Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

PK Basu has 34 years experience covering Asia's economies and markets (equities, fixed income and currencies), including 20 years covering the global economy. He was Chief Economist (SE Asia & India) at Credit Suisse First Boston for 5 years, and Chief Asia (x-Jpn) Economist at Daiwa Securities for a similar period. Among other roles, he was global head of research at Maybank Kim Eng, Malaysia equity research head and chief ASEAN economist at Macquarie, Chief Economist at ICICI Securities, ASEAN economist at UBS and the first chief economist at Khazanah Nasional (where he was co-head of research, and led all agri-business initiatives). PK Basu started his career in the Asia Service of WEFA (Wharton Econometrics) in Philadelphia in 1990, rising to be Director of their Asia Service in June 1994. 
PK's book, "Asia Reborn: A continent rises from the ravages of Colonialism and War to a New Dynamism" won the Tata Literature First Book Award (non-fiction) for 2018. It is the first single chronicle of the modern economic and political history of the whole of Asia (from Iraq and Turkey to Korea and Japan, and everything in between), told from an Asian perspective.

Chief Economist & Political Strategist

Bond Market Monitor: What Shimao’s Default Tells Us

Smaller-Than-Expected EFF from the IMF Implies More Austerity and Slower Growth

Prime Minister-Elect Imran Has His Work Cut Out, Starting with Negotiation of an IMF Loan

Military Intimidation Aimed at Bringing Imran's PTI to Power; It May Work, but Will Fuel Instability

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Macroeconomics

Karachi Stock Exchange Kse100 Index (KSE100 INDEX)

Pakistan's external liquidity situation has improved markedly over the past year, after the IMF released US$1.386 billion under its RFI (Rapid Financing Instrument) in April 2020, and the ADB subsequently rapidly disbursed two loans totalling US$800 million. This 23rd IMF loan to Pakistan was separate from the already-existing EFF (Extended Fund Facility) worth US$6 billion that the IMF approved on 3 July 2019 (for 39 months). Pakistan received the latest US$500 million tranche of the EFF (taking total disbursements under this EFF to US$2 billion) in March 2021, and Pakistan issued US$2.5 billion in sovereign bonds soon afterwards. Consequently, foreign reserves (including gold) swelled to US$20.6 billion in March 2021 and US$22.6 billion in April 2021 -- providing over 3 months' import cover (although increasing by only US$2 billion in the month in which US$2.5 billion were raised in sovereign bonds).    Pakistan's public debt remains unsustainably high (92.8% of GDP in June 2020). After promising the IMF in March 2021 that taxes would be raised in order to bring the fiscal deficit down from 7.1% of GDP in FY2020/21 to 5.5% in FY2021/22, Pakistan's Budget for 2021/22 instead cut excise duties on a slew of products and raised no taxes. While the IMF was forecasting a 27% increase in tax revenue in FY2021/22, and the government forecasts a 17.5% YoY increase, the actual outcome will likely be no better than a 10% increase -- and the fiscal deficit will likely be closer to 7% rather than the 6.3% of GDP in the official Budget (and far above the 5.5% of GDP promised to the IMF). Pakistan's external debt has soared to 281.5% of exports of goods &amp; services in June 2021, up from 235% two years earlier. In FY2019/20 (the first year of the EFF), import compression helped reduce the current account deficit to 1.1% of GDP. But loose monetary policy led to a surge in inflation (averaging 9.9% YoY in Feb-June 2021) and a 33% YoY increase in the trade deficit in FY2020/21 (close to the level in FY2018/19), as imports rose 25.8% YoY -- much faster than the 18.2% YoY growth in exports. The current account deficit is thus likely to have risen to at least 3% of GDP. The policy rate was cut by 625bp between March and June 2020 to 7%, implying that the real policy has been -2.9% in Feb-Jun 2021 (and -1.9% for the whole of FY2020/21). Growing evidence of over-heating, at a time of looser fiscal policy, will oblige the SBP (State Bank of Pakistan) to raise interest rates by at least 100bp by end-2021. We would suggest being Underweight Pakistan equities, and would also urge caution regarding the spreads on Pakistani sovereign bonds.

Pakistan's external liquidity situation has improved markedly over the past year, after the IMF released US$1.386 billion under its RFI (Rapid Financing Instrument) in April 2020, and the ADB subsequently rapidly disbursed two loans totalling US$800 million. This 23rd IMF loan to Pakistan was separate from the already-existing EFF (Extended Fund Facility) worth US$6 billion that the IMF approved on 3 July 2019 (for 39 months). Pakistan received the latest US$500 million tranche of the EFF (taking total disbursements under this EFF to US$2 billion) in March 2021, and Pakistan issued US$2.5 billion in sovereign bonds soon afterwards. Consequently, foreign reserves (including gold) swelled to US$20.6 billion in March 2021 and US$22.6 billion in April 2021 -- providing over 3 months' import cover (although increasing by only US$2 billion in the month in which US$2.5 billion were raised in sovereign bonds).    Pakistan's public debt remains unsustainably high (92.8% of GDP in June 2020). After promising the IMF in March 2021 that taxes would be raised in order to bring the fiscal deficit down from 7.1% of GDP in FY2020/21 to 5.5% in FY2021/22, Pakistan's Budget for 2021/22 instead cut excise duties on a slew of products and raised no taxes. While the IMF was forecasting a 27% increase in tax revenue in FY2021/22, and the government forecasts a 17.5% YoY increase, the actual outcome will likely be no better than a 10% increase -- and the fiscal deficit will likely be closer to 7% rather than the 6.3% of GDP in the official Budget (and far above the 5.5% of GDP promised to the IMF). Pakistan's external debt has soared to 281.5% of exports of goods &amp; services in June 2021, up from 235% two years earlier. In FY2019/20 (the first year of the EFF), import compression helped reduce the current account deficit to 1.1% of GDP. But loose monetary policy led to a surge in inflation (averaging 9.9% YoY in Feb-June 2021) and a 33% YoY increase in the trade deficit in FY2020/21 (close to the level in FY2018/19), as imports rose 25.8% YoY -- much faster than the 18.2% YoY growth in exports. The current account deficit is thus likely to have risen to at least 3% of GDP. The policy rate was cut by 625bp between March and June 2020 to 7%, implying that the real policy has been -2.9% in Feb-Jun 2021 (and -1.9% for the whole of FY2020/21). Growing evidence of over-heating, at a time of looser fiscal policy, will oblige the SBP (State Bank of Pakistan) to raise interest rates by at least 100bp by end-2021. We would suggest being Underweight Pakistan equities, and would also urge caution regarding the spreads on Pakistani sovereign bonds. 

Pakistan Government International Bond (PKSTAN GOVT)

Pakistan: Public and External Debt Remain Unsustainable; Policy Tightening Ahead