Economic & Political Weekly 23rd December, 2018

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World

Politics-

· Turkey, Iran vows to work closer on Syria

Turkish President Recep Tayyip Erdogan and Iranian counterpart Hassan Rouhani on 20th Dec vowed to work closer to end the fighting in Syria. But the two leaders made no comment on US President Donald Trump’s shock announcement that he was pulling US troops out of the war-ravaged nation.”There are many steps that Turkey and Iran can take together to stop the fighting in the region and to establish peace,” said Erdogan, without elaborating, at a joint news conference with Rouhani in Ankara.

· Satellite photo from Mars shows a giant crater loaded with ice.

Flying over the frigid northern reaches of Mars, the orbiting Mars Express satellite captured images of the 50-mile wide Korolev crater filled with ice. Korolev is an especially alluring sight, not just because it’s a well-preserved impact crater but because it’s loaded with ice over a mile deep year round.  Launched 15 years ago by the European Space Agency (ESA), Mars Express often focuses on glaciers and ice in the Martian Polar Regions. 

  • The 92-year-old queen arrived at King’s Lynn station today to kick off her Sandringham Christmas break today wearing—brace yourself—neutrals.

Abandoning her go-to neon coats and big hats, the queen blended in with her subjects in a chic camel-colored coat, a silk Burberry headscarf (similar, $400) and her signature Gucci “Horse bit” loafers ($690) and Launer “Judi” purse ($1,535). But no need to panic: There was a pop of bright floral print peeking out from underneath her coat. 

· Chaos shifts from French streets to politics and the economy.

The French political and economic landscape looks like the Champs-Élysées the morning after a riot by the gilets jaunes, the yellow-vested demonstrators who savaged President Emmanuel Macron’s best-laid plans over the past five weeks. The movement appears to have subsided for the time being. But the government is bungling its PR. The success of the yellow vests in extracting €10.3 billion in concessions has inspired a money grab. While the Élysée splurges in the name of social peace, Prime Minister Édouard Philippe clings to the idea of budgetary discipline.

  • Explosions rocked Yemen’s Red Sea city of Hodeidah for a second day on 19th Dec despite a U.N.-mediated ceasefire meant to pave the way for peace negotiations to end nearly four-years of war.

The Iranian-aligned Houthi movement and the Saudi-led government had traded blame for violations on the first day of the truce, when residents reported shelling on the eastern and southern outskirts of the Houthi-held city at night.

The United Nations brokered the truce deal as part of confidence-building measures at peace talks last week in Sweden to avert a full-scale assault on the port that is vital for urgent aid supplies for millions facing starvation.

“If the U.N. takes too long to get into (the) theater, they will lose the opportunity altogether and the Stockholm agreement will be a dead duck,” said the coalition source, who declined to be named.

  • The United Arab Emirates said on 19th Dec that reconciliation talks it hosted between the United States and Taliban officials from Afghanistan produced tangible and positive results.

The two days of meetings aimed at ending Afghanistan’s 17-year conflict were held in Abu Dhabi, with the attendance of Saudi Arabia and Pakistan. The “US-Taliban reconciliation talks” produced “tangible results that are positive for all parties concerned”, state-run WAM news agency said. The latest talks between the Taliban and the US peace envoy on the war in Afghanistan focused on the withdrawal of Nato troops, the release of prisoners and halting attacks on civilians by pro-government forces, a Taliban spokesman said on Wednesday.

A new round of talks would be held in Abu Dhabi “to complete the Afghanistan reconciliation process,” WAM said without providing further details.

  • President Xi Jinping vowed to push ahead with China’s “reform and opening up” but warned that no one can “dictate” what it does, as the Communist Party celebrated the policy’s 40th anniversary.

While he pledged to press forward with the economic reforms initiated under late paramount leader Deng Xiaoping in December 1978, Xi indicated that there would be no change to the one-party system. “The great banner of socialism has always been flying high over the Chinese land,” Xi said in a speech at Beijing’s imposing Great Hall of the People.

  • It is likely shocking for some Americans, for the first time the United States joined the ranks of places where the business of doing journalism carries real hazards. Seventy-eight journalists have been killed and 326 imprisoned around world in 2018.

Rubén Pat was gunned down execution-style outside a Mexican beach bar. Yaser Murtaja was fatally shot by an Israeli army sniper. Bulgarian Viktoria Marinova was beaten, raped and strangled. A car bomb killed Malta’s Daphne Caruana Galizia. The murder of journalist Jamal Khashoggi’s inside Saudi Arabia’s consulate in Istanbul on Oct. 2 sparked an international outcry. Here’s what should also stir public disquiet: 2018 was the worst year on record for deadly violence and abuse toward journalists, according to a report.

·US begin Syria troop pull-out as Trump declares victory over Isis. Withdrawal also hints at disagreements between White House and Pentagon over Syria policy.

US president Donald Trump has claimed victory over the Islamic State terror group in Syria as the White House said it had begun to pull US troops out of the country. The troop withdrawal hinted at disagreements between the White House and the Pentagon over Syria policy and was branded a “mistake” by one Republican senator.

  • Grace Mugabe faces South Africa arrest warrant.

South African prosecutors have issued an arrest warrant for Zimbabwe’s ex-first lady, Grace Mugabe, for allegedly assaulting a model in 2017, police say. The move comes after a court annulled her diplomatic immunity in July. South Africa’s government was criticised for letting Mrs Mugabe leave the country after the alleged assault. Gabriella Engels accused Mrs Mugabe of beating the “hell out of me” with an electric extension cord in a hotel room in Johannesburg.

  • Tanzania’s opposition unites against ‘The Bulldozer’ Cuf party.

Tanzania’s six main political parties have agreed to work together to fight rising “authoritarianism” in the country. After a two-day meeting on the island of Zanzibar, leaders and top officials of the parties issued a joint statement criticizing President John Magufuli for overseeing what they said was a repressive government that branded critics as “unpatriotic traitors”. Mr. Magufuli, nicknamed “The Bulldozer”, came to power in 2015 and was initially praised for his anti-corruption stance, but critics have since accused him of growing intolerance.

·   Carlos Ghosn: Court rejects request to extend detention.

In a surprise move, a court in Japan has rejected a request to extend the detention of Nissan’s former chairman Carlos Ghosn, paving the way for his release. He was arrested in Tokyo in November after the allegations first surfaced. However, in a shock decision the Tokyo District Court said on Thursday it had heard the prosecutors’ request to keep Mr Ghosn in detention, and had rejected it. The move means he may be released as early as Friday. Mr. Ghosn, a towering figure in the auto industry, has previously denied the accusations made against him.

Trudeau ‘very concerned’ over third Canadian detained in China

Canadian PM Justin Trudeau has said he is “very concerned” about a third Canadian detained in China. The latest detention comes amid a growing dispute between both countries following the arrest of a senior Chinese telecom executive earlier this month.

Officials say they do not believe this case is linked to that of two other Canadians recently held in China.

Economy-

  • The economic outlook hasn’t been quite as rosy lately, and so the Fed is stepping back just a bit. The Federal Reserve raised its key interest rate Wednesday for a fourth time this year but lowered its forecast to two hikes in 2019 amid the recent stock market sell-off and uncertain growth prospects.

“The economy has continued to perform well,” Fed Chairman Jerome Powell said at a news conference. But, he added, “We have seen developments that may signal some softening … In early 2018, we saw a rising trajectory for The central bank’s latest move, which comes amid President Donald Trump’s repeated criticism of Fed rate hikes, is expected to set off a domino effect across the economy, bumping up rates on credit cards, home equity lines of credit and adjustable-rate mortgages. As expected, the Fed raised the federal funds rate – which is what banks charge each other for overnight loans – by a quarter point to a range of 2.25 to 2.5 percent. It marked the central bank’s ninth hike since late 2015.

  • Global indices as of Dec 21 as compared to Dec 14, 2018.

Wall Street stocks fell sharply in volatile trading on 21st Dec with the NASDAQ confirming it is in a bear market, as concerns of slowing economic growth led investors to flee stocks in high-valuation sectors such as technology and communication services. World stock markets as well continued a week-long sell-off on 21st Dec as the threat of a U.S. government shutdown and further hikes in U.S. borrowing costs compounded investor anxiety that global economic growth is slowing.

Global indices as on 21st Dec 2018
Name Current Value Change
US MARKETS
 NASDAQ (Dec 21) 6,333.00 -195.41
EUROPEAN MARKETS
 FTSE (Dec 21) 6,721.17 9.24
 CAC (Dec 21) 4,694.38 1.92
 DAX (Dec 21) 10,633.82 22.72
ASIAN MARKETS
 NIKKEI 225 (Dec 21) 20,166.19 -226.39
 STRAITS TIMES (Dec 21) 3,046.04 -4.58
 HANG SENG (Dec 21) 25,753.42 129.89
 TAIWAN WEIGHTED (Dec 22) 9,642.05 -34.62
 KOSPI (Dec 21) 2,061.49 1.37
 SET COMPOSITE (Dec 21) 1,595.33 -0.77
 JAKARTA COMPOSITE (Dec 21) 6,163.60 15.72
 SHANGHAI COMPOSITE (Dec 21) 2,516.25 -20.02
 SGX NIFTY (Dec 22) 10,755.50 -4.50
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)

Pakistan

Politics

  • Prime Minister Imran Khan on 22nd Dec warned the leaders of opposition parties that the PTI-led government will not back down from holding them accountable for their alleged corrupt practices during their respective tenures.

He was also apprised by the MOF earlier in a meeting that foreign commercial borrowings from Chinese, European and Gulf banks and through floatation of sovereign bonds will also be the preferred tools for the PTI government to raise loans for meeting the budgetary and balance of payments requirements. Pakistan has shared these public debt projections with the International Monetary Fund (IMF), suggesting that the public debt could be Rs 36 trillion by June 2021. These projections are exclusive of publicly guaranteed debt and private debt. In terms of size of the economy, the debt to the GDP ratio would remain closer to 70% by June 2021, which will be lower than the level left by the PML-N but far higher than the path set in the Fiscal Responsibility and Debt Limitation Act of 2005.

  • Leader of the Opposition in the National Assembly Shahbaz Sharif on 20th Dec declared that the PML-N was ready to extend its “full cooperation” for the creation of a South Punjab province and the restoration of the Bahawalpur province in Punjab.

Taking the floor, the PML-N president said his party was considering tabling a private bill for this purpose and demanded that the government extend support in this regard. Sharif said the PTI had also promised to create the South Punjab province and it should now take steps for its implementation. “Don’t run away from the [creation of the] province; the government itself had promised it,” Sharif reminded the treasury benches.

  • The incumbent federal government is about to bring in yet another mini budget.

 

Finance Minister Asad Umar on Wednesday said that the government is likely to present another mini budget to increase the tax on imports. In a talk with “the Standing Committee of Senate on finance & economics” Asad Umar said that the government is to revise the proposals to enhance tax and “tariff” on imports. The Finance Minister stated that to decrease the tax rate on imported raw materials, the finance bill will be presented in first month of 2019.

  • Minister for Power Resources Faisal Vawda says ground breaking ceremony of Mohmand Dam will be held in first week of next month.

Addressing a news conference in Islamabad on Wednesday afternoon, he said the opening will be a historic landmark for country’s future water needs. He said Prime Minister Imran Khan will be the chief guest on the occasion, while Chief Justice of Pakistan and other high profile guests 
have been invited to grace the occasion. Faisal Vawda said 800 MW of electricity will be produced from this project and it will also provide abundant water to the residents of Peshawar. The Minister said 17000 acres of agricultural land will be irrigated.
He said the financing of over 300 billion rupees so far has been arranged from indigenous resources and no foreign funding is part of it.

  • Sind Minister for Women Development Syeda Shehla Raza has urged upon the Philanthropists to come forward and join hands of the Government to welfare of the differently abled persons for their proper rehabilitation through their look after and attention properly as they are capable and talented one, we should all together to give them full attention to achieve the desired results of the noble task of the humanity.

 

This she said while addressing the Annual Awards 2018 of Aagosh Trust, Shelter Home for un-assisted handicapped Ladies and Senior Women organized at local hotel here Wednesday.

  • Baluchistan Home Minister on 19th Dec said more than 100,000 families and over a million livestock had been affected in 20 drought-hit districts of Baluchistan but the provincial government was taking solid measures to mitigate the drought effects and providing essential supplies to the stricken families.

He also said around 109,339 families and 1,756,578 heads of cattle were affected in 20 districts of the province following the recent drought.

  • Federal Minister for Education and Professional Training Shafqat Mahmood said in the Senate on 20th Dec that literacy rate in the country had declined by two percentage points to 58 per cent within two years due to growing population and lack of efforts to arrest the trend.

He was replying to a question raised by Usman Khan Kakar regarding percentage of literate persons in Pakistan. The written reply received from the relevant department highlighted that the definition of literacy was ‘one who can read a newspaper and write a simple letter in any language’ and it was 60pc in 2014-15. The reply also highlighted that the literacy rate in the country was only higher than that of Afghanistan in the region.

 

Economy

  • A bit of a commotion was caused in the corporate sector after the announcement at the Pakistan Stock Exchange (PSX) of ‘withdrawal of public announcement of intention to acquire 18,336 million shares or 66.40 per cent stake in K-Electric Ltd by Shanghai Electric Power Company Ltd’.

It was mistaken by some people to mean that the China’s Shanghai Electric Power Company was walking out of the deal to acquire majority shares in K-Electric from the Dubai-based Abraaj Group. That however is not the case.

  • The United Arab Emirates has announced its intention to deposit US$3 billion (equivalent to AED11 billion) in the State Bank of Pakistan “to support the financial and monetary policy of the country

The Abu Dhabi Fund for Development said, in a statement that it will deposit the said amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the bank. The country’s support for Pakistan’s fiscal policy is based on the historical ties between the two people, and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.

  • The current account deficit (CAD) for the first five months of the fiscal year fell by $722 million, or 10.6 per cent, from the same period last year even as the trade gap in goods for the same period widened by $606m.

The CAD came in at $6.09 billion in the period between July and November, where it was at $6.812bn in the same period last year. Exports rose by a nominal $27m while imports jumped by $633m in the same period compared to last year, pushing up the trade deficit to $1.289bn till November. Some support came from trade in services, where exports were largely stagnant but imports fell by $755m, causing the deficit in trade in services to fall by $785m in the period.

  • The government’s reliance on China will only grow in the coming years as private sector investment continues to decline in the country despite improvements in security conditions, rise in power production and better infrastructure, said Fitch Solutions in a report released on 119th Dec.

“The Belt and Road Initiative (BRI) will continue to play an important role in driving infrastructure growth in developing economies in Asia,” highlights the report.

Pakistan has failed to attract private sector investment despite better security conditions, increasing power capacity and strengthening infrastructure. The lack of investment from other countries will only increase the country’s reliance on Chinese BRI. The BRI-related funding comes with its own political risks. The report points out that “the rise in the number of populist candidates around the world has increased the risk of major infrastructure policy shift in countries with upcoming elections.” In a worrying trend around Asia, “National governments embracing Chinese investment and taking on Chinese government loans has led to the opposition parties using it as an attractive campaigning tool to rally the electorate.” However, despite underlying risks, Fitch expects “a continued reliance on Beijing and the BRI for the financing and construction of infrastructure projects, regardless of who is in power.”

  • With Pakistan set to submit a compliance report to the Financial Action Task Force (FATF) next month, the government has approved new measures aimed to prevent the country from being included in its ‘black list’.

The decisions about the measures were taken at a recent meeting of the National Executive Committee (NEC) that was chaired by Finance Minister Asad Umar.

The committee reviewed the progress made on the FATF Action Plan, which was aimed at preventing suspected militants from operating bank accounts or using illegal means to transfer money, including hundi, hawala and smuggling About the possible misuse of the banking channel, the Financial Monitoring Unit (FMU) of the finance ministry in collaboration with SBP presented an analysis of reports on suspicious transactions filed by banks in the last three years and the steps taken against money laundering and terrorism financing on the basis of such reports.

 

F.C Exchange Rates of PKR as of 21st Dec 2018
Countries PKR rate as of 15th Dec 2018 PKR rate as of 21st Dec 2018
U.S.A. 140.0 140.30
U.K. 175.00176.0 176.00177.0
Euro 157.40158.4 159.00160.0
Japan 1.2200 1.2600
Saudi Arabia 37.15 37.30
U.A.E. 38.10 38.20

 

Pakistan Stock Exchange Indices as of 21st Dec 2018

The end of the week saw robust buying on the back of news that the United Arab Emirates (UAE) would provide assistance of $3 billion to Pakistan to bridge the financing gap. The index staged a smart recovery and climbed over 500 points, but volatility still prevailed and dragged it down, wiping off almost all of the gains made in the session. At the end of trading, the benchmark KSE 100-share Index recorded an increase of just 14.52 points or 0.04% to settle at 38,251.04.

Position as of 21st Dec 2018

Symbols                                           KSE100                                       PSX-KMI
Advanced (Curr.) 151
38251.04
18635.18
Declined (High) 139
38487.37
18793.88
Unchanged (Low) 24
37845.42
18473.47
Total (Change) 314
14.52
-39.50
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

 

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