Archive for June, 2017

atteeq

https://www.youtube.com/watch?v=5lewj0bLbqA

admin

The budget – or a beggar’s dilemma

Same sob-story – different year

“Dar’s ministry, having understood that Pakistan cannot meet the conditions of the IMF regarding employing tough tax and other reforms, has knocked on Beijing’s door, which is willing to give Islamabad loans and bailouts but with conditions that perhaps doesn’t impact Pakistan’s fiscal deficit in the short run.”

The economic survey that was released by the finance ministry ahead of the final budget of the current government, heading towards the next general elections, has been heralded as a remarkable accomplishment.

The country’s finance minister seemed jubilant when he quoted the fiscal year’s growth rate at 5.3%. The government has cited the growth rate as the highest achieved in at least last nine years. If one is to closely follow the indicators mentioned in the economic survey, it becomes evident that the numbers and performance indicators remain similar as those which were presented during the last year. However, the promises made by the government last year have been presented with the mere twist of facts, figures and by quoting performance in inflated terms.

Let’s decipher some of the indicators.

The government has claimed that the overall inflation rate was contained to 4.09%. However, the ministry has not clarified the source and basis of this suggestion: what factors were taken into account while arriving at this number? How can the government with the population figures that are based on a 20 years old census can accurately claim any statistics regarding the fall or increase in the country’s inflations rate? If one is to assume that inflation rate has not increased further, as the government claims, that means inflation continues to remain as high as it was during the previous year.

The finance minister, Ishaq Dar, has maintained that Pakistan’s economy has surpassed $300 billion. Dar has failed from explaining that what percentage of this economy is based on borrowed money and loan? Moreover, if the government’s optimism is to be taken as an indicator of growth than the ruling party needs to clarify that how many investments in this regard, and growth was generated by the private investors, small and big, which are hardly a result of the government’s efforts. A large sum of this number, that the government claims were added during the last fiscal year, has come due to the foreign investments whose nature remains beyond scrutiny, for the government has clearly shown reluctance toward making public any of its dealings, primarily with China, that happens to the newest addition to Pakistan’s loan ridden economy.

One of the most interesting aspects of the economic survey was the government’s claim that the fiscal deficit of Pakistan has registered a decrease, from 4.8 to 4.2 percent. While the federal minister quoted cherry picked facts to support his government’s claims of having secured a decrease in the country’s fiscal deficit, the economic realities on the ground point an alternative story: Pakistan today is more burdened with foreign loans and borrowed money than any time in Pakistan’s past history. For instance, the released economic survey doesn’t comprehensively mentions whether the investments and loans coming from China are part of the calculations upon which the government has based its claims of having decreased Pakistan’s fiscal deficit?

There are two major reasons that defy Dar’s claims regarding the decrease of the country’s fiscal deficit. First, Dar’s claim that Pakistan doesn’t need any more loans from the IMF comes in the wake of Pakistan’s growing economic reliance on Chinese loans. Put it in this way: Dar’s ministry, having understood that Pakistan cannot meet the conditions of the IMF regarding employing tough tax and other reforms, the former has knocked on Beijing’s door, which is willing to give Islamabad loans and bailouts but with conditions that perhaps doesn’t impact Pakistan’s fiscal deficit in the short run. A few weeks ago, China gave Pakistan more than 1 billion dollars in emergency loans to rescue the country from an impending currency crisis. The crisis has aggravated due to the rising imbalance in the country’s imports and exports. Recently, the State Bank of Pakistan released a report that noted that Pakistan’s net reserves have dropped to $17.1 billion in February from $18.9 billion in October 2016 and $25 billion several years ago. Another report recently claimed that “Pakistan is entitled to pay China up to $90 billion in three decades for the $50 billion worth of loan and investment portfolio Beijing rendered to the country.”

Second, apparently, the government at the moment is not considering Chinese loans as part of its fiscal deficit scheme which as the recently released report by Dawn claimed, would be returned back in the form of giving China the control of significant chunks of Pakistan’s domestic economy and industry through the China Pakistan Economic Corridor (CPEC) projects. However, Dar, on the other hand continues to harp that Pakistan doesn’t need any loans from the IMF, for the country’s economy is rapidly gaining independence. Dar’s claims pose the picture of a bagger’s dilemma where one has to choose between an expansive but pragmatic (IMF) and charming but unviable (China) donor.

Moreover, according to the economic survey and the newly presented budget, Pakistan’s tax collections have increased more than 70 percent in comparison to the previous year. However, the minister of finance has not elaborated that what percentage of these collections were made from the country’s elite class that controls more than half of Pakistan’s economy and continues to defy any regulations that bind them with fair and appropriate tax payments.

It’s unfortunate that the government continues to manipulate facts to showcase a rosy picture of Pakistan’s economy and growth rate which is far-fetched and unrealistic.

Reference

qinsarfaraz

Pakistan’s foreign debt to hit $80b in June-2017

Dr Ashfaque H. Khan, Pakistan’s renowned economist, former economic adviser to Ministry of Finance and Principal/Dean, NUST School of Social Sciences & Humanities says the external debt of Pakistan would increase to $80 billion in June-2017 and current account deficit is deteriorating because of non-serious approach of the government. Here is his latest article on balance of payment deterioration that he sent to the Editor Corporate Ambassador, Javed Mahmood, for sharing with readers and social media friends 7th-awards00

Pakistan’s balance of payments is rapidly deteriorating since the beginning of the fiscal year 2016-17 for a variety of reasons; while independent economists have been expressing their serious concerns; the government and particularly the country’s finance minister appear to have lost interest in addressing this ominous development in external balance of payments. This is indeed a matter of serious concern and hence the subject matter of this article.

Dr Ashfaque H. Khan is sitting on stage as Chief Guest at the 7th awards, organised in Islamabad in Feb 2017.

The readers would recall that I made a presentation in a Debt Conference organized by a local think tank on November 12, 2016 in Islamabad. In my presentation, I forecasted that the current account deficit for the current fiscal year (2016-17) would reach $7.5 billion as against $2.5 billion in the previous year (2015-16). Furthermore, the financing requirement for the year would reach $14.5 billion ($7.0 billion for debt servicing). Accordingly, Pakistan’s external debt and liabilities would touch $80.3 billion by end–June 2017, rising from $73 billion in end-June 2016. In order to address the rising current account deficit and external debt, I gave several recommendations.

Instead of taking my projection seriously and taking corrective measures to address the ominous development, the finance minister reacted angrily through his lengthy article on debt (February 1, 2017, Business Recorder). He charged me and my fellow independent economists (without naming of course), for being selective in presenting the facts, misinterpreting the facts, predicting doomsday scenario for Pakistan’s debt and the overall balance of payments, venting bias through writings, and most importantly committing disservice to the nation.

May I ask the honorable finance minister to tell us the latest position of current account deficit and debt? Isn’t it true that the current account deficit has reached $7.247 billion during the ten months (July – April) of the current fiscal year while two more months still are to go? Isn’t it going to touch somewhere between $8.5 – 9.0 billion in 2016-17? Isn’t it a fact that the Moody’s Investor Services has predicted that Pakistan’s external debt would reach $79 billion by end-June 2017 as opposed to my forecast of $80 billion?

What are your views Mr. Honorable Finance Minister on these developments? Were we wrong in predicting these developments some six month ago? Did we create doomsday scenario for Pakistan’s external debt and current account deficit? Did we commit disservice to the nation by projecting the ground reality? Or, did you commit disservice to the nation by misguiding the people of Pakistan? We need your answer Mr. Finance Minister?

Why have we landed in such a difficult situation today? The current account deficit for the first ten months (July – April) of the current fiscal year has amounted $7.247 billion as compared with $2.378 billion in the comparable period of last year, which is deteriorated by 205 percent. What has caused such a massive deterioration in current account deficit in this fiscal year? At least two main reasons can be identified. Firstly, massive deterioration in trade balance owing to the decline in exports on the one hand and extra – ordinary surge in imports on the other. Secondly, significant decline in external inflows, namely remittances and Coalition Support Fund (CSF). These two inflows primarily have been responsible for keeping current account deficit low in the past.

What has happened on export front? Exports have declined from over $25 billion in 2013-14 to less than $22 billion in 2015-16—a decline of over 12 percent in two years. Exports are down by 1.3 percent in the first ten months of the current fiscal year and expected to touch $21.5 billion by the end of the fiscal year – a decline of 2.1 percent compared with last year. What has caused a steady decline in the exports? There are several factors that have contributed to the steady decline in exports. These include: i) senseless taxation to achieve revenue targets under the IMF Programme, rendering Pakistan’s exports non-competitive in the international market; ii) holding back refunds of exporters’ to jack up revenue and hence creating serious liquidity problem for the exporters. Exporters were forced to borrow from commercial banks to run their factories and meet the importers demand. This has added to the cost of their doing business; iii) infrastructural bottlenecks such as the availability and prices of electricity, gas and water which have made our exporters non-competitive; iv) keeping the exchange rate at a level which is not consistent with the country’s macroeconomic fundamentals; v) little or no communication between exporters and the country’s chief executive; vi) relatively poor business environment in the country.

In short, the government itself continued to pursue policies that have eroded the competitiveness of Pakistani exporters in international market. The IMF is an equal partner to such misguided policies which have damaged Pakistani exports.

What has happened on the import front? Persistence of overvalued exchange rate has encouraged imports despite massive reduction in oil import bill owing to the sharp decline in international price of oil. As compared with the benchmark year of 2013-14, Pakistan has saved over $13 billion in the last three years owing to the decline in oil prices. During the first ten months (July – April) of the current fiscal year, Pakistan’s imports has registered an increase of 15.5 percent to reach $38 billion.

What has caused import to surge in 2016-17? The government has tried to hide behind the imports of CPEC—related projects, particularly power sector—related projects. This is factually untrue. Total imports bills have increased by $5.089 billion in the first ten months (July–April), of which almost 34 percent ($1.722 billion) contribution came from the import of petroleum group. Within petroleum group, the surge is mainly caused by the import of petroleum products, LNG and LPG. The latter two are the new entrant to our import bill. Pakistan has imported $1.128 billion of gas in the first ten months of the current fiscal year as against $537 million in the same period last year. Going forward, import of gas will continue to rise with serious consequences to the balance of payments.

Besides import of petroleum group, machinery imports contributed 16.2 percent ($823 million) to the rise in overall import bill. In fact, the contribution of import of power generating machinery in total increase in import was nearly 1.8 percent. The contribution of food and transport import in the rise of overall import stood at 14 percent and 11.4 percent, respectively. Thus, almost 71 percent contribution to the surge in overall import came from four groups, namely petroleum, machinery, food and transport while power generation machinery contributed negligibly.

Even an ordinary student of economics could see the ominous developments taking place in Pakistan’s balance of payments. I and others could forecast these developments six months ago. But what is so painful to see is that the staff of the IMF attached with Pakistani desk failed miserably in predicting these developments in the balance of payments. Their forecast went haywire within one quarter of the current fiscal year. How can the IMF staff go so wrong in their prediction of exports, imports, current account deficit, budget deficit and so on? This speaks volume, in the words of Dr. Hafiz Pasha, about the quality of work produced by the IMF staff working on Pakistani desk. This is not the IMF staff that I have dealt with for over a decade. Perhaps they deliberately kept their eyes and ears closed and in so doing they committed, in the words of Shahid Kardar—the former Governor of the Central Bank—‘academic dishonesty’.

Where do I see balance of payments and debt situation in the next year? If the current non-serious attitude of the government persists and reckless borrowing with pride and pleasure continues, Pakistan is likely to face serious balance of payment crisis in 2017-18. Since the government is in the last year of its tenure, this is highly unlikely that it can implement any meaningful reforms to promote exports. This is the year of promises and giving, with little resources in the pocket. Imports will continue to surge because of the inappropriate exchange rate and expansionary fiscal and monetary policies fueling aggregate demand. Accordingly, the current account deficit is likely to remain in their range of $12.5–13.5 billion in 2017-18. With debt servicing requirement rising to $9.0 billion in 2017-18, the total financing requirement for the year would be in the range of $21.5–22.5 billion. Likely availability of external financing is estimated at $12.5 billion, thus leaving a financing gap of $9-10 billion. Where has this amount come from? Accordingly, our external debt and liabilities would cross $90 billion by end-June 2018.

This is the emerging picture of Pakistan’s balance of payments for the year 2017-18. My request to the finance minister is that he should not shoot the messenger; the messenger has established its credibility in 2016-17; take my calculation seriously and do whatever you can to prevent the crisis.

malika

Number of anti-Muslim groups in US ‘triples in a year’

#Islamophobia

Hate crime monitor says sharp increase has been fuelled by Trump’s ‘incendiary rhetoric’ and resurgence of white nationalism

A security official investigates the aftermath of a fire at the Victoria Islamic Center mosque in Victoria, Texas on 29 January (Reuters)

The number of anti-Muslim groups in the US nearly tripled from 34 in 2015 to 101 last year, according to an annual census of hate and anti-foreigner groups compiled by the Southern Poverty Law Center (SPLC), a leading hate crime monitor.

In a report published on Wednesday, the SPLC said Donald Trump’s successful campaign for the US presidency had energised the “radical right” and contributed to an overall net increase in the number of hate groups from 892 in 2015 to 917.

“2016 was an unprecedented year for hate,” said Mark Potok, senior fellow and editor of the SPLC’s Intelligence Report magazine, highlighting the rise to influence of “white nationalist” activists such as Steve Bannon, Trump’s chief strategist who formerly edited the far-right Breitbart News website.

Young white men are being radicalised. It’s time to talk about it.

“The country saw a resurgence of white nationalism that imperils the racial progress we’ve made, along with the rise of a president whose policies reflect the values of white nationalists. In Steve Bannon, these extremists think they finally have an ally who has the president’s ear.”

An online map showing anti-Muslim hate groups in the US (Southern Law Poverty Center)

The SPLC said the overall number of hate groups likely understated the real level of organised hate in the US, as growing numbers of extremists were operating online and not formally affiliated with hate groups.

But it did record a fall in the number of organised anti-government armed militia groups, which it suggested may be due to the mainstreaming of far-right political ideas and ideologies previously confined to the political fringes.

Incendiary rhetoric

The report said that the dramatic increase in groups with a specific anti-Muslim agenda had been “fuelled by Trump’s incendiary rhetoric, including his campaign pledge to bar Muslims from entering the United States, as well as anger over terrorist attacks such as the June massacre of 49 people at a gay nightclub in Orlando”.

The magazine highlighted details of an alleged plot by three members of a group called the Kansas Security Force to blow up an apartment building housing more than 100 Somali-born Muslim immigrants and a mosque which was reported to have been planned for the day after last November’s election.

Asked by the New York Times about his support among far-right groups in November, Trump said: “I disavow and condemn them.”

The SPLC said that the growth had also been accompanied by an increase in hate crimes targeting Muslims. In a report in November, the SPLC said that nearly 900 incidents of hate and intolerance were recorded across the US in the days following Trump’s election.

It also cited an arson attack on a mosque in Victoria, Texas, just hours after Trump’s inauguration last month.

Trump’s presidency has sparked a wave of protests by civil liberties campaigners, with many taking to the streets to protest on the day of his inauguration and subsequently in opposition to a temporary ban on travellers from seven Muslim-majority countries entering the US.

Trump win: Nearly 900 cases of hate, intimidation reported#Trump

‘I feel scared for my kids’: Islamophobia in New York ‘worse than after 9/11’#Islamophobia

Not Found

Archive for June, 2017

VIDEO: Nawaz Sharif Qarz Utaro Mulk Sanwaro Scam-Lest We Forget

The budget – or a beggar’s dilemma By Umair Jamal