Pakistan economy has started deteriorating and corrupt thugs (Nawaz, Ishaq Dar, Ahsan Iqbal, Zardari etc) are using their goons in media to twist truth and cover their corruption, looting and mismanagement. At least we (people) should know the truth what is happening and ponder, so that we do not become ignorant ourselves.
A country’s survival is its economy as a bankrupt country may be in theory independent but in reality, that country is slave to whoever feeds that country. Some who are getting enough to eat and live nicely, as they are provided by hook or crook, do not care about economy of the country, as those who get effected most from bankrupt economy are poor, so these people may talk BS but fact is that the Army marches on their stomach (again it is economy that feeds the army) and poor of country survives on food (again it is economy that feeds the poor). Russia was big power but it collapsed as economy of the country gone down and Iraq may be economically strong but a country with bigger economy (USA) destroyed Iraq. Anyhow, how surprising and sad that when crooks come to power, everything starts changing very fast. Here is a summary of what happened during last 8 years and what has started happening to Pakistan economy:
Pakistan external debt situation:
Pakistan external debt was around 13 billion dollars when thugs’ period started in 1988. This dollar debt increased to 38 billion dollars by 1999 (an increase of around 3 times), or was increasing @ 10.25 percent a year. Once Musharraf came to power, external debt stopped increasing and was around 40 billion dollars at the end of last fiscal year (June 2007). A great achievement as Pakistan was paying over 3 billion dollar interest every year on debt that Pakistan inherited in 1999 and debt was not increasing even equal to interest (it increased @ 0.65 percent a year, even less than 1 percent a year).
[We should know that interest on dollar debt in 1999 was much higher, over $4 billion a year, but it got reduced because Mush government replaced many high interest dollar debts with low interest loan]
Pakistan Internal debt situation:
Pakistan internal debt was around 300 billion when thugs came to power in 1988 and they increased internal debt over 5 times to around Rs 1650 billion by 1999 (Musharraf came to power). That was an increase @ 16.85 percent a year. During last 8 years, Pakistan internal debt increased to Rs 2600 billion (end June 2007). When government works with commitment, corruptions stops and less stealing happens, comparative debt as well as interest rate starts going down … and interest rate did went down from over 20 percent pre-Musharraf period to below 8 percent … at times even 3 to 4 percent during last 8 years.
That means, debt marginally increased from Rs 1650 billion to Rs 2600 billion (1999 - 2007) @ 5.85 percent a year (marked difference between internal debt increasing at around 17 percent of Thugs’ period and 6 percent of efficient committed Musharraf period).
Ref: http://www.sbp.org.pk/ecodata/domesticdebtout.pdf
This debt increased by 411 billion to 3011.668 billion by March 2008. … Compare to 950 billion increases in 8 years (57.6 percent in 8 years), 400 billion increases in 9 months (15.4 percent in 9 months) is big increase. This shows that even when government is sincere, what crook political activists, characterless lawyers, immoral Journalists, corrupt judges, and civil-goons could do by destabilising government that these people did during last one year.
Well, it seems that old days are coming back fast and I would not be surprised when interest rate in Pakistan would again reach 15 to 20 percent for savings (as when government borrows heavily … and most of those borrowings goes in the bank accounts of corrupt politicians, debt as well as interest rate starts rising fast). Now look at the news from today’s newspaper (Dawn):
http://www.dawn.com/2008/05/30/ebr1.htm
Govt to float bond to raise Rs300bn: Budgetary support
[We should know that Thugs’ government of BB and NS took even Rs loan at very high interest rate (they were paying over 18 percent on Defence saving certificates, Mahana income certificates, and some Khas deposits certificates). Musharraf government reduced this interest a lot]
Note: We should also realise that most debt increases during last 8 years in both external and internal debt is due to not extra borrowing but due to payment of interest on past debts … Actually interest on past debts comes more than increase in total debt during last 8 years.
Pakistan Foreign exchange reserve:
Pakistan has seen unprecedented growth in foreign exchange reserves such that there was not a single year between 1999 and 2007 that Pakistan dollar reserve did not increased. Pakistan foreign exchange reserve was $16.486 billions at the end of Oct 2007 (and not only that, but it was rising every month). For instance at the end of:
June 2000: Pakistan dollar reserve was $1.9676 billions.
June 2001: Pakistan dollar reserve was $3.2195 billions.
June 2002: Pakistan dollar reserve was $6.4316 billions.
June 2003: Pakistan dollar reserve was $10.7190 billions.
June 2004: Pakistan dollar reserve was $12.3392 billions.
June 2005: Pakistan dollar reserve was $12.6234 billions.
June 2006: Pakistan dollar reserve was $13.1369 billions.
June 2007: Pakistan dollar reserve was $15.6114 billions.
And after 4 months from the end of last fiscal year,
Oct 2007: Pakistan dollar reserve was $16.486 billions.
Many do not know that Pakistan reserve reached very near to $4 billions even before 9/11.
(What a record of continuous rise in dollar reserve).
Now the situation has changed … on 24 May 2008 … reserve gone down to $11.512 billions, lower than what Pakistan had in June 2004, just above what Pakistan dollar reserve was in June 2003. Well, by end of May this reserve might be lower.
http://www.dawn.com/2008/05/30/ebr4.htm
Reserves fall to $11.512bn
KARACHI, May 29: Pakistan’s foreign reserves fell by $373 million to $11.512 billion in the week that ended on May 24, the central bank said on Thursday.
Reserves held by the State Bank of Pakistan fell to $9.061 billion from $9.5 billion a week earlier, while those held by commercial banks rose to $2.451 billion from $2.385 billion.—Reuters
Pakistan currency value:
Value of dollar effects Pakistan economy a lot. Strength and stability of currency is very important for a country’s economy. For instance, for every one rupee increase in value of dollar, Pakistan debt increases by over 40 billion rupees. Further, cost of interest on Pakistan external debt also goes up by around 4 billion rupees every year. Since value of dollar increased by around Rs 10 recently, it means Pakistan debt increased by around 400 billion rupee plus interest on external debt also gone up by around 40 billion rupees a year.
Increase in value of dollar also has impact on cost of oil and row material imports. That means increase in inflation as well as problem in industrial input. A country can control unwanted import with duty but devaluation means disaster for economy as well as well being of people.
Pakistan stock market:
Stock market tells health of an economy. Strong Stock market shows booming economy, confidence of investors as well as local and foreign investment. Stock market gets strength only when economy of country is booming, businesses in the country are booming and producing increase profit, plus confidence on future of country’s economy is positive. Market capitalisation of stock market shows the depth of investment in the country and wealth invested in Businesses. Value of a company in stock market gives collateral value to the company and helps companies raise capital for investment and expansion. This creates further prosperity in jobs in the country.
Pakistan stock market capitalisation in 1999 was similar to what it was in 1988. Well, compared to world standard, Karachi Stock market was a very small market in 1999 and could be easily manipulated. Total capitalisation value of Karachi Stock Market in 1999 was less than 250 billion rupees (less than $5 billion). Due to Musharraf government policy and booming Pakistan economy, Karachi Stock Exchange Market Capitalisation increased from below 250 billion rupees to 4800 billion rupees (around 20 times). Anyhow, recent crash in stock market that started on 21st April 2008, Market Capitalisation of KSE decreased to Rs 3700 billion, a loss of 1100 billion rupees. This crash is worse than crash of 2005 when KSE market capitalisation lost around 800 billion rupee … though in theory KSE had crash in 2005, but in reality there was no obvious crash because KSE even after that crash was one of the best performing Stock Market in world (Well, KSE was one of the best performing stock market in most years during Musharraf last 8 year rule.
Here is KSE performance of 2004 and 2005.
2004: KSE index started at 4472 … KSE ended 6218 … total gain 1746 or increased 39 percent over the year.
2005: KSE index started at 6218 … KSE ended 9556 … total gain 3338 or increased 53.7 percent over the year.
**Mystery behind 2005 crash: **
There was lot of propaganda by corrupt journalists and so called economists on media regarding crash of 2005. Government was accused of manipulated crash, scam, corruption and all sorts of malpractices. All denial went to deaf ears. Time passed still many remember that crash without knowing the truth, but it is best to know what really happened. Here is explanation:
KSE was around 4500 at the beginning of 2004. It kept increasing at reasonable pace and by beginning of Sept 2004, it reached 5300. Then uncertainty started regarding Musharraf shedding his uniform or not. It was expected that if Mush would shed his uniform we might see economical meltdown else Pakistan would keep growing at reasonable pace. News regarding uniform issue was uncertain and thus KSE went into wait-and-see mode, stayed around 5300 through Sept and Oct.
In November the news was mix, noises could get heard that Musharraf might not shed his uniform, and KSE gained few hundred points touching 5600 by end of Nov. As signal became stronger on uniform issue, KSE kept increasing to touch 6200 by end of December 2004.
[Actually, in early December I wrote to some of my friends to buy Shares quickly as it is most unlikely Mush is going to shed his uniform and that could push KSE berserk, but be prepared of losses if he sheds the uniform].
Anyhow, at the end of December, Musharraf declared that he would not shed uniform and as expected, KSE took that news favourably with lot of excitement. End of January, KSE was 6800. End of February, KSE was 8300. By March 20, KSE was around 9600.
Then reality started sinking in. KSE was 5300 in around early Nov 2004. Thus it increased around 80 percent in 4 and half months (Nov ‘04-20 Mar ‘05), big correction was due. KSE index started going down.
End of March, KSE was around 8000. End of April, KSE was 7100. End of May, KSE was around 6700 (still, over 25 percent higher than 5300 at the beginning of Nov 2004, a realistic gain).
Now, how this loss of 2900 points during 20th March and end of May is considered as manipulated (a scam), when it followed after huge increases in share prices and its low point was 25 percent higher than where it started (early Nov 2004, or equal to January 2005 level)? Well, its low point of 6700 in May 2005 was 50 percent higher than January 2004 (when KSE-Index was 4470, again a very good return).
Anyhow, investors felt that KSE-index gone down a lot and buying started bringing KSE up again such that by end of June KSE-index was 7500. By end of December 2005, KSE was 9500 (recovered all lost points and KSE was touching its maximum). I do not think that the movement shows any malpractices or scam as such movements in fast moving third world stock markets are normal. One should remember that regardless of that crash, KSE gained over 110 percent in two years between January 1, 2004 and December 31, 2005 (a fantastic gain by any standard), showing booming economical conditions in Pakistan.
