Pakistan Prime Minister Imran Khan Demonstrated Effectiveness as Crisis Leader

[Riaz Haq]

Prime Minister Imran Khan has effectively led Pakistan through multiple crises in the last 4 years. Khan inherited dangerously low forex reserves in 2018 which are now at  $23 billion, near the highest level in the nation's history. The COVID pandemic that hampered Pakistan's recovery has been handled well with the fully vaccinated rate for the eligible population at more than 75%. Not only has Khan deftly navigated his nation through these crises but his government has also revived the country's economy and grown exports by 26%.  Domestic savings rate recovered to nearly 17% after plunging to a low of 12% in 2018.  The year 2021 was a banner year for Pakistan's technology startups that raised over $350 million in funding, more than the amount raised in the previous 5 years. Manufacturing and construction industries are enjoying a boom last seen during the Musharraf years in 2000-2007. 

Pakistan has pursued an independent foreign policy under the PTI government. The nation has maintained friendly ties with all great powers, including China, Russia and the United States, as well the Islamic world. At a recent OIC foreign ministers' summit in Islamabad, Chinese foreign minister Wang Yi attended and endorsed OIC's support for the movement for “right to self-determination” in Jammu and Kashmir.

Historic Inflation Rates in India & Pakistan. Source: World Bank

Rising prices of food and fuel are still a major issue for the people of Pakistan and the rest of the world. Recent geopolitical crisis with the Russian invasion of Ukraine has only served to accelerate global inflation. It presents a serious challenge to the governments in Pakistan and elsewhere in the world. 

Pakistan's opposition parties have recently come together to try to topple Prime Minister Imran Khan's government. These opposition parties have little in common other than their hunger for power. If they succeed, the country will plunge into yet another period of instability and uncertainty that will reverse progress made in the last few years to stabilize the country's economy. 

Pakistan's Exports:

Pakistan's exports of goods and services have jumped 26% to $25 billion in the first 8 months of the current fiscal year, up from $20 billion in the same period last year. A key reason for recurring balance of payments crises and IMF bailouts has been the lack of growth in Pakistan's exports. 

Pakistan Exports in First 8 Months (July 21-Feb 22) in FY 22. Sourc...

The 26% export growth is particularly welcome after several years of stagnation seen during the PML N government of Prime Minister Nawaz Sharif. 

Job Creation: 

Pakistan’s economy created 5.5 million jobs during the past three years –on an average 1.84 million jobs a year, which is far higher than yearly average of creation of new jobs during the 2008-18 decade, according to the Labor Force Survey (LFS) published by the Pakistan Bureau of Statistics (PBS). 

Pakistan Employment By Sectors. Source: Pakistan Bureau of Statistics

For the first time in recorded history, the labor force participation rate in Pakistan is now higher than in India, according to the ILO/World Bank estimates.

Labor Participation Rates in India and Pakistan. Source: World Bank...

 

 

Unemployment rate in Pakistan is just 4.3% in spite of COVID19 pandemic. Jobless rate in India is 8%, much higher than in Pakistan. 

 

Unemployment Rate in India and Pakistan. Source: ILO/World Bank

 

Savings Rate:

Pakistan's domestic savings rate recovered to nearly 17% after plunging to a low of 12% in 2018. Savings are extremely important for increased investment to spur GDP growth in any country, including Pakistan.

Pakistan Savings Rate. Source: Global Economy

IMF Bailout:

Pakistan's forex reserves were running dangerously low forcing the country to seek a $6 billion IMF bailout in 2018 to avoid default.  The total reserves now exceed $22 billion.

Pakistan Forex Reserves 2017-2022. Source: State Bank of Pakistan

Pakistan Current Account Balance as Percentage of GDP. Source: US Fed

Pakistan External Debt as Percentage of GDP. Source: US Fed

Reko Diq Mining Deal Revival: 

Prime Minister Imran Khan's government recently resolved an $11 billion in damages that the country faced for improperly canceling a huge copper-gold mining deal in Balochistan.  

Reko Diq is the world's 4th largest undeveloped copper-gold porphyry deposit with over 14 million tons of copper and 21 million ounces of gold. The project was abandoned in 2011 after a Pakistan Supreme Court bench headed by former Chief Justice Iftikhar Chaudhry canceled the mining license granted to Tethyan Copper Company (TCC), a joint venture between Canada's Barrick Gold and Antofagasta Minerals of Chile. TCC challenged the cancellation in the International Centre for Settlement of Investment Dispute (ICSID). On July 12, 2019, the ICSID Tribunal awarded TCC $5.894 billion plus interest of  $700,000 per day in damages against Pakistan. As of 1 March 2022, the award stood at $6.5 billion. The new agreement between Barrick Gold Corporation  and the governments of Pakistan and Balochistan does away with this award. It also increases the share of the project owned by Pakistan from 25% to 50%, brings in $10 billion investment, the largest single investment in the country, and creates 8,000 jobs. Reko Diq is part of the Tethyan metallogenic belt (TMB) that extends from the Balkans in Europe to Pakistan including Serbo-Macedonian, Anatolian, Takab, Kerman and Chagai metallogenic belts. It is believed to be rich in copper and gold deposits.

Manufacturing and Construction Boom: 

Large scale manufacturing grew by 8.2% in February 2022,  after posting 7.6% growth during July-Jan FY22.  

QIM Index 2019-22. Source: APP

Pakistan Large Scale Manufacturing Index. Source: Mettis Global

The LSMI Quantum Index Number (QIM) hit an all-time high of 136.2 points in January, 2022. It averaged 120 points during July-January (2021-22), up from 111.5 points during July-January (2020-21), showing growth of 7.6%, according to latest PBS data.

Cement shipments in Pakistan. Source: All Pakistan Cement Manufactu...

Pakistan cement production has increased by double digits to respond to demand for housing and infrastructure construction on Prime Minister Imran Khan's watch. 

Technology Boom:

The year 2021 was a banner year for technology startups in Pakistan.  There was a 437% jump in investments in the startups, raising a total of $352 million across 72 deals in 2021, according to Aljazeera. 

Pakistan Startup Investments. Source: Aljazeera

Pakistan technology exports have soared 30% to $1.7 billion in the first 8 months of the current fiscal year, according to the State Bank of Pakistan. 

Expansion of Social Safety Net:

Pakistan's PTI government has built South Asia’s first digital National Socio-Economic Registry (NSER) as a part of its ambitious effort to build a basic social safety net. The Ehsaas (also known as BISP- Benazir Income Support)) program's socio-economic registry includes household information by  geography, age, income, education, health, disability, employment, energy consumption, land and livestock holdings etc. Ehsaas Programs include both Unconditional Cash Transfers (UCT) and Conditional Cash Transfers (CCT). Unconditional Cash Transfers are made only to people living in extreme poverty or distress. Conditional Cash Transfers like Waseela-e-Taleem and Nashonuma  are given for education and nutrition respectively.  In addition, there are feeding centers (langars) for the hungry and shelters (panahgahs) for the homeless. 

OIC Foreign Ministers in Islamabad:

Recent conference of Islamic countries foreign ministers hosted by Pakistan in Islamabad was attended by 56 nations. Chinese foreign minister Wang Yi attended as a special guest. Here's an excerpt of the Islamabad Declaration issued at the conclusion of the two-day conference:

“We declare that the final settlement of the Jammu and Kashmir dispute in accordance with UN Security Council resolutions is indispensable for durable peace in South Asia. We reiterate our call on India to: a) reverse its unilateral and illegal measures instituted since 5th August 2019; b) cease its oppression and human rights violations against the Kashmiris in IIOJK; c) halt and reverse attempts to alter the demographic structure and to redraw electoral constituencies in IIOJK; and d) take concrete and meaningful steps for full implementation of the UN Security Council resolutions on Jammu and Kashmir,”

Response to Indian hostility:

Prime Minister Imran Khan's government won praise for its handling of India's aggression with unprovoked air strikes in Balakot in February 2019. Pakistan responded with "Operation Swift Retort", shot down two Indian fighter jets and captured an Indian Air Force pilot. But Khan's government avoided further escalation of the incident. Similarly, Pakistan responded calmly to the "accidental firing" of Indian Brahmos cruise missile into Pakistan that could have easily escalated into a full-scale war between two nuclear-armed neighbors. 

No-Confidence Vote:

Pakistan's opposition parties have recently come together to try to topple Prime Minister Imran Khan's government. These opposition parties have little in common other than their hunger for power. If they succeed, the country will plunge into yet another period of instability and uncertainty that will reverse progress made in the last few years to stabilize the country's economy. 

Related Links:

Haq's Musings

South Asia Investor Review

Banner Year For Pakistani Tech Startups

Pakistan to Be World's 7th Largest Consumer Market By 2030

Sehat Card: Universal Healthcare in Pakistan

Textile Boom in Pakistan

Construction and Manufacturing Driving Pakistan's Recovery

Demographic Dividend and Record Remittances

Mobile Phone Manufacturing in Pakistan

Covid Crisis in India

Pakistan's COVID Handling

Riaz Haq's Youtube Channel

PakAlumni: Pakistani Social Network

[Riaz Haq]

Snap National Poll – National ASSEMBLY DISSOLUTION and Views of Pakistani Public

https://gallup.com.pk/post/33081

Key findings:

1) Widespread support for dissolution of National Assembly in Pakistan

Respondents were asked ‘ PM has dissolved the national assembly and called for fresh elections. Do you Support or are you against this’ To this question a wide majority 68% say they support and 32% say they oppose PM Imran Khan’s move.

2) Majority don’t believe in US Conspiracy to remove Imran Khan, although split exists along party lines.Significant majority 64% responded to this question and say that Imran Khan was being ousted because of inflation and not because of a foreign conspiracy.

3) Public Opinion split over performance of Imran Khan

Respondents were asked ‘ Imran Khan ruled for 3.5 years. Are you satisfied with the performance of their government or not satisfied?
To this question ‘ 54% said they are dissatisfied and 46% said they are satisfied’

4) Anti Americanism: Only 1 in 3 consider US to be a friend

Respondents were asked Some people think that America is a friend of Pakistan, and some people think it is an enemy. what is your opinion?
Almost 2 in 3 Pakistanis(72%) think US to be an enemy. Anti Americanism was highest among PTI Supporters (80% thought America was an enemy) and lowest among PML-N voters (65%)

[Riaz Haq]

Riaz Haq
@haqsmusings

Gallup #Pakistan Poll: 68% of respondents support #imrankhanPTI's decision to dissolve the National Assembly & call early elections. https://gallup.com.pk/wp/wp-content/uploads/2022/04/Snap-National-P...

https://twitter.com/haqsmusings/status/1511759488147107846?s=20&...

[Riaz Haq]

Pansota
@Pansota1
Old video of
@JoeBiden

@POTUS
from December 2020 which speaks volumes about his mindset. It reinforces the case of conspiracy against the
@ImranKhanPTI
. This can be exhibited as supporting evidence in the Supreme Court if the court wants to dilate upon the issue of conspiracy.

https://twitter.com/Pansota1/status/1510862324667715587?s=20&t=...

[Riaz Haq]

Riaz Haq
@haqsmusings

Gallup #Pakistan Poll: #PTI enjoys overwhelming support (95%) across the country. Only 5% oppose it. #ImranKhan https://gallup.com.pk/wp/wp-content/uploads/2022/04/Snap-National-P...

https://twitter.com/haqsmusings/status/1511803735336361985?s=20&...

[Riaz Haq]

World Bank warns of debt crisis for developing nations
Developing economies were hit hardest by the global economic recession brought by the pandemic. A looming debt crisis could make things much worse, according to a new report.

https://www.dw.com/en/world-bank-warns-of-debt-crisis-for-developin....

Some of the world's poorest nations face a serious debt crisis which will greatly complicate efforts to recover from the recession caused by the COVID-19 pandemic.

More than 70 low-income nations are facing extra debt repayments of almost $11 billion (€9.7 billion) this year, an increase of 45% from 2020 after a sharp rise in borrowing last year.

However, a new report from the World Bank says that is only one strand of the debt problem faced by developing economies. It says that the issue of "hidden" or nontransparent debt — for example, slow or faulty detection of financial risks such as nonperforming loans — is hitting access to financing for low-income households and small businesses.

An equitable recovery?
In its annual World Development Report, the World Bank typically focuses on one specific aspect of global economic development in middle- and low-income countries.

Its 2022 report, titled "Finance For An Equitable Recovery," focuses on the issue of debt. It argues that, in addition to the challenge of mounting sovereign debt, unstable financing systems in developing economies make them more vulnerable to other issues, such as rising inflation and interest rates.

"The economic crisis of inflation and higher interest rates will spread due to financial fragility," says World Bank President David Malpass in the report. "Tighter global financial conditions and shallow domestic debt markets in many developing countries are crowding out private investment and dampening the recovery."

Of particular concern to the World Bank, which specializes in providing loans and grants to low-income countries, is the issue of hidden debt risks.

The pandemic exposed challenges such as lack of transparency in reporting nonperforming loans and delayed management of distressed assets, the report says.

It highlights the fact that, despite the major fall in incomes and business revenues caused by the pandemic, the overall share of nonperforming loans did not increase in many countries. "This may be due to forbearance policies and relaxed accounting standards that are masking significant hidden risks that will become apparent only as support policies are withdrawn," the report warns.

[Riaz Haq]

World Bank Report: "FINANCE FOR AN EQUITABLE RECOVERY"

https://openknowledge.worldbank.org/bitstream/handle/10986/36883/97...

The (Pakistan) government’s Kamyab Pakistan Programme, rolled
out in September 2021 to provide subsidized
or interest-free loans to SMEs and agricultural
workers, could also have mixed impacts on the
stability and future growth potential of the
microfinance sector by distorting the price of
credit and increasing the moral hazard of strategic future default

------------

As the economic crisis arising from the COVID-19
pandemic unfolded in Pakistan, MFI operations
became severely restricted, and some MFIs were
forced to close temporarily. Many MFIs acted
quickly, however, to initiate business continuity
plans to ensure the health and safety of staff
and clients and work around lockdowns. Digital financial services and branchless banking
surged. In the first year of the pandemic, the
number of active branchless banking accounts
increased by 53.7 percent, from 27.7 million to
42.6 million.a
Meanwhile, from March 2020 to
March 2021 regulators enacted a debt moratorium to ease the financial crunch on borrowers
caused by lockdowns and the decline in economic activity. In addition, nonbank microfinance companies (NBMFCs) were shielded
by federal guidelines asking commercial banks
and other lenders to MFIs, such as the Pakistan


Microfinance Investment Company, to reschedule wholesale lending to the sector. Anecdotal
reports also suggest that handshake agreements
with other MFI lenders to extend repayment
terms, as well as the continued availability of
wholesale funding for creditworthy MFIs, helped
buoy the sector.
Overall, these measures appear to have
averted a liquidity crisis among Pakistan’s MFIs
in the short term, particularly those regulated,
deposit-taking, and digitally enabled.b
Indeed, during 2020 loans totaling approximately $635 million in the sector were deferred or rescheduled.
Some MFIs even experienced an increase in
business. Microfinance banks (MFBs) saw a net
increase in deposits in 2020 of 29 percent, and
gross loan portfolios increased from $1.97 billion
to $2.02 billion during 2020.c
However, results
were mixed across the sector. The largest MFBs

saw growth continue, while the smaller players,
including the vast majority of NBMFCs, saw
declines in their portfolios and asset quality. By
the end of 2020, many Pakistani MFIs had temporarily suspended their lending operations, and
the demand for credit declined slightly as people suffered income losses.d

[Riaz Haq]

SBP
@StateBank_Pak
1/2 Latest SBP figures show strong growth in low-cost housing loans to individuals #MeraPakistanMeraGhar. Till 11Apr22, banks received applications of Rs409bn, of which Rs180bn has been approved & Rs66bn disbursed. A year ago total applications stood at Rs57bn &approvals at 16bn.

https://twitter.com/StateBank_Pak/status/1514581716907794436?s=20&a...

2/2 Banks have almost doubled finance for builders and developers to Rs404bn as of 31Mar22 from Rs204bn a year earlier, supporting the construction sector and growth in the economy. See PR:

https://www.sbp.org.pk/press/2022/Pr1-14-Apr-2022.pdf

[Riaz Haq]

SBP
@StateBank_Pak
Workers’ remittances rose to their highest level in history at $2.8 billion in March 22. Cumulatively, remittances have risen to $23 billion during the first 9 months of FY22, up 7.1% over the same period last year.

https://twitter.com/StateBank_Pak/status/1514450543011409923?s=20&a...

https://www.sbp.org.pk/ecodata/Homeremit.pdf

[Riaz Haq]

The bank borrowing of the private sector has surged by 170 percent to Rs. 1,198 billion from Rs. 443 billion during the first nine months (July-March) of the current fiscal year 2021-22.

https://propakistani.pk/2022/04/14/private-sector-borrowing-surges-...


According to the State Bank of Pakistan (SBP), the private sector has obtained loans worth Rs. 1,198 billion from the banking sector during the first nine months of the current fiscal year, which shows a positive trend in the private sector. The total debt stock of the private sector from local banks amounted to Rs. 8,827.38 billion up to 31 March 2022.


Some economic experts believe that this increase was possible after reducing government borrowing from the private banking sector for bridging the budget deficit.

They believed that government heavily depends on external loans for bridging the fiscal deficit under the new policy. According to the Finance Ministry, the government has borrowed Rs. 1,025.6 billion external loans and Rs. 346 billion from domestic loans, including banking and non-banking side for bridging the budget deficit during the first half of the country’s fiscal year.

The government had obtained Rs. 454.4 billion external loans and Rs. 684 billion domestic loans, including banking and non-banking loans for bridging the budget deficit to Rs. 1,137 billion during the first half (July-Dec) of the last fiscal year 2020-21.

The data shows that the government has provided a cushion for the private sector for meeting the requirement of liquidity to run the business.


The SBP says that the bank borrowing of the private sector from conventional banking branches swelled by 261 percent to Rs. 791.56 billion from Rs. 219 billion during the first nine months of the current fiscal year compared to the same period of the last fiscal year. The debt stock of the private sector from the Conventional Banking Sector has reached Rs. 6,476.67 billion by March 2022.

The private sector has also borrowed Rs. 160.4 billion from Islamic Banks of the country during the first nine months of the current fiscal year. It had obtained loans worth Rs. 91 billion from the Islamic banks during the first nine months of the last fiscal year. The total loans of the private sector from different Islamic banks in the country amount to Rs. 1090.7 billion so far.


The loans from Islamic Banking Branches of Conventional Banks have also surged by 84.6 percent from Rs. 133.4 billion to Rs. 246.3 billion during the first nine months of the current fiscal year as compared to the same period of the last fiscal year.

According to the SBP report, the Credit to Public Sectors Enterprises (PSEs) has been also increased by Rs. 4 billion during the first nine months of the current fiscal year. The Public Sector Enterprises had retired Rs. 24.9 billion to the banking sector during the first nine months of the last fiscal year.

The credit to Non-Banking Financial Institutions (NBFIs) was also increased by Rs. 5.7 billion during the first nine months of the current fiscal year. The total debt stock from NBFIs has swelled to Rs. 78.5 billion so far.

[Riaz Haq]

Stephen Stapczynski
@SStapczynski
Pakistan bought a whole bunch of LNG at a record low price in July 2020

But no one predicted prices would rise so sharply and so quickly in 18 months. The entire industry was caught flat footed by the global gas supply crunch

https://twitter.com/SStapczynski/status/1515592399124279305?s=20&am...

-------------

Stephen Stapczynski
@SStapczynski
Pakistan PM Shehbaz Sharif blamed the previous government for the fuel crunch. He said they should have bought more LNG when prices were $3/mmbtu

(That’s not how it works. Prices were that low ~2 years ago. No one buys spot that far in advance)

https://twitter.com/SStapczynski/status/1515590037668126721?s=20&am...