

Can Pakistan Avoid Recurring IMF Bailouts?

Pakistan is the 3rd Fastest Growing Trillion Dollar Economy

CPEC Financing: Is China Ripping Off Pakistan?

Information Tech Jobs Moving From India to Pakistan

Pakistan is 5th Largest Motorcycle Market

"Failed State" Pakistan Saw 22% Growth in Per Capita Income in Last 5 Years

CPEC Transforming Pakistan

Pakistan's $20 Billion Tourism Industry Boom

Home Appliance Ownership in Pakistani Households

Riaz Haq's YouTube Channel

PakAlumni Social Network


7 comments:

nayyer ali said...

IK inherited an economic mess but so far has not done a very good job of getting out of it. While corruption is a problem and it is good to not have corrupt leadership, there is also a big competent economic management. The need for an IMF agreement has been obvious since last summer, so why are they dragging their heels on coming to terms with the IMF and swallowing the reforms that need to be done to go along with that? Devaluing the currency is starting to show results with a declining trade deficit, but the rupee should be floated so it does not become overvalued again. Dumping the Finance Minister suggests it was a big mistake to appoint him in the first place, and puts IK in a tough spot to put together his first budget in just a few weeks.
I was hopeful that PTI would represent a change toward more technocratic and competent management, similar to the Musharraf years. So far, I am worried that we will have less corruption but more incompetence with IK.

Anonymous said...

Ever wondered how the dollar denominated debt(especially cpec related) will be serviced if the PKR devalues further by 30% or the implications of a runaway inflation(oil is in USD) on an already unstable society?

It's very easy to preach economics 101 from a distance the patron saints of the IMF are less than orthodox when THEIR OWN countries have crises. How many banks were allowed to fail in 2008?

This is no endorsement of IK. A playboy cricketer with zero policy making/administrative experience(kpk region doesn't count) is a disaster...Musharraf was the last competent leader Pakistan had..

Riaz Haq said...

#Pakistan #energy #imports up 3.8% in nine months (July 2018-March 2019) of current fiscal year , led by liquefied natural gas (#LNG) , higher by 49.3% and crude oil up 15.19%. Cost of #petroleum product dipped 15.33% during the nine-month period. https://www.hellenicshippingnews.com/pakistan-oil-import-up-3-8pc-in-nine-months/

The country’s oil import bill went up 3.8 per cent year-on-year to $10.6 billion during 9MFY19, from $10.22bn in same period last year, according to data from the Pakistan Bureau of Statistics (PBS).

The rise in imported value of the petroleum group was led by surge in liquefied natural gas, higher by 49.3pc and crude oil 15.19pc. On the other hand, cost of petroleum product dipped 15.33pc during the nine-month period, whereas a 33.9pc decline was recorded in terms of the quantity imported, bringing the total down to 7.57 million tonnes.

The overall import bill during July-March FY19 fell by 7.96pc year-on-year to $40.75bn, leading to a 13pc decline in trade deficit to reach $23.67bn.

Barring petroleum and agriculture groups, all other categories saw their value of imports shrink during the period under review.

Food imports contracted 9.92pc to $4.73bn during July-March 2018-19, from $4.26bn in corresponding months last year. This decline was largely due to a 10.22pc fall in the value of palm oil, which decreased to $1.39bn in 9MFY19, from $1.54bn.

Import bill of the machinery clocked in at $6.74bn during the nine months, lower by 20.54pc, from $8.48bn in same period last year. The biggest contributor to the decrease was power generating machinery, which plunged by 49.09pc, followed by 17.26pc contraction is electrical and 8.86pc in telecom.

Similarly, transport group — another major contributor to the trade deficit – also receded during July-March FY19 as it posted a 35.7pc decline, with decrease in imported value of almost all sub-categories.

On the other hand, agriculture imports inched up by 1.6pc to $6.58bn, from $6.47bn on the back of 16.49pc increase in fertiliser, 13.32pc insecticides and 7.31pc medicinal products.

Textile exports inch up

The textile and clothing export proceeds posted a paltry growth of 0.08pc year-on-year to $9.991bn during 9MFY19, as against $9.983bn in same period last year.

Product-wise details show that exports of ready-made garments went up by 2.02pc, knitwear 9.29pc, bedwear 2.69pc while those of towels declined 1.85pc and cotton cloth 2.09pc.

Among primary commodities, cotton yarn exports dipped by 15.44pc, yarn other than cotton by 3.23pc, raw cotton 71.84pc whereas made-up articles — excluding towels — increased by 1.26pc and tents, canvas and tarpaulin gained 3.49pc in value during the period under review.

The slow growth in textile and clothing exports comes despite government’s support in the form of cash subsidies, special export packages and multiple rupee depreciations during the last year.
Source: Dawn

Riaz Haq said...

#ImranKhanPrimeMinister of #Pakistan joins 37 World Leaders, inc. #Chinese President Xi Jinping, #Russian President Putin, #IMF Chief Christine Lagarde, #UK Chancellor Philip Hammond & #Italian PM Giuseppe Conte for #China’s #BeltandRoadForum. #CPEC https://en.businesstimes.cn/articles/111210/20190425/37-world-leade...

China's Belt and Road Forum has just kicked off in Beijing with 37 international government and state leaders. Analysts said Chinese President Xi Jinping is heading to the second annual forum with support from the International Monetary Fund (IMF).

According to Caixin Global, Xi met with IMF Managing Director Christine Lagarde ahead of the forum wherein the latter expressed willingness to cooperate with Beijing's Belt and Road Initiative (BRI). Xi said he appreciates Lagarde's eagerness to work with the project.

The positive atmosphere of Xi's meeting with Lagarde is expected to extend as the Chinese leader heads to this year's Belt and Road Forum wherein he will promote his government's goals and present benefits for partners under the BRI.

While some experts said Beijing may be hit with critical questions that could trace loopholes on the BRI, other economists said China could counter criticism through highlighting the massive infrastructure project's successful schemes over the past years.

Furthermore, it is expected that Chinese officials and partnering countries will rally behind Xi as he addresses potential questions regarding the BRI that critics may raise during the three-day forum.

Turkey and India have refused to attend the meeting but Beijing will receive a whole host of international leaders including Russian President Vladimir Putin. Pakistani Prime Minister Imran Khan will also be part of the forum. U.K. Chancellor Philip Hammond and Italian Prime Minister Giuseppe Conte confirmed they will attend.



From the ASEAN bloc, all 10 heads of state will be attending the meeting. Multiple local outlets confirmed that Philippine President Rodrigo Duterte touched down in China to show support for the summit.

Amid continued criticism from the United States and other countries who are not keen on supporting the Belt and Road Initiative, China secured over 170 deals with 150 countries. For the past five years, the agreements accounted for over $90 billion in investments.

Among the latest developments is the Malaysia deal that was seemingly terminated in 2017. With the stalled $10.7 billion railway project deal set to push through this time, analysts said it is a sign that Beijing is actually willing to make amends to its Belt and Road terms for the benefit of both sides.

It was also reported that Peru is set to sign a Memorandum of Understanding (MoU) as the country prepares to join the BRI movement. The Philippines is also expected to sign a total of five deals with the Chinese government during the forum.

The 2019 Belt and Road Forum will run from April 25-27.

Riaz Haq said...

#India further behind #China during #Modi's 5 years. #Beijing continues to outspend India on #defense, reforms in its #military and #diplomatic structures, and built strategic #infrastructure in #Pakistan. #CPEC #BRF2019 https://www.business-standard.com/article/economy-policy/from-economy-to-defence-india-under-modi-slips-further-behind-china-119042800117_1.html#.XMXdeKONUM4.twitter


Yet for all that, India has only fallen further behind China over the past five years. Beijing has continued to outspend India on defense, implemented sweeping reforms in its military and diplomatic structures, and built strategic infrastructure in India’s backyard -- not to mention providing arch-rival Pakistan with defense technology.

“It’s impossible to keep pace with China,” said Vishnu Prakash, a former Indian ambassador to South Korea and consul general in Shanghai. “We cannot get into checkbook diplomacy with China. We don’t have that kind of economic muscle.”
Whether Modi returns to power or not, India’s next government will still be saddled with aging equipment like Soviet-era MiG warplanes, a bureaucracy that hinders military upgrades and an undersized diplomatic corps. To fend off China, it’s likely to continue shifting toward the U.S. and other like-minded countries in Asia while seeking to protect its periphery.

“A major long-run test for India is to ensure that China does not turn India’s own geography against it by encircling it with a string of military bases in the Indian Ocean,” said Rory Medcalf, who heads the National Security College at the Australian National University. “Delhi will play a long game. As India’s economy grows, this will still eventually translate into the world’s third-largest defense budget.”


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"Admittedly, China has a much larger economy and defense budget in line with its own needs and plans," Rao said. "India is not in any arms race with any country and has a defense budget that is adequate as per its needs. Streamlining the armed forces and reforms has been an ongoing process."

Still, India continues to lag China on every geopolitical metric, according to the Lowy Institute’s Asia power index, which ranks countries according to economic resources, military capabilities and diplomatic influence.

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Modi’s injection of personal enthusiasm into Indian foreign policy hasn’t led to more resources at the severely short-staffed Ministry of External Affairs, said Happymon Jacob, associate professor at New Delhi’s Jawaharlal Nehru University’s School of International Studies. India only has roughly 940 diplomats compared to China’s estimated 7,500.
That lopsided situation is echoed in the armed forces. Xi has overseen China’s most sweeping military reforms since the 1950s, cutting back non-combat personnel and modernizing its military technology with space and cyber operations. Meanwhile, India maintains a sprawling 1.4-million strong army and spends the bulk of its defense money on salaries and pensions, rather than new equipment.

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Beijing has also kept India out of the Nuclear Suppliers Group, which controls the export of nuclear materials, and recently blocked Indian and Western efforts at the United Nations to list as a designated terrorist the leader of a group that claimed responsibility for a suicide bombing that killed 40 Indian paramilitaries.

Riaz Haq said...

#jeddah based #Islamic Development Bank will continue to support #Pakistan in #economic growth and #social uplift. #IDB has already provided total financing of $12.43 billion for various #development projects in Pakistan https://tribune.com.pk/story/1967852/2-islamic-development-bank-support-pakistan-economic-growth-social-uplift/

Islamic Development Bank (IDB) President Dr Bander MH Hajjar has said that the IDB Group’s relationship with Pakistan spanned over 40 years during which it supported sustainable and inclusive development in the country and it would continue to support Pakistan in economic growth and social uplift.

He was interacting with the business community at a dinner hosted by the Islamabad Chamber of Commerce and Industry (ICCI) on Monday evening. Hajjar revealed that the IDB wanted to support Pakistan in the areas of science, technology, innovation, value chains, economic empowerment and public-private partnership in order to contribute to implementation of a road map launched recently by the government of Pakistan.

He also shared with the business community a new development model set out in his new book “The Road to the SDGs: A New Business Model for a Fast-Changing World”, which was launched at the 2019 IsDBG Annual Meeting.
Speaking on the occasion, ICCI President Ahmed Hassan Moughal pointed out that the IDB Group had provided total financing of $12.43 billion for various development projects in Pakistan, which showed its crucial role in the country’s economy.

He said the IDB Group was financing some key projects in Pakistan like Neelum-Jhelum hydroelectric power project, Jamshoro power station and Casa-1,000 project, which would improve the energy situation and meet energy needs of the industry, leading to better industrialisation and promotion of investment in the country.

Meanwhile, a delegation of the IDB Group discussed financing needs of the local business community in various projects, which would expand their businesses and further strengthen the small and medium enterprise (SME) sector.

Representatives of the Islamic Corporation for the Development of Private Sector (ICD), International Islamic Trade Finance Corporation (ITFC), Islamic Corporation for Insurance and Export Credit (ICIEC) and Islamic Research and Training Institute (IRTI) were in the delegation. The delegation expressed interest in setting up a joint fund with the ICCI for supporting SMEs and innovators in business development and growth.

Riaz Haq said...

#Qatar announces $3 billion in deposits/investments in #Pakistan. It follows #SaudiArabia and #UAE pledging aid packages for the South Asian country. #Riyadh has given a $3 billion loan to Pakistan, while the U.A.E. provided $1 billion. https://www.bloomberg.com/news/articles/2019-06-24/pakistan-to-get-3-billion-in-deposits-investments-from-qatar via @business


Pakistan, which got an International Monetary Fund bailout last month, will receive $3 billion in deposits and direct investments from Qatar.

State-run Qatar News Agency reported the investments, citing the gas-rich nation’s foreign minister


It follows Saudi Arabia and the United Arab Emirates pledging aid packages for the South Asian country. Riyadh has given a $3 billion loan to Pakistan, while the U.A.E. provided $1 billion. Pakistan and the IMF reached an agreement in May on a loan of about $6 billion designed to help the country avert an economic crisis.