Chinese Bank Opens in Karachi

China's banking giant,the Industrial and Commercial Bank of China (ICBC)has opened its branches in Karachi and Islamabad, Xinhua reported.

Recently ICBC has opened five new branches in major European capitals - in Amsterdam, Brussels, Paris, Madrid and Milan. The banking giant already has branches in Moscow, London, Frankfurt and Luxembourg

Addressing the inaugural ceremony in Islamabad on Friday, Pakistan's Pres. Zardari said that the ICBC initiative to open branches in the country would begin a new era of cooperation in the banking sector of the two countries.

“The opening of ICBC branches, which coincides with the 60th anniversary of the diplomatic relations between Pakistan and China, will take the economic relations between the two countries to new heights,” Zardari said.

The president hoped the ICBC’s investment in the country would prove to be profitable and that the bank would play a prominent role in channeling bilateral investments.

Aqeel Karim Dhedhi

Economists Against Oil & Petrol Price Hike

Group of emerging economists held a meeting in Karachi. They all come up with one decision, all seriously opposed the government move to increase oil prices in Pakistan at this time.

The Price Hike has already sparked an outcry from the political groups across the country but now the leading economists and business persons are speaking up against this move by the government for the first time.

"This hike is dangerous for Pakistani Rupee and the Economy" Zeeshan V, an emerging economist said in the meeting. "Fulfilling expenditures through central bank borrowing and not raising the oil prices has created a kind of equilibrium in the economy which was forcing Pakistani rupee not to go down despite heavy central bank borrowing, but now this would be reversible and would force Rupee to go down versus other currencies as oil price hike would force other commodities to rise" he added.

The country is already in economic turmoil as Pakistan Peoples Party government has failed to recover the economic cycle. Late last year, they have nearly lost its majority in parliament as allies threatened to leave the coalition amid oil price hike.

The ruling party backed off on the increase to save the coalition, upsetting international lenders whose billions are keeping the country's economy afloat.

It’s the Economy!! Stupid

The above title is the mostly used quote in US, spoken for the first time by former president Bill Clinton who accused Sr. Pres Bush for taking economic issues lightly. And still over a decade on, US economy is in doldrums where companies are laying off their staff to focus on their core business at times when the economy is in recession.

One of these companies is Yahoo which has recently announced that it will spoof off its staff to cut down on its expenses and it will also close down eight of its services including its popular social networking site Delicious. Yahoo has recently closed its Briefcase and Geocities services. But Yahoo in later statements denied the closure of ‘delicious’.

Other US companies that collapsed last year include A&P a grocery chain with 1400 outlets in East Coast, Affiliated media which couldn’t survive due to ever growing influence of the internet, Ambac The main subsidiary of this bond insurer sold protection on mortgage-backed securities, American Media etc

After Lehman Brothers, Circuit City, General Motors and Chrysler bankruptcies, the near failures of AIG and Citigroup seem like a year of convalescence for the global economy.

Pakistan Fuel Price Hike Reversed

After severe opposition from other political parties including opposition and coalition partners, Government of Pakistan has announced withdrawal of the recent increase in prices of petroleum products.

Several Economists and the IMF has called this move a mistake and said that Pakistan has to undertake difficult economic reforms for long term economic stability. But they don't seem to understand that Pakistan is going through uncertain times and its a state in Emergency which need help from across the world.

The only solution to this problem seem to be Currency Appreciation versus US Dollar on emergency basis to bridge the gap from international prices. US can of course help Pakistan doing that as it has done with Afghanistan whose currency has appreciated after the US led war.

I am keeping my fingers Crossed!!

Pakistan’s Recipe to Disaster

As per the latest Moody’s international report, Pakistani Rupee would continue to depreciate versus US dollars; the latest report said that Pakistani Rupee would further depreciate by 15% in 2012 to Rupees 99 a US dollar.

The report set alarming bells across all sections in Pakistan where the people and businesses are hoping for some good times by 2012. Report has also shaken Foreign and Local investor’s confidence from Pakistani Capital Markets and those who were planning to invest in Pakistan for longer-term period.

This report provides good chance for Pakistani people to invest their rupees in places where there are high returns. One of the best avenues is of course the money market, the other one is Gold where they can get higher returns.

But the situation in regional countries is highly surprising; currency rates of countries like India, Bangladesh and Afghanistan are higher in value than Pakistani rupee. No one can forget that just a decade back Indian rupee and Bangladesh Tika were extremely lower in value than Pakistani rupee, and one Pakistani rupee was equal to 10,000 Afghania.

And still Afghanistan is heavily dependent on Pakistan for its food supplies and most of Pakistan’s wheat is smuggled into Afghanistan that causes Inflation inside Pakistan.

Pakistan by pursuing weaker currency policy is on its verge to disaster. Government of Pakistan should take hostile steps to defend its currency and save the economy against IMF as open market operations would kill the economy on just negative perceptions and not fundamentals.

Stag-Inflation

Pakistan's Economy is uncertain; no growth, job cuts and super dooper inflation! In my previous blog  i've explained Phillips Curve which indicates that whenever inflation is high, there is growth and more employment opportunities but the present situation is completely opposite to that model.

We are seeing Higher Inflation at a time when our country is not growing, there are more job cuts, low GDP growth which is almost equal to our population growth rate. This situation can be refer as Stag-Inflation.

It is the situation when both inflation rate and the unemployment rate are high. It is a difficult economic condition for a country, because inflation and economic stagnation are occurring simultaneously, and until recently no macroeconomic policy had predicted this occurrence.

There is the inflation in the economy because of the money inflow, it means that government is spending money but on unproductive things which are not creating jobs or increasing the GDP size possibly because government is spending money on things like Security and in maintaining their lavish lifestyle.

So who to blame? Well i m going to blame the government which is spending tax payers money on unproductive things which are not creating jobs or increasing the GDP size; And, on the other hand they are pursuing policies such as increasing the taxes on Karachiites, increasing the power charges etc which is shaking the investors confidence.

IMF role here is also to be blamed which is forcing the government to reduce money supply in the economy at a time when the country is at war and facing numerous other challenges at the same time which is also shaking the investors confidence.