Economic & Political Weekly 16th December, 2018

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World

Politics-· Ruling Hindu nationalists suffer major losses in state elections. Rahul Gandhi’s Congress Party ‘revived’ ahead of next year’s national poll.

In Madhya Pradesh, Rajasthan and Chhattisgarh, Congress Party has won. In Mizoram and Talangana, Mizo National Front and Telangana Rashtra Samithi, two regional parties have won.
Indian Prime Minister Narendra Modi’s Hindu nationalist Bharatiya Janata Party (BJP) faced a damaging defeat by the opposition Congress Party in elections in three major states. The near-certain loss, in provisional election results announced would be Mr Modi’s biggest political setback since he assumed office in May 2014 and comes months before a general election due by May 2019.

·   70th anniversary Adopted and proclaimed by the United Nations on December 10th, 1948 regarding 30 rights embodied in the Universal Declaration of Human Rights has been celebrated on 10th Dec 2018.

 

 

The Universal Declaration of Human Rights is a milestone document in the history of human rights. Drafted by representatives with different legal and cultural backgrounds from all regions of the world, the declaration was proclaimed by the United Nations General Assembly in Paris on December 10th, 1948, as a common standard of achievement for all peoples and all nations.

 

  • Time magazine has unveiled its Person of the Year honoring murdered Saudi Jamal Khashoggi and three other journalists persecuted As “Person of the Year”

Among those named with Khashoggi were Philippine journalist Maria Ressa, Reuter’s reporters Wa Lone and Kyaw Soe Oo — currently imprisoned in Myanmar — and the staff of the Capital Gazette in the US city of Annapolis, including five members killed in a June shooting. Time, which has awarded the “Person of the Year” title annually since 1927, four different magazine covers for this week’s edition, each one spotlighting different honorees have come on surface.

·         Huawei CFO gets bail; China detains ex-Canadian diplomat.

A Canadian court granted bail on 11th Dec to a top Chinese executive arrested at the United States’ request in a case that has set off a diplomatic furor among the three countries and complicated high-stakes U.S.-China trade talks.

Hours before the bail hearing in Vancouver, China detained a former Canadian diplomat in Beijing in apparent retaliation for the Dec. 1 arrest of Meng Wanzhou, chief financial officer of Chinese telecommunications giant Huawei and daughter of the company’s founder.

Amid rising tension between China and Canada, Canadian Public Safety Minister Ralph Goodale confirmed earlier that a former Canadian diplomat had been detained in Beijing.

  • Seven people were killed after a high-speed train crashed into a locomotive in the Turkish capital on Thursday, the Ankara governor’s office said, revising an initial death toll.

The governorate said in a statement that one of those killed was the train driver and that 46 people were injured including three in a serious condition. Ankara governor Vasip Sahin had earlier said four people had died and 43 were injured.

·  Sri Lankan prime minister resigns 1½ months into job Mahinda Rajapaksa steps down as president seeks to avoid looming government shutdown

Sri Lanka’s embattled prime minister Mahinda Rajapaksa resigned on 15th Dec only a month and a half after taking office and giving the country’s president political space to prevent an imminent government shutdown. The South Asian island has been in political limbo since president Maithripala Sirisena in late October replaced former prime minister Ranil Wickremesinghe with Mr Rajapaksa, who was then twice sacked by parliament but had refused to resign. But as a government shutdown loomed, Mr Rajapaksa said in a statement on 15th Dec that “I have no intention of remaining as prime minister without a general election being held, and in order to not hamper the president in any way, I will resign from the position of prime minister and make way for the president to form a new government,”.

·  Countries agree rules for implementing Paris climate deal. Decision on international co-operation on carbon trading postponed after impasse.

Officials from around the world have agreed upon a set of rules to govern the 2015 Paris climate accord after two weeks of UN talks in Poland. The UN talks were meant to provide firm guidelines for countries on how to transparently report their greenhouse gas emissions and their efforts to reduce them. Scientists say emissions of gases such as carbon dioxide need to drop sharply by 2030 to prevent potentially catastrophic global warming. The meeting postponed decisions on pledging more ambitious action to fight global warming and on regulating the market for international carbon emissions trading.

Significant progress has been made in agreeing to pursue a new climate finance goal for supporting developing countries and states that are most vulnerable to climate change.

·   Eleven die, more than 90 sick after eating temple food in India

Eleven people including two children died and more than 90 were hospitalized after consuming a religious food offering at a temple in southern India police said on15th Dec, calling it a suspected case of mass food poisoning. Several crows and dogs were also found dead after eating the food. In 2013, 23 school children died in the eastern state of Bihar in one of the worst outbreaks of mass food poisoning in the country. Police had suspected that it was caused by cooking oil that had been kept in a container previously used to store pesticide.

· Paris braces for fifth weekend of protests by ‘yellow vests’

Demonstrations have continued despite demands to call off action after Strasbourg attack. Thousands of riot police and armored vehicles were deployed in Paris as France anticipates a fifth weekend of anti-government protests in the capital and other cities across France. Despite government pleas for the gilets jaunes – or yellow vest – protesters to call off street demonstrations in the wake of the terror attack in Strasbourg, many vowed to continue their struggle. The grassroots protest movement has continued all week on roundabouts and tollbooths and authorities believe street marches in major cities will go ahead.

Economy-

  • India’s government named an ally of Prime Minister Narendra Modi as the country’s new central bank chief on 11th Dec , a day after his predecessor quit following a dispute about government’s interference.

Shaktikanta Das has been appointed governor of the Reserve Bank of India (RBI) for three years, a government statement said. The 63-year-old is a former senior finance ministry official and a key figure in Modi’s controversial “demonetization” scheme of November 2016. Das has worked with various government bodies and was part of the economic affairs ministry when Modi announced his controversial cash ban that scrapped 86 percent of notes overnight.

Outgoing governor Urjit Patel’s resignation came after over a month-long tussle over policy with the government that raised concerns about the central bank’s independence.

  • Global indices as of Dec 14 as compared to Dec 08, 2018.

European US shares closed lower on 14th Dec as weak European and Chinese data renewed worries about global growth and sent a pan-European benchmark on course for its worst quarter since 2011.

Global indices as on 14th Dec 2018
Name Current Value Change
US MARKETS
 Nasdaq (Dec 14) 6,910.66 -159.67
EUROPEAN MARKETS
 FTSE (Dec 14) 6,845.17 -32.33
 CAC (Dec 14) 4,853.70 -43.22
 DAX (Dec 14) 10,865.77 -58.93
ASIAN MARKETS
 Nikkei 225 (Dec 14) 21,374.83 -441.36
 Straits Times (Dec 14) 3,077.09 -33.99
 Hang Seng (Dec 14) 26,094.79 -429.56
 Taiwan Weighted (Dec 14) 9,774.16 -84.60
 KOSPI (Dec 14) 2,069.38 -26.17
 SET Composite (Dec 14) 1,609.45 -5.54
 Jakarta Composite (Dec 14) 6,169.84 -7.88
 Shanghai Composite (Dec 14) 2,593.74 -40.31
 SGX Nifty (Dec 15)

 

Global indices as on 08th Dec 2018
Name Current Value Change
US MARKETS
 Nasdaq (Dec 08) 6,969.25 -219.01
EUROPEAN MARKETS
 FTSE (Dec 07) 6,778.11 74.06
 CAC (Dec 07) 4,813.13 32.67
 DAX (Dec 07) 10,788.09 -22.89
ASIAN MARKETS
 Nikkei 225 (Dec 07) 21,678.68 177.06
 Straits Times (Dec 07) 3,111.12 -4.40
 Hang Seng (Dec 07) 26,063.76 -92.62
 Taiwan Weighted (Dec 07) 9,760.88 76.16
 KOSPI (Dec 07) 2,075.76 7.07
 SET Composite (Dec 07) 1,649.99 -3.74
 Jakarta Composite (Dec 07) 6,126.36 10.87
 Shanghai Composite (Dec 07) 2,605.89 0.71
 SGX Nifty (Dec 08) 10,647.50 -91.50

 

Pakistan

Politics

  • Chief Justice of Pakistan Mian Saqib Nisar on Dec11 has said that no country could progress without rule of law and underlined the need to revamp the laws and system in order to curtail inordinate delay in dispensation of justice.

He stated that unfortunately there were litigation-orientated people in the society and they used to approach courts unnecessarily in rent or other frivolous civil matters, adding that cost must be imposed on such frivolous litigations. Speaking to lawyers and judges after laying the foundation stone of a proposed new registry building of the apex court at the Pakistan Secretariat, the chief justice said that judges were working hard, but the desired results were not being achieved, hence it had become necessary to introduce reforms and revamp the law and system.

  • The Islamabad High Court (IHC) on Dec 12 ordered the removal of prime minister’s aide Syed Zulfi Bukhari’s name from the Exit Control List (ECL).

The interior ministry had placed Bukhari’s name on the ECL in August upon the National Accountability Bureau’s request after he was accused of owning off-shore companies in the British Virgin Islands, and of owning assets beyond his known sources of income. Bukhari — who is the prime minister’s special assistant on overseas Pakistanis and human resource development — had challenged the decision in the IHC in October. The court has directed NAB to continue its inquiry against Bukhari as per the law.

  • At the launch of journalist Nasim Zehra’s book From Kargil to the Coup — Events that Shook Pakistan at a local hotel on 1th Dec evening discussed the Kargil crisis threadbare, dissecting the conflict with India and its aftermath in detail.

Retired Lt Gen Tariq Waseem Ghazi said at the time of the Kargil operation [in 1999] he was leading a UN peacekeeping mission. Around April he sensed something was amiss. Every time he called back home he would get a “cagey” response. When he came back to Pakistan there were all kinds of twisting and manufacturing of facts for the purpose of defining a particular narrative. He could never understand the strategic logic of the Kargil operation. Later when he was posted at the Command and Staff College in Quetta he was keen to study Kargil and the lessons that could be learned from it but he received orders not to do that.

Former ambassador Shahid Amin said that Kargil was a great military and political disaster, but we must pay tributes to the sacrifices of the volunteers and mujahideen who laid down their lives. They didn’t have any real equipment to fight with. Journalist Ghazi Salahuddin emphatically argued that no excuse could justify the Kargil operation. What could the then prime minister (Nawaz Sharif) have done? Mr Salahuddin said there was so much intolerance in the country and the Kargil episode was an offshoot of such problems.

Senator Sherry Rehman added that the Kargil issue was not just about coordination, it’s also about asking who was responsible. Nobody was held accountable for diplomatic disadvantage. Not only did the secrecy cloak military encounters, she said, it baffled her mind that it continued to be the case. “Is the prime minister asking hard questions?”

  • The Pakistan People’s Party (PPP) leader and former MPA from south Punjab, Shaukat Basra announced his departure from the party on 13th Dec, having joined hands with the Pakistan Tehreek-i-Insaf.

The announcement followed a meeting with PTI stalwart Jahangir Khan Tareen w ho extended an invitation to the politician to join the party. Later, having made his decision, Basra met with Prime Minister Imran Khan who welcomed him into the PTI fold and recognised his contribution to national politics.

  • Foreign Minister Shah Mehmood Qureshi announced in the National Assembly on 13th Dec that Prime Minister Imran Khan has decided to not stand in Leader of the Opposition Shahbaz Sharif’s way, if he wants to head the Public Accounts Committee (PAC).

He said that Imran Khan has reviewed his decision and if Shahbaz Sharif wants to head the PAC, the government will not obstruct.”In the larger interest of democracy and in order to make the parliament functional, we concede to the opposition’s demand.”

  • The Supreme Court on 13th Dec ordered a 20 per cent decrease in fees charged by upscale private schools, and ordered them to return fees they had charged for summer vacations. The order is applicable to private schools across the country whose fees are in excess of Rs5, 000.

The court, while hearing a case pertaining to exorbitant fees charged by private schools, had in October ordered the institutes to furnish their respective audit reports, and formed a committee to find an amicable solution to the issue of exorbitant fees being collected from parents.

  • The Supreme Court on 13th Dec 2018 ordered Aleema Khanum, Prime Minister Imran Khan’s sister, to pay Rs29.4 million in taxes and fines.

In hearing, the Federal Board of Revenue (FBR) told the court that a fine and tax worth Rs29.4m has been placed on Khanum, who has been identified as benamidar of a property. A three-judge SC bench, while hearing a case against 44 politically exposed individuals or their benamidars who possess properties in the United Arab Emirates, remarked that failure on Khanum’s part to oblige to court orders will result in confiscation of her properties. Khanum, who was present in court today, took the stand and said that she had bought the property abroad in 2008 against $370,000 and that she had sold the said property in 2017..

  • Chief Justice of Pakistan Justice Mian Saqib Nisar, paid his first official visit to Tharparkar district on12th Dec.

He underlined the need to uplift the education and health services in the drought-hit desert region. “There is need to do more work in the health and education sectors because I visited just one school but didn’t find the situation satisfactory there.” The CJP was accompanied by justices of Sind High Court, Sind Chief Minister Syed Murad Ali Shah, provincial ministers and other officials during his visit The CJP referred to the absence of surgeons and radiologists at the hospital which reflected the state of health affairs in Tharparkar. “I found it strange when I saw an x-ray machine kept idle for 10 years,” he told. “There’s an operation theatre but the surgeons aren’t available.” Justice Nisar said the CM had himself witnessed the situation and expressed the hope that he would take immediate measures to resolve the issues. The CJP said he was briefed that the Sind government distributed subsidized wheat among the residents of Tharparkar as a drought relief measure.

· Pakistan can go up within a span of 5 years: Dr AQ Khan.

Nuclear scientist Dr Abdul Qadeer Khan has said the country can be transformed into Turkey and Malaysia within a time span of five years. Khan was speaking as the chief guest at the inaugural session of four-day long biennial conference organized at the University of Karachi. The scientist said there is a dire need to build news dams, but the government must also look into other alternatives for the cause. He reiterated that Pakistan has no shortage of natural resources, or talent. This talent, however, has not been utilized because merit is ignored.“We can get the best people who are experts in their respective fields; we just need to utilize their abilities properly,” he added.

  • For the parents of the 144 children martyred by terrorists at the Army Public School in Peshawar, grief is eternal.

Awami National Party (ANP) president Asfandyar Wali Khan has said the wounds of the Army Public School (APS) tragedy were not healed despite the passage of four years and the nation was still mourning the loss of precious lives. “The murderer of innocent children is now a state guest while the victims still await justice,” he said referring to Ehsanullah Ehsan, the former spokesperson of Tehreek-e-Taliban Pakistan (TTP) who is currently in custody of law enforcers.“The real motives behind the tragedy are yet to be brought to fore,” he said in a message on the eve of fourth anniversary of the APS attack that killed around 150 people, mostly schoolchildren.

  • As a result of the Indo Pak war, East Pakistan disintegrated and became an independent country, Bangladesh, on 16 December 1971.

The Indo-Pakistani War of 1971  was a military confrontation between India and Pakistan that occurred during the war in East Pakistan from 3 December 1971 to the fall of Dacca (Dhaka) on 16 December 1971. This is a sad moment for Pakistan that happened due to gross mistakes of Government Officials and Political leaders of that time. This has brought a lesson to Pakistan as well that like any other country, Pakistan as a Federal State can survive only with a democratic system having parliament and strong institutions on the backing of support from people of Pakistan.

 

Economy

· SBP receives 2nd installment of $1 billion from S. Arabia.

Pakistan’s central bank has received another installment of one billion dollars from Saudi Arabia’s bailout package for Pakistan. A spokesman of State Bank of Pakistan (SBP) has said that the bank has received another tranche of one billion US dollars from the package, the kingdom had announced after visit of Prime Minister Imran Khan.

  • Fitch Ratings, one of the three major global rating agencies, on 14th Dec downgraded Pakistan’s long-term debt rating to ‘B-Negative’ owing to high debt repayment obligations, low foreign exchange reserves and fragile fiscal situation. The outlook, however, remains stable.

The New York-based agency said the downgrading of the rating from ‘B’ to ‘B-’ reflects heightened external financing risk from low reserves and elevated external debt repayments, as well as continued deterioration in the fiscal position, with a rising debt-to-GDP ratio. It said that a successful conclusion of the ongoing negotiations on IMF support could help stabilize external finances, but the program would then face significant implementation risk.

Pakistan’s liquid reserves have continued to fall, reaching $7.3 billion as of Dec 6 — equivalent to 1.5 months of imports — despite significant stabilization efforts by the State Bank of Pakistan and the new PTI government.

The agency has noted 425 basis points hike in interest rate during 2018 and 24 per cent currency depreciation since December 2017 and forecast current account deficit to narrow to 5.1pc of GDP in the fiscal year ending June 2019 and to 4pc in FY20, from a revised 6.1pc in FY18. Rupee depreciation, lower oil prices and newly imposed import duties will drive a deceleration in imports, while exports are likely to strengthen gradually. However, this may not be sufficient to rebuild reserve buffers sustainably.

Fitch estimates that in the absence of an IMF program, liquid foreign exchange reserves will continue to fall to $7bn by the end of the current fiscal year. It said Pakistan’s debt-to-GDP ratio rose to 72.5pc in last fiscal year ending June 2018 from about 67pc a year before due to rupee depreciation and widening fiscal deficit. Fitch forecast the debt ratio to rise further to 75.6pc of GDP in current fiscal year on additional rupee depreciation.

Fitch forecast fiscal deficit to narrow to 5.6 of GDP this year, higher than 5.1pc targeted by the PTI government in supplementary budget but much lower than 6.6pc last fiscal year.The rating agency has noted with concern accumulation of PSE’s losses as contingent liability, particularly power sector circular debt worth almost 3pc of GDP. It forecast GDP growth to fall to 4.2pc this fiscal year, from a 13-year high of 5.8pc last fiscal year, as monetary and fiscal tightening measures begin to weigh on activity. However, this remains above the current ‘B’ category median GDP growth of 3.5pc. Reduced infrastructure capacity constraints, particularly in the energy sector, following CPEC investments, along with improved national security, could support growth in the medium term.

Fitch projects the inflation rate to rise to 7pc from 3.9pc last fiscal year.

  • The government on 13th Dec signed loan and grant agreements worth $284 million with the Asian Development Bank (ADB) in order to “improve Pakistan’s power transmission network”, stated a press release issued by ADB.

The agreement was signed at a ceremony in Islamabad by ADB Country Director for Pakistan, Xiaohong Yang, and Secretary Economic Affairs Division Noor Ahmed. “The project will help provide a more stable and secure electricity supply, so people and businesses can continue their productivity and contribution to the  economy,” Yang said, adding: “ADB was working with the government as well as private sector to further develop Pakistan’s power supply chain, including expanding the power transmission network”.

  • Despite being asset-backed, Islamic finance is still not immunized from risks associated with deficiencies in due diligence, inadequate buffers, lack of transparency and weak risk management practices.

While addressing the book launching ceremony of Shariah Standards on12th Dec, SBP Governor Tariq Bajwa talked about the risks the Islamic banking industry needs to tackle.“Effective liquidity management is the key challenge and has gained more prominence owing to dearth of Shariah-compliant investment opportunities and absence of Shariah-compliant SBP standing facility.”

F.C Exchange Rates of PKR
Countries PKR rate as of 8th Dec 2018 PKR rate as of 15th Dec 2018
U.S.A. 139.50 140.0
U.K. 175.90176.9 175.00176.0
Euro 156.90157.9 157.40158.4
Japan 1.2400 1.2200
Saudi Arabia 37.00 37.15
U.A.E. 37.90 38.10

The week saw a three-day bearish spell with cumulative loss of nearly 1,290 points. Than the PSE-100 index took a U-turn and climbed 574 points on 14th Dec on the back of an optimistic economic outlook by a rating agency and arrival of financial assistance from Saudi Arabia. The gain partially offset the hefty losses endured during the week, leading the bourse to finish the day near the 38,600-point mark. Moody’s negative report, scarcity of gas and fall in foreign currency reserves dented investor sentiments somewhat and prevented the market from rising any further.

Position as of 14th Dec 2018
Symbols                                        KSE100                                        PSX-KMI
Advanced (Curr.) 218
38585.66
18919.89
Declined (High) 80
38597.68
18935.91
Unchanged (Low) 27
38011.63
18674.51
Total (Change) 325
574.03
245.3

 

Position as of 7th Dec 2018

 

Symbols                                   KSE100                                 PSX-KMI
Advanced (Cur.)                  208
                                 38562.05
                                 18802.23
Declined (High) 107
                                 38651.88
                                  18863.39
Unchanged (Low)                                  20
                                 37779.67
                                  18394.72
Total (Change) 335
                           261.42
                           67.19

 

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