please give your comments in pure language of economics
 

Dear all

As the season of declaring political manifesto is in its full swing.
Politicians are chanting many slogans.I observed a few,from their promises,in connection with Economics.I just put 02 of them in the following and ask you to shade a light from economics viewpoint considering the current and past economic condition of Pakistan.

1)We will pull the dollar($) to Rs.80.
2) We will reduce the prices upto the prices as they were in the year 2000.
Is it possible,if yes then how? I know it is just a slogan,but being an economist or concerned with economics,please give your comments in pure language of economics.

in order to run the economy,there is need of money and when economy of the country is poor then the country is under-developed. and then there is need to secure loans . loans are always given by the organizations , these organizations are in developed countries. in fact the loan is sanctioned and given by these countries . the first demand to sanction the loan is to devalue the currency because these countries not only sanction the loans but the rate of interest also increase so it gives benefit to the loan giver, there economy develops. on the other hand , the loan receiver is in loss. in order to pay the loan the loan receiver secures more loan . so how to decrease the value of dollar . economy of Pakistan is not strong. agriculture, industry all are suffering. imports are higher than exports. luxury goods are imported . duties increased on such imports. and tax payers do not pay tax. oil and gas prices are increasing due to which price of every kind of commodity is increasing . so how is it possible to reduce the dollar to 80 rupees or to lower the prices at the level of year 2000.

[QUOTE=maryam masood;585460]in order to run the economy,there is need of money and when economy of the country is poor then the country is under-developed. and then there is need to secure loans . loans are always given by the organizations , these organizations are in developed countries. in fact the loan is sanctioned and given by these countries . the first demand to sanction the loan is to devalue the currency because these countries not only sanction the loans but the rate of interest also increase so it gives benefit to the loan giver, there economy develops. on the other hand , the loan receiver is in loss. in order to pay the loan the loan receiver secures more loan . so how to decrease the value of dollar . economy of Pakistan is not strong. agriculture, industry all are suffering. imports are higher than exports. luxury goods are imported . duties increased on such imports. and tax payers do not pay tax. oil and gas prices are increasing due to which price of every kind of commodity is increasing . so how is it possible to reduce the dollar to 80 rupees or to lower the prices at the level of year 2000.[/QUOTE]

Are we devaluating our own currency by following the conditionalities of IMF or that is due rapid depletion in foreign reserves of our country and such depletion puts pressure on FOREX rates? Is their anything like that?please comment.

Improving the currency means to appreciate the domestic currency.. It's devaluation occurs when the general public demands more and more fooreign currency. State Bank of Pakistan has limited dollar notes and it can't meet the demand of the public. thus a currency depreciate. When large amount of foreign currency is injected in the domestic economy then for transaction purposes people demand domestic currency and thus this process will appreciate the currency. Foreign currency can be injected through remittances and exports etc.
Your second question was about Price hike i.e Inflation. First of all you must have the knowledge that how inflation comes. The answer is the increase government expenditures. The government has a source of Revenue i.e; Taxes, etc. but when the Expenditures overweighs the revenue then there comes a deficit. to finance the expenditures the government asks the state bank for notes or it takes loan from the general public by issuing Prize bonds but public loan is not much enough therefore it goes for SBP. The state bank thus prints the new currency notes to finance the govt expenditures.. This phenomenon is known as seignorage. With the introduction of new currency notes i.e increase the amount of currency creates inflation. So, to overcome it the government has to increase the revenue ... It has to increase the tax net and it should brought all those who have made themselves exempt from taxes. There is 2% inflation in newzealand because the central bank of Newzealand is an autonomous body. It has obtained autonomy from Parliament and it doesn't issue any loan to the government.. Here in Pkaistan The government has a liabilty of 12 billion ruppes of SBP.

@Durrani Abid
 

yes its the condition of imf as well as lack of foreign reserves requires the devaluation so that foreign investment of the may increase .
actually there i s a need to reduce the expenses & increase the savings. there is a need to go through monetry and fiscal policies.
when your economy is strong devaluation stands nowhere.

[QUOTE=Khan Nasar;585647]Improving the currency means to appreciate the domestic currency.. It's devaluation occurs when the general public demands more and more fooreign currency. State Bank of Pakistan has limited dollar notes and it can't meet the demand of the public. thus a currency depreciate. When large amount of foreign currency is injected in the domestic economy then for transaction purposes people demand domestic currency and thus this process will appreciate the currency. Foreign currency can be injected through remittances and exports etc.
Your second question was about Price hike i.e Inflation. First of all you must have the knowledge that how inflation comes. The answer is the increase government expenditures. The government has a source of Revenue i.e; Taxes, etc. but when the Expenditures overweighs the revenue then there comes a deficit. to finance the expenditures the government asks the state bank for notes or it takes loan from the general public by issuing Prize bonds but public loan is not much enough therefore it goes for SBP. The state bank thus prints the new currency notes to finance the govt expenditures.. This phenomenon is known as seignorage. With the introduction of new currency notes i.e increase the amount of currency creates inflation. So, to overcome it the government has to increase the revenue ... It has to increase the tax net and it should brought all those who have made themselves exempt from taxes. There is 2% inflation in newzealand because the central bank of Newzealand is an autonomous body. It has obtained autonomy from Parliament and it doesn't issue any loan to the government.. Here in Pkaistan The government has a liabilty of 12 billion ruppes of SBP.[/QUOTE]

Ok. All comes to how healthy are your foreign reserves.
As facts exist,foreign reserves of Pakistan are steeply depleting and we are in dire need of dollars as we have to foot the import bills specially for oil. Now coming to measures:One is to export more,second is remittances.
Current conditions of the BOT-balance of trade is no more a secret it's alredy shows deficit(Current Account deficit almost $3394 as per last economic servey of Pakistan) and remittances are not strong enough to improve our foreign reserves,FDI can help but in fiscal year 2011-2012 it is down by a mammoth 50% for many and various reasons.
Considering such nightmare,what is the option we are left with? Should we go to IMF again with begging bowl.Pleas comment.

According to the Debt Policy Statement:
For the first time in Pakistan’s history, the country’s total debt and liabilities touched the Rs10 trillion-mark in September 2010.According to the Federal Bureau of Statistics’ “population clock” as of February 1,2011 the country’s total registered population was 175 million, which means each individual owes up to Rs57,057.

This was the situation till 2011, do you think it can be better in the next year. In this country, off-course Not! but you can hope for the good atleast, and now here comes that hope.....

According to Fiscal Policy Statement and Debt Policy Statement 2012-13:
With Pakistan’s total debt and liabilities now in excess of Rs15 trillion.
The reports indicated the revenue deficit stood at 3.2 per cent of GDP in 2008, declined to 1.2 per cent in 2009, increased to 1.7 per cent in 2010, jumped to 3.3 per cent in 2011 and stood at 2.5 per cent of GDP at the end of fiscal year 2012.

The government also failed to double allocations for health and education throughout its five year tenure. The allocations for education as percentage of GDP stood stagnant at or around 1.8 per cent in four years and slightly increased to 2.1 per cent in fiscal year 2011-12. Likewise, the allocations for health also kept on fluctuation between 0.6 and 0.8 per cent of GDP in all five years — 2008 to 2012.

In this fluctuating economy of Pakistan, do you believe in these funny slogans? If Pakistan's upcoming leaders make the economy strong, at that time even they can only control the deficits. the statement for taking aback economy to 2000 must be made by the fake degrees politicians, so they can be forgiven. In fact, political slogans are meant for public manipulations, altering the masses’ perceptual landscape and presenting a distorted view of the hidden agendas prepared specifically by vested interest groups.

[QUOTE=Durrani Abid;585950]Ok. All comes to how healthy are your foreign reserves.
As facts exist,foreign reserves of Pakistan are steeply depleting and we are in dire need of dollars as we have to foot the import bills specially for oil. Now coming to measures:One is to export more,second is remittances.
Current conditions of the BOT-balance of trade is no more a secret it's alredy shows deficit(Current Account deficit almost $3394 as per last economic servey of Pakistan) and remittances are not strong enough to improve our foreign reserves,FDI can help but in fiscal year 2011-2012 it is down by a mammoth 50% for many and various reasons.
Considering such nightmare,what is the option we are left with? Should we go to IMF again with begging bowl.Pleas comment.[/QUOTE]

I have my two reasearch Publications about the impact of FDI on Economic growth and Foreign Aid on the economic growth of PAkistan. My final and concluding result was that FDI will promote growth when it is assissted by Human capital and political stability. As you have mentioned that there comes a mammoth fall in FDI it's because of the political instabilty prevailing in the country and corruption. Moreover it is not met by human capital. Check the economy of Denmark whose major source of the government expenditures are foreign remittances as they have equipped the population with Human capital.
IMF are the institutions that issues loan on the basis of conditionalities and in my second reearch article my final conclusion was that tied aid instead to betteroff will worse off the recepient country i the present scenario Karry lougar bill is the example,, it was issued with conditionalities. Paki govt was not allowed to invest in the developmental sector like for energy purpose and for developing human capital and education. I suggest you to read the book Confession in Economic Hitman..