Month: October 2008

Retail sales in United States have fallen sharply. It has been the biggest ever decline in the past three years as buyers find it difficult to make purchase amidst the economic crisis gripping the country.  According to the figure released by US Department of commerce the value of sales fell from 1.2% in August to below 1% in September.

This decline is an indicative of the fact that more and more people are being directly or directly affected by the financial crisis. The buying power of people has declined and they are cutting expenses. The auto sales has also declined sharply.

The economy of the country is definitely in recession and people are avoiding big expenses. With credit crisis financing facilities for cars has become difficult which has resulted in decline in car sales.

Pakistan has to pay nearly $3bn within next three months to foreign creditors. The foreign exchanage reserves of the country have depleted and are barely sufficient for one month’s import bill. It is said that the foreign exchange reserve of the country presently stand at nearly $8bn of which nearly $4bn is being held by commercial banks. This makes the situation very grim. If Pakistan could not get new loans from international donors and lending agencies, it may find it difficult to pay back the loan on time.

A consortium by the name of Friends of Pakistan had been formed during Zardari’s visit to United States. I do not see any sincere effort on the part of friendly Muslim countries to rescue Pakistan from its financial crisis. It is said that Saudi Arabia has refused to supply oil on deferred payments. Saudi Arabia did not even participate the first meeting of Friends of Pakistan in USA.

The government has been forced to lower the oil reserves from 21 days to 10 days in order to check the outflow of dollar. This is not a good sign. It can be very dangerous to lower the strategic oil reserves.

I am of the opinion that only Pakistanis can take their countries out of the crisis which it is facing today. It is said that Pakistani have more than $100bn dollars. If they could only send $10 dollars to the country, most of the current problems of the country will be solved. Pakistani must also force their leadership to behave and attend to the problems of the country themselves, instead of looking at US, UK or Saudi Arabia. I do not mean that we should cut off completely from the rest of the world. We should only learn to live like a nation.

Pakistan is lowering its strategic oil reserves from 21 days to 10 days in order to save dollars. According to a report published in Dawn, the federal government has decided to keep the reserves of petroleum products for 10 days instead of 21 to reduce the outflow of dollars.

The Federal Government has also rejected a proposal to allow oil companies to import oil directly in an attempt to discourage the outflow of dollars from the country. There has been a consistent decline in the prices of petroleum products but this benefit has not been passed on to the consumers. The government has instead increased taxes and now it is earning a lot of money at the expense of common people.

Shaukat Tareen, Prime Minister’s Adviser on Finance has rejected reports in western media that Pakistan was on the brink of bankruptcy. When asked if Pakistan would go bankrupt, he said “Over my dead body”. Mr Tareen sounds very optimistic about the financial position of the country. I wish him best of luck and  hope that he would steer the country out of its present economic mess.

Mr. Tareen has said that there will be no sacred cows and agriculutre and real estate income will be taxed. This is a step in the right direction but I do not think that Mr. Tareen will be successful in bringing this two heads under tax net as the interests of a large number of influential people in the government will be affected by this decision.

If Mr. Tareen is successful in bringing real estate under the tax net, it will bring down the prohibitive prices of land which has touhced sky due tp pure speculation. I agree with Mr. Tareen that there should be no sacred cows in the country. Every income should be brought under tax net. It is strange that whereas salaried individuals have to pay taxes, but large incomes from agriculture and real estate enjoy a tax free status.

I do not agree with Mr. Tareen that economy would be put on right track if all subsidies are withdrawn. He must take into consideration the buying power of common people before taking such steps. The government has already lost the confidence of people barely six months down the lane. Prices of essential commodities are rising on almost daily basis. Mr. Tareen should make policies for the benefit of the majority of people of Pakistan who will be badly affected by withdrawal of subsidies.

Banks in Pakistan are virtually harassing their customers for recovering consumer loans such as credit cards, personal loans and auto loans. It has been reported in the press a number of times that banks have hired thugs in order to recover loans. They have been instructed by the banks to take any step for recovering the loan installment. While it is the right of the bank to get installment on time, the Bank has no legal right to harass the customers on phone by repeated calls and seding recovery personals even if the customer is late by a few days.

Unfortunately the banks do not take into consideration the payment history of the customers. I believe that a customer who has been paying regular installments for the past two to three years must be distinguished from those who have not paid a single installments who have not paid a single installments for the past three or four months.

There is a financial crisis the world over and people are finding it difficult to pay back their debts on time. It is because of this that governments are taking steps to protect the people as well as the banks. Financial difficulties can arise in anyone’s life. If someone has been paying his installments regularly for a long period of time, he must not be intimidated by persistent calls and by sending recovery agents at home or office in case the payments are delayed by one or two weeks. The banks should instead come with some concessions and try to work with the customer and support him so that he may make payments on time.

Superior courts in Pakistan had taken notice of this growing tendency by the banks a number of times and they were asked not to harass a customer and take legal steps for recovery of loan. It now seems that the banks have thrown the courts’ directives to the wind. I request the chief justice of Pakistan and chief justice of Sindh High Court to take suo motto notice of this and take action against those banks involved in illegal practices while recovering consumer loans.

The Credit Exchange is a debt referral company. They provide debt referral services to those people who have accumulated unmanageable debt over a period of time and now need help in reducing their debt burden. Debt Counseling is not an easy job. I have seen a number of debt counseling and debt management website with various catchy slogans. If you do not chose judiciously, you may fall into yet another trap and increase your debt burden even more.

The Credit Exchange can refer you to a suitable debt management company after seeing your details. If you are carrying too much debt, you must start planning for it before it is too late.

Despite the bail-out package announced by the British government, shares of RBS, Lloyds TSB and HBOS have fallen sharply. The UK government had announced a bail-out package of 37bn pounds for these banks in order to secure their future. The government now has a major share in these banks. In RSB it has 60% shares whereas in the combined Lloyds TSB and HBOS it has 40% shares. This means that the banks will have to share a major portion of their profits with the government.

Injection of money can be a good sign for the banks but obviously it has disclosed the weak financial position of the banks which has resulted in decline in share prices.

There are no signs that the financial crisis will end soon despite the steps taken by central banks worldwide to protect the banking system.

More and more people are finding it difficult to pay back their debt on time as the financial crisis goes on. If you are carrying debts such as credit card debt, loans, mortgage and auto loan and now you are finding it very difficult to pay back despite your best effort, I think it is time for you to get Debt Relief Counseling . This would help you in lighetening your debt burden and making life easy for you. There are a number of debt counselling and debt consolidation websites that offer various solutions. DebtConsolidation.com is one such leading website where you can find a number of debt related services and information.

Whether it is credit card debt or you are looking for mortgage refinance in order to reduce your installments, DebtConsolidation.com can help you a lot. You can visit their website for details.

ABN Amro Bank in Pakistan was recently acquired by the Royal Bank of Scotland. Yesterday the news appeared that RBS was in serious financial trouble for which it has sought help from government treasury in UK. Will it have some effect on the working of RBS in Pakistan as well? There are rumors that some banks may collapse. It now seems that it may not be a rumor after all. If RBS is seeking government help for a whopping 20bn pounds, this means that not everything is right with the bank. Its chief executive has also resigned.

I hope that this financial crisis ends soon. It is having a devastating effect upon the economies the world over. If no solution is found soon it will wipe out many big institutions.