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July 29, 2016

  • Macro conditions are positive, PKR is stable and FX reserves are at record highs;
  • Political differences between the US and Pakistan should not adversely impact the closure of the IMF program;
  • GoP negotiating with real estate association about making property valuations more accurate.  We think this is a very positive step, which will enhance documentation, create white money and create some balance in real estate values;
  • GoP is now pushing towards divestiture, not privatization.  This effectively means that legislative constraints, labor strikes and political opposition are deemed insurmountable by the encumbent government;
  • Economic sentiments remain optimistic (FX reserves; stable PKR; low/soft inflation & successful IMF program);
  • Full year macro projections (for FY17) will be announced after the IMF’s post-program monitoring
  • Frexit would be much more disruptive than Brexit, as this would be the end of the Euro;
  • UK after Brexit will be saved by the English language and English Law.
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June 20, 2016

  • Macro conditions remain positive;
  • Imposition of withholding tax on cash withdrawals has resulted in a sharp increase in currency in circulation in FY16 compared to FY15;
  • Budget FY17 is selective, self-serving & a non-event:
    • No meaningful debate about the Federal Budget in Parliament;
    • Focus on poor and rural sectors (increase minimum wage), hard on salaries of the middle-class;
    • Rewards 5 key exports and low/mid-level bureaucracy;
    • No fiscal, energy or PSE reforms;
    • GoP plans to borrow $ 2 bln from global banks are not wise, as it simply seeks to replace IFI flows with commercial flows.  This will reverse the downward trajectory of external debt servicing projected for FY17-FY21;
    • Using withholding taxes as a revenue source (regressive and shows a lack of political will);
  • Brexit decision will be interesting, and it will not end on June 23rd.
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May 16, 2016

  • Macro conditions remain stable, and M2 growth has been almost the same in FY16 as it was in FY15 (6.5%).  Budgetary support also the same as in FY15, but private sector credit growth is higher this year;
  • Market remains optimistic about the economy:
    • PKR is stable and external sector is comfortable;
    • Low inflation and improvement in security conditions (esp. in Karachi);
    • Rising real estate values wealth effect consumer spending.
  • Some disappointed we will not have another IMF program (a sad reflection of the level of confidence the market has on our policymakers);
  • Little media attention on Budget Strategy Paper FY17.  More interested in Panama Papers.
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