Nawaz & Lawyers Kill Pak Economy

Nawaz & Lawyers Kill Pak Economy

 

Tuesday, 13 May 2008.

WWW.AHMEDQURAISHI.COM

 

ISLAMABAD, Pakistan—The real test of leadership for Nawaz Sharif was the economy, not the judiciary.  You need brains for the economy. Any one can play hooliganism and politics, which is what the so-called judicial ‘issue’ is all about.

 

Did you hear Nawaz Sharif even once mention the economy in his press conference Monday night when he announced he was ditching the coalition government?

 

Did he once in his recent media events offer any solutions? 

 

He generally touched on “the problems that all of you know” and pretended that somehow the question of the reinstatement of a bunch of politicized judges was the real reason why all of us are facing economic problems.

 

Read these two brief, simple and brilliantly written reports on the Pakistani economy. They offer a balanced picture of the good and the bad. After reading them, you will notice how the two writers have more common sense than some of our leaders, unfortunately.

Investment Banking

Monday, May 12 2008

http://www.cpifinancial.net

Investors take long view on Pakistan economic turmoil
By: Mike Gallagher

Falling rupee coupled with high food and fuel prices in Pakistan causes concern for investors. World Bank says “painful adjustments” are necessary to overhaul economy.

 

Karachi. Photograph: M. Imran.

 

 

 

Reports have emerged that some investors are pulling out of Pakistan as a depreciating rupee caused by a weakening dollar and political uncertainty is blunting investor appetite. The rupee has dived by nearly 9 per cent since the start of the year to a little under 70 rupees to the dollar. The Pakistani currency has fell by two rupees in just one day’s trading last week amid concerns over rising inflation, which is at a 13 year high and falling foreign investment. Pakistan’s low foreign exchange reserves means that the central bank could struggle to keep the rupee above the 70 to a dollar mark.

 

Pakistan is currently attempting to access a $500 million loan facility from the World Bank, which it hopes to have before the end of June, although some of the conditions that the World Bank might impose are reportedly making the Pakistani authorities.

 

The World Bank said in a statement that Pakistan would need to undergo “painful adjustments” if it was to be able to stave off the effects of high inflation which has been brought on by a combination of high oil

prices and soaring commodities costs.

 

World Bank vice president Praful Patel bluntly said that Pakistan had not yet reached crisis point, “but the economic picture for Pakistan is not good. Growth can only continue if Pakistan adjusts to the new global reality, which includes high prices for oil, commodities and foodstuffs such as wheat,” he said.

 

This was echoed by the central bank. “We are not in a crisis like situation. Several measures are in place to remove macro-economic imbalances,” Shamshad Akhtar, the State Bank of Pakistan Governor said. She also said that they would continue to support foreign exchange rate stability to “curb excessive short term fluctuation”.

 

However, Patel said, “On the issue of food, Pakistan, I would say, is in an even more difficult situation that Bangladesh. They have a two million tonne deficit in the wheat harvest this year, so they need to import wheat at a time when it is simply not available and what is available is at a very high price.”

 

Meanwhile, a report on Pakistan’s Geo TV said that Pakistani real estate companies have been moving capital out of the country to the tune of at least $15 billion so far to invest in Gulf real estate.

 

One analyst said, “People who were stung by the credit crunch had been looking at Pakistan, even before the Bhutto assassination took place and while the political situation is becoming more stable, you need to look at what kinds of deals are taking place in the infrastructure market there. I think there are deals still happening, but it is hard to say accurately what is happening off the back of the current situation.”

 

All this comes at a time when several financial institutions from the GCC and South East Asia have announced they were moving into the troubled country to set up banks or insurance companies by teaming up with local entities or by going it alone. The likes of Al Baraka, Habib bank, Oman International Bank, Dubai Islamic Bank and most recently Maybank, have entered the country. Maybank said it was preparing to pay around $930 million to acquire a 20 per cent stake in MCB Bank.

 

In the summer of 2007, Qatar Islamic Bank, the fifth largest Islamic bank in the world and the largest Islamic bank in the Qatar, said it was planning to launch an Islamic bank in Pakistan with paid up capital of $100 million.

 

Ahmad Barghout, senior manager of the corporate investment and developments group at Qatar Islamic Bank speaking to CPI Financial said, “Both Pakistani and GCC companies are opportunity driven. There are opportunities in both areas and I think investors are taking the long term view.”

 

While the current economic and political instability in Pakistan is causing concern in some circles, Mansoor Khan, managing director of Lahore-based law firm Khan Associates told CPI Financial that conventional banks would probably be more affected by the turmoil than their Islamic counterparts.

 

“The conventional banks are western, risk-averse and do not understand ‘Pakistan risk.’ Islamic banks are primarily Middle Eastern or Asian and have a better understanding of the mentality of Pakistan. They will not be put off,” he said.

 

Source: CPIfinancial.net

 

Pakistan Inflation Accelerates to Fastest in 25 Years (Update3)

By Farhan Sharif

May 12 (Bloomberg) — Pakistan‘s inflation accelerated at the fastest pace in at least 25 years in April because of surging food and fuel prices, straining a six-week-old coalition government already on the brink of collapse.

Consumer prices jumped 17.21 percent from a year earlier after gaining 14.1 percent in March, the Federal Bureau of Statistics said in a statement in Islamabad today.

Finance Minister Ishaq Dar‘s party said it will quit the coalition led by the Pakistan Peoples Party tomorrow, hampering the government’s ability to rein in prices. Dar said May 4 that oil and food prices are undermining the fight against poverty.

“If the trend continues, it will cause serious concerns to the new government,” said Farhan Rizvi, an economist at JS Global Capital Ltd. in Karachi. “Oil prices have added to already high food prices, which directly hit the masses.”

Oil at more than $125 a barrel and lower wheat output are straining state finances as food and fuel are subsidized in the nation of 160 million people. Hundreds of people queue for hours outside state-run shops to buy subsidized wheat flour and other essential goods across the nation.

Food prices in April rose 25.5 percent from a year earlier and fuel climbed 8.6 percent, according to the data. Inflation is the highest since at least June 1983, according to JS Capital. The statistics bureau doesn’t have data preceding the year 2000.

Stocks, Currency

Pakistan‘s key stock index rose 0.4 percent to 14,286.61 after falling 4.9 percent last week, the biggest weekly decline in almost nine months. The rupee rose 1 percent against the dollar to 69, after losing 6.8 percent last week, the most since 1998. Inflation data was released after markets closed.

Almost half the population of Pakistan, the world’s seventh- most-populous nation, faces difficulty gaining access to affordable food because of the soaring cost of cereals, a World Food Program spokesman Paul Risley said on April 23.

The Rome-based United Nations agency increased its estimate of the number of so-called food insecure people in Pakistan to 77 million from 60 million.

The nation may import more than 1.5 million metric tons of wheat this year to ease the shortage, farm minister Chaudhry Nisar Ali said on April 24.

The average price of pulses has risen about 50 percent since January, said Fareed Qureshi, chairman of the Karachi Retail Market Association. Average edible oil prices have climbed 16 percent since the start of the year and rice is 26 percent more costly than it was on Jan. 1, he said.

Pakistan‘s prices of wheat, flour, edible oil and pulses are at a record now,” Qureshi said.

Oil Bill

Pakistan, which imports about 85 percent of the oil it uses, increased prices of gasoline for the first time in more than 22 months on Feb. 29 after record crude prices increased import costs for the nation’s refiners. Oil & Gas Regulatory Authority, the regulator, has since raised prices three more times.

The trade deficit widened to $2.3 billion in April from $1.1 billion because of the rising oil import bill, the Bureau of Statistics said on May 10.

The central bank increased its benchmark interest rate for a second straight meeting on Jan. 31 to tame inflation. The discount rate for commercial lenders was raised half a percentage point to 10.5 percent for the six months ending June 30. Inflation may exceed the government’s target of 6.5 percent this year, curbing economic growth, the central bank said on March 31.

“The inflation is paced mainly by food and oil prices,” said Suleman Akhtar, an economist at Foundation Securities in Karachi. “In current conditions, a rise in interest rates would not do much.”

China, India

Rising commodity prices are also stoking inflation in neighboring India and China. Prices in China accelerated to near the fastest in more than 11 years, the government said today, while inflation in India is at a 3 1/2 year high.

Pakistan‘s consumer prices may jump as much as 9 percent in this fiscal year ending June 30, exceeding the target of 6.5 percent, the central bank estimates. Annual inflation may reach 12.5 percent, said JS Global’s Rizvi.

Sharif, who leads the second-largest party in parliament, said today he will withdraw from the PPP-led government because of a dispute over sacked judges.

“Reinstating the judges was a condition for joining the coalition government,” Sharif said, after meeting leaders of his Pakistan Muslim League in Islamabad. “We will continue to support the PPP-led government on an issue to issue basis.”

To contact the reporter on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net.

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