But the situation has been the case for several years, most notably since 2008.

Pakistan’s rupee has lost value against the US dollar in 11 of the 13 years since 2008, with the recently-concluded 12-month period being its third-worst. The year 2018 remains the one to forget (20.1% down) followed by 2019 in second-place (10.3% lower).

In 2021, it lost 9.4% of its value even after the back-to-back gains posted in the ‘last-minute’ (December 30 and December 31). Still, 2021 would count as the fourth-worst since 2001. Just to put it in context – the rupee started 2001 at a value of 57.95 against the US dollar.

The graph below shows the year-on-year depreciation the rupee suffered in the inter-bank market.

Major reasons for the fall in 2021

This was a period of new lows as the currency bore the brunt of Pakistan’s economic battle with the twin deficits — current account and trade balances.

After kicking off the year at 159.8 against US dollar on January 1, it closed at 176.51. However, this does not convey the complete picture.

The graph underneath shows how the rupee appreciated till May before the fall began. Its high point at 152.28 was followed by nearly 14% depreciation till December 31.

The world began 2021 under the cloud of the pandemic with gradual reopening of global economies and talk of a V-shaped recovery. On the macroeconomic front, Pakistan’s current account remained in the surplus in the early part of the year.

However, as Pakistan’s economy began to stabilise, macroeconomic indicators – read import bill – began to worsen. The massive trade deficit – for long Pakistan economy’s Kryptonite – widened, putting pressure on the rupee.

With the State Bank of Pakistan (SBP) reiterating that the exchange rate now reflects market dynamics – demand and supply of currency – one would get few points for saying that the rupee lost value due to demand for the dollar.

However, when the currency depreciates, exports become cheaper. In Pakistan’s cases, exports did not rise as fast as imports did.

Meanwhile, amid the worsening external account situation, rising inflationary readings and pressure on foreign exchange reserves, the rupee had very little room except to bow down.

The current account deficit continued to widen throughout the current fiscal year with the hike in commodity prices, especially oil, adding to the woes.

“The PKR fall in the second half of the year could be correlated to rise in oil prices in the international markets,” Saad Hashmey, Executive Director at BMA Capital, told Business Recorder.

In terms of numbers, Pakistan’s current account posted a deficit of $7.1 billion for July-November 2021 as against a surplus of $1.9 billion recorded in the previous year. In the month of November alone, Pakistan's CAD widened to $1.91 billion from $1.76 billion in October 2021.

“Pakistan’s import bill started to surge from August onwards,” Malik Bostan, President of the Pakistan Forex Association, told Business Recorder.

He added Pakistan’s economic problems compounded after the situation in Afghanistan worsened, leading to an outflow of dollars and creating pressure on the local currency.

Weaker rupee, high inflation, increase in interest rate

A weaker rupee also resulted in some imported inflation with the Consumer Price Index jumping to 12.3% in December 2021 — a 22-month high.

The SBP, seeing these higher readings for a few months, started increasing the key interest rate, taking it to 9.75% by the end of the year. In the last three Monetary Policy Committee meetings, the interest rate has increased 275 basis points.

The SBP also took other measures to discourage speculative buying and selling of foreign exchange. Earlier, this month it fixed a maximum limit of $100,000 (or equivalent in other foreign currencies) per person per calendar year for buying of foreign currency from Exchange Companies.

Back in October, it imposed restrictions on persons travelling to Afghanistan, who would be allowed to carry only $1,000 per person per visit with a maximum annual limit of $6,000. The measure was taken after reports emerged that US dollars to the tune of millions were being smuggled to Afghanistan on a daily basis, amid political upheaval in the neighbouring country.

It also took steps to curb the rising import bill as it announced a 100% Cash Margin Requirement (CMR) on the import of 525 items.

In another restriction in September, the SBP also mandated commercial banks to share a five-day schedule of upcoming import payments, revising it upwards from the earlier two-day directive. It also directed banks to seek permission for imports that are valued at $500,000 per transaction, cutting in half the original payment ceiling of $1 million, which banks could make without needing central bank authorisation.

Inflows announced, but did not arrest the decline

On the other hand, Pakistan also received a $3-billion deposit from Saudi Arabia to support the country's foreign currency reserves in December, and got an additional inflow of around $2.8 billion from the International Monetary Fund (IMF) as part of its new Special Drawing Rights (SDR) allocation announced in August.

Little helped the rupee decline.

What made it worse was uncertainty over the revival of the IMF programme. While a staff-level agreement for the sixth review was announced, the IMF board will only meet on January 12 this year to decide the fate of the Extended Fund Facility. The approval would see a billion-dollar inflow.

However, more than the inflow, it’s the IMF’s nod that is likely to ‘cool’ the currency market.

Meanwhile, Bostan said he believed the PKR would have fallen to 200 if the measures by the government and the SBP to curb speculation in the market were not taken.

Similar views were shared by Hashmey. “The impact of measures will be reflected in upcoming months,” said Hashmey, expressing hope that the import bill would reduce in February-March.

“Going forward, decline in imports would help the PKR.”

Hashmey added that revival of the IMF programme is important for Pakistan.

“The IMF approval will not only give $1 billion, but will also pave way for other international lenders including the Asian Development Bank and World Bank to provide funding. This will counter the current account deficit pressure.”

Revival of the IMF programme is contingent on Pakistan meeting a prior action plan that includes fiscal measures as part of a broader structural reforms package covering areas from the power sector debt to corporate governance, climate change and trade policy.

The benchmark KSE-100 index closed at 44,596 points, up 841 points. The KSE-100 index was up only 2.0 percent in Pak Rupee term and down 8.0 percent in US$ term in 2021 which was much lower than last 30-year CAGR of 12 percent.

The KSE-100 Index is now 16 percent down from its 53,000 peak seen on May 24, 2017. Market cap is down 14 percent in a year in US$ terms. Market cap is now $43 billion compared to all time high of $100 billion seen on May 24, 2017.

The KSE-100 index underperformed in regional market posting negative 8.0 percent return in US$ terms compared to its regional players like Sri Lanka, India, China etc. The index also underperformed MSCI frontier Market (MSCI FM), which gained 16 percent. On other hand, MSCI Emerging (MSCI EM) fund was down 5.0 percent.

Similarly, all other asset classes (Crypto, Real Estate and Roshan Digital), performed much better than the equity markets. Cryptocurrency, which is not officially recognised by Pakistan, remained the best performing asset class in Pakistan in 2021, posting return of 79 percent in PKR terms. This was followed by property and Roshan Digital Dollar Certificate which posted returns of 23 percent and 18 percent, respectively, in PKR terms.

Arif Habib Limited expects KSE-100 to make history next year

“The country’s weak external account situation and rising interest rates led to reduced interest in Pakistan equities,” Saad Ziker at Topline Securities said.

To note, the KSE-100 index peaked in the first half of the year 2021 at 48,726 index level on June 14, 2021 and since then it is down 10 percent due to major economic concerns. The SBP has increased the policy rate from 7.0 percent in May 2021 to 9.75 percent in December 2021 to address concern of rising inflation coupled with external account challenges.

The year 2021 saw record volumes during the year as average traded volume (ready/cash) at PSX was up 44 percent on year-on-year basis to 474 million shares per day. Similarly, average traded value at PSX was up 38 percent to Rs17bn/day which was highest since 2007. In futures market, total traded value and volume were also up by 87 percent and 34 percent to Rs9 billion and 136 million, respectively.

Huge activity was witnessed in mid and small cap companies led by retail investors which drove the overall trading activity at the bourse at PSX in 2021.

During 2021, foreign corporate selling continued to impact PSX sentiment as net foreign selling has clocked in at $359 million till December 30, 2021 as compared to $572 million in the year 2020.

Saad Ziker said that during the past seven years, total net foreign selling has been recorded at $2.6 billion, which is around 15 percent of average free float market capitalisation. Foreign selling in 2021 was mainly led by Banking, Oil and Gas Exploration and Fertiliser sectors, amounting to $167 million, $60 million and $55 million, respectively.

As per recent SBP data, total foreign ownership in Pakistani stocks has now reached at a decade low of $2.1 billion (17 percent of free float) from a peak of $8.3 billion on January 06, 2017 (30 percent of free float) due to non-stop selling by foreign funds.

During the year, Pakistan was also reclassified from Emerging Market to Fronter Market by MSCI in 2021 as Pakistani companies did not consistently meet the MSCI size and liquidity criteria.

The country saw gross and net outflows of $107 million and $58 million, respectively on rebalancing date that was November 30, 2021.

“With Pakistan’s entry into MSCI FM and its reduced weight in FM (weight of 1.5 percent), we do not expect any major inflow/outflow in 2022,” Saad Zakir said.

Back to the 'smaller pond': MSCI to downgrade Pakistan to Frontier Market

Foreign selling was absorbed by locals which was led by buying by local Individuals and Companies. Net buying by Individuals and Companies clocked in at $236 million and $108 million, respectively. Within locals, Brokers and Insurance sectors were net sellers with $33 million and $20 million, respectively.

Technology and Textile Spinning were the top performing sectors in the year 2021 posting returns of 40 percent on year-on-year basis and 37 percent on YoY, respectively. On the other hand, Tobacco and Transport sectors remained the worst performing sectors posting decline of 31 percent on YoY and 27 percent on YoY, respectively.

Technology sector in line with global trend continued to remain investor’s favorite sector post pandemic. Pakistan’s rising IT exports, government focus to facilitate IT sector, and PKR devaluation have led to higher sales and profitability for the tech sector. Textile spinning sector also posted strong gains in 2021 amid rising exports, record cotton prices and huge inventory gains during the year.

In contrast, Tobacco sector remained impacted due to increasing competition from illicit and unbranded cigarettes available at discounted rates (due to duty and tax avoidance).

Refinery sector was also amongst worst performing sectors primarily due to delay in refinery policy and news reports of withdrawal of certain incentives that were previously announced.

With respect to stock performance, Telecard (TELE) was the top performing stock of the year as value increased by over 5x. Investors were excited about the company prospects on upcoming likely IPO (likely) of its wholly owned subsidiary “Supernet” coupled with long term business contracts to Supernet supported sentiments in TELE.

Likewise, TPL Properties (TPLP) also registered strong gains in 2021 by posting 3x returns on YoY. The company has generated an ROI of 130 percent on the sale proceeds of its property project Centre point. Also, TPLP has also planed to launch its REIT in ongoing FY22, which generated investor’s interest throughout the year.

Hascol Petroleum (HASCOL) and Azgard Nine (ANL) remained worst performing stocks.

After a gap of six years, Pakistan Equity Market witnessed record offerings in 2021 where the bourse witnessed 8 IPOs (including 2 GEM board offerings), highest after 2015.

Total amount raised from investors from the 8 offerings clocked in at Rs20 billion in 2021. Interestingly, all the 8 offerings were oversubscribed and received great response from investors inspite of weak performance by the index during the year. Out of the said IPOs, Octopus Digital (OCTOPUS) remained the most popular IPO with bids of over Rs30 billion as compared to total issue of only Rs1.1 billion posting return of 93 percent since listing date. This was followed by City Pharma (CPHL) which posted return of 24 percent since its listing date.

PSX saw major development as companies started offering shares through GEM board. The aim of GEM board was to encourage Small and Medium Enterprise (SMEs), greenfield projects and tech companies to list on the exchange and raise capital.

The two listings on GEM board were Pak Agro Packaging (GEMPAPL) and Universal Network Systems Limited (GEMUNSL). The two companies raised over Rs644 million from the two GEM board offerings.

“If macro economic situation in Pakistan stabilises post resumption of IMF programme, we will continue to see new offerings in 2022,” he said. Though, there are few IPOs in pipeline as companies plans to expand their capacities but the outlook on IPOs will be dependent upon the overall economic and market conditions in 2022. “We eye KSE-100 index target of 53,000 by December 2022,” Saad Zakir said. This is based on target market PE of 6-7x seen in times of high interest rates.

Copyright Business Recorder, 2022

The Covid-19 pandemic continued to challenge Pakistan’s health system with hospital staff burdened with pressure.

The country’s domestic security and political stability also faced increasing challenges with Tehreek-e-Taliban Pakistan (TTP) and Tehreek-e-Labbaik Pakistan (TLP) contesting the state’s writ.

Pakistan also played a pivotal role in Afghanistan after the withdrawal of the US troops, particularly with its efforts to facilitate the evacuation of thousands of people from Kabul, including ambassadorial staff and employees of organisations such as the UN, World Bank, and others.

For the most part, the government remained under pressure from its political rivals, as the economy faced challenges and inflation increased. Towards the end of the year, the Pakistan Tehreek-e-Insaf's (PTI) loss in Khyber Pakhtunkhwa (KPK) local bodies elections appears to have set the tone for the general elections.

As the world embarks upon 2022, amid hope of a better year, here is a recap of the issues that defined and dominated headlines in Pakistan. The list is chronological, and not in terms of importance.

In February, Pakistan and India signed an agreement to strict observance of ceasefire along the Line of Control (LoC) and other sectors.

Reports suggested that the ceasefire was the beginning of a larger roadmap to forge a lasting peace between the embattled neighbours, both of which have nuclear weapons and have regularly turbulent relations. Earlier, Pakistan's Army Chief General Qamar Javed Bajwa asked India “to bury the past and move forward” while stating that the military was ready to enter talks to resolve “all our outstanding issues."

Prime Minister Imran Khan, on his part, called for a resolution on the Kashmir issue, which he described as “the one issue that holds us back".

Read More: LoC ceasefire restoration: PM says onus of creating enabling environment for further progress rests with India

In July, a bus carrying Pakistan and Chinese workers to the site of the Dasu project met with an accident after their vehicle plunged into a ravine. At least 13 people, including nine Chinese nationals and four Pakistanis, lost their lives in the incident, according to initial reports.

The government seemed uncertain about what actually caused the incident. According to one account, it said that the workers died after a bus plunged into a ravine owing to a mechanical failure. Later, it was confirmed that the incident was the result of a militant attack. China, on its part, issued a statement saying that the incident was a "bombing". Pakistan’s foreign minister Shah Mahmood Qureshi blamed Indian and Afghan intelligence agencies for the attack, saying their nexus cannot bear Pakistan and China’s “growing cooperation.”

The incident was significant as it amplified existing concerns of militants targeting the China-Pakistan Economic Corridor in an attempt to derail the project. Moreover, it also raised concerns about security issues becoming a hindrance in China-Pakistan bilateral relationship. However, both countries reaffirmed their commitment to deal with actors trying to derail their economic cooperation and the bilateral relationship.

Read Here: Investigation into Dasu incident has reached final stages, says Pakistan's interior minister

Noor Mukadam, daughter of a former ambassador of Pakistan to South Korea and Kazakhstan Shaukat Mukadam, was brutally murdered at a residence in Sector F-7/4 on July 20. A first information report (FIR) was registered against Zahir Jaffer under Section 302 (premeditated murder) of the Pakistan Penal Code on the complaint of the victim's father.

In the FIR, Shaukat said police took him to Zahir's house where he discovered that his "daughter has been brutally murdered with a sharp-edged weapon and beheaded".

As the investigation progressed, Zahir confessed to killing Noor while his DNA test and fingerprints also showed his involvement in the murder.

Later, the police also arrested Zahir's parents and household staff. Zahir and his father Zakir and others were indicted by a district and sessions court in Islamabad.

The case is still ongoing.

Read Here: Gruesome murder of Noor Mukadam echoes in NA

On August 31, the US completed its military withdrawal from Afghanistan after a huge but chaotic airlift that left behind thousands of Afghans and hundreds of Americans still seeking an escape from Taliban rule. The sudden withdrawal left thousands of people in limbo, as the Taliban marched to Kabul.

Pakistan played an important role in facilitating the withdrawal of thousands of people from Afghanistan, a move appreciated globally, including by the United States. Reportedly, Pakistan evacuated more than 8,000 foreign and Pakistani nationals stranded in Afghanistan through air and land routes since the Taliban took control of the country.

Read More: US military completes withdrawal from Afghanistan

The controversy over the appointment of the Director-General (DG) Inter-Services Intelligence (ISI) gripped the county’s politics for weeks, with many terming it an event that had a deep impact on the government’s ties with the military leadership.

In October, the Inter-Services Public Relations (ISPR) announced that Lt Gen Nadeem Ahmed Anjum was appointed as the new chief of the Inter-Services Intelligence, replacing Lt Gen Faiz Hameed.

Days after the ISPR’s announcement, the Minister for Information and Broadcasting Fawad Chaudhry held a press conference, announcing that a legal course will be followed for the appointment of the new DG ISI and Prime Minister Imran Khan had the authority to do that. Addressing speculation regarding differences between PM Imran and COAS Bajwa over the appointment of the new DG ISI, Fawad said: “Prime Minister will never take a step that could impact the prestige of Pakistan’s Army and its Chief.” Fawad also appreciated the media for not sensationalizing the issue of the DG ISI's appointment.

Later in the month, the Prime Minister's Office (PMO) announced that the Ministry of Defence received a "list of officers during the process," and Prime Minister "interviewed all the nominees." It said that after a final round of consultation with the Chief of Army Staff, Lt Gen Nadeem Anjum was notified the new DG ISI with effect from November 20, 2021. "The prime minister has seen and approved the appointment of ... Lt Gen Nadeem Ahmed Anjum ... as director-general Inter-Services Intelligence, with effect from November 20, 2021, from the panel of officers at para 6 of the summary," a notification issued by the PMO said.

At the time, sources informed Business Recorder that the delay in the notification was only because of certain legal formalities, as the Prime Minister wanted to adhere to the process and fulfill all the legal requirements by receiving a summary carrying a few names of candidates before handpicking the new ISI chief.

Read Here: New DG ISI’s appointment: PM’s office receives summary

As of November 2021, TTP carried out at least 27 terrorist attacks across Pakistan since the Taliban takeover of Afghanistan on August 15, 2021, killing at least 58 civilians and security personnel. A month-long ceasefire between the government and the TTP ended earlier in December, allowing the militant outfit to resume its operations.

TTP’s resurgence in 2021 has posed a serious threat to Pakistan’s security as the group’s cross border attacks grow, frustrating Pakistan’s counterterrorism gains. The group is likely to increase its attacks in 2022 if its sanctuaries in neighbouring Afghanistan are not dismantled.

Read Here:****27 terror attacks take place in Pakistan since Taliban takeover in Afghanistan

In November, the joint session of the Parliament passed on Wednesday the Elections (Amendment) Bill, 2021, and the Elections (Second Amendment) Bill, 2021 regarding the use of Electronic Voting Machines (EVMs) despite hue and cry from the opposition.

The bill also authorizes the Election Commission of Pakistan (ECP) to procure EVMs for casting of votes in general elections as well as granting voting rights to overseas Pakistanis.

According to another amendment in clause 3 of the bill, “notwithstanding anything contained in this Act or rules made thereunder, the commission shall, with the technical assistance of any authority or agency, procure and use in the prescribed manner, subject to secrecy and security, stand-alone Electronic Voting machine (EVMs) in general elections in Pakistan.”

Now it remains to be seen whether the Election Commission of Pakistan will be able to complete all the essential steps for the procurement and deployment of EVMs within the time remaining before the next elections.

Read Here: Joint session of Parliament passes bill on use of EVMs

Earlier this year, the Supreme Court ordered the demolition of the Nasla Tower, saying that part of the building was constructed on the service road and had encroached upon the footpath. Following the order, authorities started the demolition, while Karachi police registered an FIR against building owner Abdul Qadir, as well as officials of various civic agencies and departments. However, steps have not yet been taken to provide compensation to the residents of Nasla Tower.

The SC decision was the first of its kind on illegal high rises and is being seen as a warning to those looking to find shortcuts in the construction industry. However, the development was followed by protests around the building with many saying that the entire system needs an overhaul.

Read Here: Nasla Tower: Police baton-charge protesters as demolition speeds up

On December 3, a mob of people described as “employees” of a garment factory in Sialkot had tortured and killed their Sri Lankan manager in factory premises and set his body on fire over blasphemy accusations. The incident brought Pakistan’s civil-military leadership and civil society together in condemning the attack. Pakistan’s religious parties also denounced the attack and called for strict measures to prevent any such incidents in the future.

Read Here: All those arrested to be prosecuted with full severity of law: PM tells Sri Lankan president

In a major diplomatic achievement, the extraordinary session of the OIC Council of Foreign Ministers on the 'Humanitarian Situation in Afghanistan' was held in Pakistan on December 19, 2021. The meeting was held in Pakistan after 41 years. More than 90 delegations arrived and took part in the session.

Although the meeting concluded with no immediate financial assistance and pledges, it established a “Humanitarian Trust Fund” which would serve as a vehicle to channel humanitarian assistance to Afghanistan including in partnership with other international actors.

The event was hailed as a success internationally with the US thanking Pakistan for organising the episode.

Read More: US 'warmly welcomes' contributions, role of OIC

Local bodies’ polls were held in 17 districts of Khyber Pakhtunkhwa (KPK) on December 19, the first elections since the merger of tribal districts with KPK. Pakistan Tehreek-e-Insaf (PTI) lost ground as Jamiat Ulema-i-Islam (JUI-F) was in lead on many fronts.

Opposition parties had a combined lead over the ruling PTI, prompting Prime Minister Imran Khan to announce a new organisational structure.

Read Here: Major upset for PTI in Peshawar as JUI-F wins mayor seat

On December 27, the National Security Committee (NSC) meeting chaired by Prime Minister Imran Khan approved Pakistan’s first National Security Policy (NSP) 2022-2026. Later, the Federal Cabinet also gave the green signal to the policy.

The policy aims to bolster the security apparatus to deal with all internal and external challenges. National Security Adviser Dr Moeed Yusuf has said that human security population, health security, and food security have been given importance in the NSP.

Read Here: NSP envisaging economic security to the core approved

Here is a quick rundown of major sporting events in 2021:

January

Even though international cricket began to return in 2015 with Zimbabwe’s limited-overs series, Pakistan failed to attract top Test nations until early this year when South Africa visited Pakistan in January.

Here, they played a two-match Test series and were white-washed by Pakistan. Meanwhile, the successful holding of the series set up the platform for staging top-level international cricket in the country and encouraged more countries to tour Pakistan. As a result, Pakistan looked set to host countries like, Australia, England, and New Zealand later.

February

February brought the sad news that Pakistan’s most iconic mountaineer, Mohammad Ali Sadpara, along with two international climbers had gone missing.

The trio was attempting to reach the 8,611-meter (28,251 foot) Korakarum-2 summit, commonly known as K-2, without supplemental oxygen to make history. They, however, lost contact with the base camp when they were only 411 meters away from the snow-capped top. After considerable search, they were presumed to be dead, while their bodies were found in July.

March

The bio-secure bubble became the new buzzword for the sports industry, as it began to resume activities after a gap of one year due to the Covid-19 pandemic. Though the Pakistan Cricket Board (PCB) kept assuring that the arrangements were airtight, the bubble, however, burst in the second week of the league. At least seven players and coaching staff members testing positive for the coronavirus, and the sixth edition of PSL was postponed until May-June.

The incident earned a bad name to the cricket managers of the country. The PCB launched an inquiry and terminated its medical officer Dr Sohail who was in charge of the medical team which was dealing with the Covid-19 SOPs during PSL 6.

April

Arshad Nadeem brought javelin into the limelight by winning a gold medal at the inaugural Imam Reza Athletics Cup. Nadeem registered his personal best throw and broke the national record for the longest throw. His throw was recorded at 86.38m, booking an automatic place in the Javelin Throw event at the Tokyo Olympics.

May

In May, 19-year old Shehroze Kashif set two world records as he became the youngest mountaineer in the world to summit the two highest peaks in the world; Mount Everest and K2.

He went on to break another record a few months later as he became the youngest Pakistani mountaineer to summit the 8th tallest peak in the world, Manaslu, which is at a height of 8,163 meters.

June

Learning from past mistakes, the cricket board went on to complete the remaining matches of the PSL 6 in Abu Dhabi without a hitch. The tournament saw another new winner as Mohammad Rizwan-led Multan Sultans defeated Karachi Kings in the final of the event by 12 runs.

Rizwan, who was warming the bench with Karachi during the first leg of the tournament, was drafted by Multan during the supplementary draft ahead of the second leg and was immediately made captain. The rest is history.

July

Pakistan sent a 10-member contingent to Tokyo to compete across different events of the Olympics 2020. However, only two performers, Arshad Nadeem and Talha Talib, stood out.

Talha impressed followers in the weightlifting event, and Nadeem won hearts by coming close to a medal in the javelin throw contest.

Talha became an instant sensation after he finished fifth in the 67-kg weightlifting category, narrowly missing the bronze.

After him, Nadeem revived Pakistan’s hopes but fell less than a metre short of the medal, which could have been Pakistan’s first Olympic medal since 1992.

August

Young prodigy Syed Imaad Ali created a record by winning the World English Scrabble Players Association (WESPA) Youth Cup for the second time. The 15-year old defeated his opponent in 9 out of 13 games in the finals of the tournament, held in Karachi, and helped Pakistan finish as the winners of the tournament.

September

The month started with good news as Haider Ali made the country proud by winning the first Paralympics gold for Pakistan after a personal-best distance in the discus throw event at the Tokyo 2020 Paralympic Games.

Ali's 55.26-meter throw, in his fifth attempt, was not only his personal best but also the highest distance in the event that earned him the top podium finish.

Soon after, Pakistan were to receive a major shock when New Zealand abandoned their first tour to the country in 18 years on the basis of unspecified security threats.

In an official statement, the PCB said that it was willing to continue matches as the country’s intelligence agencies had ensured that no security threat of any kind exists for the visiting team.

However, it could not convince New Zealand as they departed from Pakistan without playing a ball. Following their withdrawal, the England cricket board also decided against sending their team for two T20Is in October.

Both cricket boards, however, ensured PCB to tour Pakistan in 2022 and play additional matches to compensate for the cancelled games.

October

After being cornered by world cricket, the national cricket team responded strongly in the T20 World Cup. They first defeated archrivals India by 10 wickets in the opening match of the event on October 24, and then settled scores with New Zealand two days later. The Greenshirts also became the only team to finish the group stages of the world cup unbeaten. They, however, were outperformed by Australia in the decisive moments of the semi-final.

November

Pakistan’s all-format captain Babar was named the captain of the Team of the Tournament after he finished the T20 World Cup campaign as the highest run-scorer. Babar, who featured in his first-ever T20 WC, scored record 303 runs in 6 innings with the help of four half-centuries.

2021 was a year to remember for Pakistan’s wicketkeeper-batter Mohammad Rizwan who piled up record after record with his batting display in the shortest format.

In international cricket, Rizwan accumulated 1,326 runs in T20Is in 29 outings, which is the highest ever achieved by any batsman in a calendar year. He stands miles ahead of Chris Gayle’s six-year-old record of 1,165 runs made in 2015.

December

The month of December brought so many accolades for Pakistan cricket. It started with the PCB successfully hosting West Indies for a three-match T20 series in Karachi. This was the first-ever international series hosted by Pakistan after back-to-back setbacks from New Zealand and England in September.

Rizwan’s golden run in 2021 continued till the final game of the year. Overall, the 29-year-old amassed over 2,000 T20 runs this year, becoming the only cricketer in history to achieve the milestone. n the process, he created the records of most boundaries, most sixes, most half-centuries, and most T20I runs in a calendar year.

Pakistan skipper Babar Azam regained his form and played a brilliant 79-run innings in the final of the three-match T20I series against West Indies to help Pakistan chase down a 208-run target against the West Indies in Karachi to complete a 3-0 clean sweep. In the process, he reclaimed the No.1 spot in the ICC T20I batting rankings.

With 805 points each, Babar and England’s Dawid Malan will end the year as the joint No.1 batters in the shortest format.

Pakistan's economy remained flooded with news over new car models, rupee depreciation, the IMF programme, coronavirus vaccinations/restrictions, and startups. Hence, it is not surprising to see it reflected in our reading trends as well.

Here is what Brecorder.com's readers found most interesting over the past 12 months. You can click on the links to read the stories from back then.

1. Honda City's 6th generation officially launched in Pakistan with price starting from Rs2.599 million

Towards the end of July, Honda Atlas officially launched its 6th generation City model in Pakistan. The base variant – the 1.2-litre manual transmission model – was priced at Rs2.599 million. It is now Rs2,729,000.

Read the latest prices here:

Automart: car prices in Karachi

Why the development was significant?

Not only for its shareholders – since Honda Atlas is a listed company – the development was popular among readers since City saw a change in generation after 12 years. Market talk also suggested that around 12,000 pre-bookings were made.

2. Suzuki: Preparing for the race

Improvement in financial performance always ignites interest, especially among shareholders, who read how Pak Suzuki turned a corner in the first half of this year after turning losses for eight consecutive quarters.

Why the development was significant?

At the time, when the half-year results were announced towards the end of August, Pak Suzuki seemed set for greater heights as lower tax rates, accommodating interest rate, and a growing economy remained favourable factors. Its performance in the next quarter ended September did not disappoint either.

3. Pak Suzuki discontinues 2nd-gen Swift, halts Cultus bookings, say dealers

Yes, yet another Suzuki story. The car is popular with a wider audience in Pakistan, and news that it has discontinued the 2nd generation Swift, and halted Cultus bookings took the market by surprise. Business Recorder was the first to report it.

Why the development was significant?

Development over the two vehicles, which target a bigger market segment in Pakistan, was always going to spark greater interest. Chip shortage along with a halt in bookings affect not only intending to buy, but also those who have made the bookings. Being a listed company, this news was probably not going to sit too well with shareholders either.

4. Sixth review to be presented to IMF board on Jan 12: Pakistan's finance ministry

This was the big one. For several weeks, the government kept saying that the $6-billion Extended Fund Facility (EFF) was set to be revived. It was put on halt during the pandemic.

However, when a staff-level agreement was reached, it still took several weeks for the finance ministry to officially announce when the IMF board would sit and give its green signal.

Why the development was significant?

The announcement remains significant since it is likely to take some pressure off Pakistan's currency, which hit a record low multiple times this year, and would also see a billion-dollar inflow. January 12 remains a significant day.

5. FBR serves notice to beggar

The headline itself says it all, doesn't it. The country’s supreme tax collection body was shocked after seeing the details of assets owned by the beggar, who is said to be the “richest” beggar of Multan.

Why the development was significant?

Pakistan suffers from low tax collection, primarily because it hasn't been able to expand the net. When news of the FBR serving notice to a beggar made the rounds, its sheer uniqueness made people want to know more.

6. Pakistan can benefit from Dubai’s ‘structured’ approach to boosting startups

The article focused on how businesses love setting up shop in Dubai. Its relaxed tax regulation, economic free zones, and 'vibrant urban lifestyle' attract the best talent.

Some of Pakistan's startups already have a base of operation there, and consideration for others remains under way.

Why the development was significant?

The year was for Pakistan's startups. They raised a record amount, and left readers gushing with announcements being made every other month. In terms of numbers, they raised close to $345 million during the year, with a major portion coming in seed and series-A funding rounds.

Read details on funding here: Startup space 2021

7. Pakistan's rupee ends at historic low against US dollar

Probably one of the most used headlines this year. It stands accurate even today (December 29, 2021) and also on December 28. This one was on September 27, when the rupee was seeing – comparatively – happier times when it was trading below 170 in the inter-bank market.

Why the development was significant?

Many would want you to believe the rupee value should move in tandem with demand-supply dynamics. Ideally, it should.

But post-May this year, it only moved in one direction — depreciation. The rupee value is significant because it affects literally everything in the economy — how expensive imports would become, how cheap exports would get, and what kind of intrinsic value would the savings in your account have. The rupee's volatile ride this year made it all the more important to follow.

8. FBR issues tax rates on immovable properties

In August, the FBR issued updated rates of withholding tax on sale and purchase of immovable properties under Section 236C and 236K of Income Tax Ordinance, 2001.

Since the real estate market remains a huge component of the economy, any update on rates affects both buyers and sellers.

Why the development was significant?

Over the last few years, the property market has seen various revisions in tax rates. The distinction between filer and non-filer of income tax returns has become more obvious, and penalties have become heavier for the latter.

The move to revise rates is keeping in line with the FBR mandate to keep updating the rates as it looks to meet tax collection targets.

9. Karachi likely to receive heavy rain with strong winds from Monday, predicts PMD

A spell of strong monsoon currents, coupled with winds and thunderstorm, is likely to penetrate Sindh, especially Karachi from September 27 (Monday), the Pakistan Meteorological Department stated at the end of September.

The news spread with citizens rushing to prepare ahead of the monsoon spell.

Why the development was significant?

In 2020, just to refresh memory, rains wreaked havoc with urban flooding causing damage to lives, property, and routine. Grocery stores lined up, and people rushed to protect their homes ahead of the monsoon season. This year, preparations were made, but the spell wasn't as damaging as 2020.

10. Egyptian electrical giant acquires Pakistani transformers manufacturer

In May, Elsewedy Electric, an Egyptian multinational electrical company, said that it has entered the Asian market with the acquisition of a Pakistani electric power transformers company.

In a statement to the Egyptian Stock Exchange (EGX), Elsewedy informed that it has acquired 100 percent of Validus Engineering PVT LTD, a company that manufactures electric power transformers in Pakistan.

Why the development was significant?

Any foreign investor, company entering Pakistan excites not only the market, but also the government.

This news was especially significant because the investment was coming in one of Pakistan's most problematic sectors — power and energy.

These were the top-10 Business Recorder readers found interesting. There are some honourable mentions as well, though.

1. Telcos: merger talk

2. Reduction in oil, ghee prices: Govt, PVMA finalise MoU

3. Hyundai Nishat recalls over 1,600 Tucsons in Pakistan

4. Hafeez for reviewing pay, pension mechanism

Pakistan’s 2021 in economic terms was better than its 2020 but that is like saying a stroke is better than a heart-attack. 2020 ravaged economies across the world. Even China, the economic success story of the 21st century, had a few quarters of relatively slow growth.

But a V-shaped growth was expected in 2021 and for many countries it did take place. The stress on global supply chains and ever increasing oil prices are indicative that businesses picked up the slack and demand continues to be high. Pakistan’s economic growth was negative 0.5% in 2020, and seeing the writing on the wall the IMF projected a miserly growth rate of 1.5% for 2021 even though the State Bank of Pakistan (SBP) had put forth its rate of growth at 3%.

The IMF was wrong. Global demand for goods and a weak rupee pushed exports high. Indeed, 2021 has been a good year for Pakistani goods. Pakistan’s exports at the height of Covid-19 were $1.26 billion for the month of May 2020. The exports’ value in June 2021 was more than double of that at $2.5 bn. Exports had been doing well all year till that point and the indicators were looking better than expected. The exchange rate which was PKR 160.5 on January 1, 2021 was whittled down on PKR 152.1 on May 14.

Shortly after, the International Monetary Fund (IMF) revised its earlier gloomy prediction and revised projected GDP growth to 3.9%.

Pakistan’s booming exports and a better-than-expected agricultural output meant that the pessimistic outlook at the beginning of the year no longer held true.

In its World Economic Outlook report 2021 the IMF stated, “Projections are revised up for the Middle East and Central Asia due to robust activity in some countries (such as …Pakistan)”. The 3.9% growth was less than the 6% growth projected in 2021 for the global economy as a whole but it was a massive improvement from 1.5% stated earlier. On July 27, the SBP put out its forecast of the GDP growth to rise from 3.9% in FY21 to 4-5% this year, and average inflation to moderate to 7-9% from its recent higher out-turns. It seemed Pakistan had turned a corner. But there was trouble looming on the horizon.

As exports increased, so did Pakistan’s imports. This is the continuing tragedy of the Pakistan industry which has not been able to manage import substitution in 70 years.

As demand for steel, oil, and other industrial raw materials went up, so did the import bill and with it came pressure on the local currency. Around this time commodity prices starting going up including that of imported food items. Oil prices have been increasing due to rising demand and in spite of firm signaling by the US, the OPEC has not increased its production of oil, significantly forcing the country to dip into its own reserves.

Unfortunately, Pakistan has no similar facilities and had to import expensive oil and related energy products putting its currency under immense strain.

Since May 13 2021, the rupee has continuously shed its value as the demand for dollars out paces it, thus making imports even more expensive. December has been particularly brutal with new lows every few days and currently standing at PKR 178.5 to the US dollar.

Talk of new records being set in exports is doing the rounds with the finance ministry and the PTI government’s economic team proudly bringing them up in their public and media interactions. “We are glad to inform that Pakistan’s exports during November 2021 increased by 33 percent to a historic monthly high of $2.903 billion as compared to $2.174 billion during the corresponding period last year. Our target for the month was $2.6 billion,” Abdul Razak Dawood adviser to the Prime Minister on Commerce said in a tweet on December 1, 2021. He also stated that the cumulative exports in the first five months from July to November 2021 were $12.365 billion, a big increase from the $9.747 billion recorded in same period of the last fiscal year which showed a growth of 27%.

The trouble was that the import bill was even higher. In November, the trade deficit grew by 162.4%, largely due to imports being three times compared to exports from the country. The trend started in June and the deficit has been growing since then with actual deficit in November being $5.107bn compared to $1.946bn in the same month last year. The import bill itself reached an all-time high of $8.01bn from $4.12bn over the corresponding month of 2020, an increase of 94.41%.

The country was trapped in a vicious circle. Although remittances have also been growing at high pace between industrial and nonindustrial imports and national debt servicing, the demand for dollars has far outstripped supply leading to a worsening deficit. Macroeconomic figures are gloomy with inflation at nearly 11%, although many say that real inflation is much higher. The Consumer Price Index (CPI) shows a constant increase from 5% in January 2021 and eventually getting to an eye-watering 20-month peak of 11.5% in November 2021.

The Wholesale Price Index (WPI), which monitors prices in the wholesale markets across Pakistan, saw a massive increase of 27% in November 2021 while the Sensitive Price Index (SPI), which monitors prices of 51 essential commodities also shows an average increase of 19.43% on an annual basis. Food, fuel, transport, medicine, consumer goods, and other basic necessities are fast becoming out of reach of the common man and although the government has stated that it is being vigilant on price increase, the reality on the ground says otherwise. The SBP raised interest rates a few weeks ago in the hope that it will curb inflation - one hopes that it alleviates the situation.

Pakistan’s economy has slipped into a state of stagflation and unless something is done on the policy side, 2022 will turn out to be as difficult as 2021. The one ray of hope is the growth of technology and startup companies which attracted over $300 million in FDI and is expected to increase this amount significantly in 2022. But more needs to be done on the policy side if Pakistan is to climb out of its economic quagmire.

The article does not necessarily reflect the opinion of Business Recorder or its owners

Digital assets started the year with a stampede of cash from investors large and small. And bitcoin and its kin were rarely out of the spotlight since, with the language of crypto becoming firmly entrenched in the investor lexicon.

Here is a look at some of the major trends that dominated cryptocurrencies this year.

1/Bitcoin: Still no.1

The original cryptocurrency held its crown as the biggest and most well-known token - though not without a host of challengers biting at its heels.

Bitcoin soared over 120% from Jan 1. to a then-record of almost $65,000 in mid-April. Fuelling it was a tsunami of cash from institutional investors, growing acceptance by major corporations such as Tesla Inc and Mastercard Inc and an increasing embrace by Wall Street banks.

Spurring investor interest was Bitcoin's purported inflation-proof qualities - it has a capped supply - as record-breaking stimulus packages fuelled rising prices. The promise of quick gains amid record-low interest rates, and easier access through fast-developing infrastructure, also helped attract buyers.

Pakistan records $20bn cryptocurrency value in 2020-21: report

Emblematic of bitcoin's mainstream embrace was major US exchange Coinbase's $86 billion listing in April, the biggest yet of a cryptocurrency company.

"It's graduated into the sphere where it is traded by the sort of people that are taking bets on treasuries and equities," said Richard Galvin of crypto fund Digital Capital Asset Management.

Yet the token stayed volatile. It slumped 35% in May before soaring to a new all-time high of $69,000 in November, as inflation spiralled across Europe and the United States.

Prominent sceptics remain, with JPMorgan boss Jamie Dimon calling it "worthless".

2/The rise of the memecoins

Even as bitcoin remained the go-to for investors dipping their toes into crypto, a panoply of new - some would say joke - tokens entered the sector.

"Memecoins" - a loose collection of coins ranging from dogecoin and shiba inu to squid game that have their roots in web culture - often have little practical use.

Dogecoin, launched in 2013 as a bitcoin spinoff, soared over 12,000% to an all-time high in May before slumping almost 80% by mid-December. Shiba inu, which references the same breed of Japanese canine as dogecoin, briefly muscled its way into the 10 largest digital currencies.

The memecoin phenomenon was linked to the "Wall Street Bets" movement, where retail traders coordinated online to pile into stocks such as GameStop Corp, squeezing hedge funds' short positions.

Many of the traders - often stuck at home with spare cash during coronavirus lockdowns - turned to crypto, even as regulators voiced warnings about volatility.

"It's all about the mobilisation of finance," said Joseph Edwards, head of research at crypto broker Enigma Securities.

"While assets like DOGE and SHIB may in themselves be purely speculative, the money coming into them is coming from an instinct of 'why shouldn't I earn on my money, savings?'"

3/Regulation:

The (large) elephant in the room.

As money poured into crypto, regulators fretted over what they saw as its potential to enable money laundering and threaten global financial stability.

Long sceptical of crypto - a rebel technology invented to undermine traditional finance - watchdogs called for more powers over the sector, with some warning consumers over volatility.

With new rules looming, crypto markets were skittish to the possible risk of a clampdown.

When Beijing placed curbs on crypto in May, bitcoin tanked almost 50%, dragging the wider market down with it.

"Regulatory risk is everything because those are the rules of the road that people live by and die by in financial services," said Stephen Kelso, global head of markets at ITI Capital. "The regulators are making good progress, they're catching up."

4/NFTs

As memecoin trading went viral, another formerly obscure corner of the crypto complex also grabbed the limelight.

Non-fungible tokens (NFTs) - strings of code stored on the blockchain digital ledger that represent unique ownership of artworks, videos or even tweets - exploded in 2021.

In March, a digital artwork by US artist Beeple sold for nearly $70 million at Christie's, among the three most expensive pieces by a living artist sold at auction.

The sale heralded a stampede for NFTs.

What Pakistan can learn as Dubai races to become cryptocurrency ‘hub’

Sales in the third-quarter hit $10.7 billion, up over eight-fold from the previous three months. As volumes peaked in August, prices for some NFTs rose so quickly speculators could "flip" them for profit in days, or even hours.

Soaring crypto prices that spawned a new cohort of crypto-wealthy investors - as well as predictions for a future of online virtual worlds where NFTs take centre stage - helped fuel the boom.

Cryptocurrencies and NFTs' popularity may also be linked to a decline in social mobility, said John Egan, CEO of BNP Paribas-owned research company L'Atelier, with younger people drawn to their potential for swift gains as soaring prices put traditional assets like houses out of reach.

While some of the world's top brands, from Coca-Cola to Burberry, have sold NFTs, still-patchy regulation meant larger investors largely steered clear.

"I don't see a situation where licensed financial institutions are actively and aggressively trading (these) digital assets in the next three years," Egan said.

Demand for vehicles had become really robust earlier this year due to slashed car prices (as a direct result of government cutting back on FED and sales tax) together with cheaper cost of borrowing due to lowered interest rates. But since July, the month-on-month sales do not instill quite the same confidence. In the month of Nov, sales for passenger cars have dropped 24 percent compared to July, 16 percent for SUVs, and 23 percent for LCVs. After cutting down prices, nearly all the OEMs (old and new alike) raised price last month after a round of rupee depreciation. The higher cost of imported inputs (CKD kits and other parts) clearly began to pinch automakers. Any “affordability” that consumers could enjoy in July, was retracted only 4 months later.

At the same time, policy rates have now gone up. A simple analysis of increased car price since July and higher interest rates charged on auto financing shows that a Suzuki Alto 660 buyer would be paying Rs5,000 per month more against an auto loan today. The same is about Rs8,400 for Cultus, Rs7,000 for Picanto A/T and Rs9,500 for Corolla. Naturally, expensive cars will bear the higher burden but even vehicles in the affordable category—which is a segment the government is heavily trying to boost—will become expensive to buy. Since demand for this segment is more sensitive to price and income changes, the dual effect of price increase and interest rate hike would affect demand. Preliminary, one can argue looking at data that there is a clear relationship between Kibor movements and overall car sales (as depicted in the graph) and while the affect of higher interest rates may be delayed, it eventually materializes in reduced demand. Already, after SBP slapped new restrictions on auto financing, data shows net borrowings thinning out.

While some measures under policy such as FED and sales tax cuts were already implemented during the budget period, other measures such as cuts in additional customs duties, WHT, additional sales tax etc. could potentially coax car makers to bring down prices. The grapevine however suggests that the FBR may be raising FED on cars and taking back some of the earlier implemented measures to shore up its revenues. If that happens, car prices will go up, not down. But even if that were not the case and the new auto policy measures go through, evidence from the last similar exercise suggests, such price declines only last a few months, as they are an outcome of tax cuts, rather than market forces. Automakers dependence on expensive imported content (and stagnant localization) makes car prices very responsive to rupee-dollar parity. When rupee depreciates, cost of imports rises which pushes OEMs to raise prices.

Inevitably so, the larger goal under the policy of substantially enhancing localization within the industry can only come when significant volumes are coming in. But, such dramatic changes in the way the market forces function will not happen overnight. Right now, no matter what hopefuls are saying, incremental car volumes will continue to weaken.

I2I’s Deal Flow Roundups for the three quarters of 2021 show that the top funded sectors in terms of total amount raised in 2021 included e-commerce, followed by fintech, and health. It further shows that the seed stage deal count has been on the rise with 2021 recording the highest number of seed stage investments in the country followed by series A and series B.

A key finding from the data available at Techshaw and i2i is that where the total amount raised by startups was staggeringly high in 2021, the number of deals has not increased by the same extent, which means either larger funding rounds or the money is largely going into some specific startups. Also, the funding is coming from multiple investors including VCs, but a general trend has emerged where angel investors and HNWI have also been increasing.

The startup space has definitely come too far in 2021 from a small base earlier on, and the trend will continue. The country has an advantage of its population, increasing tele-density and mobile phone and internet penetration as well as fewer regulatory barriers. But a key challenge for investors and financiers for startups going forward will be macro-economic situation of the country especially with respect to rising interest rates, falling real income, and depreciating currency.

In a startup ecosystem where some startups grow and scale, many fail. With so much funding coming in, the startup ecosystem needs an exit strategy, which is missing currently. Will these startups be able to go and list on the stock market 8-10 years down the line? If they can’t, or have no other viable exit strategy, does that mean there will no unicorns in Pakistan? Nonetheless, as the funding frenzy slackens, many experts believe that a foreign funding crunch could be in the offing - something that India saw 6-7 years ago. This means local investors must be ready to take charge if that happens.

First, the agreement with the International Monetary Fund (IMF) under the 6 billion dollar July 2019 Extended Fund Facility Programme identifies time-bound administrative measures targeted to attain full cost recovery focused on passing on sector inefficiencies to consumers by raising prices of utilities (instead of implementing structural reforms with the objective of dealing with the sector inefficiencies, particularly gas and electricity), and petroleum levy with direct impact on the cost of transportation of people and goods, including perishables. This approach was reiterated in February 2021 in the second to fifth IMF review that led to the sudden exit of Dr Hafeez Sheikh — one of the two signatories to the programme, the other being Dr Reza Baqir, Governor State Bank of Pakistan — and the appointment of Shaukat Tarin in April 2021 as the finance minister.

There is now ample evidence that Tarin’s initial optimism that he could renegotiate the terms agreed with the IMF was misplaced, and the government’s support for the money bill envisaging the withdrawal of exemptions of over 330 billion rupees is proof as is the public admission that the government will raise the petroleum levy by 4 rupees per litre each month to push it to the maximum allowed of 30 rupees per litre.

Second, the continued erosion of the rupee vis-a-vis the dollar — from 152 rupees to the dollar in May 2021 to over 178 rupees to the dollar in the last week of the year, resulted in imported inflation contributing significantly to the general price level. Pakistan however benefited marginally through a raise in the price of its exports (by around 2 billion dollars) on account of rise in international prices of most commodities and items but lost heavily through its sustained reliance on imports.

The trade deficit for the first five months of 2021 is 20 billion dollars that compares extremely unfavourably with the 30 billion dollar at the time the Khan administration took oath in 2018. The discount rate at 9.75 percent today indicative of a reversal of the easing of the policy due to the pandemic which had made the cost of borrowing cheaper and fuelled growth was justified by the Monetary Policy Statement (MPS) as appropriate given the headline inflation increasing to 11.5 percent year on year, and core inflation in urban centres at 7.6 percent and rural 8.32 percent. In January 2021, the discount rate was 7 percent with the MPS projecting inaccurately that “inflation is still expected to fall within the previously announced range of 7-9 percent for FY21 and trend toward the 5-7 percent target range over the medium-term.”

And finally, a comparison of the rate of inflation with regional countries shows that Pakistan’s rate is double that of India and a good 2 to 3 percentage points higher than Sri Lanka and Bangladesh. A comparison with the West complaining of supply side issues being responsible for inflation also shows rates below ours – US 6.2 percent, EU 4.9 percent – but with their income levels much higher than in Pakistan their ability to absorb the price rise is greater.

The solution to what ails Pakistan’s economy, as per the Khan administration, is threefold: raising revenue, borrowing and lending at cheap/free rates to small and medium enterprises, poor farmers with no collateral required. Disturbingly, the focus continues to be raising indirect taxes whose incidence is greater on the poor than the rich (the controversial money bill envisages the withdrawal of sales tax exemptions by raising it on hundreds of items to the standard 17 percent — a tax that maybe appropriate in the West given their incomes and social security safety nets (payments) for the unemployed).

There is of course talk of widening the tax net but such talk has been ongoing since 2008 and one would have to wait and see if the government will succeed in implementing measures that are being opposed by several pressure groups. Secondly, external borrowing has risen from 95 billion dollars in August 2018 to over 127 billion dollars today — a rise that is not supported by the government’s narrative that it is borrowing to pay off past loans. And domestic debt has risen at a horrendous rate — from 16.5 trillion rupees in August 2018 to over 27 trillion rupees today.

And finally, the government’s focus on lending at cheap rates/nil interest rates with no collateral maybe an attempt to cut into the windfall profits of banks which have so far been lending to the government at rates even higher than the discount rate with no risk involved but the government should be aware of the fact that this is not a new scheme and in the past such schemes were hijacked by the rich and influential. Again time will tell if this scheme will be successful.

Pro-poor Ehsaas programme is widely regarded as well run; however, the limited fiscal space together with the high rate of inflation continues to erode the purchasing power of the package sooner than the government can announce its addition.

The government holds the lack of tax culture as the reason for the limited fiscal space; however, it needs to look at its own annual budgeted expenditure rise: It has raised current expenditure by about a trillion rupees this year, a rise that is simply untenable. The recipients of budgeted allocations, including subsidies given to influential pressure groups, must make a voluntary sacrifice to slash their allocations by half to strengthen the government’s hands in its negotiations with the Fund on the next review.

Copyright Business Recorder, 2021

Hottest month

July 2021 was the hottest month globally ever recorded, the US National Oceanic and Atmospheric Administration (NOAA) says.

And wildfires in Siberia, North America and around the Mediterranean caused record levels of CO2 emissions in July and August, the EU's Earth monitoring service says.

Record gas prices

As economies reopen from their Covid-induced slumber firing heightened gas demand, prices in Asian, European and British gas hit record peaks. Europe's reference Dutch TTF gas price hit 187.78 euros per megawatt hour.

Biggest airlift

The United States carried out its biggest ever airlift in the wake of the Taliban takeover of Afghanistan in August, bigger even than the evacuation of Saigon at the end of the Vietnam War.

It airlifted more than 123,000 people out of Kabul, including US citizens, Afghan interpreters and others who supported the US mission.

Around 55,000 people were evacuated from southern Vietnam in 1975.

Suez Canal blocked

The giant container ship Ever Given blocked the Suez Canal in March, bringing a halt to shipping for six days in one of the world's busiest waterways.

The ship, almost as long as New York's Empire State Building, caused a record traffic jam of 422 ships loaded with 26 million tonnes of merchandise, worsening supply difficulties already disrupted by the Covid-19 pandemic.

Bitcoin soars

Cryptocurrency bitcoin soared to record levels in late 2021, being valued at $68,513 on November 9. The digital currency increasingly won support from small and large investors, some of whom see it as a way of protecting themselves against inflation, which hit a 30-year high in the US in October.

Art goes wild

Art sales records in 2021 included works by Frida Kahlo, veteran French artist Pierre Soulages and Banksy reaching sky-high levels.

Revenues from sales of contemporary art have never been as high, totalling $2.7 billion, boosted in particular by the explosion in sales of unique digital works and NFTs (non-fungible tokens).

Space tourists

Captain Kirk of "Star Trek", alias veteran actor William Shatner, became the oldest person to go into space at 90.

He was among two dozen non-professionals who blasted off into space in 2021 on rockets owned by billionaires Jeff Bezos (Blue Origin), Elon Musk (SpaceX) and Richard Branson (Virgin Galactic).

Ronaldo versus Messi

Two of football's living legends, Portugal's Cristiano Ronaldo and Argentina's Lionel Messi, rewrote the record books.

Ronaldo became the top scorer of all time for a national team with 115 goals and also the most capped European, having been selected 184 times.

Messi outstripped Brazil's Pele as the best Latin American striker with 79 goals for Argentina.

Everest and the Channel

Nepal's Kami Rita Sherpa beat his own record for climbing Everest, claiming a 25th successful ascent to the roof of the world in May.

Australia's Chloe McCardel, 36, became the person to have swum the Channel the most -- a remarkable 44 times.

The Taliban's astonishing return to power caught everyone on the wrong foot -- not least the hardline themselves -- and Afghans are stumbling to make sense of what happened, and what the future holds.

For the Taliban, the biggest challenge remains being able to transform from an insurgent force into an administrative body that can govern a complex and diverse nation.

For Western nations such as the United States and its NATO partners, the fear is twofold: that conditions will deteriorate and prompt tens of thousands more Afghans to flee abroad, and that terror groups such as Al-Qaeda will again find safe haven.

And for ordinary Afghans, food, shelter and employment are a priority -- with women in particular bearing the brunt of the Taliban's oppressive social policies.

"The consequences of the takeover were calamitous and immediate," Kate Clark wrote in a special report for the Afghanistan Analysts Network (AAN).

The Taliban, she argued, "had no plans for how they would run the Afghan state without aid, an entirely predictable outcome of their decision to push for a military victory".

"In opposition, they taxed the population under their control effectively, but were able to leave public services entirely up to the government, NGOs and ultimately donors," Clark added.

"Now, in power (they) find government revenues greatly reduced and they have an entire population to look after."

Women and girls on front line

One of the biggest problems facing the Taliban is the effective collapse of the bureaucracy.

Over 120,000 Afghans were evacuated in the chaotic last days of the US withdrawal -- mostly people who had worked with foreign powers in managing the aid-dependent administration and economy.

Many civil servants had not been paid for months before the Taliban takeover, and have little incentive to go back to work without knowing when they will get a salary.

"I go to the office in the morning but there is nothing to do," said Hazrullah, a mid-level technocrat at the foreign ministry.

"Before, I was working on trade deals with our neighbours. Now we have no instructions on how to proceed. Nobody knows anything."

Some of the Taliban's leadership have been at pains to present the new regime as different to the hardline rule that characterised their first stint in power from 1996 to 2001, and -- superficially at least -- there have been some changes.

There has been no edict on women having to again wear the face-covering burqa, for example, or to be accompanied by a men in their families when leaving the house, though authorities say close male relatives must accompany women on long-distance road trips.

But apart from essential services such as healthcare, women are effectively barred from government work and high-school girls from education in several provinces.

The Taliban have tried to justify their decisions according to their definition of Islamic principles.

"It is for their own security," they say -- turning a blind eye to the fact that the biggest threat to women and girls' safety has for years come from the militants themselves.

With the Taliban in power, security has undoubtedly improved, but brazen attacks by IS militants are on the rise -- particularly targeting the country's Shiite minority and also the Taliban fighters.

But it is the teetering economy that will dictate Afghanistan's future at a time when a major humanitarian crisis is unfolding across the country described by the UN as an "avalanche of hunger".

Donors' dilemma

For humanitarians, it is a race against time as nearly 23 million people, or 55 percent of the population, face "crisis or emergency" levels of food insecurity this winter, the United Nations Office for the Coordination of Humanitarian Affairs (OCHA) said.

Both the Taliban and foreign powers will need to strike a delicate balance in the months ahead.

Donors are concerned about helping a pariah regime, while the Taliban believe their victory should not be compromised by, for instance, allowing women to work.

On Wednesday, the UN Security Council adopted a US-proposed resolution to help humanitarian aid reach desperate Afghans while seeking to keep funds out of Taliban hands.

The militants welcomed the move as a "good step", though they deny the country faces a humanitarian crisis.

At a local level, some aid organisations have already been able to bypass Taliban officialdom and distribute essential supplies directly to those in need.

Elsewhere, Taliban commanders insist they have the sole right to hand out aid -- to cement their authority and reward loyalists.

But at the national level, the Taliban can't be seen to be dictated to by foreign powers and organisations and the leadership insists it must have control of funding and aid -- something still unpalatable to many donors.

"If all the assistance goes to the poorest and most needy without discrimination -- a very tall order -- it would still make it easier for the Taliban to focus their resources on strengthening their control of the state," Clark wrote for AAN.

The road ahead is unclear.

"The economic benefits flowing from the peace will still only be marginal nationally compared to the harm done by the absolute loss in foreign income and the isolation Afghanistan now faces," said Clark.

In earlier auctions (Sep to Nov), government accepted bids only in 3M papers and that has resulted in lumping of maturities and higher targets in December. That has given banks an opportunity to dictate their terms and they didn’t shy away to take full advantage while they could.

The latest auction target was for Rs1,200 billion worth bills, and government accepted Rs1,265 billion (including Rs119 Bn non-competitive bids) – Rs746 billion in 3M at cut-off of 10.59 percent (20 bps down from the previous auction); Rs396 billion in 6M at 10.45 percent (5bps lower than previous auction); and, Rs122 billion at 11.51 percent in 12M (no change from the last cut-off).

The behavior of the market suggests that another rate hike is anticipated by the market by March 2021. Cut-offs remain higher than secondary market yields. PKRV has inched up a little in papers (not bonds) after the auction, yet it is still below the cut-offs. The reason for higher cut-off is nothing but higher demand from the government. This is evident from the fall in weighted average yields – down by 27 bps in 3M to 10.39 percent, by 6 bps to 11.32 percent in 6M, while the weighted average yield has inched up by 4 bps to 11.48 percent in 12M.

This behavior clearly depicts that the easing is primarily in the 3M papers and some in 6M. SBP attempted to cover banks’ repricing risk by injecting higher OMOs for longer duration, and with a commitment of no policy rate change in January. Beyond that the market is still smelling blood. However, not everyone is thinking the same. The bid pattern in 3M suggests that some banks perhaps were ready to take chunks around 10 percent in 3M and they did bid as a good gesture. But others pounced on the opportunity to make money for their shareholders.

The government cornered itself by lumping higher maturities in December and concentrating only in 3M. The target in Dec was Rs2.6 trillion and it has mostly been achieved in the last two auctions. Since the coordination between the SBP and MoF was missing during Sep-Nov, market got the opportunity to make money, and it did.

Nonetheless, the worst part is over. In Jan, the target will be Rs1,350 billion and Rs900 billion in Feb. The ‘obedient’ boys (banks’ who acted in line with SBP’s signaling) may continue to show good behavior while the hawks may not feel so amused. The cut-off yields could come down a bit in the next two auctions.

However, interesting times shall follow soon after. The bigger question remains over what may happen in March. Inflation figures are likely to remain high. However, trend of inflation and currency shall depend upon the trajectory of the current account in the next quarter and for that the key commodity to track is oil. If oil prices remain upward sticky, banks are likely to dominate thereafter.