Karachi - In a surprising hard-hitting move Pakistan's central bank on Thursday warned the government to stop unbridled borrowing and help the bank to control inflation. "The inflation has reached to an unsustainable level, no country depends so much on its own central bank to meet fiscal deficit," Shamshad Akhtar, governor central State Bank of Pakistan (SBP), said at a press conference in the port city of Karachi.
"Most countries disallowed borrowing to meet fiscal deficits from its central bank," Akhtar said.
In order to fight inflation and carry out fiscal monetary control, Akhtar also announced hiking up the country's benchmark interest rates, popularly known as 3-day repo (discount) rates, by 150 basis points to 12 per cent.
"We want to increase cost of borrowing and want government to help us in fighting the inflation".
The central bank governor also accused the government of violating the country's fiscal laws and did borrowing far more than the target, increasing pressures on State Bank to print more money and igniting inflation.
According to Akhtar, the government's borrowing doubled during the last 10 months of fiscal year 2007-2008 (July-June) to 944 billion Pakistani rupees (around 15 billion US dollars) from 452 billion rupees (7.5 billion dollars).
"This is dangerously at 9.44 per cent of GDP (gross domestic product). This reckless borrowing stocked inflation and the ultimate price is paid by businesses, industry and ordinary citizens," Akhtar said.
"Our food inflation has almost doubled to 25.5 per cent from 12.2 per cent," she added.
Pakistan's overall official inflation stands at a 30-year high and many economists believe it has reached a point where the road to hyper-inflation wouldn't be far.
Soaring inflation also had its beating on the Pakistani rupee recently which has been depreciated by over 14 per cent since the beginning of the outgoing fiscal year.
"We have seen around 11 per cent devaluation of the rupee in just 6 weeks from March," Akthar said, accusing ballooning current account deficit, rising inflation and rampant government borrowing as major causes.
Pakistan's current account deficit soared to about 7.3 per cent of GDP during 10 months of the current fiscal year mainly due to slow growth in exports, increase in imports and sluggish foreign money inflows.
The deficit for July-April period has widened by 74.8 percent to an all time high level of 11.58 billion dollars.
The governor also cited rising cost of imports as also a big reason in mounting inflationary pressures and economic imbalances.
Pakistan's exports stood at 16.167 billion dollars as compared to imports worth 28.907 billion dollars during July-April.
It resulted in, governor said, a major erosion of a whopping over 4 billion dollars in the central bank's reserves during the last five months from a peak of 16 billion dollars to around 12 billion at present.
Meanwhile, the key KSE-100 Index of Karachi Stock Exchange fell 347.49 points or around 2.5 per cent to close at 13,627 against Wednesday's 13,974.49 points over the news of benchmark rate hike by the central bank.
"Institutional investors will now avoid investing in stocks and will more invest in the secured central bank instruments," said Asif Qureshi, head of research at Invior Securities.
Earlier, two major international rating agencies had substantially cut Pakistan's sovereign dent ratings within a span of one week.
On Wednesday, Moody Investor Services cut Pakistan sovereign foreign currency bond rating to B2 from B1 to further put pressure on the market to bring it even lower than Turkmenistan and Jamaica.
Moody also reduced Pakistan's local currency debt issue rating to B2 bringing it to a par with Cambodia and Honduras.
On May 15, Standard & Poor's also reduced Pakistan's long-term foreign currency debt rating to B from B+, also citing expanding fiscal and external imbalances within the background of a volatile political setting.
QUOTE(OmaR UK @ May 22 2008, 08:26 AM) 
"Our food inflation has almost doubled to 25.5 per cent from 12.2 per cent," she added.
This literally means that the food prices have shot up by 100% and the salaries have not gone up by that much.
I think that my dad made a wise decision to sell our property in our pind before we become "Zimbabwe"
Even the Indian rupee has lost 10% since the crises, this is not big deal
Pakistan's current account deficit soared to about 7.3 per cent of GDP during 10 months of the current fiscal year mainly due to slow growth in exports, increase in imports and sluggish foreign money inflows.
The deficit for July-April period has widened by 74.8 percent to an all time high level of 11.58 billion dollars.
The governor also cited rising cost of imports as also a big reason in mounting inflationary pressures and economic imbalances.
Pakistan's exports stood at 16.167 billion dollars as compared to imports worth 28.907 billion dollars during July-April.
It resulted in, governor said, a major erosion of a whopping over 4 billion dollars in the central bank's reserves during the last five months from a peak of 16 billion dollars to around 12 billion at present.
Meanwhile, the key KSE-100 Index of Karachi Stock Exchange fell 347.49 points or around 2.5 per cent to close at 13,627 against Wednesday's 13,974.49 points over the news of benchmark rate hike by the central bank.
"Institutional investors will now avoid investing in stocks and will more invest in the secured central bank instruments," said Asif Qureshi, head of research at Invior Securities.
Earlier, two major international rating agencies had substantially cut Pakistan's sovereign dent ratings within a span of one week.
^^^^
This is what we were all afraid of.
Moody also reduced Pakistan's local currency debt issue rating to B2 bringing it to a par with Cambodia and Honduras.
On May 15, Standard & Poor's also reduced Pakistan's long-term foreign currency debt rating to B from B+, also citing expanding fiscal and external imbalances within the background of a volatile political setting.
This literally means that the food prices have shot up by 100% and the salaries have not gone up by that much.
QUOTE
Pakistan's overall official inflation stands at a 30-year high and many economists believe it has reached a point where the road to hyper-inflation wouldn't be far.
I think that my dad made a wise decision to sell our property in our pind before we become "Zimbabwe"
QUOTE
"We have seen around 11 per cent devaluation of the rupee in just 6 weeks from March," Akthar said, accusing ballooning current account deficit, rising inflation and rampant government borrowing as major causes.
Even the Indian rupee has lost 10% since the crises, this is not big deal
Pakistan's current account deficit soared to about 7.3 per cent of GDP during 10 months of the current fiscal year mainly due to slow growth in exports, increase in imports and sluggish foreign money inflows.
The deficit for July-April period has widened by 74.8 percent to an all time high level of 11.58 billion dollars.
The governor also cited rising cost of imports as also a big reason in mounting inflationary pressures and economic imbalances.
Pakistan's exports stood at 16.167 billion dollars as compared to imports worth 28.907 billion dollars during July-April.
It resulted in, governor said, a major erosion of a whopping over 4 billion dollars in the central bank's reserves during the last five months from a peak of 16 billion dollars to around 12 billion at present.
Meanwhile, the key KSE-100 Index of Karachi Stock Exchange fell 347.49 points or around 2.5 per cent to close at 13,627 against Wednesday's 13,974.49 points over the news of benchmark rate hike by the central bank.
"Institutional investors will now avoid investing in stocks and will more invest in the secured central bank instruments," said Asif Qureshi, head of research at Invior Securities.
Earlier, two major international rating agencies had substantially cut Pakistan's sovereign dent ratings within a span of one week.
QUOTE
On Wednesday, Moody Investor Services cut Pakistan sovereign foreign currency bond rating to B2 from B1 to further put pressure on the market to bring it even lower than Turkmenistan and Jamaica.
^^^^
This is what we were all afraid of.
Moody also reduced Pakistan's local currency debt issue rating to B2 bringing it to a par with Cambodia and Honduras.
On May 15, Standard & Poor's also reduced Pakistan's long-term foreign currency debt rating to B from B+, also citing expanding fiscal and external imbalances within the background of a volatile political setting.
At the end of this article I think that there has been a systematic approach to destroy our economy and sadly, but the truth is it has succeeded to a large extent. Correct me if I am wrong. Thanks Omar for the eyeopening article.
The central bank governor also accused the government of violating the country's fiscal laws and did borrowing far more than the target, increasing pressures on State Bank to print more money and igniting inflation.
Only one thing comes to mind ! Ishaq Dar.
The quick fix solution for economy & over time on judge restoration is showing it's toll on our economy in black & white within 3 months ! Jeez ... 8 years of hard work damaged in 3 months !
Only one thing comes to mind ! Ishaq Dar.
The quick fix solution for economy & over time on judge restoration is showing it's toll on our economy in black & white within 3 months ! Jeez ... 8 years of hard work damaged in 3 months !
http://www.brecorder.com/index.php?id=7368...m=&supDate=
The SBP statistics depict that during July to April 26, 2008 net government borrowing for budgetary support grew by Rs 163.884 billion as compared to last fiscal year. After the current upsurge net government borrowing from banking system including the SBP and other banks reached Rs 334.871 billion during July to April 26 of current fiscal year against Rs 170.987 billion during corresponding period of last fiscal year.
The SBP statistics show that the government budgetary borrowing stocks as on June 30, 2007 stood at Rs 810.053 billion and after the current fiscal upsurge of Rs 334.871 billion, the overall government budgetary borrowing stocks reached some Rs 1,144 billion on April 26, 2008.
Major upsurge was witnessed in the borrowing from SBP, which rose by Rs 484.950 billion during the current fiscal year as compared to the upsurge of Rs 3.051 billion during same period of last fiscal year, registering an increase of Rs 140 billion during first 10 months of FY08.
http://www.dawn.com/2008/03/05/ebr7.htm
The SBP statistics depict that during July to April 26, 2008 net government borrowing for budgetary support grew by Rs 163.884 billion as compared to last fiscal year. After the current upsurge net government borrowing from banking system including the SBP and other banks reached Rs 334.871 billion during July to April 26 of current fiscal year against Rs 170.987 billion during corresponding period of last fiscal year.
The SBP statistics show that the government budgetary borrowing stocks as on June 30, 2007 stood at Rs 810.053 billion and after the current fiscal upsurge of Rs 334.871 billion, the overall government budgetary borrowing stocks reached some Rs 1,144 billion on April 26, 2008.
Major upsurge was witnessed in the borrowing from SBP, which rose by Rs 484.950 billion during the current fiscal year as compared to the upsurge of Rs 3.051 billion during same period of last fiscal year, registering an increase of Rs 140 billion during first 10 months of FY08.
http://www.dawn.com/2008/03/05/ebr7.htm
QUOTE(must7 @ May 24 2008, 06:36 AM)
Only one thing comes to mind ! Ishaq Dar.
He also compiled a "charge sheet" so he did a little more than just sending the nation's economy on a downward spiral....
Dar accuses previous government of plundering national wealth
ISLAMABAD (May 25 2008): Pakistan Muslim League (N) leader and under resignation Finance Minister Ishaq Dar has criticised the previous government for taking too many loans during its tenure which resulted in amounting the figure to Rs 2400 billion. Talking to a private news channel he said the previous economic team changed the baseline of the economy, which changed the 27 percent volume of the economy without any reason.
Ishaq Dar criticised the past government for plundering national wealth, and held them responsible for the current price hike, higher petroleum prices, shortage of atta and electricity. Dar held three factors responsible for the current fiscal crisis which included external shocks, mismanagement and under budgeting. "The over-run of expenditures of Rs 522 billion demonstrates the biggest weakness of management", he added.
Pointing out the failure in policies of the previous government, Ishaq Dar gave the example of subsidy on oil and electricity saying the previous government allocated only Rs 15 billion for subsidy on oil prices for the whole fiscal year, but subsidy of Rs 155 billion is expected. Similarly Rs 52 billion were fixed for subsidy on electricity while the actual figure is expected to be Rs 125 billion.
Ishaq Dar said there was a dire need to change the policies and focus should be laid on promoting our agricultural sector as it would pay us in the long run and fulfil our requirements. He said the country was facing the acute shortage of electricity because the previous government did not generate even single megawatt of electricity and neither built any water reservoirs.
Link
ISLAMABAD (May 25 2008): Pakistan Muslim League (N) leader and under resignation Finance Minister Ishaq Dar has criticised the previous government for taking too many loans during its tenure which resulted in amounting the figure to Rs 2400 billion. Talking to a private news channel he said the previous economic team changed the baseline of the economy, which changed the 27 percent volume of the economy without any reason.
Ishaq Dar criticised the past government for plundering national wealth, and held them responsible for the current price hike, higher petroleum prices, shortage of atta and electricity. Dar held three factors responsible for the current fiscal crisis which included external shocks, mismanagement and under budgeting. "The over-run of expenditures of Rs 522 billion demonstrates the biggest weakness of management", he added.
Pointing out the failure in policies of the previous government, Ishaq Dar gave the example of subsidy on oil and electricity saying the previous government allocated only Rs 15 billion for subsidy on oil prices for the whole fiscal year, but subsidy of Rs 155 billion is expected. Similarly Rs 52 billion were fixed for subsidy on electricity while the actual figure is expected to be Rs 125 billion.
Ishaq Dar said there was a dire need to change the policies and focus should be laid on promoting our agricultural sector as it would pay us in the long run and fulfil our requirements. He said the country was facing the acute shortage of electricity because the previous government did not generate even single megawatt of electricity and neither built any water reservoirs.
Link
Dar accuses previous government of plundering national wealth
Suppose he means S&P & Moody's should further negate our soverign rating .. The more negative it would be the costlier he can get loans from WB & IMF .. which is his specialization !
Suppose he means S&P & Moody's should further negate our soverign rating .. The more negative it would be the costlier he can get loans from WB & IMF .. which is his specialization !
Dar should first stand in the mirror and take a long hard look at his own existance than go outside and accuse everyone of everything ... except himself.
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