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DISCUSSING ALL THINGS FISCAL
Get your act together! System of international financial safety nets needs to be reorganised: ADB g
ISLAMABAD ONLINE
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he system of international financial safety nets needs to be reorganized to ensure sufficient liquidity to combat systemic crises, said by Asian Development Bank
(ADB) seminar’s speakers. “International and regional financial safety nets have become much more important in an era of globalized financial markets and volatile capital flows,” said ADB Chief economist Changyong Rhee. “To enable developing Asia to ride out financial storms, what is needed is a new,
flexible system that is truly international and adequately financed.” Speakers at the seminar, co-sponsored by the International Monetary Fund (IMF) and Philippines Central Bank, emphasized that reform of the international financial system had become more pressing since the 1997–98 Asian financial crisis to prevent localized crises from spreading to the global economy. The crisis prompted ASeAN+3 countries to launch the Chiang Mai Initiative (CMI) in 2000 to provide emergency liquidity. The initiative began as a bilateral currency swap facility, but after the 200809 global economic crises it grew into a multilateral facility, the Chiang Mai Initiative Multilateralisation (CMIM). On 3 May, ASeAN+3 announced a doubling of the CMIM to $240 billion and an increase
Monday, 07 May, 2012 in the amount countries can access without IMF conditionalities. The network of financing arrangements, however, remains a work in progress, as seen by the numerous reforms since the 2008-09 crises, the audience heard. The challenge is to find a solution that provides the needed support to countries without giving rise to undue risk, such as the IMF lending facilities targeted to countries with a track record of sound policies. Panelists discussed how the current system could be reformed and what role existing and new regional financing mechanisms would play. Other issues touched upon included how reforming international financial safety nets could lead to progress on important global macroeconomic issues and how reform would affect exchange rate policy and international capital flows.
It figures
Budget delaying excuse numero uno g
Controversy over finalisation of macroeconomic figures likely to delay budget ISLAMABAD
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ONLINE
he controversy triggered over finalization of macroeconomic figures is likely to delay the presentation of next federal budget till the first week of June, said an official, requesting anonymity. Budget was to be presented on May 25th this month but due to controversy triggered over rebasing date is create fear of delaying the presentation of federal budget till first week of June.
According to sources familiar with the matter told Online Saturday that Finance Ministry has also sought one week delay in presenting the federal budget while citing delay in budget making process. “Federal Minister for Finance and Deputy Chairman Planning Commission had expressed their displeasure over the National Accounts Committee’s decision for approving GDP growth rate at 3.2 per cent,” said the official, adding that due to these angry economic managers the National Accounts Committee’s approved
decisions had revived in the meeting of the Governing Council of the Pakistan Bureau of Statistics (PBS) which was held on May 04. The Meeting of National Accounts Committee (NeC) was held last month on April 26 and approved Gross Domestic Product (GDP) growth figure at 3.2 per cent. A meeting of the Governing Council of the Pakistan Bureau of Statistics (PBS) was held on 4th May, under the chairmanship of the Minister for Finance Dr.Abdul hafeez Sheikh. In the meeting the Members of the Council
raised many observations and concerns regarding the methodology, the quality of primary data base on various sectors of the economy, analytical framework and the restructuring steps taken by PBS to adjust the GDP of the past 10 years. The Council also expressed concerns on lack of adequate consultations with stakeholders including academia and multilaterals on the technical aspects prior to taking rebasing data to the National Accounts Committee as was done during the previous rebasing exercise.
DATA DIve
Stocks, oil slump on weak jobs data NEW YORK
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REUTERS
lOBAl stocks swooned and crude oil tumbled on Friday after a weak U.S. jobs report and data that suggested a deeper recession across the than previously thought dented sentiment. Major U.S. and european stock indexes fell more than 1 percent, oil slumped about 4 percent and government debt prices jumped after the labor Department said American employers reduced hiring more than expected in April. The week was the worst this year for Wall Street stocks, with energy leading the decline. The S&P energy index .GSPe of 44 gas and oil-related companies fell 2.2 percent on fears a worsening economy would sap demand.
“We have broken through key technical levels here after a disappointing employment report and the PMI number from europe which suggest that the recovery is stalling and could affect energy consumption,” said Gene McGillian of Tradition energy. Just 115,000 workers were added to payrolls last month, or 55,000 less than economists expected. While the unemployment rate fell one-tenth of a point to 8.1 percent, a three-year low, that was only because the workforce shrank as people retired or stopped seeking work. The third straight monthly decline in hiring growth spurred concerns that the U.S. economy is losing momentum and doused hopes that a stretch of strong winter hiring had signaled a turning point for the U.S. recovery. The Dow Jones industrial average closed down 168.32 points, or 1.27
percent, at 13,038.27. The Standard & Poor’s 500 Index fell 22.47 points, or 1.61 percent, at 1,369.10. The Nasdaq Composite Index slid 67.96 points, or 2.25 percent, at 2,956.34. The U.S. jobs data added to the gloomy tone from europe, where purchasing managers’ indexes, primarily covering services, suggested a recession across the euro zone could extend to mid-year and be deeper than previously imagined. Markit’s eurozone Services PMI, which gauges business activity over a month, came in at 46.9 for April, sharply lower than 49.2 in March. Anything below 50 signifies contraction. The JPMorgan Global Purchasing All-Industry Output Index of about 20 countries showed declines in April from March. In europe, the pan-european FTSeurofirst 300 index closed down 1.7 percent at 1,027.15, and the euro STOXX 50 index fell 1.7
percent to 2,248.34 , despite strong earnings from Royal Bank of Scotland (RBS.l), BNP Paribas (BNPP.PA) and lafarge (lAFP.PA). MSCI’s all-country world equity index .MIWD00000PUS fell 1.5 percent to 321.72. Benchmark in london fell to three-month lows around $113 a barrel, its steepest weekly fall since December, after the weak jobs report. Brent’s slide took three-day losses to more than 5 percent. While the downbeat data weighed, traders said a combination of less-definitive factors - from confusion over margin changes to the breach of the 200-day moving average compounded selling. Brent settled down $2.90 at $113.18 a barrel, lows last seen in early February. U.S. crude settled down $4.05 at $98.49 a barrel. Some analysts said the jobs report, which followed weaker-than-expected
CommeNT
Careful with tapi
I
T’S not that tapi is inappropriate, it’s just that it might not be the most appropriate of things right now. Pipelines are good, and we definitely need a lot more of those. And a lot many of them will pass through countries surrounding us to get to us. And some of the time some of them might not be our best friends. What is more, some of them might not even be their own best friends. like in Afghanistan, where some of them are sure to blow up parts of it, which is why tapi’s been prompting clearing of throats at board meetings for almost two decades. A pipeline like tapi is likely to be to Pakistan what radio-therapy is for people who can’t afford it, in places where it’s not available for free. It’s going to be very expensive. And even the most lenient risk assessments will almost certainly guarantee 100 per cent chances of attack/sabotage. Is it really what should draw our funds – harder to get hold of with time – especially when movement on the other, good pipeline (IranPakistan) is still slow for some reason and it’s longevity seems increasingly in doubt? Still, we do need gas, so we will need these pipelines. Perhaps that’s the call in Islamabad, the donors’ nod indicating the plan sits well with them as well. expect serious announcements in Afghanistan soon, about how the American withdrawal will be followed by reconstruction on an unprecedented scale, how acts of terrorism like blowing up pipelines will become things of the past. Come to think of it, should Afghanistan’s use as pipeline host be accompanied by a visible improvement in people’s lives, why would anybody have a problem with it? Perhaps a serious turnaround in Afghanistan is really around the corner. Perhaps Islamabad has come to buy this narrative, at the very least.
services sector data this week, will fuel hopes for a third round of stimulus, or quantitative easing, by the Federal Reserve to keep rates low and to foster growth. “The data in the U.S. is weakening somewhat. It puts into play that if the economy in the U.S. continues to weaken then Qe3 will be on the table, so there are really no sellers of Treasuries,” said Charles Comiskey, head of Treasuries trading at Bank of Nova Scotia in New York. The benchmark 10-year U.S. Treasury note rose 16/32 in price to yield 1.88 percent, and the 30-year U.S. Treasury bond gained almost a full point in price to yield 3.07 percent. Gold rose as the weak data boosted bullion’s investment appeal on talk that a weaker economy might prompt further monetary easing by the Fed. U.S. gold futures for June delivery settled up $10.40 an ounce at $1,645.20. The dollar slipped against the yen in volatile trading after the payrolls number, with the U.S. currency down 0.45 percent at 79.83 yen. The U.S. dollar index .DXY rose 0.33 percent at 79.481. The euro was down 0.47 percent at $1.3088.