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Mafias are at rule in Pakistan now also accepted by the State Bank itself

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At its meeting on 20th September 2021, the Monetary Policy Committee (MPC) decided to raise the policy rate by 25 basis points to 7.25 percent.

Raising rate means to decelerate GDP growth by putting pressure of inflation on economy.

This mean that State Bank has also accepted that source of income has reduced by 50% and private institutions has decreased the salaries by 30%.PTI government is in its 4thyear but common man has not got any relief.Atta, ghee, sugar with other kitchen articles have gone out of reach. Imran Khan is blaming some mafias for doing this but being in government it was his responsibility to snub all these mafias. But these mafias are sitting with him in the cabinet. Who is Tareen and who is chief Minister of Punjab everybody knows them.

Now 4th or 5th Finance MinisterShaukatTareen is blaming IMF for all this mess. It means he has also decided to leave. But being part of the IMF Pakistan’s repayment of loanshas been deferredup to Dec 2021. But IMF is also insisting of taxing people further through electricity and energy bills. Predictions are also there that Pakistan has bought energy items like LNG from Qatar at very high prices.

China and Qatar two basic allies of Pakistan are not happy with Imran Kahn with his U turns. CPEC is at halt. While raining Cities get out of electricity for hours.

Internationally and in Pakistan it has been accepted that Corona had made billionaire highly beneficial andpushing common man almost 90% of population in to miseries.

It has been estimated by all multilaterals that Pakistan GDP growth would remain in between 1.5% to 2.5% with inflation at 11% during current and next year.

The MPC had also noted that the pace of the economic recovery has little bit exceeded its expectations. This recovery in domestic demand, coupled with higher international commodity prices, is leading to a strong pick-up in imports and a rise in the current account deficit. While year-on-year inflation has declined since June, rising demand pressures together with higher imported inflation could begin to manifest in inflation readings later in the fiscal year.

With growing signs that the latest Covid wave in Pakistan remains contained, continued progress in vaccination, and overall deft management of the pandemic by the Government, the economic recovery now appears less vulnerable to pandemic-related uncertainty. As a result, at this more mature stage of the recovery, a greater emphasis is needed on ensuring the appropriate policy mix to protect the longevity of growth, keep inflation expectations anchored, and slow the growth in the current account deficit.

 In line with this shift in the economic outlook, the MPC is of the view that the priority of monetary policy also needed to gradually pivot from catalyzing the recovery after the Covid shock toward sustaining it. As foreshadowed in previous monetary policy statements, the MPC noted that this rebalancing would be best achieved by gradually tapering the significant monetary stimulus provided over the last 18 months.

MPC noted that over the last few months the burden of adjusting to the rising current account deficit had fallen primarily on the exchange rate and it was appropriate for other adjustment tools, including interest rates, to  playtheir due role.

 The MPC noted that the stance of monetary policy is still appropriately supportive of growth, with real interest rates remaining negative on a forward-looking basis. Looking ahead, in the absence of unforeseen circumstances, the MPC expects monetary policy to remain accommodative in the near term, with possible further gradual tapering of stimulus to achieve mildly positive real interest rates over time. The pace of this possible further gradual tapering would be informed by updated information on the continued strength of demand growth and the stance of fiscal policy, amongst other factors.

 On reaching its decision, the MPC considered key trends and prospects in the real, external and fiscal sectors, and the resulting outlook for monetary conditions and inflation.

Real sector-with a supportive FY22 budget and accommodative monetary policy, most high-frequency domestic demand indicators such as automobiles, POL (petroleum, oil and lubricants) sales, cement sales and electricity generation continue to depict robust growth. This growth is mirrored in the strength of imports and tax collections. LSM registered strong growth in June (18.5 percent (y/y)) before moderating in August to 2.2 percent (y/y), in line with typical seasonal patterns.

The services sector is also rebounding strongly; latest Google Community Mobility Reports show that activity across grocery stores, restaurants, and shopping centers during July and August rose above pre-Covid levels.

In agriculture, the decline in the area under cultivation of cotton is expected to be compensated by an increase in area for rice, maize, and sugarcane.

The current account deficit rose to $0.8 billion in July and $1.5 billion in Augusts. While remittances remained strong, growing by 10.4 percent (y/y) during July-August and exports also performed reasonably well (averaging $2.3 billion per month).

But they were outstripped by imports. In response, the rupee depreciated by 4.1 percent since the last MPC meeting.

The MPC noted that the flexible market-based exchange rate regime has performed well since its introduction in June 2019, including through the Covid shock.

 Since its floatation, the rupee has moved in an orderly manner in both directions and has depreciated by only 4.8 percent to date, much less than many other emerging market currencies over the same period. Since the rupee was floated, SBP’s gross foreign exchange reserves have nearly tripled to a record $20 billion, while net international reserves have risen by nearly $16 billion between end-June 2019 and end-August 2021. 8.

In FY21, prudent management of the public finances facilitated fiscal consolidation for the second year in a row despite Covid, with the primary deficit declining by around ½ percentage points to 1.4 percent of GDP. This improvement largely stemmed from strong growth in tax and petroleum development levy (PDL) revenues, together with significant deceleration in non-interest expenditures.

Following the seasonal end-year release of expenditure allocations, the fiscal impulse was strongly expansionary in the final quarter of FY21. In the first two months of FY22, FBR revenue grew by over 40 percent (y/y) while Federal PSDP releases rose to an all-time high for this period, equivalent to nearly 44 percent of their budgeted amount for the full year. It will be important to support tax revenue growth and carefully monitor outturns through the year to ensure the budget remains on track.

The MPC felt that some macro prudential tightening of consumer finance may also be appropriate to moderate demand growth as part of the move toward gradually normalizing monetary conditions.

But the main question remains that under these changing figures what a common man should do with no food, no employment, and no educations for his children and no health facilities. This is Nayya Pakistan with no one to plan and prepare road map that how to move forward.

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