Business

No more dreams as rich-poor divide widening at frightening pace

Published

8 months ago

August 21, 2023

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No more dreams as rich-poor divide widening at frightening pace

The newspapers and TV screens are bombed with new housing schemes, new eateries serving the elite and upper middle class are being opened, car parking is a problem outside high-end outlets and departmental stores during rush hours, brand new SUVs and convertibles are seen on roads.

On the other hand, there are others who have reduced food intake due to a record-high inflation, once bustling markets with the middle class families are empty, there are long queues of men and women where cooked meal or grocery items are the distribution points.

Both scenario involve real humans living in the same country and city amid the same economic crisis that has triggered inflation and cost of living crisis. Same

Surely, there is something that differentiates the two sets of people. What is this? Ample finances for the first and reduced purchasing power for the second?

Yes, but there is something more as the cost of living or purchasing power crisis should affect everyone. There is inflation and the prices of all commodities – from food to luxury items – have surged.

If the income of the first set of people has also reduced and they are only spending their savings, then it is incomprehensible because they aren’t stupid. No one would waste money on expensive coffee or imported car or buy a piece of land without a sustained money supply.

So the only thing separating the two is that the elite and the upper middle class still enjoy reliable sources of money even during an economic crisis that has destroyed many lives.

And it is also means that the gap between the rich and the poor is widening – the most frightening consequence of the current turmoil.

Of course, the wealthy classes around the world are acting in the same. China is an example. But it raises another question: for how long they can sustain this crisis or are they immune to it?

As far as Pakistan is concerned, we need more in depth look into the phenomenon as we don’t have the required industrial base and economic resources.

“Tax amnesty schemes and exemptions are for the rich. The salaried class members start thinking about the next pay cheque even before 15th of the month,” says a citizen, explaining the state of affairs in a clear manner.

It is the government policies like tax breaks and financial incentives that help the wealthy grow their money through financial market investments.

Meanwhile, those not falling in this category are burdened with indirect taxes and higher electricity, gas, petrol and diesel prices with any wage or income growth.

The higher cost of doing business means businesses and industrial units – from small and medium to large – busted. They are either shut down permanently or bought by the others, further leading to concentration of wealth.

But this cycle doesn’t stop there as the fewer number of businesses in any sector means less competition, exploiting new avenues for exploitation. What we have been witnessing in shape of Big Tech and the banking sector in the developed economies is enough to understand the dynamics.

However, don’t forget looking around you in the market you visit for groceries and other any other item. Even eateries of different nature would help you realise that the concertation of wealth is happening around you right now slowly but surely.

“Till 1980s, even the low-income families would dream about buying a small piece of land to build a new house. But things had already started changing slowly. By the time we reached late 1990s, having land of their own had become impossible for many.”

This man, who was in his 70s, described the state of affairs correctly, adding, “It all came to an end due to the much-glorified Musharraf boom. He snatched even our dreams although a large chunk of the educated urban middle and upper middle thinks otherwise because of being a beneficiary of the bubble.”

He listed two factors for 1980s being a turning point? The effects of Dubai Chalo saga – the remittances sent from the Gulf States – and the jihad money of Zia era became visible to everyone with the skyrocketing land prices.

Just forget the big cities. Take Abbottabad for an example. A canal of land was available for less than Rs7,000 near the Ayub Medical College in late 1970s. However, the same plot was priced at Rs1.5 million just over 10 years later. Now calculate the difference with the current rate.

In our long journey, we in Pakistan have always left out the weaker during the recent decades. But the unprecedented rate and intensity of the ongoing changes around us certainly make these terrifying.

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JP Morgan predicts lower gas and LNG prices, which will help switch from coal

Published

2 days ago

April 25, 2024

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JP Morgan predicts lower gas and LNG prices, which will help switch from coal

Global natural gas prices will come under pressure through the end of the decade as supply and shipping infrastructure grow rapidly, particularly in Qatar and the US, JP Morgan said in a report.

Read more: Is Pakistan in the race? It should be: QatarEnergy CEO says new LNG supply deals ‘imminent’

The growth in gas output and liquefied natural gas (LNG) facilities, which allow tankers to transport the fuel around the world, will boost efforts to switch industries from highly polluting coal to gas, which can cut greenhouse gas emissions by as much as half, the report said.

The US investment bank forecasts a 2 per cent annual growth in natural gas production by 2030 to 4,600 billion cubic metres (bcm) from 4,000 bcm in 2022, which will lead to an oversupply of 63 bcm by the end of the decade.

Read more: Oil down over 3pc during the week despite Israel-Iran tensions

LNG exporting infrastructure is expected to grow by 156 bcm by 2030 from nearly 600 bcm in 2024.

The primary sources of production growth are expected to encompass the US, the Middle East and to a lesser extent Russia, the report said.

“We see a downward global LNG price trajectory with increased volatility driven by a structurally oversupplied market,” JP Morgan Global chief global energy strategist Christyan Malek told Reuters.

Read more: Russia cuts oil price forecast to $65 per barrel in 2024-27

The world’s leading oil companies including Shell, BP and TotalEnergies are betting on growing demand for gas and LNG as economies grow and switch from coal to natural gas as part of their efforts to reduce greenhouse gas emissions.

The sharp growth in gas supply and the drop in prices could lead to a rapid conversion from coal to gas that could save up to around 17pc of global carbon emissions, the report said.

Read more: Refineries against fuel price deregulation which Ogra says will boost competition

“While the risks of oversupply in global LNG towards the end of the decade are well understood, we believe the upside potential of coal to gas switching on LNG demand has been underestimated,” Malek said.

The European oil companies’ plans to grow gas and LNG output will however have a minimal impact on their plans to reduce carbon emission intensity of their business by 2030, research firm Accela said in a recent report.

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Business

Thailand interest rates: Thai lenders to cut rate by 25 bps for ‘vulnerable groups’

Published

2 days ago

April 25, 2024

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Thailand interest rates: Thai lenders to cut rate by 25 bps for 'vulnerable groups'

Thai banks will cut lending rates by 25 basis points for vulnerable groups for a period of six months, a bankers’ association said on Thursday, responding to a government request to help small businesses.

Thai Prime Minister Srettha Thavisin has been repeatedly pressing the central bank to cut interest rates from a more than decade high of 2.50 per cent, saying it is hurting businesses as the economy confronts stubbornly high household debt and China’s slowdown.

Read more: Thailand interest rates conundrum: Economy shrinks, as PM wants cuts but central bank doesn’t

He this week said he had asked Thailand’s four largest lenders to lower their rates.

The banks’ rate cuts will be for both individual and SME customers and will help reduce their interest burden and support their recovery, the bankers’ association said in a statement.

“Thailand member banks will expedite consideration of implementing the aforementioned principle and prepare the work system to answer the needs of vulnerable customers of each bank in the appropriate context as quickly as possible,” it said.

The Bank of Thailand left its key interest rate unchanged for a third straight meeting on April 10, resisting government pressure to ease, saying the rate still supported the economy. The next rate review is on June 12.

Read more: Interest rates continue creating fissures between governments and central banks

The association said its move was in the same direction as the government in driving the economy and in line with the central bank’s responsible lending.

An official said it was up to each participating bank to decide when they would implement the measure.

On Wednesday, the central bank said the current policy rate was close to neutral, robust and could handle future risks to the economy, but the rate could be adjusted if needed.

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Business

War on inflation: Hungary gives fuel traders two weeks to match regional average prices

Published

2 days ago

April 25, 2024

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War on inflation: Hungary gives fuel traders two weeks to match regional average prices

Hungary’s government is giving fuel traders two weeks to adjust their prices to the central European average, Economy Minister Marton Nagy was quoted by the index.hu outlet as telling a news conference on Wednesday.

Prime Minister Viktor Orban’s government scrapped a fuel price cap in December 2022 after a lack of imports and panic buying led to fuel shortages, but promised it would intervene again if fuel prices rose above the regional average.

On Tuesday, the national bank said fuel price margins had widened since the cap was scrapped, exceeding not just their previous levels but also average levels seen elsewhere in central Europe.

“In two weeks, the government will revisit this issue, look at price developments and intervene with tough measures if fuel retailers do not return to the regional average,” Marton Nagy was quoted as saying.

Read more: Refineries against fuel price deregulation which Ogra says will boost competition

On Tuesday, deputy central bank governor Barnabas Virag said he believed any intervention that “moves the market towards a lasting and sustainable decrease in these margins, setting fuel prices on a lasting and sustainable lower path” was justified.

In the first quarter of last year, annual inflation in Hungary stood at 25 per cent, the highest in the European Union. It stood at 3.6pc last March, but economists see it rebounding to 5.4pc by the end of 2024 as base effects fade and services inflation stays hot.

Morgan Stanley economist Georgi Deyanov said Hungary’s plan to align fuel prices to the regional average could trim 20 to 30 basis points off headline inflation, raising the chances of keeping it within the central bank’s tolerance band.

“We think that such an outcome would create a favourable environment for the NBH to proceed with 25bp of rate cuts per meeting in 3Q24,” he said.

“Yet, for the central bank to consider such an option, we believe more favourable global financial conditions would need to materialise too.”

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