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PTI's New Economic Team Line-Up in Pakistan

Who are the members of Pakistan's top new economic leadership team? Who's Reza Baqir? Who's Shabbar Zaidi? Why were the changes necessary? Were the latest changes made to remove previous PMLN government's loyalists considered to be responsible for the current economic crisis? Did their policies and actions contribute to large twin deficits? Did the International Monetary Fund (IMF) force these changes as a condition for the country's bailout?

Pakistan's External Debt. Source: Wall Street Journal

Pakistan Current Account Deficit. Source: State Bank of Pakistan

As Pakistan awaits the news of the discovery of large offshore oil reserves, what lessons should Pakistan learn from the governance failures in Venezuela? Is Venezuela suffering because of its government's hostility toward the United States? Will large oil reserves be a panacea for Pakistan's economic problems?

Viewpoint From Overseas host Faraz Darvesh discusses these questions with Sabahat Ashraf (ifaqeer) and Riaz Haq (www.riazhaq.com)

https://youtu.be/1UucUo_eU90

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Comment by Riaz Haq on May 13, 2019 at 7:40am

Pakistan agrees to 13th bailout in 30 years from the IMF

https://www.cnn.com/2019/05/13/asia/pakistan-khan-imf-intl/index.html

"Pakistan is facing a challenging economic environment, with lackluster growth, elevated inflation, high indebtedness, and a weak external position," IMF representative Ernesto Ramirez Rigo said in statement.
"This reflects the legacy of uneven and procyclical economic policies in recent years aiming to boost growth, but at the expense of rising vulnerabilities and lingering structural and institutional weaknesses. The authorities recognize the need to address these challenges, as well as to tackle the large informality in the economy, the low spending in human capital, and poverty."

Khan met with IMF director Christine Lagarde in February, as he sought to secure funding from the agency despite being a longterm critic of its previous dealings in Pakistan.
The IMF has been criticized in the past for imposing strict austerity on receiver nations, forcing governments to cut social programs and privatize national industries.
Khan has spoken of the need for a major anti-poverty program to boost Pakistan's economy and help its worst off citizens, but this will involve considerable spending that is typically antithetical to the conservative IMF.
These types of restrictions are one of the reasons Khan has been publicly attempting to avoid returning to the IMF to seek more funding. In October, Saudi Arabia agreed to advance Islamabad $6 billion in financial support. But that has not been enough to plug the gaps in Pakistan's economy -- issues Khan inherited and has been struggling to get under control.
The Pakistani Prime Minister has also turned to China for help. Beijing has invested heavily in the country under President Xi Jinping's Belt and Road Initiative.
"I can tell you one thing, the Chinese have been a breath of fresh air for us ... They have been extremely helpful to us," Khan said earlier this year.
China's increasing presence in Pakistan has not been without incident, however. On Sunday, militants attacked a five-star luxury hotel in Gwadar, in Balochistan province. The city is at the center of China's multi-billion-dollar Belt and Road infrastructure project.
Five people were killed in the attack, for which a Pakistani separatist group claimed responsibility, warning of more attacks in China and Pakistan in a post on an unverified Twitter account. CNN could not independently confirm whether the account, which claims to belong to the Baolchistan Liberation Army, is authentic.

Comment by Riaz Haq on Tuesday

Foreign #investors return to #Karachi #Stock Exchange in #Pakistan with the purchase of $6.9 million of shares yesterday, the second-biggest single-day purchase this year, after the country secures a new #IMF loan. #economy #PTI #KSE100 https://www.bloomberg.com/news/articles/2019-05-14/local-pessimism-... via @markets



Overseas funds returned to Pakistani stocks on Monday after the nation secured a $6 billion loan from the International Monetary Fund, even as domestic investors fueled the market’s biggest decline this year.

Foreigners bought $6.9 million of shares yesterday, the second-biggest single-day purchase this year. That’s as the benchmark KSE-100 Index fell 2.4% at close, the most in more than five months.

Foreigners “will welcome the loan’s conditions, which mean that policy is going to stay on a credible and reformist path,” said Hasnain Malik, head of equity strategy at Dubai-based Tellimer. The loan “improves foreign investor confidence,” he said.

The agreement with the IMF comes after a sixth-month period that saw rating companies downgrading Pakistan’s credit score and stocks hitting a three-year low. The slump has left the KSE-100 Index trading at a price-to-book ratio of 1.1, the lowest reading in at least a decade, according to Malik.

Comment by Riaz Haq on Wednesday

Why #IMF bailout? #Pakistan #economy was in crisis when #ImranKhan took office in 2018. Forex reserves plunged by 50% to $7 billion last year, and government was running current-account and budget #deficits of over 5% of #GDP. #PMLN #PTI https://www.bloomberg.com/news/articles/2019-05-13/why-pakistan-nee... via @bpolitics

Will this time be different?
Time will tell. Khan has overhauled his economic team, including the installation in May of Reza Baqir, who previously served in senior positions at the IMF, as the central bank governor. His predecessor was fired along with the chief of the tax-collection agency over their “performance.” Khan also appointed Abdul Hafeez Shaikh as his finance adviser after forcing Asad Umar to resign in a cabinet shuffle in April. Much will depend on how successful the new team is in implementing the IMF’s loan conditions and whether measures like higher taxes and energy prices will hurt the prime minister’s political standing.

Does Pakistan have other options?
Khan has also secured $3 billion in financing each from Saudi Arabia, the United Arab Emirates and China. China has been playing a bigger role in Pakistan’s economy, financing billions of dollars of power and road projects as part of its Belt and Road program, funding that typically doesn’t come with the kind of strings attached to IMF loans. In his visit to Pakistan earlier this year, Saudi Crown Prince Mohammed Bin Salman pledged $20 billion in investment in Pakistan, including in an oil refinery, although no agreements have been signed yet.

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