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| India-Pakistan | |
| Alarm Bells | |
| 2019-11-26 | |
| [TheNews.com.pk] Alarm bell number 1: Never in our history have our net international reserves stood at negative $11 billion. Are we facing an economic crisis? An economy facing an “economic crisis will most likely experience a drying up of liquidity, a falling GDP and rising prices due to inflation”. Question number 1: is our liquidity drying up? Question number 2: is our GDP rising or falling? Question number 3: are our prices rising due to inflation? For the record, our net international reserves are now at negative $11 billion. What that means is that our liquidity has already dried up (read: no dollars left). As of November 30, international reserves with the SBP were $7,265 million; short-term drains (12 months or less) amounted to roughly $11 billion; and forward swaps stood at roughly $7 billion. An emergency is “a serious, unexpected, and often dangerous situation requiring immediate action”. In 2013, we ran to the IMF when our net international reserves had fallen to negative $7 billion. In 2008, we ran to the IMF when our net international reserves had fallen to negative $2 billion. Imagine: our net international reserves now stand at negative $11 billion. Alarmingly, we are gulping down around $2 billion a month. China’s loan of $1 billion that came in July is long gone. The $1 billion received from Saudi Arabia in November is gone. Saudi Arabia’s billion that came in December is also gone. Do we have a policy other than the so-called ‘packages from friendly countries’?
Alarm bell number 3: As of August 2018, we “booked the highest-ever budget deficit of Rs2.26 trillion or 6.6 percent of GDP”. Conveniently, we don’t include losses from public-sector enterprises, the electricity sector and the government’s commodity operations because if we do then our budget deficit would be around 10 percent of GDP. This year, as has been the case in previous years, expenditures are out of control and revenue collection is below target. Alarm bell number 4: Circular debt has gone up from Rs1.14 trillion in August 2018 to a current figure of Rs1.4 trillion. Alarmingly, we are adding an average of Rs1.8 billion a day every day of the year. Our biggest enemy on the economic front is uncertainty. Uncertainty is defined as a “situation which involves imperfect or unknown information”. To be certain, economic activity and uncertainty are correlated. What is our deficit-funding strategy? Do we even have one? Are we going to the IMF or not? Do we have an alternative strategy to tackle our external vulnerabilities? What are we doing on the FATF front? Do we have a strategy to tackle internal financial turbulence? What’s the future of the rupee? Uncertainty is bad for business – really bad. The writer is a columnist based in Islamabad. | |
| Posted by:John Frum |
| #3 Jai Hind, John Frum ! I didn't know you were Indian. I thought you simply clicked pictures from the sky flying over to Vanuatu, dropping off those goodies now and then. 😉 |
| Posted by: Dron66046 2019-11-26 02:04 |
| #2 |
| Posted by: Bright Pebbles 2019-11-26 01:57 |
| #1 They'll get their funding as soon as a compromise with FATF bigwigs is reached. A lot of indirect feeds to accounts in European and Panamanian banks. Gawd knows they're practically trying to let them off the grey list. They've had to make categories different shades of grey on the blacklist to accommodate 'the difficult situation' of poor Pakistain. |
| Posted by: Dron66046 2019-11-26 00:56 |