This year when I said down to write review of the outgoing year, nothing came to my mind except genocide of Palestinians by Israel in Gaza. Over the last eleven weeks nearly 20,000 people have been killed, mostly women and children. The biggest tragedy is, Israel is adamant at eradicating Palestinians and rest of the world is talking about humanitarian aid but not ceasefire.
Two of the superpowers also enjoying Veto power, the United States and Russia abstained from a United Nations resolution passed by the Security Council that would increase humanitarian aid to the Gaza Strip without directly calling on Israel for a ceasefire.
At the domestic front conditions seems to be stabilising with the announcement of general election date. Pakistan-IMF relations are also getting more cordial with the caretaker government towing the IMF guidelines. There are growing expectations that sooner than later Pakistan will sign and other agreement with the IMF of a grater magnitude.
This year Pakistan has produced nearly 8 million cotton bales after a long time. However, it is alarming to note that the policy makers have allowed export of raw cotton. During 5MFY24, textile exports declined to US$6.9 billion from US$7.4 billion 5MFY23, posting a 6%YoY decline. This was mainly due to economic slowdown and a reduced demand of textile products worldwide. The government has set a textile export target of US$25 billion. However the sector experts believe that textile exports for FY24 may not surpass US$17 billion.
Economy status
After lagging behind for last few years, Pakistan equities outperformed major asset classes in 2023. The benchmark KSE-100 Index provided a gain of 53% (January 01, 2023 till December 22, 2023) with 4 trading sessions left in 2023. This gain is inclusive of dividends received during this period.
Another favourite investment for Pakistanis has been dollar in last few years. In 2023 it provided a return of 25% gaining from Rs226 to Rs283 in the interbank market and 21% from Rs236 to Rs285 in open market. If this amount is invested in a one year term deposit at beginning of year the gain would have increased to 29% at interbank dollar and 25% at open market (assuming a return of 4% on US dollar deposits).
Similarly holder of Naya Pakistan US$ Certificate under Roshan Digital Account (RDA) also made 33% in PKR terms due to falling PKR value.
Gold that provided an above average returns in last few years to local investors posted decent gain. In 2023 it gained from Rs157,836 per 10 grams to Rs186,900 per 10 grams providing a profit of 18%. In international market it also increased from US$1,826 an ounce on December 30, 2022 to US$2,065 an ounce on December 22, 2023.
Another widely discussed investment avenue has been Government T-Bills. Amid tightening monetary policy, government has to raise interest rate rates to record high. As a result investors in T-Bill made 23% gains in 2023. Analysts assume investment in 3 month T-Bills (which was actively traded) being reinvested every 3 months.
Many investors moved to fixed income low risk avenues in 2023 due to high rates. Within fixed income market, average bank saving rate remained 17% in 2023 while National Savings 3 year Special Saving Certificate (SSC) provided a gain of 13%. Local AMCs’ money market funds generated an average return of 20% in 2023.
Though many investors remained out of the property market, but as per Zeeman.com, real estate (houses, residential and commercial plots) in Karachi went up 6% to 29% in 2023.
This year the government has set wheat production target at 33 million tonnes. The initial data suggest that more than targeted area has been cultivated this year and the output may exceed 35 million tonnes. However, the country faces two major challenges, inadequate warehousing facilities and high probability of smuggling to neighbouring countries, due to highly porous borders.
It is encouraging to note that State Bank of Pakistan has set an agri lending target of PKR2.25 trillion. However, it may not be out of context to say that wheat is not included in electronic warehouse regime and there are virtually no grain storage silos in the country.