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Showing posts from September, 2008

Fear and Greed on Wall Street

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As the US faces its worst financial crisis since the Great Depression of the 1930s, the American financial and economic leadrship has come under severe criticism by the world. Last week -- even before Wall Street's latest collapse -- 13 former finance ministers met at the University of Virginia campus and called on the Americans to fix their 'broken financial system.' Australia's Peter Costello noted that lately the US has been "exporting instability" in world markets, and Yashwant Sinha, former finance minister of India, concluded, "The time has come. The U.S. should accept some monitoring by the IMF." The Wall Street Journal reports that the turmoil in the U.S. financial sector is rippling through political debates around the world, giving ammunition to foreign officials who question American economic leadership and oppose policies that follow the U.S. model. While the U.S. has been a model for Chinese reforms, now it's clear "the teacher…

Zardari Offers Pakistani Assets For Sale

Pakistan considers asset sales to bolster economy
By Heather Timmons
Tuesday, September 9, 2008

NEW DELHI: Pakistan plans to sell valuable energy assets, beginning with a major gas field, as it tries to reap billions of dollars from deals with investors in industries like banking and farming.

The move comes as Asif Ali Zardari, the widower of former Prime Minister Benazir Bhutto, is stepping in as president.

Because of a hefty oil bill and a slowing economy, Pakistan is struggling under its biggest budget deficit in a decade, $21 billion; inflation that hit a 30-year high, 24.3 percent, in July; and fast-rising unemployment that is projected to reach 6.6 percent in 2009. Government leaders are eager to raise money, quickly.

"The government is going through all their funding options," a banker advising the Pakistani government said. Financial advisers to the government spoke on the condition of anonymity so as not to alienate their client.

The Qadirpur gas field in Pakistan, a natur…

Pakistan's Electric Power Crisis Worsens

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In June 2007, the power cuts in Pakistan lasted no more than 3 or 4 hours a day. Today, in extremely hot weather, Pakistanis have to endure without electricity for 8 to 10 hours a day. Industrial production is suffering, exports are down, jobs are being lost, and the national economy is in a downward spiral. By all indications, the power crisis in Pakistan is getting worse than ever.

Extended Load-shedding:
Extended electricity load shedding in Karachi's five major industrial estates is causing losses in billions of rupees as the production activity has fallen by about 50 per cent. KESC, Karachi's power supply utility, is dealing with with a shortfall of around 700MW against a total demand of 2200MW. Almost all forms of power generation from fossil fuel-fired thermal to hydroelectric to nuclear are down from a year ago. As a result of the daily rolling blackouts, the economy, major exports and overall employment are also down and the daily wage earners are suffering. The KESC a…

Uncle Sam Saves Fannie and Freddie

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The US Treasury Secretary Henry Paulson announced the weekend seizure of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). While some have criticized the US regulators' handling of the mortgage crisis, there is almost unanimous agreement that the bailout of the two mortgage giants was absolutely necessary to prevent a major, worldwide financial markets collapse. The cost of this bailout to the US taxpayers is estimated to be at least $200b.

Who are Fannie and Freddie? Both are government sponsored enterprises (GSEs) that guarantee or own more than $5 trillion of mortgages, about 50% of all the mortgages in the United States. Both have suffered heavy losses in the ongoing real estate bust in the United States. Both have suffered heavy losses in the ongoing real estate bust in the United States. Home prices have been falling and many homeowners have lost most or all of their equity in their homes. In many cases, the outstand…

Zardari as a Steward of Pakistan's Economy

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As Pakistan finds itself in the midst of arguably the worst economic crisis in its sixty one year history, the recent accounts of Mr. Zardari's understanding of the economy and decision-making are not particularly encouraging. It is certainly a huge letdown after Prime Minister Shaukat Aziz, whose expertise on economic matters is well known. Here are the relevant excerpts from a report in the New York Times:

Two recent decisions by Mr. Zardari showed a disregard for Pakistan’s alarming deficits, they (sources) said, speaking anonymously because they did not want to publicly criticize the next president.

In April, Mr. Zardari told Ishaq Dar, the finance minister at the time and a member of Mr. Sharif’s party, which has since broken with Mr. Zardari, that he wanted the price the government paid farmers for wheat to be raised substantially as a way of rewarding an important constituency in Punjab Province, the nation’s most populous, according to two participants in the discussion with…

World Economy Worst in Sixty Years

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In a candid interview in late August with Guardian Weekend magazine, British Finance Minister Alistair Darling warns that the economic times faced by Britain and the rest of the world "are arguably the worst they've been in 60 years". To deepen the sense of gloom, he adds: "And I think it's going to be more profound and long-lasting than people thought."

While Mr. Darling's candor is rare for such a senior government official, what he revealed are off-the-record feelings shared by many top economic officials around the world. The dramatic impact of a severe, worldwide credit crunch, and sharp rise in the price of basic commodities, including food and fuel, are taking an unprecedented toll on the world economy. Economic growth has either stopped or slowed to a crawl, major stock markets have crashed, unemployment is on the rise, and the increasing world hunger and poverty are threatening global security and stability.


South Asia's economy is no except…

Google Joins the Battle of the Browsers

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"The Web has clearly evolved to where people are running complex applications in the browser," said Google's Sunder Pichai. "It's not just a window where you show a Web page."

Pichai, vice president of Product Management at Google, describes Chrome, Google's newly released Web browser, as a new platform for Web development. As the Web becomes a powerful platform for complex applications development and deployment, the browser wars are becoming more heated. The holy grail for the Web based companies such as Google and Yahoo is to offer Web applications to achieve the look and feel as well as the power and performance of desktop applications. A powerful Web browser will help in this pursuit but it won't be sufficient. Ubiquitous, reliable, high-bandwidth, always-on connectivity will be essential. Significant improvements in mini browser software and reliable, broadband, wireless connectivity will also help spawn a mobile Internet revolution.

Google cla…

Declining Economy Hurts Pakistani Workers

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Pakistan has a diverse economy that includes textiles, chemicals, leather products, food processing, financial services, telecommunications, retail, automobile manufacturing, light and heavy armaments, agriculture and other industries. It is the 45th largest economy in the world in terms of official exchange rates ($144b GDP) and 25th largest based on purchasing power parity GDP ($410b PPP). Its service sector accounts for more than half of its GDP.

As the economies in the US and Europe slow down, Pakistan's key exports of textiles and leather products are experiencing a slowdown in growth as well. This is particularly painful at a time when the country's import bill has skyrocketed due to rising oil and food prices. Textile exports in Pakistan grew from 8.92 billion USD in 2004-05 to 10.11 billion USD in 2005-06, reflecting a growth rate of 18%. As against this, in the current year, export growth has been only 5%. For all leather goods excluding footwear growth was 24.05%. Of…