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Tuesday, May 21, 2024

Government needs better or more spokesmen? – Muhammad Zeeshan Younas

Muhammad Zeeshan Younas |

History has proven that the economic development of nations depends, to a large extent, on the stability of financial markets. During the last couple of months, the financial sector of Pakistan is not showing promising trends as KSE 100 index continued on its downward spiral while US dollar soaring up in the interbank market.

There is a plethora of literature available which postulating that the financial stability of an economy is highly sensitive to speculations and sparkling statements of celebrities and government resource persons. Speculation means transactions made by the investors in the stock market on the basis of anticipated fluctuations in financial securities. Now the question is how these speculations generate and penetrate in the market?

“Pakistan Tehreek-I-Insaf needs a credible spokesperson, most probably with an economics background, and shared an understanding on economic issues”

Over time, an extensive literature has developed which concludes that public information is directly associated with the complex behavior of financial markets. Politicians and celebrities should incorporate the sensitivity of markets while remarking on any subject matter because a single line can traumatize the favorable market tendencies.

There are plenty of times in the past when celebrities and politicians have shaken up the stock markets with words, for example, Kylie Jenner’s single line tweet on Snapchat caused 1.3 billion dollars loss to the company with 6.1 percent drop in share value at the start of this February.

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Biotech stocks plunged when presidential candidate Hillary Clinton posted a tweet on pharmacological price extorting in 2015. Versace’s share price quickly shot up during October 2016 when Michelle Obama was spotted in this brand to a White House State Dinner.

Market observers dubbed the increasing trends of Versace as “Michelle Effect”. Similarly, recent tweets by Donald Trump, in which he blamed OPEC for high oil prices, damaged the global economy with inflation where Iran officials informed that oil prices would go down only if he abstained himself from tweeting.

Auctions of the luxury vehicles of PM house has added Rs 200 million to national kitty while Pakistani rupees slump against dollar added Rs 900 billion to foreign debt in a single day.

A reliable, consistent, and apt communication is recognized as a key tool of the economic policy-making process in mixed economies. Pakistani politicians are ignoring the role of media in crafting speculations related to the financial sector at their own peril. Government is lacking in shared understanding of sensitive economic issues and everyone is giving its own explanation on the market swings.

For instance, last week Port and Shipping Minister Ali Zaidi commented on the currency devaluation that dollar was likely to hit 140 rupees. He further added that “it affects everyone even us”. Information Minister Fawad Chaudhary stated that the reason for dollar climb was gambling of people on dollars which created speculations.

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On the other hand, Asad Umer stated in an interview to PTV news that the dollar was soaring due to the slump of the artificially controlled exchange rate which lowered down the foreign exchange reserves. In addition, electronic media reported that PM Imran Khan had expressed disappointment over Asad Omer’s performance and economic strategies during an informal meeting.

“Pakistan Tehreek-I-Insaf needs a credible spokesperson, most probably with an economics background, and shared an understanding on economic issues”.

One of the most unanticipated traits of this government has been MNA’s contradictory statements on economic issues while the virtual silence of  Imran Khan. It seems like there is a huge communication gap or lack of shared understanding of the economic crisis. Imran Khan mentioned in his maiden speech that government policies will be based on the principle of “root out poverty with a lesser burden on poor”.

Only members of this team should be allowed to give a point of view on economic issues in the talk shows of electronic media. Other MNA’s should be strictly forbidden from giving naïve statements on the economy.

He has been loaded by a variety of preoccupations and not sufficiently concentrated on the implications of 1 rupees increment in dollar impacts on poor people. Auctions of the luxury vehicles of PM house has added Rs 200 million to national kitty while Pakistani rupees slump against dollar added Rs 900 billion to foreign debt in a single day.

Besides, the regular devaluation of rupees is continually increasing transportation costs, import bills, shrinking real wages, power and input prices which severely affect both the common person and industrial sector. In contrast, devaluation makes domestic goods cheaper for the foreigners which put pressure on the exporters to gain from it.

However, this devaluation would have no influences on the export sectors but in terms of rupees shooting up the external debts along with the uncontrollable level of domestic inflation.

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The government should pay key attention to the sensitivity of financial markets rather than doing political stunts of selling luxury cars, helicopters, and even buffalo. As well, they need to recognize the real consequences of rupees devaluation, stock market swings, and importance of speculations that generates from their immature statements.

They require a credible spokesperson, most probably with an economics background, and a shared understanding of economic issues. Or else, there should be a team, consists of four to five young MNA’s, who have deep knowledge of the modern economics and functionality of global markets to provide government views on different sensitive issues like stock exchange and currency devaluation.

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Only members of this team should be allowed to give a point of view on economic issues in the talk shows of electronic media. Other MNA’s should be strictly forbidden from giving naïve statements on the economy. However, there is nothing embarrassing in saying  “I do not know sufficient about this to have an opinion” rather than giving exaggerating statements which cause the formation of speculation about the market.

Muhammad Zeeshan Younas is a Ph.D. Economics scholar at Quaid-i-Azam University. He can be reached at iameconomist@hotmail.com. The views expressed in this article are the author’s own and do not necessarily reflect Global Village Space’s editorial policy.