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Wednesday, 15 April 2020

Pak economy and its impact on Defense Modernization.-

Pakistan under PM Imran Khan has taken many measures to curb Current Account Deficit (CAD).He has put restrictions on all imports with heavy tariffs. This has resulted in severe shortage of many commodities, the ban on imports from India has increased prices of essentials such as tomatoes ,which had skyrocketed to PKR 300( About 125 INR).There is severe shortage of  spare parts.The foreign currency reserves have plummeted to just $15 billion, Pakistan now does not regularly release data of foreign currency reserves. Saudi Arabia has provided $ 3 Billion as balance of payment support, and another $3.2 Billion as deferred oil payment.UAE has provided$3 billion and Qatar $ 3 Billion.PM Imran Khan has secured $6 Billion from China ($1.5 Billion loan and $ 3 Billion CEPC Loan).Pakistan had to go to IMF for a $6 Billion loan that came with stiff conditions.( Imran Khan had promised during elections that he will commit suicide but would not take a loan from China).
Some important Events that will impact Pak economy in near future.
·        Rico Dig gold mines payment- Pakistan had given Rico Dig gold/copper mines to a company Tethayan Copper company (TCC), a company from Chile .A joint venture between Antofagusta and Barrick gold( Canada) went into litigation and matter was taken to International court. The court gave a verdict that Pak should pay $12 Billion to these companies.After long negotiations the amount was reduced to $5.95 billion ( $ 1.87 Billion as interest and $ 4.08 Billion as penalty), in all likely hood ,Pak will press for interest or penalty waiver. But it will have serious implication on investments by MNCs, in future.
·        Swarms of Desert locusts have invaded in Sindh and Punjab province .locusts  have attacked Cotton crops, Potatoes, Wheat and Tomatoes. The production of Cotton will be reduced to just about 8 million cotton bales,
This will affect the textile group exports ( $ 13.33 Billion).There was a time Pakistan used to export 2 Million bales of Cotton ,now will have to import 3-4 Billion bales of cotton ($1.5 billion approximately) or accept lower exports.
·        Inflation in Pakistan has touched a dizzy 14.5%, the common man is suffering as Wheat flour and Maida has become costly that has increased price of Roti ( Bread).All other requirements in kitchen like Tomatoes which are required in all Pak food have become expensive. Milk prices are PKR160 rs( INR 75 approximately). The gas, electricity prices have gone up. The price of Petroleum products has increased , in a time when oil prices have touched all time low of $20 per Barrel.
·        As per PM Imran khan 25% of population is already under poverty line.
·        Pakistan International Airlines (PIA) is on verge of bankruptcy, Pakistan Railways are in big losses, and Pakistan Steel mills has closed down, but workers have to be paid.Automobiles sector is reeling under recession and sales are down by 40-50%.
·        Gwadar port is commissioned but there are hardly arrivals and departures of merchant ships. The water shortage  problem continues therefore there is little development in Gwadar Industrial estate.
·        Gwadar International Airport has just two domestic flights per day so it is loss making.
·        Corona Virus (Covid-19) has affected Pakistan severely already all four provinces have imposed lockdown. Pakistan has stopped all trade with Iran which is affected severely by Corona virus. It had already broken trade relations with India but now wants Indian medicines and Indian pesticide companies to provide pesticides to kill Desert locust.
·        SAARC forum was used by PM Narendra Modi to talk to SAARC leaders, but Pakistan sent an official with shady past( involved in smuggling of face masks), who used the forum of SAARC  to rake up Kashmir issue, and squandered a genuine offer of help.
·        PM Imran Khan has requested the countries that have given loans to waive off or defer payment.
·        PM Imran khan has asked for IMF help to fight corona virus. Pakistan is requesting $1.4 Billion loan from IMF to deal with economic slowdown, this was as per Financial Advisor Abdul Hafeez Sheikh. Pakistan also  is seeking more loans from World Bank and Asian Development Bank.

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