Free Presentations

This presentation was specifically prepared for a discussion at HBL, with its senior management and stakeholders.  It builds on recent papers and presentations that have been shared with our clients. 

• Supreme Court decision to disqualify Nawaz Sharif as party head creates uncertainty;
• SBP seeks to amend FX manual to better regulate Dollar flows in and out of Foreign Currency Accounts;
• FATF decision has been delayed for 3 months, but could return with a bigger bang;
• BoP pressure continues to build;
• Despite being an election year, there is no election cheer;
• School shooting in Florida could taint pro-gun Republican politicians;
• Trump’s expansionist fiscal policy contradicts the Fed’s monetary tightening.  Could this trigger a Twitter exchange between President Trump and the US Federal Reserve? ;
• Trump’s pivot towards India will keep Pakistan-US relations tense.

• New finance team, but no policy action;
• SBP optimistic about 6% growth in FY18;
• Growing uncertainty about political calendar in 2018;
• We see an IMF program in 2H-2018, so Spring Meetings in DC should be interesting;
• First line of business for the new government would be an IMF stabilization program;
• Trump outmaneuvered by Kim Jong Il (Koreas cozy up in Winter Olympics);
• US stock market shows signs of being a bubble;
• Merkel era ending, and alternative political ideologies are gaining traction in Europe;
• Could a trade war between China and the US precede the mid-term US elections in November 2018?

• Dar finally departs, creating the possibility of more proactive policies;
• PKR parity allowed to adjust during Post Program Monitoring discussions with the IMF;
• As of end-November 2017, SBP’s unencumbered FX reserves are negative 2.5 bln;
• SBP Governor finally acknowledges external sector stress;
• Economics more worrying than the politics;
• 2018 election cycle in some doubt;
• Middle East developments could adversely impact Pakistan’s economy via remittances;
• Next IMF program could be critical, and focus on politically difficult reforms.

• Dar’s resignation imminent;
• Case against Nawaz Sharif is heading towards a conviction;
• Nawaz Sharif is lashing out against Judiciary;
• Islamabad blockade on Ahmedi issue shows how powerless the authorities are;
• Steps taken by Saudi crown prince (MbS) are very significant, and will change domestic policies and Saudi foreign policy.  Could negatively impact Pakistan’s economy in the short-term, but could be positive in the medium and long-term;
• Trump’s blanket support for MbS is creating a strong anti-Iran bias in US foreign policy;
• Glaring contradiction in US policy to defuse tensions between America and North Korea- what President Trump tweets and what key cabinet members state;
• Updated SBP data on FX swaps, shows that authorities are desperate to give the market false comfort;
• Next IMF program could be impacted by changing geo-political landscape.

• Dar holds on (but barely);
• Economy in limbo – uncertainty is debilitating;
• Premier Xi (of China) being compared to Mao Zedong and Deng Xiopeng.
  • Mao made China;
  • Deng made China prosperous;
  • Xi makes China powerful;
• President Trump, on the other hand, continues to be President Trump;
• Political uncertainty in Pakistan increases;
• Sharjeel Memon’s arrest has created expectations that the PPP is also going to be investigated;
• COAS’s stated concern about the economy is unprecedented (and telling).  Rumors swirling about a 3-year technocratic government to rebuild key institutions (SBP, MoF, SECP, FBR, PC, Nepra, etc.);
• Premier Xi flexes military/economic muscle and challenges Western democracies (19th National People’s Congress, Oct 18th-24th, 2017);
• Stand-off between the US and North Korea continues;
• Trump’s rhetoric against Iran, will deepen the divide between the US and China, and force regional countries to take sides.

• Dar’s departure imminent;
• Hudaibiya Paper Mill case could sink the entire Sharif family;
  • China and Russia support Pakistan’s role in the UN General Assembly;
• Political uncertainty eases somewhat (rumors that Dar has turned informer);
• External sector challenge will not go away (Pakistan’s Balance of Payments, the IMF and China, September 14, 2017).
• Growing talk about technocratic government to rebuild key institutions;
• Trump excludes Russia and China from his proposed solution to North Korea;
• In response, we expect a North Korean missile test to show defiance;
• Trump likely to scuttle the Iran nuclear deal.

• PKR/$ parity is Dar’s political trophy;
• Politics not helping market sentiments;
• PM Abbasi takes over more economic decision making;
• Trump stands by his racist base (perhaps his most defiant stance so far);
• On Afghanistan, Trump puts Pakistan on notice and seeks India’s help;
• Nawaz Sharif increasingly isolated within his party;
• External sector concern will gain traction with time (drip-drip);
• When will China reveal the real CPEC?
• Policymaking and regulatory institutions weakened to the stage of dysfunction.

• PKR volatility reveals a compromised central bank (Dar’s public outburst against SBP on July 5th-6th);
• Despite assurances from GoP/SBP, a BoP crisis appears likely;
• Supreme Court’s unanimous verdict to disqualify Nawaz Sharif, is in keeping with Justices’ written judgment and blunt JIT assessment;
  • Reaction of Western government?
  • Will MoF/SBP start talking with the IMF?
  • Will new SBP Governor retain his position?
• BoP problem is structural.  Exports are key and CPEC needs to become export-based to succeed;
• Expect mini-Budget to resolve external sector problem;
• Qatar blockage has not helped the Saudi alliance or the US (Qatar will remain defiant);
• White House descending into the unknown (Priebus leaves, trump Tweets against his Attorney General, health reform is rejected, Trump criticizes Hezbollah during a
  press conference with Lebanese PM, where Hezbollah is a coalition partner in the Lebanese government);
• North Korea tests ballistic missile that can reach the continental US.  Trump refuses to engage the UN and seeks to find a unilateral solution.  Americans increasingly concerned about a nuclear exchange.

• Stock market very erratic, and JIT is being blamed;
• JIT is serious, and the manner in which the PML-N is hitting back reveals that it is scared of the possible outcome.  Predict a negative verdict against Nawaz Sharif;
• Qatar blockade is likely to be green-lighted by Trump, and now cannot be solved within the GCC.  Turkey’s Erdogan is very vocal, showing regional ambitions that are new;
• Iran has struck Syria with missiles.  This is unprecedented and shows that Iran also has regional ambitions;
• Policymaking and regulatory institutions in Pakistan are now unable to manage political/financial /economic shocks;
• Export outlook will not be rectified by ‘policy packages’ – more is now required;
• Suggest that high end consumer items (luxury cars) may be disallowed;
• Real estate values in Karachi are soft because of regulatory issues;
• Qatar blockade will not be resolved soon, while Syria has become a proxy war between the US and Russia;
• Macron’s victory is a relief for the liberal order;
• Trump’s involvement with Russian meddling in the 2016 election will not go away.