State bank report unveils Pakistan's rocky economic ride: first half of FY23 brings challenges and glimmers of hope

Morning! Guess who's making waves in the region? Pakistan's rising stars are making their mark on Forbes' 30 Under 30 Asia list! Five incredibly talented individuals from Pakistan are being recognized for their exceptional accomplishments in fields like The Arts, Media, Finance, and Social Impact.

In this week’s edition:

💵 INR 2000 notes

📝 All about Pak’s economy in H1-FY23

🐕‍🦺 Global AI watchdog?

💛 Pak-China BFF goals (again)

- The Itla Squad 💼

Business

Global 🌎️

India’s currency shake-up…again

India has decided to shake things up in the currency world: the 2000-rupee note, which had its grand entrance back in 2016, is now being gently escorted out of circulation. While the note will still be accepted, citizens are being asked to deposit or exchange it before September 30, 2023.

Why the break-up with INR 2000 notes? According to RBI (The Reserve Bank of India), the 2000 rupee note is not frequently used for transactions, and there are enough banknotes in other denominations to fulfill the currency needs of the country. But there is more to the story.

*Macroeconomics has entered the chat* When people deposit or exchange the 2000 rupee notes, it will increase the amount of money in banks. Right now, the rate at which people are saving money in banks is slower than the rate at which banks are giving out loans. So, this will help balance things out. It's good news because banks won't have to raise deposit interest rates to attract more savings. Also, when all the 2000 rupee notes come back to the banks, there will be less cash circulating, which will improve the overall liquidity in the banking system. 

TLDR: India is phasing out the 2000-rupee note and citizens are asked to deposit or exchange it by September 30, 2023, as the note is not commonly used, and sufficient banknotes in other denominations meet currency demands. The change will boost bank deposits, reduce the need for higher interest rates, and improve banking system liquidity.

What else is new in news

✶The Federal Reserve reported that the high inflation wave last year, which continues to persist, has negatively impacted US households. Many have reduced savings, feel less secure about retirement, and have delayed purchases or opted for cheaper alternatives while shopping.

Local 🇵🇰

Pakistan’s economy in H1-FY23

Pakistan's economy faced tough times in the first half of FY23, despite some positive signs, according to the State Bank of Pakistan's Half Year Report.

Some highlights from the report:

1. SBP raised the policy rate by 225 bps (basis points) in H1-FY23, adding to the 675 bps increase from the previous year.

1. Food prices surged due to flood-related supply shortages, leading to overall inflation. PKR depreciation, higher power tariffs, and increased energy prices also contributed to inflationary pressures, causing core inflation to rise.

2. The fiscal deficit remained unchanged due to higher interest payments even with the reduction in expenditure. Tax revenue increased, but low imports and economic activity limited overall collection. The government relied on domestic sources for borrowing as external funding was insufficient.

3. Pakistan's external sector, including external financing, faced pressure in H1-FY23 due to IMF program uncertainty and global financial conditions. Supply chain disruptions from conflicts and Covid policies affected exports. However, a larger fall in imports reduced the current account deficit.

4. Financial inflow shortages, delayed IMF tranches, political uncertainty, and increased debt repayments led to a decline in foreign exchange reserves. Consequently, the Pakistani Rupee depreciated against the US dollar during H1-FY23.

TLDR: Pakistan's economy faced challenges in H1-FY23. Inflation rose due to increased policy rates, supply shortages, and higher tariffs. The fiscal deficit remained unchanged, while export disruptions and financial shortages impacted the external sector. Overall, Pakistan's economy experienced difficulties and depreciation of the Rupee.

News Flash

✶Climate change is throwing shade at Karachi, and the victim this time is Pakistan's prized mango harvest. Brace yourselves for a 20% slump in this season's mango yield, as rising temperatures and unpredictable weather patterns continue to mess up with our favorite fruit.

Tech

Global 🌎️

AI leader calls for a global watchdog for AI

Warren Buffet was right when comparing AI with an atom bomb a few weeks ago because it seems like OpenAI’s CEO agrees.

In a recent blog post by OpenAI President Greg Brockman and Chief Scientist Ilya Sutskever, they reveal that the next big leap in artificial intelligence is almost here, and thinks we should create a worldwide watchdog group like the International Atomic Energy Agency (IAEA) to keep an eye on things.

OpenAI ain’t playing around: The blog post outlined three important points for future planning:

1. They called for coordination among top AI innovators, possibly through government involvement.

2. They also proposed the need for an international authority to inspect AI systems, set safety standards, and restrict deployment.

3. Lastly, they highlighted the importance of developing technical capabilities to control and ensure the safety of superintelligence. OpenAI acknowledged that these are ongoing research questions. 

This isn’t brand new: The recent comments echoed Altman's concerns during his testimony before Congress last week, where he highlighted the potential risks of dealing with artificial intelligence. It's a whole new ball game when you see industry leaders of this tech revolution actually begging the government to step in and regulate their actions.

TLDR: They propose a global watchdog for monitoring AI, emphasizing coordination, safety standards, and controlling superintelligence. Industry leaders now urge government regulation of AI.  

What else is new in news

✶Meta has been slammed with a mind-blowing €1.2 billion fine (around $1.3 billion) by the European Data Protection Board. Their crime is transferring Facebook users' personal data to servers in the United States.

Local 🇵🇰 

Slow internet speed in Pakistan? China to the rescue…again

Pakistan has kicked off a major project to set up 16,000 km long fiber optic cable. The goal? To amp up digitalization and networking in the country.

More: Tony Lee, the CEO of Sunwalk Pvt Limited, made the announcement during a ceremony in Islamabad. Sunwalk, a Chinese company, has already invested $5 million in Pakistan and is now planning to invest $100 million to lay optical fiber in different parts of the country. However, they need to obtain the Right of Way (ROW) from various public sector departments before proceeding. The groundbreaking for Phase-1, which will establish a nationwide fiber backbone from Islamabad to Multan, took place on Thursday. 

TLDR: Pakistan kickstarts a major 16,000 km fiber optic project to boost digitalization and networking. Sunwalk Pvt Limited, a Chinese company, invests $5 million and plans $100 million more for nationwide optical fiber installation. ROW permissions pending. Phase-1 groundbreaking connects Islamabad to Multan. 

Tech tour of news

✶Pakistan is imposing a comprehensive ban on cryptocurrency services, with the Minister of State for Finance and Revenue, Aisha Ghaus Pasha, asserting that cryptocurrency will never be legalized in the country.

More interesting Itla (اطلاع) we consumed:

📚 Trevor Noah's incredible talent for wit and his knack for finding humor in the most surprising moments never fail to impress. We recently had the pleasure of delving into the biography "Born a Crime" by Trevor Noah, and it was an absolute gem. With his sharp wit and ability to see the lighter side of even the most heart-wrenching situations, Trevor wrote a book that was both hilarious and deeply emotional.