Positive vibes

On August 2, the Election Commission of Pakistan (ECP), in a unanimous ruling, ruled that: the PTI received foreign funding; the PTI received prohibited funding; the PTI diverted funds meant for charity to politics; Imran Khan filed false declarations-and all of this was done “knowingly and wilfully’.

On August 3, the rupee gained Rs10 against the mighty dollar. The rupee has gained a good 10 per cent in just five days. The Pakistan Stock Exchange has since gained a wholesome 1,500 points adding some Rs400 billion to its capitalization or an equivalent of a couple of billion dollars.

What does this mean? Pakistan’s financial community has taken the ECP’s ruling as a strong sign that the PTI’s potential of creating chaos is being contained. Naturally, political chaos being contained would lift business sentiments. The coalition government must learn a lesson or two from this episode: if the economy is to improve, a political party’s potential – any political party’s – to create chaos and mayhem must first be contained. The coalition government must now demonstrate to the world that the government intends to bring down ‘political risks’.

The good news is that the worst of the currency crisis seems to be behind us. In July, imports fell by 37.7 per cent on a month-to-month basis and 12 per cent on a year-on-year basis. Consequently, our trade deficit narrowed by 20.6 per cent on a year-on-year basis. The not so good news is that our exports also declined by 0.7 per cent on a year-on-year basis.

The other good news is that the UAE has offered to buy some $2 billion worth of minority shares in our publicly-listed, government-owned companies. What is so good about this offer is that this will be non-debt creating dollar inflow. In other words, this would amount to dollars coming into Pakistan in the form foreign direct investment as opposed to a loan. In April, in a similar deal, Abu Dhabi Developmental Holding Company invested $1.8 billion in five publicly traded Egyptian companies.

In June, foreign exchange inflows under the Roshan Digital Account (RDA) scheme surged a healthy 32 per cent to reach $4.6 billion. For the record, non-resident Pakistanis from 175 countries have so far opened 429,364 RDA accounts. The not-so-good news is that RDA accounts are actually expensive loans taken up by our government.

In June, the coalition government signed a debt-relief in the amount of $3.68 billion with the G20 countries. The not-so-good news is that this suspension is only temporary. In another development, China rolled over $2 billion for a year. Pakistan and France also signed an agreement deferring a payment of $107 million. Imagine, we are just one short step away from exiting the FATF’s gray list. Plus, Pak-US counterterrorism cooperation seems to be on track. So there are positive vibes from the international arena as well.

Yes, there are positive vibes coming from the currency market. Yes, there are positive vibes coming from the stock market. There also are positive vibes from the counterterrorism front. It is now safe to say that the period of maximum economic stress is behind us.

The writer is a columnist based in Islamabad. He tweets @saleemfarrukh and can be reached at: farrukh15@hotmail.com