Pak's government to withdraw subsidies to clamp down on circular debt on IMF's requirements

Morning! Isn’t it cute that you received Itla’s first-ever edition on Valentine’s day? Seems like fate. Let our love story begin. In this week’s edition:

📉 Adani group suffers loss in market equity value

💰 IMF convinces (read: forces) Pak’s government to discontinue the power tariff subsidies

🤖 Tech giants compete to win over AI

🏆 JazzCash’s dominance as a mobile money wallet in Pak

- The Itla Squad 💼

Business

Global 🌎️

Moody’s being moody when it comes to Adani

These times suck for billionaires too apparently. Moody’s (an agency providing international financial research on bonds issued by commercial and government entities) downgraded the rating outlook of four Adani Group companies from ‘stable’ to ‘negative’ on Friday. These ratings signal a significant decline in the market equity value of the Group.

Rewind: It all started when a New York-based Hindenburg (not Heisenberg) Research report accused the Adani group of stock manipulation and using offshore tax havens. Though the group has denied these accusations, the report has resulted in a loss of $110 billion from Adani‘s listed stocks and halved Adani’s net worth.

The big picture: Are we supposed to feel sorry for the billionaires now? No, but it deserves a closer look. The timing of the release of the report didn’t do any favors to India as India has set its sights on seeking center stage globally - recently overtaking the UK as the world’s fifth-largest economy. Setbacks like these worry investors about the risk of contagion (a situation where a shock in a particular economy or region spreads out and affects other sectors). Case in point: China’s real estate industry with Evergrande.

TLDR: Adani group suffered a loss in market inquiry values after a report claiming its involvement in stock manipulation and using offshore tax havens was released. The timing of the release was ill-timed for ambitious-India as investors fear the risk of contagion into other companies in the country.

What else is new in news

✶ Horrible market conditions seem to be uniting east and west right now. JPMorgan Asset Management chief strategist David Kelly claims that the US economy will be “on the edge of recession — if it doesn't fall into a recession — over the next two years."

Local 🇵🇰

IMF demanding a subtraction in subsidies

Despite the protests of sectors against the slashing of subsidies by the government on the requirement of IMF, ECC (the Economic Coordination Committee) meeting headed by Finance Minister Ishaq Dar approved the withdrawal of power tariff subsidies to zero-rated industries effective from March 1.

What’s up with IMF’s beef with subsidies? We can’t blame them. The government has extended a subsidy of Rs 281 billion to K-Electric (KE) without budget allocation. The total cost of electricity in the country is Rs 3 trillion per year, but the government only receives Rs 1.8 trillion in recovery, implying a gap of Rs 1.2 trillion. The government allocates Rs 550 billion in the budget for subsidy, but this is not enough to cover the whopping Rs. 1.2 trillion deficit and the remaining amount owed further increases the circular debt - a form of public debt that accumulates in the power sector due to subsidies and unpaid bills.

TLDR: Succumbing to IMF’s pressure, the Pakistani government decided to discontinue the power tariff subsidies to zero-rated industries despite protests from various sectors.

News Flash

✶A report by the World Bank report suggests ‘smart interventions’ rather than ‘blanket subsidies’ will pave the way for sustainable economic growth in Pakistan

Tech

Global 🌎️

Tech giants & AI: ♫ Baby, let the games begin ♫

It seems like AI is the new cool kid in school that everyone wants to be friends with. After the huge success of ChatGPT (a free writing tool, launched by a company called OpenAI) late last year, the tech landscape was forced to embrace AI quicker than it may have expected.

The big players: However, ChatGPT’s success seems to threaten the very existence of Google - a company built on giving people quick answers to their questions. Worse news for the search engine giant sprung out when its version of ChatGPT, Bard, tanked after it made a factual error in a promotional video. Now, all eyes are set on Microsoft as it announced plans to redesign its Bing search engine and Edge web browser with a series of new AI tools.

Who will win? We can’t say yet. Regardless of Bard’s blunder, Microsoft has an uphill battle to fight as its search engine holds just 9% of the worldwide online search market to Google’s 80%.

TLDR: As a response to the popular OpenAI’s ChatGPT, the leading tech giants Google and Microsoft scramble to gather their weapons in the AI battle. Google’s factual error in its advertisement for Bard (its own version of ChatGPT) might not do Microsoft much favor because of Google’s decades-long popularity as a search engine.

What else is new in news

✶ Seems like Apple Watch is having mixed feelings when it comes to adding a camera to it. Apple was granted a patent for an Apple Watch strap release mechanism that could potentially contain a camera - making it the third camera-related Apple Watch patent in recent years.

Local 🇵🇰

Looks like Easypaisa wasn’t so easy after all

The Financial Inclusion Survey 2023 by Karandaaz reveals that JazzCash is the most popular (56%) mobile money wallet in Pakistan, followed by Easypaisa (32%).

Some more numbers: It also highlights that overall mobile money wallet registrations increased substantially from 9% in 2020 to 19% in 2022. Mobile money wallet registrations in the urban population increased from 11% to 26% in the last two years while the rural population showed an increase from 11% to 16%.

Why does it matter? The digitalization of money not only brings order to the economy, but it also empowers the microfinance sector to promote financial inclusion among people. The ease of opening a mobile wallet account, in particular, benefits the less literate, and the lack of a requirement to visit bank branches help women.

TLDR: Survey shows JazzCash as the most popular mobile money wallet followed by Easypaisa with the overall mobile money wallet registrations increasing from 9% in 2020 to 19% in 2022.

Tech tour of news

✶ Bazaar (Pakistan’s leading B2B commerce, fintech platform) launches its new business vertical, Bazaar Industrial – a simplified raw material sourcing platform for manufacturers across Pakistan.

More interesting Itla (اطلاع) we consumed:

💘 Why Valentine's Day is actually the perfect time for a first date.

📐 How fun it is seeing the different design approaches to the same space by leading interior designers in Architectural Digest’s YouTube series named “Space Savers”.

👩‍🔬 Can we predict earthquakes? (spoiler alert: we can’t)

☕ Lahori’s love for anything branded Tim Horton’s coffee.