Business

Pakistan on the brink of default, again

Published

2 years ago

Farwa

Pakistan’s time is running out. For decades, the country has run a system that needs near-constant external assistance. The system doesn’t deliver prosperity outside a tiny elite. Real incomes are, at best, stagnate. We barely export or save. If there is a strategy, it is waiting for someone to invade Afghanistan to extract geopolitical rents from them.

Underlying these decades-long challenges is a fundamentally changing society. For one: over the next 28 years, Pakistan will add about 132 million more people above its current population size. Pakistanis also now live increasingly in urban areas which reshapes how people interact with each other – opening new avenues for collective action and greater demand for public services. Add to this increased access to technology. The country is changing even if the economic system that governs them remains the same.

The changing dynamics demand sustained economic growth to improve lives, but our current system doesn’t allow growth. Whenever the economic growth rate exceeds 4-odd%, Pakistan’s import bill skyrockets pushing the country into a balance of payments crisis. This is a fundamental constraint in Pakistan’s growth model: nothing short of a complete break from the current trajectory will work.

Today, Pakistan is on the brink again. While a sovereign default is unlikely, what is clear is that Pakistan’s survival once again depends solely on the generosity of its few allies. This generosity might be eventually forthcoming allowing us to kick the bucket down the road for a few months – but then what? What happens a few months from now when once again we need more money to pay for imports or service our debt?

We need a radical break. There must be an immediate realization that the current economic system neither delivers growth for its citizens nor is stable enough to be maintained. Critically: even those who benefit from the current economic system, must realize that the system isn’t sustainable – even for growing their wealth. A different pathway requires a pro-growth coalition that pushes for reforms that can make real gains in Pakistan’s productive capacity.

What should such a reform agenda prioritize? I suggest three actions. First: Pakistan must discourage the capital stuck in real estate. Putting a large chunk of domestic savings into real estate takes capital away from sectors that can contribute towards exports (plots can’t be exported, alas). A great way to do this is by levying an annual tax on urban land. Not only would this raise revenue for public services but help allocate capital towards tradable sectors.

Second: We need deliberate and significant efforts to improve female labour market participation. Currently, only two out of 10 adult women are in the labour market; this is below countries of similar income levels. One way to do so is by investing in urban transport systems that would disproportionately benefit women as they face the highest mobility barriers.

Third: Pakistan should reduce policy-induced market distortions that are often in place to benefit vested interests. One example are the import duties that incentivize firms to sell domestically rather than attempt to innovate and compete abroad (a recent report by the World Bank calculates that a 10% import duty ups the profitability of selling domestically as opposed to exporting by 40%). By making the market a level playing field, we can incentivize firms to innovate and compete globally.

Pakistan is on a path to the abyss. In 1990, a child born in Pakistan would expect to live longer than a child born in India or Bangladesh. Today, that has been completely reversed. You’re better off being born in Dhaka or Chennai, than Lahore. This trajectory will continue if we don’t do something differently. Time is running out.

Business

An investigation was “launched” into PTA’s inability to get Rs. 78 billion back from Telcos

Published

18 hours ago

Farwa

The PTA has reportedly been instructed to reply to NAB by July 29. According to the enquiry, the national exchequer has suffered losses as a result of the delay in collecting dues.

The PTA has been asked to provide NAB with information about any pertinent records, court proceedings, and overdue bills. The NAB Karachi has summoned the PTA officials to appear with all pertinent documentation.

All of the principle sum has to be paid by the LDI firms, according to sources. But due to judicial stay orders, the collection of dues has been impeded.

These sources further state that a steering group has been established by the Ministry of IT to supervise the issue of dues recovery.

In a previous event, the tariffs levied on importing cell phones from outside were clarified by the Pakistan Telecommunication Authority (PTA).

Contrary to what some internet reports claim, PTA clarified in response to recent news regarding the tariffs on mobile phone imports that there hasn’t been a formal decision to remove these levies in Pakistan.

the PTA.Pakistanis living abroad will be the only ones free from these levies, according to the PTA. A SIM card can be inserted and the phone restarted to temporarily register a device for non-PTA mobile subscribers.

Business

Weekly inflation in Pakistan increased by 0.17 percent.

Published

18 hours ago

Farwa

The SPI for the week under review in the aforementioned group was reported at 321.95 points, as opposed to 321.40 points during the previous week, according to the PBS statistics.

The SPI for the combined consumption group saw a 20.09 percent increase in the week under review compared to the same week the previous year.

The weekly SPI includes 51 necessary items for every spending group and 17 urban areas, with a base year of 2015–16 = 100.

The SPI for the lowest consumption category, which is up to Rs 17,732, grew by 0.08 percent from 311.97 points to 312.22 points this past week.

0.18 percent,The index of consumption for the lowest consumption groups, which are Rs 17,732-22,888, Rs 22,889-29,517, Rs 29,518-44,175 and above Rs 44,175; increased by 0.13 percent, 0.15 percent, 0.18 and 0.19 percent, respectively.

Nineteen (37.25%) of the fifty-one commodities had price increases over the week, eight (15.69%) had price decreases, and twenty-four (47.06%) had unchanged pricing.

On a weekly basis, the following commodities saw significant price decreases: tomatoes (9.19%), onions (2.14%), LPG (1.04%), bananas (0.53%), wheat flour (0.35%), potatoes (0.17%), pulse masoor (0.16%), and bread (0.05%).

Chicken (4.80%), garlic (2.01%), pulse gramme (1.87%), eggs (1.71%), beef (0.93%), gur (0.89%), pulse moong (0.84%), fresh milk (0.45%), firewood (0.23%), and cigarettes (0.12%) were among the items whose average prices increased significantly week over week.

The commodities that saw a year-over-year decline were: wheat flour (31.75%); cooking oil (13.44%); vegetable ghee 2.5 kg (10.42%); vegetable ghee 1 kg (9.85%); mustard oil (8.33%); eggs (5.82%); rice basmati broken (4.15%); and tea package (2.52%).

Gas prices for Q1 (570.00%), onions (96.01%), pulse gramme (40.39%), powered milk (39.11%), garlic (34.61%), pulse moong (29.77%), men’s sandals (25.01%), beef (23.52%), salt powder (23.28%), pulse mash (22.50%), and energy saver (17.96%) were among the commodities whose average prices increased year over year.

Business

The price of gold has drastically dropped in Pakistan.

Published

2 days ago

Farwa

As per the All-Pakistan Gems and Jewellers Sarafa Association (APGJSA), the cost of 24-karat gold per tola decreased by Rs 2,300, standing at Rs 250,500.

A kilogramme of 24-karat gold costing Rs1,972 less at the local market, making it worth Rs2114,763. Ten grammes of 22-karat gold had a price decrease to Rs196,866 as well.

After losing a significant $43 during the day, the rate per ounce of gold on the international market also decreased. It currently stands at $2,370.

On Thursday, the price of 24-karat silver also experienced a decline, falling by Rs60 to settle at Rs2,860 petal.