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Chinese President Xi Jinping's just concluded three-day visit to India has been generating, for obvious reasons, a lot of interest, even anxiety, in this country. Prime Minister Narendra Modi rolled out the red carpet for the visitor, starting with a warm welcome in his home state of Gujarat. The two sides signed as many as 12 agreements committing $20 billion Chinese investment in India over the next five years, and enhanced access to Indian products in farm, pharma, gems and jewellery sectors. China is to help India introduce high-speed trains and redo railway stations. The two sides also agreed to start talks on civilian nuclear cooperation. President Xi said his country welcomes and supports India's full membership in the Shanghai Cooperation Organisation (SCO). None of this should bother this country. In fact, before setting out on his tour of three South Asian countries, during a meeting with Prime Minister's foreign affairs adviser, Sartaj Aziz, President Xi sought to dispel any misgivings Islamabad might have had about policy change, saying "this relationship [between Pakistan and China] is insulated from developments around the world. We should, therefore, not be concerned in this regard." That holds good for now.

Following an attack on a security post in North Waziristan, in which four soldiers lost their lives, Pakistan Foreign Office summoned the deputy chief of the Afghan embassy on Wednesday to hand him a demarche. Foreign Office later issued a statement saying "serious concerns were conveyed to the Afghan side on the developing threats from the recently-established sanctuaries across the border in Khost and Paktika provinces." The protest note comes in the wake of reports that TTP and affiliated militants escaping from the ongoing military operation in North Waziristan had established sanctuaries in two Afghan provinces to launch cross-border attacks like the one on the security post. After 11 of them killed in the clash with soldiers some 100 terrorists fled back across the border. There is no sane reason for Kabul to harbour these terrorists.
It is indeed a matter of concern that outstanding stock of public debt continues to rise, without any hope of reversal in its trend in the near future. According to the latest data released by the State Bank, Pakistan's gross domestic and foreign debt has jumped from Rs 14.160 trillion at the end of July, 2013 to Rs 15.807 trillion by the close of July, 2014, reflecting a rise of Rs 1.647 trillion or 11.63 percent over a period of 12 months. Both the domestic and foreign debt showed increases of varying degrees. While the domestic debt surged by 14.7 percent to Rs 10.946 trillion from Rs 9.538 trillion last year; foreign debt, mostly provided by Western donors and international financial institutions including the IMF, went up by 5.19 percent to Rs 4.861 trillion as against Rs 4.622 trillion at the end of July, 2013. The ratio of public debt to GDP, however, remained flat at around 64.3 percent but this percentage still breached the Fiscal Responsibility and Debt Limitation (FRDL) Act of 2005 that requires the government to take measures to reduce public debt and maintain it within prudent limits of 60 percent of the GDP. The government nonetheless, made a deliberate effort to shift short-term debt to long-term debt as it borrowed as much as Rs 2.023 trillion through PIBs in the last 12 months that took its overall borrowings through PIBs to Rs 3.163 trillion by end-July 2014 reducing a short-term floating debt by 13.4 percent to Rs 4.553 trillion in the same period. The shift of domestic debt from 12 months and less in the form of treasury bills to three, five and 10 years tenors may raise the government's cost of PIBs Rs 40 billion due to the increase in PIB cut-off rate which was badly managed. The growing gap between the rates on T-bills and PIBs has increased from a historical one percent to two and half percent. As a consequence, there is now a complete disconnect between inflationary expectations and the SBP's discount rate; rendering monetary policy less relevant. Banks are no more lending to SMEs and are also shying away from consumer products. If the current situation persists, banks may well shy away from corporate as well. In case this happens, the productive sector of the economy would suffer with disastrous consequences.
The political transfer of Hong Kong to China in 1997 is widely considered the end of the British Empire. A 'yes' vote in favour of Scottish independence would have caused a profound blow to the United Kingdom that had administered or ruled a large number of dominions, colonies, protectorates, mandates and other territories; and by 1922 the British Empire held sway over one-fifth of world's population. British prime minister David Cameron, who was being rated by his detractors as one of the worst prime ministers in the British history, now has every reason to be delighted about the results of Scottish referendum. However, there is a growing agreement that the referendum is an affirmation of the need to ensure that all the units within the UK, other than England, need greater representation at Westminster than currently available. Out of a total of 650 seats in the House of Commons, England contributes 533, Scotland 59, Wales 40 and Northern Ireland 18.
According to data released by the Pakistan Bureau of Statistics (PBS), exports fell to 3.84 billion dollars in July-August 2014 against 4 billion dollars last year - a decline of 5.8 percent. This statistic should be a source of serious concern to the government as well as those that are being held responsible for a decline in productivity and exports namely the Pakistan Tehreek-e-Insaf and the Pakistan Awami Tehreek whose one month sit-ins in Islamabad have compromised our exporters' meetings with foreign clients for new contracts as well as transport of goods to upcountry areas leading to piling up of inventories.
The minister for Water and Power, Khwaja Asif and Secretary, Water and Power, Nargis Sethi, were severely criticised during a recent meeting of the Economic Co-ordination Committee of the Cabinet for over billing electricity consumers. This followed a meeting of the cabinet chaired by the Prime Minister who had reportedly taken serious notice of claims of over billing across the country during the last two months. The Prime Minister set up a committee to be headed by his Advisor on Energy Musaddaq Malik to submit a report on the matter while urging the Ministry to redress genuine grievances of the consumers.
Claudio Borio, Head of Monetary and Economic Unit of the Bank for International Settlements (BIS) stated that loose monetary policies had given an "illusion of permanent liquidity" spurring investors to take risky bets and fuel asset prices. Borio was referring to historically low interest rates in Western developed countries since the 1997 financial crisis as a critical monetary policy tool to deal with recession. BIS has long opposed moves to cut rates and warned that this merely whets the investor appetite for short-term high risk investments, for example the property market thereby potentially creating bubble conditions for a new market crash.


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Foreign Debt $61.805bn
Per Cap Income $1,386
GDP Growth 4.14%
Average CPI 8.6%
Trade Balance $-1.434 bln
Exports $1.930 bln
Imports $3.364 bln
WeeklySeptember 18, 2014
Reserves $13.525 bln