Main financial assets discussed:
1. Global X MSCI Pakistan ETF (NYSEARCA:PAK)
Top 3 key points:
1. Pakistan's stock market is currently cheap and has a lot of room to run based on local currency returns.
2. The market has faced challenges such as rising inflation, poor currency performance, and growing public debt.
3. Despite these challenges, the recent weighting boost from MSCI and the discount to other high-risk markets make investing in Pakistan attractive.
Recommended actions: **Buy**
The article suggests that now is a wonderful time to initiate a position in the Global X MSCI Pakistan ETF, especially since Pakistan's weighting in MSCI Frontier Markets will increase soon. The market is cheap and has potential for growth.
Pakistan's rupee dropped to a record low due to the easing of import restrictions, which has increased demand for the dollar.
The Pakistani rupee has reached a historic low of 300.37 against the US dollar in the interbank market due to increased demand and a dollar liquidity crunch caused by dropping exports and remittances, with experts suggesting that the interbank market is trying to catch up with the kerb market.
The depreciating exchange rate of the Pakistani rupee against the US dollar is leading to a potential economic disaster, with increased inflation, higher prices for petroleum and fuel, and a rise in poverty and unemployment.
The Pakistani rupee weakened further against the US dollar in the interbank market due to higher demand and uncertainty, while the open market remained stable; however, insiders noted that currency dealers were selling the dollar at higher rates in the open market.
The rupee's decline against the US dollar is being attributed to the powerful influence of the grey market and the International Monetary Fund's involvement in Pakistan's financial system, leading to a loss of control over the exchange rate and economic uncertainties.
The relentless surge in pressure on the exchange rate and price level in Pakistan over the past two and a half years can be attributed to serious malfunctions on the balance of payments and fiscal accounts, which have thrown the monetary aggregates far from their projected path to stability. This has led to inflation and exchange rate pressure, and traditional IMF-mandated adjustments alone may not be enough to resolve the situation.
Former finance minister Ishaq Dar believes that a few speculators are responsible for the fluctuation and rise of the US dollar against the Pakistani rupee and that the government must take action against them to prevent them from holding the economy hostage. He also states that there is no quick fix to any problem, and emphasizes the need for the revival of effective policies and time to reverse the damage caused to Pakistan's economy. Additionally, Dar criticizes the policies of the Pakistan Tehreek-e-Insaf (PTI) government and expresses confidence in the ability of the Pakistan Muslim League-Nawaz (PML-N) to fix the economy if given a fresh and full mandate. He also highlights the complexities of the rise in electricity prices in the country.
The Pakistani rupee is expected to trade within a narrow range against the dollar in the upcoming week following its recent sharp depreciation, although some analysts anticipate continued pressure on the currency due to capital withdrawals, political unrest, and economic uncertainty.
The current economic crisis in Pakistan is driven by high inflation, mismanaged policies, and failure to ensure price stability, leading to a weakened currency and a struggling middle class, but implementing radical reforms such as demonetization and swapping out foreign currency debt can potentially alleviate the situation and revive the economy.
Chief of Army Staff (COAS) General Asim Munir has pledged to bring transparency to dollar exchange and interbank rates, and to incorporate money exchanges under taxation, during a meeting with the business community in Lahore.
Pakistan's Chief of Army Staff, General Asim Munir, outlines key economic policies and assures a stable business environment during a meeting with top businessmen in Karachi, reflecting similarities with former military dictator Zia-ul-Haq's approach.
Chief of Army Staff (COAS) General Asim Munir assured the business community that efforts will be made to bring foreign investment to revive Pakistan's economy, with a $25 billion investment discussed with Saudi Arabia in various sectors, including IT, minerals, agriculture, and defense, according to Federation of Pakistan Chambers of Commerce & Industry (FPCCI) President Irfan Iqbal Sheikh.
The rupee rebounded in the open market as a crackdown on the informal currency market helped narrow the gap between interbank and open-market rates, bringing it closer to the IMF's target of 1.25%. The State Bank of Pakistan has also introduced structural reforms for exchange firms and increased the minimum capital requirement, while ordering banks to set up separate entities for forex transactions.
Millions of Pakistanis are facing the devastating consequences of an unprecedented economic crisis, with rising inflation, soaring fuel and electricity prices, and a weakening currency, leaving low-income households struggling to make ends meet.
The Pakistani rupee's rise against the dollar is attributed to a crackdown on hoarding and illegal outflows of the greenback as well as increased vigilance in the Afghan transit trade.
Pakistan's central bank is expected to increase interest rates in order to address high inflation and bolster foreign exchange reserves, which have led to a record low value for the rupee. A Reuters poll shows that 15 out of 17 analysts are forecasting a rate hike, with some expecting an increase of at least 150 basis points. The country's economic recovery is being challenged by IMF loan conditions, import restrictions, and subsidies removal, which have caused spikes in energy prices and elevated food inflation.
The Pakistani rupee has depreciated significantly in the first three weeks of the interim government's tenure, reaching a record low and making it the worst-performing Asian currency this quarter, due to factors such as a change in government and high inflation. The State Bank of Pakistan is implementing measures to address the economic challenges, including reforming the exchange rate and modernizing the banking system.
Despite Pakistan's immense potential in various sectors such as energy and agriculture, the country continues to face economic injustice and elite capture, which undermines social justice and human development, according to economist Dr Hafiz Pasha; in recent months, however, the government has taken action against electricity theft, currency smuggling, and commodity hoarding to combat these issues.
The Pakistani rupee has gained significantly against the US dollar due to administrative measures taken by the interim government, leading to a possible reduction in petroleum prices in the upcoming review.
Pakistan is facing a major economic crisis with high inflation, insufficient public resources, and policy decisions influenced by vested interests, according to the World Bank. The country needs to make hard choices and prioritize coordinated, efficient, and adequately financed service delivery to improve human development outcomes. Additionally, the Pakistani Rupee has reached a record low against the US dollar.
The Pakistani rupee strengthened against the US dollar in the interbank market due to the government's crackdown on the money market.
The Pakistani rupee has continued to rise against the US dollar, trading below Rs290, due to a crackdown on the money market, but analysts warn that the gains may only be short-term.
The author argues that there are underlying pressures responsible for an ongoing spiral of devaluation in Pakistan's economy, and these pressures make it difficult to sustain recent gains in the value of the rupee.
An obsession with controlling the rupee-dollar exchange rate in Pakistan has led to ineffective administrative measures and failed attempts at stabilization, as the country's heavy dependence on imports and mounting external debt hinder economic restructuring and contribute to the rupee's depreciation. The need for a long-term plan focused on increasing exports, investment, and macroeconomic stability is emphasized.
The Pakistani rupee has strengthened against the US dollar for a month due to a military-backed crackdown on currency smugglers, with analysts expecting the rupee to reach 280 to the dollar in the near future.
The Pakistani rupee is expected to strengthen further, potentially falling below 280 against the US dollar, due to factors such as the anticipation of the IMF's next tranche, improved balance of payments, and government actions against illegal dollar trade.
Illegal activities such as black market currency trade, gold smuggling, and oil smuggling are costing Pakistan's economy USD 23 billion per year, leading to currency devaluation, inflation, and a loss of government revenue.
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