Imran Khan Government's Midterm Review: Economy and Foreign Policy

Imran Khan's government has completed about half of its 5-year term it won in 2018. What are its accomplishments? Where has it failed in terms of economy and foreign policy. 

Economy:

Imran Khan inherited a serious balance of payments crisis cased by flat exports and record high imports in 2013-2018 period under Pakistan Muslim League (Nawaz) government. while the PTI government was still dealing with it, the country and the world were hit by COVID19 pandemic that devastated the global economy. 

Pakistan's Trade July2020-Jan2021. Source: Arif Habib


The 2019 International Monetary Fund's bailout required the PTI government to significantly devalue the Pakistani rupee to make exports competitive, and to raise interest rates to slow down imports. These actions triggered inflation, particularly food inflation, as energy and fertilizer prices rose. 

Export Growth in South Asia. Source: Wall Street Journal

The global COVID19 pandemic hit Pakistan and the world while the PTI government was still trying to stabilize the economy. The global economy slowed down as a result of lockdowns imposed around the world to slow the spread of the novel coronavirus. It impacted South Asian economies but Pakistan was thankfully spared the worst of it. 
Pakistan Vehicle Sales 1H FY20-21. Source: Arif Habib



Now Pakistani economy is finally stabilizing and a strong recovery is underway. The recovery is led particularly by the construction and manufacturing sector as evident from double digit increases in cement consumption and large scale manufacturing growth. 

Cement Sales in Pakistan. Source: Bloomberg


Foreign Policy:

One of Pakistan's key foreign policy successes is the US-Taliban Peace Deal. But now there is uncertainty surrounding it with the inauguration of President Joseph Biden. Biden's election and the growing rivalry between US and rising China have changed the calculus in South Asia and the Middle East regions, impacting Pakistan. Former President Trump's erratic behavior has also contributed to it. 

Based on Biden's record as Obama's vice president, it is expected that the new US president will continue to support a stable Pakistan. A suggestion that has been made by former State Department officials Shumaila Chaudhry and Vali Nasr is for the US to take advantage of Pakistan's free trade deal with China by setting up value-added re-export units in the country. 

Please watch this discussion with Faraz Darvesh as host and Dr. Owais Saleem, Sabahat Ashraf and Riaz Haq as panelists:

https://youtu.be/Cse9j72H1cU



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Comments

Nayyar A. said…
Pakistan is set up for several strong years of economic growth. IK and PTI should win re-election easily in 2023. Pakistan economy likely outperform India in this decade as Modi is holding India back with poor policies.
Naseem K. said…
Appreciate your efforts to give good news about Pakistan, no better tonic than a dose of optimism. We are unfortunately a third world country pretending to be something better & avoiding tackling the real problems.Tackle population explosion- the real problem
Riaz Haq said…
#Chinese firm Challenge Apparel plans $150m #industrial park in #Lahore to lift exports. It's already operating since 2017 with its #garment manufacturing unit on Multan Road near Lahore fetching nearly $44m in export revenue during the last fiscal year

https://www.dawn.com/news/1608516

A Chinese company is investing $150 million in an industrial park on Lahore’s border with Kasur, which will house state-of-the-art fabric units, dyeing facilities and garment manufacturing units for exporting sportswear from Pakistan. — Reuters/File
LAHORE: A Chinese company is investing $150 million in an industrial park on Lahore’s border with Kasur, which will house state-of-the-art fabric units, dyeing facilities and garment manufacturing units for exporting sportswear from Pakistan to the Americas, Europe, Asia-Pacific and other regions of the world.

The project by the Shanghai-based Challenge is probably the first foreign direct investment (FDI) in an export industry in Pakistan. The firm is already operating as Challenge Apparel since 2017 with its garment manufacturing unit on Multan Road near Lahore fetching nearly $44m in export revenue during the last fiscal year, according to its managing director Chen Yan, who is known in the government and business circles as Karen.

She expects exports from her existing facility to grow to $54m this fiscal year. Once the Challenge Fashion Industrial Park becomes functional from July next year, its sportswear exports from Pakistan are projected to grow to $120m in the first year and to $400m in the next few.

The largest Pakistani textile exporting company’s exports stood at less than $300m last year.

“Our total production is meant for export,” Chen told Dawn in an interview. “We’re bringing modern, most-efficient and environment-friendly technology to Pakistan from across the world besides introducing new ways of management at our new flagship industrial park. Our plan is to make Pakistan the hub for our polyester-based sportswear exports. Our Chinese operations in Shanghai and Hubei have customers like Adidas and Reebok who’re willing to come to Pakistan if we’ve capacity here. We’ll bring Pakistan new business. We’re a different breed and our product line is new for Pakistan.”

Currently, the company employs around 3,000 workers, including 28 Chinese nationals. Once the industrial park becomes fully functional, the company would have created nearly 10,000-11,000 new jobs.

Challenge’s exports from China stand at $150m. Its garments manufactured in China are sold at an average price of $20. Compared to that, its Lahore operation fetches an average unit price of $8-9, which is double the average unit price of around $4 fetched by Pakistani garment companies.

“This difference in unit price isn’t about value-addition; this is all about the quality of the fabric. Fabric is the key to higher unit prices. You can charge customer whatever you want if you can give them high-end product,” Chen said. The Pakistani cotton-based garments attract lower unit prices because of poor quality of short-staple local cotton, she said. “Even a cotton product can sell for $100-200 if made from finer cloth produced from long staple fibre.”

Challenge entered the Pakistan market in 2014 when it invested $47m in a joint venture with Masood Textiles, a major exporter from Faisalabad. But the venture couldn’t last long as the company bled money profusely and the Chinese investor decided to relocate to Lahore as an independent company.

Riaz Haq said…
Number of #COVID19 cases in #Pakistan drops dramatically, down to 1,329 new #infections reported yesterday. Total number of active cases has dropped to 24,466. https://www.dawn.com/news/1608730
Nayyar A. said…
A massive refinery that takes 5 years to build but will there be oil demand after 2030 to justify? Not sure this project actually materializes. EV will supplant ICE vehicles faster than many expect including Saudis.
Riaz Haq said…
Nayyar: "A massive refinery that takes 5 years to build but will there be oil demand after 2030 to justify? Not sure this project actually materializes. EV will supplant ICE vehicles faster than many expect including Saudis"

Fossil fuels are not going to suddenly disappear with the growth of EVs. Oil and gas be around for a long time, driven mainly by demand for petrochemical materials and applications.

The project will have a $1 billion petrochemical complex that will lay the foundations for Pakistan’s petrochemical industry by producing polyethylene and polypropylene.
Riaz Haq said…
A recent report by the Pakistan Business Council (PBC) titled “Enhancing the Competitiveness of Pakistan’s Refrigerator Industry” provides a valuable insight in this regard (exports markets). The local labour-intensive refrigerator industry that caters to 98 per cent of domestic demand by utilising 75-80pc capacity hasn’t been able to break into the export market. The said report dissected the costing and regulatory duty framework to conclude that the biggest hurdle in entering the export market is neither expensive power nor high dependence on imported raw material. Rather, it was the limited volume of production and Pakistan’s low economies of scale.

https://www.dawn.com/news/amp/1608620


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No big boost in exports is expected till Pakistani manufacturers reorient their business model and target achieving scales to integrate effectively in the global supply chain.

They might also need to build agile organisations to quickly restructure and reconfigure market strategies to compete for a bigger share in the international market.

The perception that the private sector of Pakistan lacks capacity and capability can’t be true as it did prove its mettle by competing and breaking the stronghold of multinationals in the domestic market when it chose to. Thirty years back, multinationals ruled the drug market in Pakistan. Today, the local pharmaceutical industry commands the lion’s share in the domestic medicine market.



---------------


No big boost in exports is expected till Pakistani manufacturers reorient their business model and target achieving scales to integrate effectively in the global supply chain.

They might also need to build agile organisations to quickly restructure and reconfigure market strategies to compete for a bigger share in the international market.

The perception that the private sector of Pakistan lacks capacity and capability can’t be true as it did prove its mettle by competing and breaking the stronghold of multinationals in the domestic market when it chose to. Thirty years back, multinationals ruled the drug market in Pakistan. Today, the local pharmaceutical industry commands the lion’s share in the domestic medicine market.


A recent report by the Pakistan Business Council (PBC) titled “Enhancing the Competitiveness of Pakistan’s Refrigerator Industry” provides a valuable insight in this regard. The local labour-intensive refrigerator industry that caters to 98 per cent of domestic demand by utilising 75-80pc capacity hasn’t been able to break into the export market. The said report dissected the costing and regulatory duty framework to conclude that the biggest hurdle in entering the export market is neither expensive power nor high dependence on imported raw material. Rather, it was the limited volume of production and Pakistan’s low economies of scale.

‘We have removed most of the impediments. We are witnessing excellent growth in industry and exports,’ says Abdul Razak Dawood

It is not surprising, therefore, that over the past decade, the contribution of the manufacturing sector to GDP has been hovering in the range of 12-14pc, which is the lowest in the region. The huge trade deficit (where export earnings were barely one-third of import spending) speaks of the poor show of the corporate sector in the global marketplace. The PTI government did succeed in containing and narrowing the trade gap but it was more through import suppression than export gains. Did the government and the private sector pay attention to expand the domestic market, achieve volumes and economies of scale to enter the global marketplace more confidently?
Riaz Haq said…
#ImranKhan has prevailed by refusing to be bullied by the #Arabs. Western experts believe #SaudiArabia & #UAE, having tried to exert pressure on #Pakistan with little effect, are recalibrating their positions after #Trump's departure & #Biden's arrival.
https://asia.nikkei.com/Politics/International-relations/Pakistan-efforts-to-mend-fences-with-Saudi-led-bloc-bear-fruit

(James) Dorsey (senior fellow at the S. Rajaratnam School of International Studies in Singapore) told Nikkei Asia that Gulf states do not want to alienate Pakistan. "Pakistan is the second largest Muslim country, which hosts the world's largest Shiite minority population," he said, "and hence it's too important for Gulf states to ignore."

The senior fellow added that Pakistan's geography, particularly its coast along the Arabian Sea, is important for Riyadh now that uncertainty is emerging in regard to U.S. President Joe Biden's commitment to regional security. Biden took office a month ago.

And then there is the Israel angle.

"The Saudis want to recognize Israel but cannot do so easily," Dorsey said. "If Riyadh recognizes Israel, the biggest protest against the country will take place in Pakistan." Therefore, Dorsey said, Riyadh wants Pakistan to establish relations with Israel first.

"That is why the kingdom has softened its stance toward Islamabad," he said.

-----------------

James M. Dorsey, a senior fellow at the S. Rajaratnam School of International Studies in Singapore, told Nikkei Asia that several factors are at play, including Pakistan's Shiite population, doubts about the U.S. commitment to the region and Saudi Arabia's desire to recognize Israel.

After the Pakistan-Arab League rift emerged in August, Saudi Arabia and the United Arab Emirates asked Pakistan to repay $4 billion in loans taken out in 2018. Then in December, the UAE suspended the issuance of work visas to Pakistani nationals, a move experts said was designed to pressure Pakistan.

But last week the situation pivoted. Besides Qureshi's trip to Cairo, Saudi Arabia and the UAE each rolled over loans of $1 billion to Islamabad.

In addition, plans for a $10 billion Saudi Aramco oil refinery in the Pakistani port city of Gwadar appeared to move forward. Shahzeb Khan Kakar, director-general of the Gwadar Development Authority, has told reporters that planning for a mega oil city will be completed in six to seven months.

Experts believe Saudi Arabia and the UAE, having tried to exert pressure on Pakistan with little effect, are recalibrating their positions.

Dorsey told Nikkei Asia that Gulf states do not want to alienate Pakistan. "Pakistan is the second largest Muslim country, which hosts the world's largest Shiite minority population," he said, "and hence it's too important for Gulf states to ignore."

The senior fellow added that Pakistan's geography, particularly its coast along the Arabian Sea, is important for Riyadh now that uncertainty is emerging in regard to U.S. President Joe Biden's commitment to regional security. Biden took office a month ago.


Riaz Haq said…
#Pakistan consumer confidence up 1.8% from Q3/20 to Q4/20. The index covers four key parameters -- household financial situation, country’s economic condition, unemployment, and household savings. #economy - Business Recorder

https://www.brecorder.com/news/40067439

Dun & Bradstreet Pakistan and Gallup Pakistan have issued their report on ‘Pakistan Consumer Confidence Index (CCI)’ for Q4 2020.

The Consumer Confidence Index stood at 90.3 points in Q4 2020, compared to 88.7 points in Q3 2020, translating into 1.8% quarter-on-quarter increase. This was driven by the improvement in current situation, up 14.9% q-o-q, which was magnified by a recovery from a low base as sentiments were severely dampened during the past 6 months due to COVID-19.

In contrast, future expectations deteriorated for the first time since Q1 2020 due to cautious optimism by individuals because of prevailing uncertainty amid resurgence in COVID-19 cases. Moreover, the overall consumer confidence in Pakistan has remained pessimistic in all four quarters of 2020.

The CCI report has been developed by assessing consumers’ confidence about the economy as well as their personal financial situation.

The index covers four key parameters -- household financial situation, country’s economic condition, unemployment, and household savings.

The index is a reflection of ‘current situation’ (economic changes felt in the last six months), as well as ‘future expectations’ (changes expected for next 6 months) of consumers across the country. The CCI ranges from 0 to 200, with 100 as the neutral value. A score of less than 100 indicates pessimism.

During this survey, optimism has improved for household financial situation, country’s economic situation and unemployment, while it has declined for household savings.

This is primarily attributed to consumers’ concerns about future household savings. This could have a cascading effect on asset related investments in the country, and overall spending by consumers. Perceptions about the country’s economy have improved consistently across all four quarters of 2020, highlighting upbeat consumer sentiments. Household financial situation was the most optimistic parameter, implying people’s household income seems to be rising after a decline due to COVID-19.

During Q4, household financial situation was the only CCI parameter to turn overall optimistic owing to improvement in current situation. While 33% consumers believe that their income levels will improve in the next 6 months in Q4 compared to 30% in Q3, 28% in Q2 and 32% in Q1.

In contrast, rising inflation and more importantly unemployment continue to drag consumers’ enthusiasm as unemployment remained the most pessimistic parameter. Despite an increase in overall optimism regarding unemployment, 3 out of 4 (73%) respondents believed that unemployment has increased in the last six months as compared to 77% in Q3.

During Q4 survey, 93% consumers believed that daily essentials have continued to become expensive/very expensive in the last 6 months compared to 91% in Q3.

On the whole, consumers across all provinces, location (urban and rural) and different age groups were relatively more optimistic for current economic situation than they were during Q3 2020 survey.

Nauman Lakhani, country lead of Dun & Bradstreet in Pakistan, stated, “The fourth issue of Pakistan Consumer Confidence marks the end of the calendar year 2020. The report compares changes in Consumer Confidence from Q3 2020 to Q4 2020. Current Consumer Confidence growth of almost 15% as compared to the last quarter is healthy, showing signs of recovery in Pakistan but consumers were cautiously optimistic as Future Expectations have declined by 6.0% as compared to Q3. I envision this Index to become a barometer of economic well-being in the Country in the years to come.”


Riaz Haq said…
With sub-optimal utilisation of earlier $4.5 billion worth of three-year financing framework, Pakistan and the International Islamic Trade Finance Corporation (ITFC) on Wednesday signed a $1.1bn trade financing facility for the current year.https://www.dawn.com/news/1609227
Under the Annual Financing Plan, “ITFC will mobilise trade financing of $1.1bn during the year 2021”, said an official statement after the signing ceremony. The financing available through this facility will be utilised by the Pakistan State Oil (PSO), Pak-Arab Refinery Ltd (Parco) and Pakistan LNG Ltd (PLL) for the import of crude oil, refined petroleum products and LNG during the year 2021 and help augment foreign currency reserves of the country and provide resources to meet the oil import bill.The document was signed by Economic Affairs Division Secretary Noor Ahmed and ITFC’s Chief Executive Officer Eng Hani Salem Sonbol.ITFC is a subsidiary organisation of the Islamic Development Bank Group.On the sidelines of the signing ceremony, the two sides also agreed to firm up another three-year financing framework agreement while expanding the scope of the plan to also include agricultural commodities including DAP fertiliser from existing pipeline of oil products and liquefied natural gas, informed sources told Dawn. The next financing framework would be taken up for approval at the annual meetings of the Islamic Development Bank in June.The government could not utilise almost one-third of the earlier package for three years that expired on Dec 31, 2020. Total utilisation in three years ending December 2020 amounted to about $3bn. The $4.5bn package was signed by the two sides in April 2018 to cover oil and LNG imports over a period of three years (2018-2020) at the rate of about 1.5 per cent per annum.The annual utilisation, however, did not cross $900 million in first two years while third year utilisation just went past $1bn.The facility had formally become effective on July 1, 2018, when it rolled over about $100m loan. Before the 2018-20 framework agreement, the ITFC had extended about $3.2bn trade financing facility of similar tenure to Pakistan mostly covering crude oil and some petroleum products. That three-year facility had come to an end in 2017.Before 2018, the ITFC’s financing was available only to Pak-Arab Refinery which was expanded to the Pakistan State Oil in 2018. Last year, Pakistan LNG Ltd was also included in the arrangement for the first time. ITFC had a limited portfolio of its own and normally arranged funds from other private financial institutions.Signing of this financing facility will be helpful in financing oil and gas import bill of the country and easing of pressure on foreign exchange reserves of the country. This agreement also reflects confidence of international financial institutions in Pakistan’s economy and its future, a statement issued by the Economic Affairs Division said.Under the facility, funds do not come into Pakistan’s account but ease pressure on foreign exchange reserves. These funds would be used for financing of letters of credit for oil and LNG imports by PSO, Parco and PLL. The credit facility is subject to about 2.3pc plus London Interbank Offered Rate (Libor).Minister for Economic Affairs Makhdum Khusro Bakhtyar who witnessed the signing ceremony appreciated ITFC support for Pakistan and said the financing commitments reflected confidence of international financial institutions in Pakistan’s economy. He said the ITFC financing for import of oil and LNG had been instrumental in the revival of the industrial sector in Pakistan.Chief Executive Eng Hani Salem Sonbol said Pakistan and ITFC had a long-standing cooperation since creation of the ITFC in 2008 and Pakistan was the second largest beneficiary of ITFC financing. Both sides agreed to enhance the portfolio including the agricultural sector, a statement said.
Riaz Haq said…
AMERICA CAN’T IGNORE THE NEXT INDO-PAKISTANI CRISIS
SAMEER LALWANI

https://warontherocks.com/2021/02/america-cant-ignore-the-next-indo-pakistani-crisis/

While Washington has made a strategic wager on India to reap dividends for U.S. competition with China, it still retains a significant interest in ensuring future South Asian crises do not spiral out of control and risk even a limited nuclear exchange. Such a course of events would jeopardize fundamental U.S. interests, including the non-use of nuclear weapons, the lives of U.S. citizens, and that very strategic bet on India itself. If the 2019 crisis has taught us anything, it is that being an impartial bystander is not an option.

-----------

U.S. official strategy documents identify India as a vital and critical node in Washington’s strategy in the Indo-Pacific to balance China’s rise. But the region within which it resides remains one of the most risk-prone. The nuclear-armed Indian-Pakistani rivalry has produced several crises testing the last five presidents, and since the end of the Cold War, this rivalry composes the most commonly recurring pair in the International Crisis Behavior database. Thirty years ago, the intelligence community judged this region the “most probable” location for a nuclear exchange, a judgment that was reinforced after the 2019 near miss.

----------------

Meanwhile, incentives for conflict and escalation may be growing. Soon after the 2019 crisis, the Indian prime minister was politically rewarded in an electoral landslide, largely attributed to his national security choices. New Delhi also enjoyed the geopolitical rewards of international diplomatic support in international fora while political pressure ratcheted up on its adversary. Pakistan too feels deeply aggrieved because of what it perceives as India’s August 2019 unilateral annexation of disputed territory of Kashmir and the abrogation of its autonomy. Pakistan may also sense a window of opportunity as the United States is once again reliant on Islamabad to help deliver the Afghan peace process while India appears embattled and stretched with a much hotter second front since the summer 2020 border crisis with China.

Certainly the recent ceasefire is a welcome pause, but its durability remains uncertain and crises can still flare up. The rivals have renewed commitments to a ceasefire agreement many times only to lapse back to fighting. The last ceasefire declaration in May 2018 portended a tempering of border hostilities but was followed months later by the Balakot crisis.

Riaz Haq said…
Show of confidence in #ImranKhan: #Investors are bullish on #Pakistan, seeing clear road ahead for the next 6 months. #Karachi shares market (#KSE100) are outperforming the rest of #Asia. https://www.bloomberg.com/news/articles/2021-03-08/khan-s-victory-set-to-revive-bullishness-in-pakistan-markets

Pakistan Prime Minister Imran Khan’s victory in a confidence vote in Parliament, gave a boost to his fragile government and may help lure investors to its equity markets.

Khan got 178 votes from members of his Tehreek-e-Insaf party and allies in the 342-seat lower house National Assembly, proving majority, Speaker Asad Qaiser said in televised meeting in Islamabad on Saturday.

His win may temporarily bring stability to the South Asian nation as its economy recovers from the pandemic-induced contraction with the help of the International Monetary Fund’s $6 billion loan program. With U.S. President Joe Biden urging allies to uphold democracy, stability in Pakistan is an advantage in the region, which is already reeling from a coup in Myanmar.

“For the next six months I see a clear road of bullishness,” said Ayub Khuhro, chief investment officer at Faysal Asset Management Ltd. The fund manager will be buying stocks, he said.

The benchmark KSE-100 Index erased earlier gains to close down 2.1% on Monday., paring its advance to 65% since March 25 when countries went into lockdown because of coronavirus

The army-backed former cricket star voluntarily sought the confidence vote after his finance minister Abdul Hafeez Shaikh unexpectedly lost an election for a Senate seat to an opposition-backed candidate on Wednesday, triggering a debate Khan had lost the majority support.

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The strong military, which has an outsized role in Khan’s administration - with a say in matters from foreign policy and security to economic decisions, - may be relieved to see him surviving the vote.

“Political uncertainty has decreased because of this,” said Amjad Waheed, chief executive officer at NBP Fund Management Ltd., the nation’s largest fund manager with 170 billion rupees ($1 billion) in assets. “It can never end in Pakistan. It’s a favorite pass time to talk about politics. We don’t talk about health, education or anything else.”

Khan indeed faces another test this week. The nation’s upper house will elect a chairman on March 12 in a secret ballot. Should Khan’s candidate win that vote, it will make it easier for the premier to get laws enacted, said Faysal Asset’s Khuhro.

Army Tightens Grip on Pakistan as Imran Khan’s Popularity Wanes

Meanwhile, the Senate result has been a boost for the opposition alliance that plans to march on Islamabad on March 26 to topple Khan’s government, two years before he finishes a five-year term. The alliance includes the Pakistan Muslim League-Nawaz led by ex-premier Nawaz Sharif and the Pakistan Peoples Party of former President Asif Ali Zardari.

“For the last couple of years, politics was not an active variable but now we will need to follow it,” Muhammad Asim, CIO at MCB-Arif Habib Savings and Investments said by phone.
Riaz Haq said…
#India to Buy 30 #US-Made MQ-9B Predator Armed #Drones to Counter #China, #Pakistan. #Modi doing $250 billion military modernization. Gen Lloyd Austin to visit India this month. #Biden will soon join leaders of India, #Japan & #Australia in #Quad summit.
https://www.bloomberg.com/news/articles/2021-03-09/india-to-buy-first-u-s-armed-drones-to-counter-china-pakistan

The South Asian nation will approve next month the $3 billion purchase of 30 MQ-9B Predator drones manufactured by San Diego-based General Atomics, the officials said, asking not to be identified speaking with the media. The deal would add to India’s military capabilities as the drones it has now can only be used for surveillance and reconnaissance.

India is emerging as a strategic defense partner for the U.S., particularly in countering Chinese influence in the Indian Ocean and some areas of Southeast Asia. Prime Minister Narendra Modi’s government is in the midst of a 10-year, $250 billion military modernization.

Spokespeople from India’s Defense Ministry and General Atomics didn’t respond to requests for comment. Pentagon officials didn’t respond to a request for comment either.

U.S. Defense Secretary Lloyd Austin is expected to visit India this month, according to local media, while President Joe Biden will soon join counterparts from India, Japan and Australia in the first-ever meeting of the “Quad” bloc. The leaders will meet virtually on March 12, according to an announcement posted on the Indian government’s website, which said they would discuss issues including supply chains, maritime security and climate change.

The MQ-9B drone can fly for about 48 hours and carry a payload of about 1,700 kilograms (3,700 pounds). It will give the Indian Navy the ability to better monitor Chinese warships in the southern Indian Ocean, and equip the army to engage targets along the disputed India-Pakistan border in the Himalayas.

Last year, India leased two unarmed MQ-9 Predators as border tensions with China threatened to spin into a full-blown conflict. In the end they weren’t deployed after the Air Force expressed apprehension about drones manned by U.S. personnel flying over the border.


Riaz Haq said…
Pakistan’s economy reaches its peak production levels, record growth of 9.1% reported

https://www.techjuice.pk/pakistans-economy-reaches-its-peak-production-levels-record-growth-of-9-1-reported/

The Minister for Industries and Production, Hammad Azhar, has announced that large scale manufacturing, including automobiles, textile, sugar, and medicine, in Pakistan has grown by 9.1% – the second-highest growth recorded after many years.


The minister also added that sustained and robust growth in the industry is expected to lift economic growth beyond earlier forecasts.

The Quantum Index of Large Scale Manufacturing Industries (QIM) maintained by the Pakistan Bureau of Statistics records the growth of businesses involved in large scale manufacturing, registered under the factories Act 1934

The index covers the establishments registered under the factories Act 1934. The index had touched the highest level ever recorded, 175.17, in Mar 2018 and has now recorded the second-highest level of 175.15 in Jan 2021. During the first seven months of the present fiscal year, the overall production increased by 7.85 % compared to the previous fiscal year’s corresponding period.


https://www.pbs.gov.pk/sites/default/files//industry_mining_and_energy/qim/2021/web_note_jan_2021.pdf
Riaz Haq said…
IMF says #PMLN government overstated #Pakistan #gdp and understated #debt to gdp ratio starting in 2016. This was done as part of sovereign loan guarantees. Current #PTI government has taken remedial action to correct the error to #IMF's satisfaction https://www.imf.org/en/News/Articles/2021/03/24/pr2182-pakistan-imf-executive-board-reviews-remedial-actions-data-revision-noncomplying-purchase

The Executive Board of the International Monetary Fund (IMF) approved a 39-month Extended Arrangement under the Extended Fund Facility (EFF) for Pakistan in the amount of SDR 4,268 billion (about US$6 billion), equivalent to 210 percent of quota, on July 3, 2019. The first review under the arrangement was completed by the Executive Board on December 19, 2019, based upon, inter alia, the reported observance of the quantitative performance criteria (PC) at end-September 2019, including the amount of government guarantees. Upon completion of the first review under the EFF, Pakistan made a purchase equivalent to SDR 328 million (about US$452.4 million).

Subsequently, new information that came to the authorities’ attention, and which was shared with Fund staff, has revealed that the data on government guarantees dating back to FY 2016 was reported inaccurately. The revised data indicates a nonobservance of the PC on government guarantees at end-September 2019 by a margin of PRs 357 billion (about 0.9 percent of GDP), which resulted in a noncomplying purchase and a breach of obligations under Article VIII, Section 5 of the IMF Articles of Agreement. The authorities previously reported that the PC had been met with a margin of PRs 55 billion (0.1 percent of GDP) at end-September 2019. The statistical revision only had a small impact on public debt.

The authorities have taken strong corrective actions to address institutional and technical short-comings that gave rise to the inaccurate information, including: (i) creating a working group to reconcile and cross-check guarantees and debt data; (ii) announcing additional functions for the Debt Policy Coordination Office (DPCO), including to act as custodian of all guarantees issued by the federal government; and (iii) publishing a semi-annual debt bulletin that consolidates key debt statistics. Beyond these actions, the authorities have committed to include a list of all new guarantees expected to be issued in the FY 2022 budget submitted to Parliament.

At the conclusion of the meeting, Deputy Managing Director Antoinette Sayeh and Acting Chair, stated:

“The Executive Board of the International Monetary Fund (IMF) reviewed Pakistan’s remedial actions and data revisions linked to a noncomplying purchase under the Extended Arrangement under the Extended Fund Facility as well as a breach of obligations under Article VIII, Section 5. The non-complying purchase arose as a result of a lack of inter-agency coordination in the compilation of government guarantees provided by the federal government to state-owned enterprises that contributed to incorrect estimates of government guarantees starting as far back as FY 2016.


Riaz Haq said…
#Pakistan currency is world's best performing currency against #US$. PKR strengthened with large inflow of remittances from #Pakistani #diaspora. #Remittances grew 24% to $18.74 billion in the first 8 months (July-February) of the current fiscal year 2021
https://tribune.com.pk/story/2292537/rupee-becomes-worlds-best-currency

Taking to his Twitter handle, Tangent Capital Advisers CEO Muzammil Aslam while citing Bloomberg data tweeted, “Pakistani rupee has been the world’s best currency against the US dollar from January 1 to March 31.”

The rupee strengthened 4.09% to Rs153.55 against the US dollar during the day since the opening level of January 1, 2021, according to the data.

Later, the rupee closed at Rs152.75 against the dollar in the domestic inter-bank market on Wednesday, Pakistan’s central bank reported.

According to data released by Bloomberg, the Canadian dollar stood at the second position among the top-performing currencies worldwide, as it appreciated 1.09% to 1.25 against the US dollar during the period under review. It was followed by the pound, which gained 0.64% against the US dollar during the same period.

“It is good to celebrate (the strengthening of rupee) but equally important is to maintain competitiveness. I am for gradual changes than abrupt,” Aslam said in his tweet.

Arif Habib Limited Head of Research Tahir Abbas, while talking to The Express Tribune, said the excessive inflow of dollars supported the rupee in maintaining the uptrend.

“The rupee may peak somewhere between Rs150 and Rs152 against the dollar under the current cycle of gains. It seems it will remain stable between Rs152 and Rs155 by the end of June 2021,” he estimated.

“In its latest move, Pakistan has successfully raised $2.5 billion through the sale of five to 30-year Eurobonds in the international market. It is backed by the resumption of International Monetary Fund (IMF) loan programme worth $6 billion,” Abbas added. Pakistan received the third loan tranche of around $500 million from the IMF on Tuesday (March 30) following the restart of the loan programme, which had been on hold since the Covid-19 outbreak in the country in February 2020.

“Going forward, the inflows are expected to continue to surge partially due to the release of remaining $4 billion later under the IMF Extended Fund Facility,” he said.

Worker remittances sent home by overseas Pakistanis have played a leading role in supporting the rupee to grow stronger during testing times of the pandemic. Besides, additional inflows from the Pakistani expatriates through Roshan Digital Account (RDA) into different assets like saving certificates, property and stock markets also kept the rupee hovering high, he said.

The analyst said the partial suspension of international travelling forced the overseas Pakistanis to send remittances through banking channels instead of sending them through people visiting Pakistan from abroad. The development helped remittances to grow during the pandemic.

The remittances grew 24% to $18.74 billion in the first eight months (July-February) of the current fiscal year 2021 compared to $15.10 billion in the same period of the last year. The RDA inflows are estimated to be above $700 million during the first six-month since its launch in September 2020. With a fresh gain of Rs0.34 on Wednesday, the rupee has gained 9.30% or Rs15.68 in the past seven-month to date since it touched a record low of Rs168.43 on August 26, 2020.

Pakistan’s foreign currency reserves have remained at around three-year highs above $13 billion for the past couple of months. They grew $275 million to $13.29 billion in the week ended March 19, 2021. The reserves would grow further with an addition of the IMF tranche worth $500 million, the $2.5 billion raised through Eurobond and other inflows from the World Bank and Asian Development Bank (ADB) in recent days.


Riaz Haq said…
Pakistan’s growth miracle

https://tribune.com.pk/story/2301343/pakistans-growth-miracle

The World Bank projected that Pakistan’s economy would grow by 1.3% in 2020-21. The IMF predicted 1.5% growth, whereas the State Bank of Pakistan (SBP) estimated 3%. But official (provisional) estimate of nearly 4% GDP growth exceeded all expectations. Pakistan’s economy has indeed made a comeback from the pandemic, with a bang!
The services sector grew by 4.4%, industrial sector by 3.5% and agriculture 2.7%. Within services, the highest growth came from wholesale and retail trade, whereas within the industrial sector, it was the large-scale manufacturing that grew by 9%. Considering that these two sub-sectors together constitute 28% of the GDP and both suffered a serious contraction last year, these growth estimates are hardly surprising. Other major contributors to the growth include bumper crops of wheat, rice, sugarcane and maize, construction, finance & insurance and housing services.
Part of this growth may be attributed to our resilient economy with a rapidly growing population and a sizeable middle class. Then comes the low-base effect, owing to the contraction of our GDP last year. But attributing this entire growth miracle to low-base effect and resilience would be injustice to the government actions that contributed to this turnaround.
Pakistan’s strategy to deal with Covid-19 — through NCOC-coordinated lockdowns and restrictions — aided in a quick recovery. The massive Covid-stimulus package worth Rs1.27 trillion (2.9% of GDP) greatly helped in battling the spread of the virus and provided much-needed targeted financial support to the poor and relief to businesses. Government’s construction package also had a big role to play, as manifested in 8.3% growth posted by the construction sector and a massive increase of 25% in the cement sector. A drastic reduction in interest rate by the SBP and measures like Long-term Financing Facility (LTFF) and Temporary Economic Refinance Facility (TERF) for the businesses also contributed in stimulating growth. The government can therefore rightly claim the credit for this turnaround.
Riaz Haq said…
Pakistan’s growth miracle

https://tribune.com.pk/story/2301343/pakistans-growth-miracle

Some people have raised questions about the credibility of the data, but those claims do not seem to hold ground. These growth estimates reflect the performance of the previous finance minister. If anything, Shaukat Tarin would have benefitted from lower growth, which could have made next year’s numbers healthier. The out-of-whack projections, however, underscore the need for having regular quarterly estimates of GDP, which can prevent such miscalculations.
Moreover, these numbers are not counter-intuitive. For instance, the growth in LSM is in line with long queues of booked orders for new SUVs and vehicles. Anecdotal evidence from textile industry also confirms that the factories are running at near-full capacity.
But is this growth sustainable?
Considering that the third wave of pandemic is subsiding, the recovery is likely to continue unabated. The indication that government will be holding off on tough IMF conditions and will instead be giving a pro-growth budget would also help. The government may be better off focusing on sectors that have performed poorly such as cotton, mining, and transportation & communication, which with some effort can yield greater dividends.
But further growth without investment will increase inflationary pressure and will also boost imports. The inflation is already on the rise, confirming that we may not have much more excess capacity. The trade deficit is also touching $24 billion. For now, we are being compensated through high remittance inflows but if continued, this can lead to another current account crisis in the next three years. The government therefore needs to keep inflation under check, diversify exports and increase investment. All of this however is easier said than done and needs structural reforms.
In short, while this growth cannot be sustained without structural reforms, the next two to three years look good and more promising. It is therefore time to celebrate!

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