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‘Unbridled’ dollar closes at historic high of Rs262.60 in interbank



'Unbridled' dollar closes at historic high of Rs262.60 in interbank

The US dollar continued its upward momentum in the local currency markets on Friday as the greeback touched Rs262.60 in the interbank and Rs265 in the open market, 

The dollar surged by Rs7.17 to reach Rs262.60 in the interbank trade, the State Bank of Pakistan (SBP). The local currency depreciated 2.73 against the greenback. The PKR was closed at Rs255.43 on Thursday. 

Economic experts and business community fear that extraordinary weakening of the Pakisni rupee since yesterday will not only trigger inflationary pressures in the consumer markets, but also multiply the cost of loans. 

There were reports that the weakening of the local currency has jacked up the cost of loans up to Rs3,950 billion.


The dollar has gained Rs30.11 in the interbank market since Thursday as forex companies removed a cap on the exchange rate.

According to Reuters, The Pakistani rupee fell 9.6% against the dollar on Thursday, central bank data showed – the biggest one-day drop in over two decades – in a slump that may persuade the International Monetary Fund to resume lending to the country.

The drop comes a day after foreign exchange companies removed a cap on the exchange rate, a key demand of the IMF as part of a programme of economic reforms it has agreed on with the cash-strapped South Asian nation.

The currency s official value closed at 255.4 rupees against the dollar versus 230.9 on Wednesday, the central bank said.

Facing an acute balance of payments crisis, Pakistan is desperate to secure external financing, with less than three weeks  worth of import cover in its foreign exchange reserves, which fell $923 million to $3.68 billion in the latest data.


Pakistan secured a $6 billion IMF bailout in 2019. It was topped up with another $1 billion last year to help the country following devastating floods, but the IMF then suspended disbursements in November due to Pakistan s failure to make more progress on fiscal consolidation.

The lender announced on Thursday that it was sending a mission to the country at the end of January to discuss resuming the programme.

Aside from wanting the government to take fiscal measures, the IMF is pushing for it to move to a market-determined exchange rate regime, which the IMF highlighted in its statement on Thursday.

— Artificial distrotions —

The foreign exchange companies said on Wednesday that they had removed the cap for the sake of the country, because it was causing “artificial” distortions for the economy.


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Wednesday s move by foreign currency dealers, whose open market rates are different from the rate notified by the central bank, had a cascade effect on official exchange rates on Thursday.

The drop in the official rate was the biggest since 1999 in both absolute and percentage terms, according to JS Global, a Pakistani brokerage house.

In the open market, the rupee weakened from 243 rupees to the dollar to 262, a drop of about 7%, having lost 1.2% the previous day, according to the Exchange Companies Association of Pakistan (ECAP) trade data.

“We requested the central bank to increase the interbank (rate) to help combat the black market,” ECAP President Malik Bostan told Reuters.

The State Bank of Pakistan (SBP) and the finance ministry did not respond to a Reuters request for comment.


Attempts by Finance Minister Ishaq Dar to defend the rupee since his appointment in September, including reported currency market interventions, had run counter to the IMF s advice.

— Positive response — 

The Pakistan Stock Exchange, however, reacted positively to the rupee s fall, with the KSE 100 index shooting up more than 1,000 points, or 2.5%.

“The depreciation in the rupee takes away some uncertainty regarding the economic roadmap ahead and resumption of the IMF programme, which the market is responding positively to,” Tahir Abbass, Head of Research at Arif Habib Limited, said.

Topline Securities, a Karachi-based brokerage house, said the sharp fall in foreign exchange reserves from $8 billion in September to $4.6 billion as of Jan. 13 led to a widening in the spread between the official and open market rates, and created a black market for dollars due to the low supply.


The sudden drop in rates hit banks hard. According to two officials in commercial banks operating in Pakistan, banks that had earlier borrowed at 230 rupees to the dollar to make payments by running open positions now have to settle payments at a rate of 250 rupees.

The officials told Reuters on condition of anonymity that banks that were hit the hardest are those that did not have adequate dollar inflows.

— Decades-high inflation —

While the move increases the chances of a restart in IMF funding, Pakistan is also reeling from decades-high inflation, which economists fear will now get worse. Most of Pakistan s critical imports, including fuel, are paid for in dollars.

“It will give a significant impetus to already elevated price pressures in the economy,” said Sakib Sherani, a Pakistani macroeconomist, adding that consumer price index (CPI) numbers are heading to levels previously unseen in the country.


In the first half of the current financial year, which ends in June, average inflation has been 25%. The central bank is also tightening monetary policy sharply, with key rates also at decades-high levels and growth having come to a grinding halt.

The ensuing economic crisis will also pile political pressure on the government, with former prime minister Imran Khan demanding a snap general election.


India cabinet okays $11bn revival plan for state-owned BSNL




India cabinet okays $11bn revival plan for state-owned BSNL

India’s cabinet has approved a revival package of 890.47 billion rupees ($10.79 billion) for state telecom operator Bharat Sanchar Nigam Ltd (BSNL), CNBC-TV 18 reported on Wednesday citing sources.

The development comes days after BSNL partnered with top software company Tata Consultancy Services to help deploy 4G network across the country when larger rivals are rolling out high-speed 5G network.

BSNL, struggling with poor infrastructure, has been battered by intense competition from Jio, the wireless arm of Reliance Industries,

Bharti Airtel and Vodafone Idea which have rolled out 4G services at low prices on voice calls and data.
Shares of state-owned telecom firm Mahanagar Telephone Nigam Ltd surged nearly 12 per cent after the news on rival package for BSNL.


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Pakistan’s economy shrinks to $341.5bn: Economic Survey




Pakistan's economy shrinks to $341.5bn: Economic Survey

Size of Pakistan’s economy – Gross Domestic Product (GDP) – shrank by $34 billion during the outgoing fiscal year, as its overall size dipped to $341.50bn when compared with the level of $375.4bn in 2021-22.

According to the Pakistan Economic Survey 2022-23 which would be released tomorrow (Thursday), it translated into a $198 reduction in per capita income which plunged to $1,568 against $1,766 recorded last financial year.

But the depreciation in rupee against the US dollar meant the overall volume of economy increased in terms of local currency, reaching Rs84,760bn after an increase of Rs10,678bn. It means the per capita income – in terms of rupee – also jumped to Rs388,775 in 2022-23 when compared with Rs313,337 recorded last year.

However, this spike in terms of Pakistani rupee is meaningless for the people as the rising cost of living and the resultant reduced purchasing power triggered by the record-high inflation meant that they were emptying their pockets much quicker than previous years. In fact, meeting the basic needs like food has become a challenge for many.


The document cites the ongoing Ukraine-Russia war as the main reason behind the high cereals prices in world markets, which has triggered an inflationary cycle; as a result, Pakistan witnessed 29 per cent inflation during July-March period.

The Pakistan Economic Survey is a year-ending document which is released every year a day before the presenting the federal budget. It contains official final figures for the first nine months [July-March] and provisional estimates related to the last quarter [April-June] which are finalised later.

Read more: WB projects two more dark years for Pakistan’s economic growth

With the National Economic Council (NEC) approving a GDP growth rate of 0.4pc for 2022-23 and setting a target of 3.5pc for 2023-24, one can easily notice Pakistan’s inability to maintain or increase a growth rate that can meet the national needs amid a high population growth rate.

In 2017-18, the growth rate was 6.1pc which dipped to -0.94 in 2019-20. However, it witnessed a jump by 5.77pc but only after the then PTI government decided to rebase the economy. Previously, the year 2005-06 was used as a base but it was changed to 2015-16, thus benefitting, in terms of figures, from the high growth rate witnessed during the PML-N government.


This rebasing of economy did certainly improve the GDP numbers but only hid the reality, thus the critics describing the move as just a political gimmick. So the economy’s size actually shrank alarmingly from the level of $357bn in 2017-18 to $301bn in 2019-20.

It surpassed the 2017-18 level only once in 2021-22 by just $18bn to $375bn but again witnessed a decline to the level of $341.50bn this fiscal year.

The document showed that the services sector had the largest share in national economy which stood at 54pc followed by agriculture 24pc and industry 22pc.

To understand why Pakistan couldn’t achieve a sustainable and stable economy while spending a huge sum on importing food items is best illustrated by a dismal agriculture sector growth rate which ranged between 3.88pc in 2017-18 and 1.55pc in 2022-23 with an exception of 2021-22 when it surpassed the 4pc mark.

On the other hand, the manufacturing sector witnessed negative growth in twice during the last six years – -7.8 in 2019-20 and -3.91 2022-23.


These examples from the agriculture and manufacturing sectors show that Pakistan has been left with very little room to earn much-needed foreign reserves through exports. Same applies to the services sector.

But the political pressure we are facing today is perhaps best explained by a huge budget deficit – an issue that is also responsible for the harsh conditions set by the International Monetary Fund (IMF).

Hence, the easiest solution proposed by the country’s policymakers and the quickest remedy coming from the international experts is hiking the gas, electricity and fuel prices which leads us to the inflationary cycle we are witnessing.

Read more: IMF official says Pakistan must explain fuel-pricing scheme before any loan deal

In 2017-18, the budget deficit was recorded at Rs2,260bn but it swelled to Rs5,260 in 2021-22. This huge gap meant that Pakistan became more dependent to foreign assistance and influence, as explained by the ongoing IMF saga.


However, there has been a marked reduction to the level of Rs3,079 during the first nine months of the current fiscal year due to the measures taken by the coalition government.

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For Musk and other foreign CEOs visiting China, silence is golden




For Musk and other foreign CEOs visiting China, silence is golden

A veritable parade of overseas CEOs including Tesla’s Elon Musk and Goldman Sachs’ David Solomon have made their way to a reopened China in the last few months.

One notable common strand: they’ve not talked much in public about their trips which have mostly consisted of meetings with government officials, local staff and business partners. Media events and other public engagements, once frequent before the pandemic, are now rare.

Even Musk, known for his unreserved banter on Twitter, was uncharacteristically silent on a whirlwind trip last week.
In 2020, the billionaire celebrated the delivery of the first cars made at Tesla’s Shanghai plant with a dance on stage that was open to the press. This time around, media were not invited to cover his plant visit.

And while Musk has mentioned the trip in two posts since leaving, he didn’t tweet once while in China.


Goldman’s Solomon has similarly been more low-key. In 2019, he gave media interviews and participated in several forums. But during his trip in March this year, his only known engagements were closed-door meetings with regulators, China’s sovereign wealth fund and at a university.

The lack of information from Western CEOs and their companies about the trips to China can be attributed to wariness given that US-Sino political and trade tensions have worsened to their lowest point in decades, said senior staff at chambers of commerce and trade associations.

President Xi Jinping’s increasing focus on national security – in particular a recent crackdown on consultancies and due diligence firms – has also left many foreign companies uncertain where they might step over the line of the law, they said.

Noah Fraser, managing director of the Canada China Business Council, said visiting executives are no longer chasing new business opportunities but are concentrating on maintaining existing relationships and will often stipulate no press, big dinners or speaking opportunities.

They appear to be keeping “their heads down and will have private lunches where they can learn from people on the ground what’s happening,” he said.


Before travelling to China, US CEOs have been seeking advice about how Beijing’s expansion of its counter-espionage law could affect them, according to the head of a U.S. trade association who declined to be identified, citing the sensitive nature of doing business in China currently.

The CEOs also want to know how to deal with Chinese government officials and with questions once the trip becomes public, the association head said, adding it was not in their interest to speak to media and run the risk of being asked to comment on stances taken by Washington and Beijing.

The EU Chamber of Commerce said in a statement that companies operating in China have always exercised a certain level of caution and were now adapting to changes in areas that might be deemed sensitive.

Tesla did not respond to a request for comment while Goldman declined to comment.

China’s foreign ministry said in a statement that the numerous visits from US CEOs were a “vote of confidence” in the Chinese economy. That their trips were relatively low-key stemmed from what it called the US government’s “wrong policy” of containing China, it said.


With respect to concerns about its counter-espionage law, it was China’s right to safeguard national security through domestic legislation, it added.

The US Department of Commerce declined to comment.

While US President Joe Biden said last month he expected a thaw in frosty relations with Beijing “very shortly”, there is no denying that tensions have soared this year with flashpoints including U.S. export curbs on semiconductors and data security concerns.

That said, after three years of harsh COVID curbs that hampered entry into China, foreign CEOs appear eager to get the lay of the land.

Those travelling here in recent months have included Apple’s Tim Cook, Intel’s Patrick Gelsinger, General Motors’ Mary Barra, Blackstone’s Stephen Schwarzman and JPMorgan’s Jamie Dimon.


Sixty-seven foreign business leaders attended the high-profile China Development Forum this year, although that is still 20 fewer than in 2019.

“The idea is that you have to show sufficient commitment to the China market if you’re playing there,” said Christopher Johnson, president of China Strategies Group, a political risk consultancy.

At the same time, the CEOs need to do that “without setting off alarm bells with the U.S. government, and it’s a very difficult task,” he added.

JPMorgan and Blackstone declined to comment. Apple, General Motors and Intel did not respond to requests for comment.

The few known comments by foreign CEOs whilst they were in China have been in line with Biden’s stance that he is not seeking to decouple the world’s two largest economies.


The foreign ministry quoted Musk as saying he was opposed to a decoupling of the U.S. and China economies which he described as “conjoined twins”.

JPMorgan’s Dimon told the JPMorgan Global China Summit last week he favoured East-West “de-risking” rather than decoupling, according to a source from the event.

Daniel Russel, vice president for international security and diplomacy at the Asia Society Policy Institute, said the difference between de-risking and decoupling was a subtle but important one.

It “makes clear that the issue is managing the risk of dependency on China rather than a determination to separate the world into two competing spheres,” he said.

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