Pak economy is in shambles


Pak economy is in shambles with oil price touch high 70$ barrel more squeeze to screw tighten and more immediate adverse impact when Rupee touches 148 vs the $. Crisis situation as #Islamabad tries to control falling PKR

Pakistan’s currency has continued to depreciate against its trading partners over the last six months. Pakistan’s real effective exchange rate, which is the average of its currency in relation to an index of other major currencies weighted by their relative trade shares and adjusted for inflation differentials, depreciated by nearly 5.5 percent from October 2018 to March of this year. The depreciation against its trading partners increases the price competitiveness of Pakistan’s exports in international markets and makes imports more expensive. Over time, such an adjustment of relative prices is needed if policies are put in place to improve the trade balance,” the World Bank stated.

Pakistan, external account pressure reduced international reserves to USD 6.6 billion (1.3 months of goods and services import coverage) by mid-January 2019. With short-term financing from the Kingdom of Saudi Arabia, the United Arab Emirates and China, international reserves increased to USD 10.5 billion (2.0 months of goods and services import coverage) at the end of March. Meanwhile, the government continues to negotiate a support package with the International Monetary Fund,” the report stated.

“The current account deficit continued to widen but stabilized over the course of last year and it stood at 5.2 percent of GDP in the fourth quarter of 2018. The current account deficit reached 8.8 USD billion (3.3 percent of GDP) at the end of February 2019, compared to 11.4 USD billion (3.7 percent of GDP) the year before.”

Regarding inflation, the report observed, “In Pakistan core inflation steadily rose throughout 2018, mostly due to currency pressures which made imported final and intermediate goods more expensive. It reached 8.3 percent (year over year) in December of last year, the highest value since January 2015… Consumer prices increased despite a strong decline in food prices.

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