Economic crisis – Water Valley Chamber http://watervalleychamber.info/ Fri, 24 Jun 2022 02:49:56 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://watervalleychamber.info/wp-content/uploads/2021/11/wat.png Economic crisis – Water Valley Chamber http://watervalleychamber.info/ 32 32 Treasury lawmakers hold PTI government responsible for current economic crisis – Pakistan https://watervalleychamber.info/treasury-lawmakers-hold-pti-government-responsible-for-current-economic-crisis-pakistan/ Fri, 24 Jun 2022 01:16:07 +0000 https://watervalleychamber.info/treasury-lawmakers-hold-pti-government-responsible-for-current-economic-crisis-pakistan/ ISLAMABAD: Lawmakers belonging to the ruling coalition on Thursday blamed Pakistan’s previous Tehreek-e-Insaf (PTI) government for the ongoing economic crisis, soaring inflation and rising commodity prices oil, gas and electricity in the country. Participating in the budget debate on the Finance Bill 2022-23, Pakistani Muslim Nawaz League (PML-N) MP Rasheed Khan said that the faulty […]]]>

ISLAMABAD: Lawmakers belonging to the ruling coalition on Thursday blamed Pakistan’s previous Tehreek-e-Insaf (PTI) government for the ongoing economic crisis, soaring inflation and rising commodity prices oil, gas and electricity in the country.

Participating in the budget debate on the Finance Bill 2022-23, Pakistani Muslim Nawaz League (PML-N) MP Rasheed Khan said that the faulty economic policies of the PTI are the reasons behind the deteriorating situation. economy and soaring inflation in the country. country.

He said that due to the PTI, the value of the dollar fell from Rs 115 to Rs 190 during his tenure as the prices of petroleum products, electricity and daily use items soared to unaffordable levels. .

Despite all the ‘favours’ – from the mighty military establishment – he claimed that the PTI government over the past three and a half years has failed miserably in putting in place and designing prudent economic policies to relieve man of the common.

He expressed his optimism that the coalition government would not only lift the country out of the current economic crisis, but also bring relief to the people.

He asked the government to carry out an investigation into the alleged corruption committed by the management and friends of the PTI.

Agha Rafiullah of the Pakistan People’s Party (PPP) said the coalition government had no choice but to take tough decisions to overcome the economic challenges facing the country.

He said that every effort is being made to provide maximum relief to the common man and avoid the negative impacts of PTI’s poor economic policies.

“The PTI had signed unrealistic and unfavorable agreements with the IMF [International Monetary Fund] putting behind the interests of Pakistan,” he said.

Dr. Darshan of PML-N, while criticizing the PTI government’s deal with the IMF, said that the policies of the previous government had made the life of the common man miserable.

He said the PTI government had taken out record loans and allowed price increases for all items used by the masses.

Malik Mukhtar of PML-N stressed the need to sign the “Economy Charter” for sustainable economic growth and put the country in the right direction.

He asked the Minister of Finance to focus on the industrial sector which contributed to the improvement of the country’s exports.

Dr Fehmida Mirza of the Grand Democratic Alliance (GDA) said parliamentarians are expected to have a closed-door briefing on the government’s talks with the Tehrik-e-Taliban Pakistan (TTP).

She called on the government to take effective action to tackle the coronavirus as cases rise again.

She said the economic challenges facing the country must be addressed with collective wisdom and all political parties must sit together to draw up an economic roadmap.

She said the parliament should be strengthened and lawmakers should do their part to improve the economic situation.

She hopes that reforms within the Federal Board of Revenue (FBR) will continue and that the tax net will be widened through technological means.

Shahida Akhtar Ali called the budget “good overall” but demanded more people-friendly policies to uplift the oppressed segment of society.

She said the country’s import of agricultural products is about $7 billion and there is a need to increase production per acre through the use of modern technologies.

She said agricultural machinery should be exempt from taxes and research should be done for better production through the use of quality seeds.

PML-N’s Ahmed Raza Maneka said he was confident that the incumbent government would soon be able to revive the national economy, as it took drastic measures in the 2022-23 federal budget to put the country on a sustainable path. of progress and development.

He called for a “Charter of the Economy” bringing together all stakeholders to move the economic wheel forward at a rapid pace.

PML-N MP Samina Matloob said affected neighborhoods should pay attention to the production of quality items by the industrial sector so that Pakistani goods can get their fair share in the international market, which would eventually increase reserves. exchange rate of the country.

Naveed Aamir Jeeva of the PPP said that the PTI government is not taking proper care of the minority community living in Pakistan and making the life of the common man miserable due to its poor economic policies.

Muhammad Khan Daha of the PML-N described the budget as encouraging which would help pull the country out of the current economic crisis despite all the challenges inherited from the “incompetent government” of the PTI.

He said the government should pay special attention to promoting food processing for value addition as this will increase the country’s exports, adding that the agricultural sector has the great potential to overcome the economic challenges it is facing. .

Calling the federal budget “constructive and balanced”, PPP’s Mahar Irshad Ahmad Khan said the incumbent government had presented the best fiscal plan possible in a difficult financial situation inherited from the old regime.

Copyright Business Recorder, 2022

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An economic crisis https://watervalleychamber.info/an-economic-crisis/ Thu, 23 Jun 2022 01:00:00 +0000 https://watervalleychamber.info/an-economic-crisis/ Pakistan is undoubtedly facing an economic crisis of gigantic proportions caused by the gross mismanagement of the economy by successive elected and military governments over the past decades. These governments have taken the easy way out while managing the economic crisis, which has only worsened over time. Necessary but difficult corrective decisions have been avoided […]]]>

Pakistan is undoubtedly facing an economic crisis of gigantic proportions caused by the gross mismanagement of the economy by successive elected and military governments over the past decades.

These governments have taken the easy way out while managing the economic crisis, which has only worsened over time. Necessary but difficult corrective decisions have been avoided or postponed at enormous cost to the nation as a whole. This politically easy approach has made the task of each successive government more difficult than it otherwise would have been, as the scale and severity of the country’s economic problems have steadily grown. As a result, the country is now virtually on the brink of economic disaster unless decisive action is taken to stem the rot.

The most serious problem facing our economic policymakers is the tendency of the Pakistani economy to run unsustainable current account deficits whenever the government attempts to accelerate the rate of GDP growth. For example, in 2017-2018, when GDP growth was estimated at 6.1%, the current account deficit reached the high level of $19.1 billion. In subsequent years, the PTI government slowed the rate of GDP growth, which led to lower current account deficits. However, as he attempted to accelerate the rate of GDP growth, the high current account deficit reappeared. The 2021-22 fiscal year with a GDP growth rate of 6% is expected to end with a current account deficit of $17 billion.

The immediate cause of the increase in the current account deficit in fiscal year 2022 is the sharp increase in imports compared to relatively slow growth in exports. The import bill jumped to $72.18 billion between July 2021 and May 2022. At this rate, the total import bill for 2021-22 would be around $78 billion from $54.27 billion a year earlier. On the other hand, exports, estimated at 28.84 billion dollars over the period from July 2021 to May 2022, will increase to 31 billion dollars at the end of June 2022. The situation calls for drastic fiscal, monetary and administrative measures to reduce the sharp reduction in imports while encouraging exports and import substitution in order to be able to balance our external account.

In the final analysis, however, the current account deficit reflects the excess of national investment over national saving. This is why whenever the government tries to accelerate the GDP growth rate by increasing the national investment rate without increasing the national saving rate, it inevitably leads to high current account deficits. It happened in 2017-18 and is happening again in 2021-22. The moral is that if we are to achieve high GDP growth rates in the years to come without running into unsustainable current account deficits, we must raise our national savings rate to at least 20% of GDP or even more relative to the current low level of 11.1% of GDP. Austerity coupled with effective policies to promote exports and substitute imports is therefore a prerequisite for sustainably accelerating Pakistan’s GDP growth rate.

High public deficits are another source of weakness and vulnerability in our economy. The proposed federal budget for 2022-23 pegs total expenditure at 9.50 trillion rupees against the estimated net federal revenue of 4.9 trillion rupees. The budget deficit is therefore expected to be around 4.6 trillion rupees. The stark reality is that debt service (3.95 trillion rupees) and defense (1.52 trillion rupees) alone will exceed net federal revenue by 570 billion rupees.

The budget deficit as a percentage of GDP is expected to decline from 6.3% in 2021-22 to 4.9% in 2022-23. Despite everything, its high level in absolute terms will keep the federal government’s budgetary position tight in addition to generating inflationary pressures. Given the high level of the budget deficit, the rising prices of gasoline, diesel and other petroleum products and international inflationary trends, it is unlikely that the government will be able to contain inflation in the 11.5% limit set for 2022. -23.

The tight fiscal position of the federal government calls for a reform of the tax system to raise the tax-to-GDP ratio from 9.2%, as projected in the draft federal budget for 2022-23, to more than 20%. Until the federal government is able to implement these reforms and tightly control its current spending, its fiscal deficits and public debt will continue to grow rapidly. Already, total public debt, which was estimated at 24.953 trillion rupees at the end of June 2018, has risen to 44.366 trillion rupees at the end of March 2022 – hardly a story of fiscal prudence.

The 2022-2023 budget sets the objective of a GDP growth rate of 5%. It envisages a federal development expenditure of 727 billion rupees against actual development expenditure of 550 billion rupees for the year 2021-22. In addition, the provinces will incur development expenditure amounting to Rs 1.4 trillion, bringing the total development expenditure to Rs 2.1 trillion in 2022-2023.

Overall, the draft budget aims to stabilize the economy by maintaining a reasonably high GDP growth rate, easing inflationary pressures, and reducing current account and fiscal deficits. However, the 2022-2023 budget does not go far enough to raise the tax-to-GDP ratio and the national savings rate to the high levels required to place the country on a path of sustainably high growth rates. It also remains to be seen whether and to what extent the government is taking steps to reduce imports and promote exports and import substitution with the aim of reducing the current account deficit.

Historically, education, which is a prerequisite for economic development, has received low priority from Pakistani governments in terms of resource allocation. Our national expenditure on education has generally remained below 2% of GDP, against the standard of 4% of GDP recommended by Unesco. Ideally, our national expenditure on education should be above 4% of GDP on the model of rapidly developing economies, if we are to transform Pakistan into a dynamic and progressive country with a worthy place in the community of nations. Unfortunately, the budget for 2022-2023 does not reflect the high priority this critically important sector deserves.

The writer is a retired ambassador. He can be contacted at: javid.husain@gmail.com

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Political tension in Tunisia aggravates economic crisis https://watervalleychamber.info/political-tension-in-tunisia-aggravates-economic-crisis/ Wed, 22 Jun 2022 03:33:58 +0000 https://watervalleychamber.info/political-tension-in-tunisia-aggravates-economic-crisis/ With rising energy and commodity prices globally and a growing current account deficit, Tunisia cannot afford to delay building a national consensus on key political and economic structural reforms. to unlock aid from the International Monetary Fund for its struggling economy. At the heart of the economic transformation agenda is the government’s attempt to secure […]]]>

With rising energy and commodity prices globally and a growing current account deficit, Tunisia cannot afford to delay building a national consensus on key political and economic structural reforms. to unlock aid from the International Monetary Fund for its struggling economy.

At the heart of the economic transformation agenda is the government’s attempt to secure $4 billion in IMF financing, which could help it pull the country out of its worst economic and financial crisis.

However, IMF financing is forcing President Kais Saied’s administration to make tough and unpopular decisions, including freezing wages and cutting energy and food subsidies at a time when rising inflation has reduced government power. ‘purchase.

It is a delicate balancing act for Mr Saied’s reform agenda as rising consumer prices are fueling public discontent across the country, leading to mass protests and labor strikes in all the countries.

Earlier this month, Finance Minister Sihem Boughdiri said she expected to resume discussions with the fund on the loan program soon. In preparation, the government will start cutting food and fuel subsidies in 2023 and cut the public wage bill by 5% over the next three years.

However, the IMF has not yet indicated its willingness to accept the loan program with Tunisia.

“Tunisia faces major structural challenges that translate into deep macroeconomic imbalances, weak growth despite its strong potential, high unemployment, low investment and social inequality,” the Washington-based lender said after three days of meetings with the Tunisian authorities. in March.

“The impact of the pandemic and the war in Ukraine now adds to these structural challenges.”

The North African country faces “stronger current account outflows caused by rising global commodity prices, such as oil and wheat,” Fitch Ratings said in a May research note.

“We expect the country to run a current account deficit of 8.4% of gross domestic product in 2022. [up from 6.3 per cent in 2021]”said the rating agency.

Rising import prices also fueled already high inflation and added to the government subsidy bill.

“Partly as a result, we expect the fiscal deficit to widen to 8.5% of GDP in 2022, from 7.8% in 2021,” Fitch said.

The IMF predicts that the Tunisian economy will grow by 2.2% this year and that inflation will reach 7.7%. The World Bank estimates GDP growth at 3% this year.

Tunisia’s economic outlook remains highly uncertain as the economic rebound in 2021 has been relatively moderate.

“Debt sustainability concerns remained acute” due to budget deficits and high financing needs, according to the World Bank.

Worsening political unrest in the country continues to hamper reforms. Ahead of a referendum on constitutional reforms, Mr Saied dissolved parliament and took control of the country’s judicial system after sacking 57 judges.

In March, Fitch downgraded Tunisia’s rating to “CCC” from “B-“, seven notches below investment grade and on par with El Salvador and Ethiopia.

The downgrading of the rating denotes a very high level of default risk compared to other issuers or bonds, mainly due to increased threats of fiscal and external liquidity.

The threats are the result of further delays in agreeing to a new IMF deal after political changes in July 2021, when Mr Saied suspended parliament and sacked the prime minister.

“In this context, it is difficult to imagine the government being able to credibly commit to reforms and implement the politically difficult prior actions necessary to secure an IMF program,” said Patrick Curran, senior economist at Tellimer Research.

Last month, the Tunisian government invited the Tunisian General Labor Union (UGTT), along with lawyers and human rights organizations, to participate in discussions to develop a national consensus on constitutional reforms and economic.

However, the powerful UGTT rejected the government’s plans. Hundreds of thousands of Tunisian public sector workers marched on June 16 as part of a nationwide strike to demand higher wages and protest against planned spending cuts and the privatization of public entities.

It is hard to imagine the government being able to credibly commit to reforms and implement the politically difficult prior actions necessary to secure an IMF program

Patrick Curran, Senior Economist at Tellimer Research

“The UGTT is ultimately big and powerful enough to bring the country to a standstill if [Mr] Saied ignores his economic demands, which are fundamentally incompatible with the IMF’s likely reform demands,” Curran said.

“The constitutional referendum will keep [Mr] Saied on a collision course with the UGTT and the opposition and will continue to absorb most of its bandwidth and political capital.

The government faces mounting pressure and will need to find a solution quickly as its debt is set to become unsustainable unless a strong and credible reform program is passed with broad support, Fitch said.

Tunisia’s public debt reached 79.2% of GDP in 2021, according to government estimates, which is lower than the 85.6% initially forecast in the 2021 budget.

“However, the trajectory ahead is less favorable, given the expected widening of the deficit in 2022 and the worsening of the real growth interest rate differential,” said Mr. Curran, who forecasts a sharp increase. central government debt to around 90% of GDP this year.

“Even if Tunisia gets an IMF program, there is a risk that its stock of debt will be deemed unsustainable and that the IMF will not be able to provide financing without debt restructuring,” he said. declared.

Updated: June 22, 2022, 03:30

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We are facing a global economic crisis. And nobody knows what to do | Philippe Inman https://watervalleychamber.info/we-are-facing-a-global-economic-crisis-and-nobody-knows-what-to-do-philippe-inman/ Sat, 18 Jun 2022 16:00:00 +0000 https://watervalleychamber.info/we-are-facing-a-global-economic-crisis-and-nobody-knows-what-to-do-philippe-inman/ Back in February, many investors were betting that the buildup of Russian troops on the Ukrainian border was nothing more than an elaborate bluff. The Russian and Ukrainian currencies appreciated as hedge funds and private equity firms signaled confidence in some form of an emerging peace deal, confidently buying rubles and the Ukrainian hryvnia. Today, […]]]>

Back in February, many investors were betting that the buildup of Russian troops on the Ukrainian border was nothing more than an elaborate bluff.

The Russian and Ukrainian currencies appreciated as hedge funds and private equity firms signaled confidence in some form of an emerging peace deal, confidently buying rubles and the Ukrainian hryvnia.

Today, there is a war that has effectively blocked raw materials and food usually exported by both nations, and no one knows when the conflict will end.

It is clear from the collapse of global stock markets and falling cryptocurrency values ​​that investors are panicked by the uncertainty. In the United States, where the S&P 500 index is down nearly a quarter since January, stocks had their worst start to the year in 60 years.

We’ve seen panics before, especially after the crash of 2008. Investment firms, despite their reputation as smart stewards of pension money, always hit the sell button at the first sign of trouble. Collectively, this leads to a rout.

Seasoned decision makers know how to respond in these uncertain times, which is to do whatever it takes to reassure investors that their money is safe. Western governments tapped into their reserves and, when that liquidity ran out, borrowed heavily to maintain a stable outlook for their economies. Vital support arrived in the form of cheap borrowing from central banks. With low interest rates acting like the cavalry in a John Wayne movie, everyone could be assured that the panic will be short-lived.

Not anymore. This time there is a real war, not only financial, and no one knows what to do. The major powers disagree on how to combat it, and policymakers disagree on how to handle the fallout, especially the shortages of raw materials and food from Ukraine and Russia that push inflation to 10% and beyond.

In particular, central banks have lost their temper. Instead of being a reassuring presence, they add to the feeling of panic by increasing the cost of borrowing. As one analyst said of the U.S. central bank’s decision to raise interest rates by 0.75 percentage points last week: “The Federal Reserve will raise interest rates up to what policy makers break inflation, but the risk is that they also break the economy”.

On Thursday, the Bank of England pushed its key rate to 1.25% after a period of more than a decade in which it had never risen above 0.75%. Some analysts believe the base rate will rise to 3% by the end of next year after Threadneedle Street put fighting inflation above sustaining growth.

We know that an increase in the cost of borrowing in the UK, the Eurozone and the US, which we are seeing right now, will do nothing to lower prices.

Inflation is an affliction caused by Russia’s invasion of Ukraine and, to a lesser but important extent, China’s difficulties with Covid after its vaccine development failures, which caused blockages and repeated blockages in ports. In the UK, Brexit adds another big twist as it has hurt trade and reduced the number of available workers.

The justification for higher interest rates must therefore lie elsewhere, and central banks, to justify their spasm of action, argue that they must move forward to avoid a wage spiral – one where wages exceed inflation.

In Britain, this argument assumes that the average worker, to avoid a decline in personal living standards, will be able to negotiate a wage deal that exceeds the Bank of England’s latest forecast of an 11 % later this year.

While the government is expected to limit public sector wage increases to between 0% and 3% this year, that means private sector increases are expected to be even higher – around 12% or 13% on average. These levels of wage increases are a fiction. Workers’ power, outside of a few discrete pockets of the labor market, is a mirage.

Still, the Bank looks likely to go ahead anyway, which leaves anyone looking for reasons to remain confident looking to Rishi Sunak.

The Chancellor has made it clear that he values ​​fiscal rectitude above the “whatever it takes” open-ended commitments needed to foster confidence. He has warm words for investors on low corporation taxes, special visas for foreign entrepreneurs and a warmed-up Thatcherite plan to increase the number of workers by forcing more people on benefits to look for work.

This is a weak set of micro-policies that will do little to improve the mood of companies looking to invest in the UK. No wonder the pound fell. Few investors want to buy British right now, and who can blame them?

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Despite the devastating economic crisis of UNRWA, its advisory commission visits Lebanon https://watervalleychamber.info/despite-the-devastating-economic-crisis-of-unrwa-its-advisory-commission-visits-lebanon/ Fri, 17 Jun 2022 11:47:38 +0000 https://watervalleychamber.info/despite-the-devastating-economic-crisis-of-unrwa-its-advisory-commission-visits-lebanon/ The Advisory Commission (AdCom) of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) held a crucial meeting in Lebanon this week amid deep concern over its situation miserable financial. This movement comes as Lebanon is in the grip of the worst financial crisis in living memory, 86% of […]]]>

The Advisory Commission (AdCom) of the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA) held a crucial meeting in Lebanon this week amid deep concern over its situation miserable financial.

This movement comes as Lebanon is in the grip of the worst financial crisis in living memory, 86% of Palestinian refugees in Lebanon would live below the poverty line.

During the meeting, the commission discussed the need to raise funds to cover services for Palestinian refugees for the remainder of 2022.

They also stressed the need for a mechanism that would facilitate priority assistance needs such as health, education and social protection.

According to a statement released by UNRWA, the meeting focused on UNRWA’s ability to continue to fulfill its mandate in the face of financial and political challenges.

With the impact of the Ukraine crisis on funding in the backdrop, AdCom members also discussed efforts to innovate and sustain funding modalities to enable refugees’ continued access to essential services such as as health, education and social protection.

UNRWA Commissioner General Philippe Lazzarini said during his visit to the Palestinian refugee camps in Lebanon: “Holding this AdCom session in Lebanon is indicative of the attention that UNRWA wishes to attract on the situation of the approximately 210,000 Palestinian refugees living here”.

“The stories we hear are heartbreaking. More than 80% of Palestinian refugee infants do not receive the nutritional requirements necessary for healthy growth. It is one of many shocking indicators of the plight of Palestinian refugees in Lebanon, where almost everyone is now suffering from the impact of the acute economic crisis that has hit the country.

He added: “At this time, between what we have already received from donors and based on the best available information, we anticipate a funding shortfall of approximately $100 million. Chronic underfunding eventually exhausted our ability to cope.

The AdCom team witnessed first-hand the enormous needs of Palestinian refugees and the Agency’s work in Burj Barajneh camp, Beirut, during pre-meeting field visits. Together with UNRWA’s Director of Affairs in Lebanon, Mr. Claudio Cordone, the delegation met with members of the community, who shared their experiences with deaths resulting from exposed live electricity and water pipes and open sewers, according to the release.

In addition, they highlighted the difficulty they face in feeding their families due to the rising cost of living and hospitalization costs amid economic crisis, increasing poverty, unemployment, domestic violence, child labor and divorce cases.

The AdCom delegation also heard stories about the resilience, hopes and aspirations of Palestinian refugees and how UNRWA’s health, education and shelter repair services, among others, were sometimes the only support they received. Delegates visited an UNRWA health centre, the Women’s Program Association and shelters in need of rehabilitation, as well as those that had been rebuilt with UNRWA support.

The UNRWA delegation was also briefed on the UNRWA archives project to digitize the registration records of Palestinian refugees and the progress of the reconstruction of the Nahr el-Bared camp following a conflict. who destroyed it in 2007.

Members of the Advisory Commission visited the Ein El Hilweh camp in southern Lebanon where they met with representatives of the Palestinian refugee community, teachers and students who gave first-hand accounts of the impact of the country-wide economic crisis on their ability to access food, education, employment and health care. Discussions also focused on access to rights, the restrictions of which greatly reduce the future prospects of refugees.

Also in this regard, the delegation paid a visit to the new Al Sakhra School in Mieh Mieh and the Vocational Training Center in Siblin, where students shared their aspirations and concerns about their ability to achieve them.

The Advisory Commission is responsible for advising and assisting the Commissioner-General of UNRWA in the execution of the mandate of the Office and in the execution of the programs of UNRWA. It meets twice a year, usually in June and November.

It should be mentioned that UNRWA, which assists Palestinian refugees in Jordan, Lebanon, Syria and the West Bank, including East Jerusalem and the Gaza Strip, is facing an increased demand for services resulting from an increase in the number of registered Palestinian refugees, the extent of their vulnerability and their growing poverty. The UN agency is funded almost entirely by voluntary contributions and financial support has been exceeded by growing needs.

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Advice from a Pakistani official in the midst of an economic crisis: drink less tea https://watervalleychamber.info/advice-from-a-pakistani-official-in-the-midst-of-an-economic-crisis-drink-less-tea/ Thu, 16 Jun 2022 03:55:00 +0000 https://watervalleychamber.info/advice-from-a-pakistani-official-in-the-midst-of-an-economic-crisis-drink-less-tea/ PESHAWAR, Pakistan — Pakistan’s government has come under fire after an official urged people to drink less tea to help the country’s struggling economy. As Pakistan, the world’s largest tea importer, grapples with runaway inflation and a plummeting rupee, Ahsan Iqbal, the minister for planning and development, told reporters on Tuesday that his compatriots should […]]]>

PESHAWAR, Pakistan — Pakistan’s government has come under fire after an official urged people to drink less tea to help the country’s struggling economy.

As Pakistan, the world’s largest tea importer, grapples with runaway inflation and a plummeting rupee, Ahsan Iqbal, the minister for planning and development, told reporters on Tuesday that his compatriots should ” reduce tea consumption by one to two cups because we import tea on loan.

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His comments were met with a mix of memes, mockery and harsh criticism in the South Asian nation of 220 million people, which bought more than $640 million worth of tea in 2020, according to the Observatory of economic complexity, an international trade data site.

“The problem is that the Pakistani elites will impose heavy taxes on the masses and snatch our cup of tea from us, but they will never quit their lavish lives,” Hameed Khan, a 45-year-old journalist from the city of Peshawar, told NBC News. , in the north of the country. Wednesday.

Pakistan has been in political and economic turmoil for months, with sharply declining foreign exchange reserves and rising food, gas and oil prices putting further pressure on the country’s already struggling economy. country. A devastating heat wave added to the challenges as temperatures hit 124 degrees Fahrenheit last month.

“There is no electricity or drinking water in this scorching weather,” said Gohar Ali, 47, a civil servant from Mardan city.

He added that his monthly salary ran out after two weeks and he did not know how he would cope for the remaining fortnight.

Handling the economic crisis is a huge test for Prime Minister Shehbaz Sharif, who took power in April after his predecessor, Imran Khan, was ousted by lawmakers.

Khan, a cricket star turned Islamist politician, had faced mounting criticism for his performance, including his handling of the country’s finances.

Image: An employee pours tea for customers at a restaurant in Islamabad, Pakistan, June 15, 2022.
An employee pours tea for customers at a restaurant in Islamabad on Wednesday.Aamir Qureshi / AFP-Getty Images

Last week, Miftah Ismail, the country’s finance minister, announced a new budget which he said would raise taxes on the rich, tackle tax evasion and privatize government assets when it comes into effect on 1 January. July. He also banned government officials from buying new cars. for personal and official use to reduce fuel consumption.

The measures appeared to be designed to encourage the International Monetary Fund to reinvigorate a bailout package worth $6 billion that was negotiated in 2019 after years of stagnant growth. The program was put on hiatus amid questions about Pakistan’s finances.

One of the key steps towards meeting IMF conditions, the removal of costly fuel subsidies, has already been implemented by the Sharif government, with fuel prices rising by 40%.

IMF staff and Pakistani officials are due to meet this month.

Although reducing tea consumption is not an official policy, financial analyst Mohammad Irfan Khan, 35, from the Mohmand tribal district, said he was not only surprised by the demand but also hurt.

“In my life, Pakistan has never come out of an economic crisis,” he said.

Reuters contributed.

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Economic crisis: the Federal Reserve is considering more aggressive interest rate hikes to curb inflation | Economy and business https://watervalleychamber.info/economic-crisis-the-federal-reserve-is-considering-more-aggressive-interest-rate-hikes-to-curb-inflation-economy-and-business/ Wed, 15 Jun 2022 14:34:00 +0000 https://watervalleychamber.info/economic-crisis-the-federal-reserve-is-considering-more-aggressive-interest-rate-hikes-to-curb-inflation-economy-and-business/ The Federal Reserve is looking for a way to rein in inflation without causing a recession, but the path is narrowing. The upward pressure on prices is unrelenting, and in May its annual rise marked a new 30-year high of 8.6%. Economists now think it is very likely that the Fed will raise interest rates […]]]>

The Federal Reserve is looking for a way to rein in inflation without causing a recession, but the path is narrowing. The upward pressure on prices is unrelenting, and in May its annual rise marked a new 30-year high of 8.6%. Economists now think it is very likely that the Fed will raise interest rates more aggressively than expected until recently.

The first step could be taken during the two-day meeting that started on Tuesday. In May, after raising rates by half a point, the biggest hike in 22 years, Federal Reserve Chairman Jerome Powell indicated that policymakers expected two more half-point hikes in the rate. interest rates in June and July. However, the market began to talk about a three-quarter point rise, which would be the highest since 1994, as the most likely outcome of the meeting (some analysts are even talking about a full point). For central banks, being predictable has become an asset. They try to anticipate what their movements will be to avoid scares and distortions in the markets, but this is not always possible.

In fact, the market has already adjusted its expectations. The sharp fall in the stock market is a clear symptom that combines the fear of higher interest rates and weaker growth. The dollar has strengthened and is trading again near 20-year highs against major currencies, hurting the balance sheets of US multinationals. But it is on the debt market that there has really been a change of direction which concerns almost exclusively interest rate expectations. The yield on three-year U.S. Treasuries soared, posting the biggest two-day rise since 1987, rising from 3% to 3.49%, according to Bloomberg data.

In the money market, interest rate derivatives, which more accurately gauge market expectations for policy rates, show that investors expect the fed funds rate to be at 4% by the midpoint. next year, compared to 0.75% to 1% currently. If the Fed was trying to avoid surprises, a 0.75 point hike has almost ceased to be, although some also believe the central bank could still get away with half a point this week and postpone the hikes. most aggressive rate hikes in July. or September.

Even Wall Street gurus are unsure of the outcome of Wednesday’s meeting. For the chief economist for the United States at JP Morgan, the most likely result is a rise of 0.75 points, although it is possible that the Fed could amplify it to a whole point. Head of global economic analysis at BoFA Securities, Ethan Harris, estimates the upside will be 0.5 points, according to two reports sent to clients on Monday. However, Harris predicts that Fed Chairman Powell will adopt a “no matter what” tone in the fight against inflation, in reference to the famous 2012 statement by the then head of the European Central Bank, Mario Draghi, to save the euro.

Recession risk

The problem is that what it takes may be a recession. Or, more specifically, what is needed to rein in inflation may be rate hikes that eventually cause a recession. Rising interest rates discourage businesses and consumers from borrowing because they make loans more expensive, cool the real estate market and, in short, slow the economy.

Morgan Stanley CEO James Gorman warns: “There was a legitimate risk of recession. I thought it was around 30%. It’s probably more like 50% now – it’s not 100%. It’s up to you to be a little careful. Speaking at a business meeting on Monday, he said “it was inevitable that this inflation would not be transitory, it was inevitable that the Fed would have to move faster than they anticipated.” His colleague Jamie Dimon, of JP Morgan, had already warned weeks ago that he saw an economic hurricane coming.

Gasoline prices at a Los Angeles gas station over the weekend.Miguel Jimenez Cabeza

The markets are showing another sign of this risk: the inverted yield curve. Normally, interest rates on debt are lower in the short term and higher in the long term, since the risk is greater in the long term. By plotting interest rates at different terms on a graph, they generally show an upward curve. Sometimes, however, the curve flips. This inverted curve, at least in a certain sense, is interpreted by the market as an indicator that a recession is approaching (and that when inflation is brought under control, rates will have to be lowered again).

Part of the price increases is linked to the reactivation of demand, but there are other reasons which are exogenous or result from supply problems, and it is not certain that the price increases are very effective for fight them. For example, gasoline prices are skyrocketing due to rising oil prices. The price of a gallon (3.78 liters) averaged over $5 for the first time in history across the country, but in California it reached around $8, prices never seen before. .

The nightmare scenario would be stagflation, ie stagnation with inflation. Rate hikes could cripple the economy, but that might not be enough to ensure price stability. The political implications of the price increases are already dire for President Joe Biden’s popularity and for Democrats’ expectations ahead of November’s midterm elections, in which just over a third of the Senate and the entire House are rising. for renewal. If you add an economic downturn to that, things could get even worse.

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Economic crisis and fear of default https://watervalleychamber.info/economic-crisis-and-fear-of-default/ Mon, 13 Jun 2022 03:31:56 +0000 https://watervalleychamber.info/economic-crisis-and-fear-of-default/ ISLAMABAD: Pakistan now faces daunting challenges in coping with the economic crisis to meet its balance of payments needs and avoid economic failure. The budget deficit for the outgoing year 2021-22 is expected to be around Rs 5.2 trillion. Circular debt in the power sector will amount to Rs 2.5 trillion. The trade deficit has […]]]>

ISLAMABAD:

Pakistan now faces daunting challenges in coping with the economic crisis to meet its balance of payments needs and avoid economic failure.

The budget deficit for the outgoing year 2021-22 is expected to be around Rs 5.2 trillion. Circular debt in the power sector will amount to Rs 2.5 trillion. The trade deficit has increased by 58% to around $45 billion while the current account deficit is expected to be around $16 billion.

As a result of high imports and exchange rate pressures, foreign exchange reserves have shrunk to $9.7 billion, barely enough to cover 1.5 months of imports.

The Pakistani rupee is continuously falling against the US dollar and has fallen from 180 rupees per dollar to 202 rupees. Consequently, the inflation rate rose to 14% despite an increase in the key interest rate to 13.75%.

Gross government debt increased to 44.365 trillion rupees or 75% of GDP. Therefore, debt service would be around Rs 3,900 billion over the next fiscal year. Total external debt and liabilities increased to $128 billion in March 2022.

The government is in a difficult situation since it will have to pay 21 billion dollars to international creditors for the service of the foreign debt during the next fiscal year.

The country is facing a severe economic crisis in an environment of political turmoil and uncertainty.

If timely policy actions and corrective policy measures are not implemented, the country may face a default and a crisis like Sri Lanka, which will have profound implications for inflation, growth and jobs. and will affect the poor and vulnerable segments of the population.

Pakistan has no choice but to accept the strict IMF conditions in order to reinstate the IMF program to avoid an economic default.

We all know that the country has already undertaken 22 IMF programs in the past and IMF policies and programs have not proven to be a panacea to solve the economic problems of the country.

It should be noted that most of our economic problems span the last 15 years, as the country has maintained a high budget and a high current account.

Unfortunately, these deficits were financed by borrowing abroad, which increased the country’s debt burden.

The nuclear-capable nation now faces a dilemma due to inappropriate macroeconomic expansionary policies, higher government spending, loss of state-owned enterprises, untargeted subsidies, fixed exchange rate policy until in 2017 and an expansionary import-oriented fiscal policy of the outgoing government in 2022. this led to a high current account deficit and put pressure on the exchange rate, resulting in double-digit inflation constantly high.

Although the new government has taken steps to remove subsidies on petroleum products and impose restrictions on imports of non-essential items, the country needs an immediate political consensus on a charter for the economy backed by the government. establishment to avoid an economic collapse. Tough decisions are needed over the next few months to stop the bleeding from overspending and over-importing.

First, Pakistan needs to revive IMF financing by implementing economic reforms to restore credibility in the markets, as well as continued financing of CPEC.

Reforms aimed at reducing high trade and current account deficits would require significant cuts in spending and imports, but without negatively impacting the cost of living of low-income families whose lives have become miserable due to the persistence of a high inflation in recent years.

The government’s economic reform program is to include a halving of the budget and current account deficits over the next year by reducing the budget deficit by 2 trillion rupees and non-essential imports by $10 billion consumed by the elite rich.

The reduction in imports must be achieved within the first three months to avoid an economic collapse and halt the free fall of the Pakistani rupee against the US dollar.

This is essential to tighten the belts of high-income households, to send a signal that the poor are not victims of the economic mismanagement caused by the previous government. The economic reform program should include the following measures:

First, through fiscal and credit policies, we must limit the growth of industries that are heavily dependent on imports (cars, luxury goods, electronics, etc.) producing for the domestic market.

Second, declare all exporting industries as tax-exempt manufacturing units and ensure that they are provided with all utilities at regionally competitive prices and subsidized credits. Bangladesh thus increased its exports to 45 billion dollars.

Third, provide Rs 800 billion in targeted cash grants to 30 million poor and vulnerable families through the BISP registry system to offset rising electricity, oil and food prices.

Once targeted subsidies are in place, market prices for these goods can be raised through higher tax rates and import duties, which would provide revenue to provide targeted subsidies to poor and vulnerable groups.

Fourth, government non-development expenditure should be cut by Rs 1 trillion by reducing waste in civilian and military institutions, reducing development expenditure and reducing projections, except for dams and water management. water, privatizing loss-making state enterprises and reducing untargeted subsidies. .

Fifthly, it is necessary to impose a tax to raise 1 trillion rupees to reduce public debt. This tax can be levied on: (i) all assets (vehicles, agricultural land, urban real estate and PSX shares) of individuals who own assets of more than Rs 5,000,000; and (ii) real estate and equity capital gains, and profits of large corporations. It is a sacrifice that should be made by the wealthy elite to save the country.

Sixth, reduce interest rates on loans and deposits by 5% by reducing the discount rate to 8%. This will reduce the cost of borrowing for businesses and accelerate GDP and employment growth.

Low-income pensioners and widows can benefit from income protection through higher rates on national savings instruments. The aim should be to save about 700 billion rupees a year on interest charges on domestic public debt.

Finally, the country is expected to impose a one-year embargo on all imported cars, cell phones, non-essential food and all manufactured goods for domestic use with the aim of reducing imports by $8-10 billion a year. next year, which would reduce the current account deficit, strengthen the national currency against the US dollar and accelerate growth and job opportunities.

The author holds a PhD in Economics from the University of Sussex, UK, and has over 37 years of experience in senior positions in various national and international institutions.

Published in L’Express Tribune, June 13e2022.

As Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join the conversation.

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43% hold Imran Khan responsible for Pakistan’s economic crisis: survey https://watervalleychamber.info/43-hold-imran-khan-responsible-for-pakistans-economic-crisis-survey/ Thu, 09 Jun 2022 11:40:52 +0000 https://watervalleychamber.info/43-hold-imran-khan-responsible-for-pakistans-economic-crisis-survey/ A total of 43% of respondents to an opinion poll in Pakistan held the government led by former Prime Minister Imran Khan responsible for the country’s unfavorable economic conditions. According to the survey results, 43% of respondents criticized the three-year PTI rule for its failure to control inflation and for the country’s debilitating economy, The […]]]>

A total of 43% of respondents to an opinion poll in Pakistan held the government led by former Prime Minister Imran Khan responsible for the country’s unfavorable economic conditions. According to the survey results, 43% of respondents criticized the three-year PTI rule for its failure to control inflation and for the country’s debilitating economy, The News International reported.

The survey was conducted in Pakistan by the Institute of Public Opinion and Research (IPOR), a research company specializing in social science surveys and research. Twenty-one percent said they had experienced no change under Imran Khan’s government. While 55% of respondents called on the government led by outgoing Prime Minister Shehbaz Sharif to control inflation.

The research firm conducted the survey on economic conditions in Pakistan from May 24 to June 3 and gathered the opinions of more than 2,000 people from 79 districts across the country, according to the outlet. Seven percent said tackling poverty, seven percent on rising unemployment, six percent on load shedding, six percent on deteriorating economy, three percent on rising prices fuel, three percent on corruption, three percent on political instability, 2 percent on the availability of drinking water and one percent on the non-availability of educational institutions.

One percent said holding elections was a critical issue while one percent raised other issues. Another percent said they couldn’t come up with issues that needed immediate attention. Previously, Pakistani Interior Minister Rana Sanaullah also criticized the Imran Khan-led government and said it had wasted many precious years for the country. Sanaullah said the PTI wreaked havoc on the economy through the most unstable and daily shifting fiscal policies, which plunged the country into the quagmire of inflation.

The Home Secretary said the PTI had only painted a rosy picture and made false promises which turned out to be a complete failure. He said that the burden of foreign loans had become unbearable solely because of PTI’s ill-conceived policies. At the same time, in its recent “Pakistan Development Update”, the World Bank highlighted the structural weaknesses of Pakistan’s economy, including low level of investment, weak exports and a weak growth cycle of productivity.

Moreover, strong domestic demand pressures and rising global commodity prices would lead to double-digit inflation in the country. Moreover, the growth momentum is not expected to pick up in Pakistan in the near future as a sharp rise in the import bill would also negatively impact the Pakistani rupee, according to local media. The World Bank report cites the insufficiency of the financial sector as one of the reasons for this weak growth. According to the Standard and Poor’s Ratings Global Financial Literacy Survey 2015 (S&P Global FinLit Survey), only 26% of adults in Pakistan are financially literate. Thus, the limited financial literacy in Pakistan is of concern to investors as it has exacerbated the challenge of informality in the country. (ANI)

(This story has not been edited by the Devdiscourse team and is auto-generated from a syndicated feed.)

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Plymouth faces economic crisis as inflation rises and other towns poach workers https://watervalleychamber.info/plymouth-faces-economic-crisis-as-inflation-rises-and-other-towns-poach-workers/ Thu, 09 Jun 2022 05:20:00 +0000 https://watervalleychamber.info/plymouth-faces-economic-crisis-as-inflation-rises-and-other-towns-poach-workers/ Plymouth faces an economic nightmare with rising inflation making the cost of living crisis worse, falling business investment and workers being poached by employers from other parts of the country. A new report from the British Chambers of Commerce (BCC) predicts that economic growth will come to a halt and inflation will hit a 33-year […]]]>

Plymouth faces an economic nightmare with rising inflation making the cost of living crisis worse, falling business investment and workers being poached by employers from other parts of the country. A new report from the British Chambers of Commerce (BCC) predicts that economic growth will come to a halt and inflation will hit a 33-year high of 10% before the end of the year – comfortably outpacing average earnings growth – and will not drop significantly until the end of 2024.

These rising costs are also expected to significantly weaken business investment in the UK, according to BCC forecasts. And the situation is likely to be made worse by rising taxes and interest rates and global shocks such as Russia’s invasion of Ukraine.

Plymouth will not be immune to pain with Stuart Elford, managing director of Devon & Plymouth Chamber and chairman of BCC South West, saying: “The latest economic forecasts are extremely worrying but come as no surprise. Businesses are grappling with the effects of Brexit, Covid and now the war in Ukraine.

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“The exponential rise in the cost of raw materials, fuel and energy has created additional pressures at a time when cash reserves have been depleted and a tight labor market is stifling productivity. The additional costs for households put pressure on wages and this generated runaway inflation.

He said there is the added problem of Plymouth businesses unable to retain talented staff. He explained: “In the South West, we are seeing companies struggling to match the wages offered by out-of-region companies that allow people to work from home or force them to move from the region – adding further pressure on the labor market here.

He added, “We have called on the government, through the BCC, to organize an emergency budget to ease the pressure on businesses and expand the scope of the annual investment allowance to cover training. professionalism, which would contribute to bridging the productivity gap which is particularly wide in our region because of its specific challenges. Without these measures, some businesses will unfortunately fail. Devon & Plymouth Chamber member businesses are three times more likely to survive than those that are not, so we reach out to Devon businesses to offer our support through these difficult times.

The BCC lowered its GDP growth expectation for 2022 to 3.5% (from 3.6%) in the face of what it called a “deteriorating economic outlook”. He now expects the UK inflation rate to hit 10% in the fourth quarter of 2022, with heightened economic uncertainty and rising costs expected to significantly weaken business investment, with growth of 1 .8% forecast in 2022, down sharply from the 3.5% of the previous forecast.

Expectations for GDP growth in 2022, at 3.5%, are now less than half of the 7.5% growth recorded last year. Quarter-over-quarter, GDP is expected to stagnate with no expected growth in the second and third quarters before contracting 0.2% in the fourth quarter.

This negative outlook reflects a combination of runaway inflation, weak business investment, tax hikes and global economic shocks – initially caused by Covid, then compounded by the war in Ukraine. UK annual economic growth is expected to slow sharply to 0.6% in 2023 before recovering slightly to 1.2% in 2024.

Meanwhile, consumer spending is now expected to rise 4% in 2022, down from the first quarter forecast of 4.4%. This reflects the historically high pressure on real household incomes, with inflation far exceeding the expected 5% growth in average incomes for the year.

Businesses and consumers are facing unprecedented inflationary pressures from rising raw material costs, rising energy price caps, and upward pressures on energy and commodity prices. raw materials. BCC said if CPI inflation hits 10% in the fourth quarter of 2022, it would be the highest since CPI records began in their current form in 1989.

CPI inflation should eventually fall back to the Bank of England’s 2% target by the end of 2024, but at the same time the Bank of England’s interest rate should rise to 2% in 2022 and 3% in 2023. These represent significant changes from the 1% and 1.5% rates previously forecast in the first quarter.

The BCC said business investment is expected to grow by 1.8% in 2022, a significant downward revision from the previous forecast of 3.5%. The downgrade reflects heightened political and economic uncertainty and growing cost pressures that limit the ability of small businesses to invest. BCC survey data on business investment has shown no signs of recovery since the start of the Covid pandemic.

Alex Veitch, UK Chambers of Commerce policy director, said: “Our latest forecast indicates that the headwinds facing the UK economy show little sign of abating with continued inflationary pressures and sluggish growth. The war in Ukraine came just as the UK was entering a Covid recovery; additional pressure on corporate profitability.

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“The projected decline in business investment is particularly concerning. Urgent action is essential here, and we are having constructive conversations with the government about its review of capital cost allowances and other policies to incentivize business investment.

“With inflation expected to outpace wages, we are concerned that a decline in consumer spending would further impact businesses and hamper growth. We expect that if trends continue, inflation will only return to the rate Bank of England target until the end of 2024, implying a prolonged period of hardship for the UK.

“Against this backdrop, the government needs to put in place stable and supportive policies that help businesses pull the UK out of this economic quagmire. Companies must have confidence to invest, only then can they drive the growth the economy desperately needs.

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