Economic & Political Weekly

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World

Politics-

  • United States officials say they intercepted communications in June showing that Ivan Savvidis, a Greek-Russian billionaire, was working as Russia’s conduit to undermine an agreement between Greece and Macedonia that would have paved the way for Macedonia to join the North Atlantic Treaty Organization.
  • The U.S. Treasury secretary has warned China not to engage in competitive devaluations of the renminbi as the two countries spar over their economic relations and engage in an escalating trade war.
  • A sudden influx of Guatemalan families into Arizona has overwhelmed detention facilities there and forced the government to release hundreds of parents and children over the past several days, U.S. Immigration and Customs Enforcement said on 9th Oct 2018.
  • Questions and condemnation of Venezuela’s leadership poured in on 9th Oct, 2018 following the suspicious death of an opposition activist who authorities say evaded justice by throwing himself from the 10th floor of a police building.
  • A man has been arrested in Germany and charged with the rape and murder of a Bulgarian journalist, the authorities in Bulgaria announced on 10th Oct 2018, saying that there was no indication that she had been killed because of her work.
  • Negotiators have moved within sight of a deal on terms of Britain’s divorce from the European Union, diplomats from the two sides say, narrowing differences over a key sticking point: How to avoid a physical border between Ireland and Northern Ireland.
  • The woman who led the global campaign to free Nigerian schoolgirls kidnapped by Boko Haram extremists is now running for president, saying she is fighting for “the soul” of Africa’s most populous nation.
  • South Africa’s finance minister resigned on 9th Oct 2018 after acknowledging missteps during the scandal-tainted tenure of former president Jacob Zuma.
  • As Jamal Khashoggi prepared to enter the Saudi consulate in Istanbul on Oct. 2, a squad of men from Saudi Arabia who investigators suspect played a role in his disappearance was ready and in place.
  • Late last month, the European Union and China announced that they intended to set up a special global payments system to allow companies to continue to trade with Iran despite U.S. sanctions. The announcement marks a small but notable step toward the fragmentation of the global economic order.
  • A Bangladeshi court sentenced 19 people to death and the son of the opposition leader to life imprisonment on Wednesday over a deadly 2004 attack at a political rally held by current Prime Minister Sheikh Hasina.

 

Economy-

  • The International Monetary Fund’s Financial Stability Report says that although banks are far safer than they were in 2008 there are new risks. Trade tensions are growing, the and inequality has risen. Further moves towards a trade war could “significantly harm global growth”. Other threats to trade, such as a disorderly Brexit, could also “adversely affect market sentiment”, the IMF argues.
  • Trump’s trade war with China and Europe will hit global growth. The IMF says that even without a further deterioration in US and China relations, the global economy would grow this year at 3.7% and at the same rate in 2019 compared with the 3.9% it predicted for both years in an interim report in April 2018.
  • China has slashed the amount of cash of some of its banks held in reserve as Beijing’s leadership seeks to bolster a flagging economy.
  • As higher US interest rates and fears of a trade war piles pressure on economies around the world, China’s central bank said on 7th Oct 2018 that it was cutting the reserve requirement ratios (RRRs) by one percentage point from 15 October to lower financing costs and spur growth in the world’s second-biggest economy. Reserve requirement ratios (RRRs) – currently 15.5% for large commercial lenders and 13.5% for smaller banks would be cut by 100 basis points from October 15, the PBOC said.
  • The injection of cash into the economy, which will be 750bn Yuan ($109.2 billion), will also boost hopes in chinato counter the negative impact of higher US tariffs on Chinese exports.
  • A high-profile investment summit in Riyadh later this month is rapidly becoming a fiasco as prominent businesses and media groups have pulled out over Saudi Arabia’s alleged involvement in the disappearance and possible murder of the journalist Jamal Khashoggi.
  • A volatile week across global stock markets has escalated into a heavy sell-off, with European stock markets plunging to their lowest level in 20 months on 11th Oct, 2018. In the UK, the FTSE 100 entered correction territory – falling 10% from its peak in May – after Wall Street suffered its biggest drop in eight months on 10th Oct, 2018. The sell-off is being fuelled by mounting investor concern over raising US interest rates, which could curtail growth in the world’s biggest economy and have a damaging knock-on effect for global growth.

Pakistan

Politics

  • ISPR DG says, those alleging Pakistan Army of rigging polls have failed to produce supporting evidence. He further said that army has no role in accountability or anti-corruption drive and will work to strengthen democracy.Maj Gen Ghafoor says previous govt approved Saudi employment for ex-COAS Raheel Sharif and army has no role in supporting Musharraf. He further said that Pakistan will launch 10 surgical strikes if India carries out even one against country. He further said that the July 25, 2018 polls were the freest and fairest elections in Pakistan’s history, and the armed forces has made it possible for the people to exercise their right to vote.
  • Chief Justice of Pakistan (CJP) Mian Saqib Nisar took a suo motu notice of Punjab University former vice-chancellor Mujahid Kamran and other professors appearing in court in handcuffs. The National Accountability Bureau (NAB) had arrested Kamran and the other professors over allegations of corruption, illegal appointments and nepotism and brought them to court to seek physical remand.Justice Nisar on 12th Oct 2018 tooknotice of the ‘disrespectful’ way the professors had been handcuffed and brought to court.At the outset of the hearing, NAB Lahore Director General Saleem Shahzad issued an apology before the court and conceded that it had been a mistake to handcuff the teachers as it inadvertently humiliated them. “I am deeply ashamed and ask the whole nation for forgiveness,” he said.The court ordered Shahzad to personally apologize to Kamran and the other professors and instructed that a written apology also be submitted to the court.
  • On 14th October 208 ,The National Assembly constituencies where the by-elections were held included NA-35 Bannu, NA-53 Islamabad, NA-56 Attock, NA-60 Rawalpindi, NA-63 Rawalpindi, NA-65 Chakwal, NA-69 Gujarat, NA-103 Faisalabad, NA-124 Lahore, NA-131 Lahore and NA-243 Karachi East. Till midnight in NA-35 (Bannu) Zahid Akram Durrani of the MuttahidaMajlis-e-Amal (MMA) has won, In NA-53 (Islamabad-2) Ali Nawaz Awan of PTI has won, InNA-56 (Attock-2)PML-N candidate Malik Sohail Khan has won. In NA-60 (Rawalpindi) Sheikh Rashid Shafeeq of PTI has won, In NA-63 (Rawalpindi-7) PTI candidate Mansoor Hayat Khan has won. In NA-65 (Chakwal-2) PML-Q candidate ChaudhrySalikHussain has won. In NA-69 (Gujrat-2)PML-Q candidate MoonisElahihas won. In NA-103 (Faisalabad) Ali Gohar Khan of PML-N was leading. In NA-124 (Lahore-2) former prime minister and PML-N leader ShahidKhaqanAbbasihas won. In NA-131 (Lahore-9) PML-N candidate KhawajaSaadRafique was leading. In NA-243 (Karachi East-2) Muhammad Alamgir Khan of PTI has won. Elections are being held on 24 seats from provincial assemblies includimg 11 seats for Punjab Assembly, nine for Khyber Pakhtunkhwa, and two each for Sindh and Baluchistan. IN Sind both seats have gone to PPP. In Baluchistan both seats have gone to nationalistparties. In KPK PTI has retained the lead whereas in Punjab the result is 50:50. This indicates that status quo would remain in Federal/KPK/Punjab whereas in Sind, MQM and Mustafa Kamal are out of the field. The situation as such would bring more pressure on PTI which is already under immense pressure due to economic situation.

Economy

  • Pakistan would adopt gold standard within the next five years in a revamped economy based entirely on the barter system, newly appointed spokesperson for the government Dr. Farrukh Saleem says.Dr Saleem extolled the virtues of adopting the gold standard to escape the grip of Bretton Woods’s consensus. He mentioned the possibility of overseas Pakistanis sending tons of gold to shore up the fledgling economy in Pakistan as a possible result of this move.Under the new proposal, public employees will be paid in bars of gold and barter system would also be made legal, Dr Saleem confirmed.
  • Finance Minister Asad Umar reaffirmed the nation that Pakistan has formally demanded money from the International Monetary Fund to address its economic challenges, speaking exclusively, Umar said that the words used by IMF Managing Director Christine Lagarde were ‘misleading’. “There was no requesting, imploring or begging. We demanded money as a self-respecting, sovereign state that does not need anyone’s help to reaffirm itself as the very best country in the world,” Umar said.Umar confirmed that the demand for money came during his meeting with Legarde on the sidelines of the IMF and World Bank annual meetings in Bali. “The demand was strong, firm and assertive. Had it been any stronger, it could’ve been interpreted as Pakistan holding IMF on gunpoint and robbing it – which of course would’ve been pretty cool!” Umar added. The Finance Minister urged the nation to be proud of its government for extorting more money than ever from the IMF. Asad Umar also clarified that the money that Pakistan will get is what the IMF owes the country, and should not be mistaken as borrowing. “As a government that is absolutely clueless about the functioning of economy in the real world, it is our right to demand money from others, which is why donations have been an integral part of our strategy to revamp the economy,” he added. Finance Minister Asad Umar further said that Pakistan will contemplate all other options if bailout terms are unacceptable. He said that US should not object to Pakistan’s request for IMF bailout as it has no power to influence Fund’s decision
  • SE-100, the benchmark index of the Pakistan Stock Exchange decreased by 1,328.06 points or 3.39% to 37,898.29 points.Financial experts say the volatility in the market was due to reports of the government approaching the International Monetary Fund (IMF) for a bailout package. On 8th Oct, 2018 i. beginning of the week, the stock market continued on its downward spiral as the KSE-100 dipped over 1,300 points during trading. KSE-100, the benchmark index of the Pakistan Stock Exchange decreased by 1,328.06 points or 3.39% to 37,898.29 points.The Financial experts say that meeting IMF targets would lead to inflation in the country.
  • The US dollar soared to Rs134-138 in the interbank market last week inflating foreign debt by Rs 1000 billion. The devaluation would no doubt increase exports and decrease imports but in the coming weeks it would surge the inflation as well.
  • State Bank of Pakistan (SBP) on 11th Oct 2018 said that the overall risk profile of the banking sector has improved in first half of 2018, mainly, due to strengthening capital adequacy and improving asset quality. According to the report, banking sector has performed reasonably well. The asset base of the banking sector has expanded by 4.7 percent during H1CY18 (Year-on-Year (YoY): 9.7 percent). The overall risk profile of the banking sector has improved in H1CY18, mainly, due to strengthening capital adequacy and improving asset quality. Capital Adequacy Ratio (CAR) has further strengthened to 15.9 percent; well above the minimum regulatory required level of 11.275 percent.Non-Performing Loans (NPLS) to total loans ratio has receded to 7.9 percent—the lowest level since H1CY08. Banks’ after-tax earnings (Year to Date), however, have declined by 14.7 percent due to reduced non-interest income, one-off provision expenses, and higher administrative cost.The report also highlights expectations about macro-financial conditions in H2CY18. The results of the 2nd wave of SBP’s Systemic Risk Survey suggest that external sector pressures, fiscal sector vulnerabilities, growing domestic inflation and volatile commodity markets could potentially impact financial stability over the coming six months.

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