Business News

UK Pound Drops To 37-Year Low

UK Pound Drops To 37-Year Low

September 17, 2022 / By Zunair Tahir / Business News


The British pound hit new lows against the US dollar and the euro on Friday, marking the 30th anniversary of “Black Wednesday,” as weaker-than-expected retail overall sales fueled concerns about the country’s economy.

In terms of the dollar, the pound dropped more than 1% to $1.1351—its lowest level since 1985—and was most recently trading at $1.1404.

A further significant rate rise from the Federal Reserve next week has been priced in by markets as a result of this week’s hotter-than-expected U.S. inflation, which has made the dollar stronger than most other major currencies in recent months.

The euro, on the other hand, increased to 87.71 pence on Friday, its highest level since February 2021, while the pound has notably suffered. At 87.45 pence, it was recently up 0.39 percent.

A severe depreciation of the pound resulted from Britain’s exit from the Exchange Rate Mechanism, a mechanism created to lessen currency swings prior to the introduction of the euro, on September 16, 1992.

Sterling dropped 4.3% on that day, now known as Black Wednesday, and ended the day at $1.778, which is significantly more than it is presently.

The statistics that led to Friday’s decline indicated that retail sales volumes fell 1.6% in monthly terms in August, which was worse than all of the projections in a Reuters survey of experts, who had called for a 0.5% decline. This was the worst loss since December 2021.

The International Monetary Fund predicts that the British economy will see weaker economic growth and more persistent inflation than any other major country in 2019.

According to John Hardy, director of FX strategy at Saxobank, “the grinding backdrop of everything that’s going on is pushing on sterling, with the UK running these big external deficits and the concerns around the incoming prime minister’s plans contributing to that.”

To lessen the economic blow of the war in Ukraine, Britain’s new leader, Liz Truss, proposed last week a two-year ceiling on consumer energy prices. The measures are expected to cost the nation upwards of 100 billion pounds ($115 billion). 

On September 23, British Finance Minister Kwasi Kwarteng is anticipated to present a fiscal statement outlining how this will be paid for as well as how he would carry out the tax cuts Truss pledged during her run for the Conservative Party leadership.

Additionally, markets are “risk-off” as a result of FedEx pulling their prediction and a decline in U.S. stocks below a crucial support level. Sterling is equivalent to a worse euro in a risk-off atmosphere, according to Foley.

On Thursday, FedEx Corp cancelled the financial projection it had made just three months prior, sending its shares tumbling and straining the market as a whole.

A jam-packed week of central bank meetings will include the Bank of England’s meeting the following week. Market pricing suggests that a 75-basis-point increase has a little higher probability than a 50-basis-point increase.

There is definitely a danger that a 50bp boost will spark further GBP selling, according to MUFG, given that the (European Central Bank) increased rates by 75bps, the Bank of Canada did the same, the Fed will follow suit, and potentially the (Swiss National Bank).


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Business News

GPCCI Calls For Lifting The Import Prohibition On Automobiles

GPCCI Calls For Lifting The Import Prohibition On Automobiles

August 10, 2022 / By Zunair Tahir / Business News


For a fresh GSP+ application, Pakistan needs German political and diplomatic backing

The German Pakistan Chamber of Commerce and Industry (GPCCI) has urged the Pakistani government to immediately reverse the import restriction on automobiles after warning that it might negatively affect impending GSP+ discussions with the European Union (EU).

Syed Nadeem Ali Kazmi, president of the German Pakistan Chamber of Commerce and Industry, wrote a letter to finance minister Miftah Ismail warning that the impending GSP+ negotiations with the EU may suffer as a result of the ban on imports of vehicles (CBU) from Germany.

German cars in CBU form are included in the list of imports that are prohibited by the coalition government.

READ MORE: UAE To Spend $1 Billion In PSX, Claims Miftah Ismail

“We would like to draw your kind attention to the existential crisis that the top three German automakers in Pakistan, Audi, BMW, and Mercedes-Benz, are currently experiencing. This is because imports are now prohibited, he added.

Since 1951, Pakistan and Germany have had cordial and varied relations. 70 years have passed since diplomatic ties were first established, which was last year.

Audi, BMW, Mercedes-Benz, Siemens, BASF, Bayer, DHL, Metro Cash and Carry, KSB Pumps, and SAP are a few of the well-known German firms have offices in Pakistan.

Audi, BMW, Mercedes-Benz, Siemens, BASF, Bayer, DHL, Metro Cash and Carry, KSB Pumps, and SAP are just a few of the popular German corporations have offices in Pakistan.

One of the few nations with whom Pakistan enjoys a positive trade balance is Germany. In 2021, Pakistan exported $1.568 billion to Germany while importing $1.016 billion from that country.

“Since the EU’s present GSP+ program ends in 2023, Pakistan must reapply for the new GSP+ programme, which includes additional restrictions. In the past, Germany has been a fervent supporter of Pakistan and has argued for Pakistan’s application for GSP+ status inside the EU, according to him.

GPCCI efforts will make sure that both imports and exports of goods between Pakistan and Germany prosper. The trade surplus of exports from Pakistan to Germany (totaling $l.568 billion in 2021) has been boosted by the ongoing efforts of GPCCI.

Pakistan purchased fewer than 100 million euros’ worth of automobiles from Germany in 2022, while the total cost of imports for the fiscal year was $56.380 billion.

German partners seek to collaborate in a setting with consistent economic policies and a sustainable governance framework since Germany is a highly developed economy. According to him, this is the only way Pakistan can use its attractive geographic location for its German commercial partners.

The GPCCI demanded that the import restrictions placed on the automobile industry be immediately lifted. Due to the import ban, which is causing an ongoing crisis, these actions are forcing German automotive companies to leave the Pakistani market, which will have far-reaching negative effects such as rendering over 30,000 cars (Audi, BMW, and Mercedes-Benz) unserviceable and ending all German innovative technology transfer in terms of knowledge and skill sets required for the maintenance of these vehicles.

The GPCCI President asked the finance minister to take action right now to end the restriction. It is anticipated that the administrative procedures to put the formal orders into effect would take a few days.


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UAE To Spend $1 Billion In PSX, Claims Miftah Ismail

UAE To Spend $1 Billion In PSX, Claims Miftah Ismail

August 6, 2022 / By Zunair Tahir / Business News


Finance Minister Miftah Ismail announced on Saturday that the United Arab Emirates (UAE) has invested in the nation’s stock exchange in an effort to strengthen bilateral economic ties.

The UAE previously announced its willingness to invest $1 billion in Pakistani businesses across a range of economic and investment sectors. The action is intended to seek new investment possibilities and areas for collaboration in projects across multiple industries in order to strengthen bilateral economic relationships in the best interests of the two nations, according to the Emirates News Agency.

“Problems will continue to prevail until September,” says Miftah Ismail

Miftah Ismail stated during a news conference in Karachi that the national economy requires the importation of luxury goods to be prohibited for the foreseeable future.

He insisted that wise government policies are driving the country’s economy in the right direction, and that efforts are being done to stabilize it.

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The finance minister underlined that neither he nor the State Bank had “personally interfered” to devalue the dollar in response to a query concerning the rupee’s rising trend versus the dollar.

The minister, who was critical of the previous PTI administration, stated that the country’s imports were $80 billion last year while its exports were just $31 billion. He also stated that the trade deficit was $18 billion while the current account deficit was $17.5 billion.

During the PTI’s rule, the total amount of the country’s loans increased from Rs25,000 billion to Rs42,000 billion, he said.

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The minister warned that the rupee would be under pressure if such a large imbalance was created.

The minister made reference to the difficult choice made by his government, saying that after assuming office, they determined they would not allow the nation to fall into default.

“For the current fiscal year, the administration has set the exports target at $35 billion,” he continued.

Miftah emphasized the necessity of austerity measures by claiming that he feels ashamed when asking for loans from the outside world. He pleaded with the populace to give to the prime minister’s relief fund.


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Business News

Meteoric Dollar Smashes All Records & Reaches Rs200 In The Interbank Market

Meteoric Dollar Smashes All Records & Reaches Rs200 In The Interbank Market

May 19, 2022 / By Zunair Tahir / Business News

US dollar hit Rs200 in interbank trade on Thursday morning, up Rs1 from the previous day’s closing of Rs199, according to statistics from the Forex Association of Pakistan (FAP).

Around 11 a.m., the US dollar hit an all-time high of Rs200, according to the FAP.

The greenback had made a huge gain of more than Rs2 from Tuesday’s close and closed at Rs199 at the end of the session, the latest in a succession of new highs for the US currency since last Tuesday.

While the FAP reported the previous day’s closing rate as Rs199, the State Bank of Pakistan reported the rate as Rs198.39, which is still close to the Rs200 mark that the international currency is expected to reach earlier in the day due to the country’s rising import bill, growing current account deficit, and depleting foreign exchange reserves.

In the open market yesterday, the dollar had already touched Rs200.

‘The Darkest Day’

Some analysts are upset with the achievement. FAP Secretary General Zafar Paracha told Dawn.com that today was the “blackest day” in Pakistan’s history due to the current currency rate.

In a statement to Dawn.com, FAP chairperson Malik Bostan requested the Federal Board of Revenue (FBR) to issue statutory regulatory instructions for the execution of import restrictions.
Meanwhile, Asad Rizvi, a former Chase Manhattan treasury chief, told Mettis Global, a web-based financial data and analytics portal, that “pension costs, circular debt [of] Rs2.5 trillion, public entities [worth] Rs1.2 trillion, and fiscal deficit of nearly 8% are not sustainable and adding pressure” on the rupee.

Meanwhile, the “independent SBP” was “not bothered by the PKR collapse, perhaps waiting for [an] IMF decision,” according to the Mettis Global report.

Rising oil prices have already increased the country’s oil import expenses in recent weeks, and overall imports are also at an all-time high. Imports soared by 72 percent in April, leaving the government with no room to repair its external balance.

Furthermore, the central bank’s foreign exchange reserves have dropped to $10.3 billion, the lowest level since June 2020.

Currency traders believe the unexpectedly large import bill and little foreign investment were not supportive of the currency rate, while the government already faced a $13 billion current account deficit.

The news comes after Pakistani officials resumed talks with the International Monetary Fund (IMF) yesterday, in which Finance Minister Miftah Ismail sought to dispel doubts on two fronts: that the new coalition government would stay in power and take tough decisions, as well as that the original fund program’s reforms would be implemented and structural benchmarks would be met.

According to informed sources, the negotiations began on a positive note, with both parties agreeing on important concepts such as separating the state’s economic decision-making from politics.

According to these sources, the government would revise gasoline and energy prices within days and implement a complete ban, rather than increase tariffs, on a total of approximately 30 luxury products, including cars and cellphones, as well as some smaller things, to limit imports and therefore external accounts. These announcements will be made soon in order to forward discussions toward a satisfactory conclusion of the revised program.


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Pakistan Is Expected To Increase The Price Of Electricity By PKR3.15 Per Unit

Pakistan Is Expected To Increase The Price Of Electricity By PKR3.15 Per Unit

April 20, 2022 / By Zunair Tahir / Business News

ISLAMABAD, Pakistan – The National Electric Power Regulatory Authority (NEPRA) has received a petition demanding a Rs3.15 per unit rise in power prices in March 2022 due to changes in fuel prices.

The application was sent by the Central Power Purchasing Agency (CPPA), and it will be heard by Nepra on April 27. If the raise is accepted, the public would be saddled with a Rs30 billion charge.

According to the CPA’s appeal, a total of 10 billion units were produced in March at a cost of Rs94 billion.


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In March, the CPPA notified the regulatory body that the per unit cost of power generated from thermal oil was Rs22.52, while the cost of energy generated from LNG was Rs14.36.

According to the electricity regulatory, the ruling will have no impact on K-Electric customers.



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Business News

(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

April 20, 2022 / By Zunair Tahir / Business News

ISLAMABAD, Pakistan – Pakistan’s surging inflation and expanding current account deficit have alarmed the International Monetary Fund (IMF).

According to a recent assessment by the Washington-based banking organization, the South Asian country’s productivity is on the decline.

Inflation is expected to stay around 11.2 percent this year, with the current account deficit hovering at 3.5 percent of GDP.

According to the estimate, economic growth will be about 4% this year, while unemployment will be around 7% this year and 6.7 percent next year.


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Meanwhile, in the aftermath of the crisis in Ukraine, the UN has cut its global growth estimates, warning that a Kremlin invasion may break the global economy into opposing blocs.

It noted that prospects had deteriorated in the previous three months, as it decreased its growth forecast for 2022 from 4.4 percent to 3.6 percent. The news comes as Islamabad has formally begun discussions with the IMF on the bailout package in Washington. According to sources, negotiations with the US-based financial institution will last until April 24, and the IMF will disburse a $1 billion tranche following successful talks.

Governor of the State Bank of Pakistan, Reza Baqar, is now in the United States for discussions with IMF officials. He will also be present at the World Bank’s steering committee meeting. Miftah Ismail, the Prime Minister’s Finance Adviser, will participate in the IMF negotiations electronically.


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BUSINESS NEWS

BUSINESS NEWS


UK Pound Drops To 37-Year Low

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September 17, 2022 / By Zunair Tahir / Business News


GPCCI Calls For Lifting The Import Prohibition On Automobiles

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August 10, 2022 / By Zunair Tahir / Business News


UAE To Spend $1 Billion In PSX, Claims Miftah Ismail

Read More…

August 6, 2022 / By Zunair Tahir / Business News


Meteoric Dollar Smashes All Records & Reaches Rs200 In The Interbank Market

Read More…

May 19, 2022 / By Zunair Tahir / Business News


(IMF) Has Expressed Concern Over Pakistan’s Growing Inflation and Expanding Current Account Deficit

Read More…

April 20, 2022 / By Zunair Tahir / Business News


Pakistan Is Expected To Increase The Price Of Electricity By PKR3.15 Per Unit

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April 20, 2022 / By Zunair Tahir / Business News


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