From Pakistani Economy to CBRT Decision…

In yesterday’s report, I told you that I would tackle today my expectations from the CBRT decision. First, let me share with you my impressions from my visit to Pakistan and then my expectations about the CBRT decision.

I started a presentation titled “World Economy and the Developing Countries” yesterday in Islamabad. This 2-day presentation will be followed by two more, “risk management” and “digitalization”.

Every night I sit in front of the television to watch the media in Iran, Pakistan, India, Afghanistan and China. Apparently, the United States is imposing policy on these countries. It’s clear as day. While Americans are trying to prevent Pakistan and Afghanistan from siding with China by doing everything in its power to smooth things over between these two, US Government is also using a diplomacy aimed at facilitating Saudi activity in the region to replace Iranian power. It also appears like they have recently made an intervention to ease tension between India and Pakistan.

By the way, Pakistan PM Imran Khan appears on television every day to urge citizens to declare their assets by June 30. “Our agencies have information about who has benami accounts and benami properties,” Imran Khan said.

I should say that he is following a policy that is quite different than our Cash Repatriation rules. No amnesty, no reconciliation… Every citizen is asked to declare their income and assets to enable Pakistani government to tax everything. The budget meeting held at Pakistan Parliament yesterday is considered an “rescue plan”. The premier expresses that Pakistan will never achieve development until everyone pays taxes.

In the meantime, Pakistan’s most powerful opposition leader was arrested for bogus bank accounts. Government gave a powerful message that when the opposition leader was directly sent to prison after bail rejection. Nevertheless, I think recording all citizens’ assets will only be achieved through “encouragement”, not “intimidation”.

Pakistan reminds of Turkey’s recent past when we were dealing with multiple zeros. In yesterday’s report, I told you about the 4-digit service prices in Turkey. Pakistan economy is filled with four-digit, even five-digit prices. But, the Pakistani rupee is at 155 PKR to 1 US dollar, which means prices are quite low compared to Turkey.

Pakistani army has great dominance over the country. The most leading universities in Islamabad are owned by Air, Naval and Ground Forces. Retired army officers are appointed to key security points. Chinese-Pakistani relations are becoming stronger every day. Pakistan’s urban infrastructure, on the other hand, is partially built by Turks. The light rail system in Islamabad is Turkish-made. Pakistan launched the first stage of the rail system while the second stage is currently under construction.

“CBRT decision…”

Now, let’s get back to the situation in Turkey. I get these two questions all the time:

  1. Is an Agreement with IMF inevitable for Turkey?
  2. Will Turkish Central Bank cut interest rates?

As a matter of fact, both questions seem meaningless to me. First, there are no favourable circumstances to negotiate with the IMF. Also, it seems quite unlikely that CBRT will issue a drastic rate decision especially before elections.

According to some, recent fall in exchange rates is caused by the CBRT’s likelihood to raise interest rates. I’m going to say one more time that this is not an option as CBRT will not dare to make such a critical decision before Istanbul elections.

In short, CBRT will quite probably keep the rates intact today.