Macro Bites

Macro Bite # 23

4 min read

This past week, economic news focused on yet another current account surplus in the month of October. While this was great news, Macro Pakistani took concern with the other side of the balance of payments. Total Foreign Investment in the country fell by 62% during Jul-Oct FY 2021 as compared to the same period last year. A drop in foreign portfolio investments (foreigners investing in Pakistani stocks and bonds) of $760 m was the main culprit. The returns on offer, with the policy rate at 13.25% at the same time last year, are not as attractive these days at their current 7% rate.

However, Foreign Direct Investment rose by 151% as compared to October last year! This was on the back of over $220 m foreign investment in Coal power. We will let readers decide on their own if this was good news or bad news, after they have read last week’s article on climate change in Pakistan.


The exchange rate crossed the PKR 160 mark once again, after remaining below that level for the past two weeks. This was partly because the US dollar has started gaining strength again with the global rise in coronavirus cases. Safe investments such as US dollar and gold are typically in demand in times of stress, reflecting their traditional role as havens for investors and savers. Hence, gold prices have also risen slightly while risky investments, such as the stock market, have fallen during this past week. However, the arrival of vaccines could trigger a significant dollar slump in 2021. So maybe hold off on buying dollars for now.

Sensitive Price Index increased by 7.7% since last year with the declining trend of weekly inflation unfortunately reversing this week. Weekly price increases affected all income levels while the Bottom 20% of income earners continued to be the most adversely impacted. Higher prices for Potatoes (+7.9%) and Tomatoes (3.5%) forced the index up, despite the usual suspects of Wheat (-0.3%) and Sugar (-3.0%) continuing their decline. On an annual basis, Sugar prices are still up 36%, Chicken 48% and Potatoes 73%! We have launched a dedicated page to track commodity prices here. You can browse the different tabs, and track weekly, monthly and annual changes.

What is the use of fertilizers in Pakistan?

By Umer Vakil

Macro Pakistani has discussed in earlier articles that agriculture productivity has been practically unchanged for the last 25 years. Umer argued last time that a major reason behind this lagging productivity is the fact that traditional farmers in Pakistan do not know what their soils contain. He continues this week to show how farmers over apply certain fertilizers and under apply others, given their lack of awareness. Read more


The three primary macronutrients required by crops are Nitrogen (N), Phosphorous (P) and Potash (K). Pakistani farmers over apply nitrogen since it provides a relatively quick response in the form of green vegetative growth. On the other hand, they under apply Potash, even though 40% of Pakistan’s soils are known to be deficient in the nutrient. For someone like me, who does not know much about agriculture, the following analogy was useful: nitrogen is like fast food leading to instant gratification, while potash is like the healthy meals I have been missing.

A study conducted across Sindh and Punjab in 2015, found that the use of potassium and micronutrients, alone or with farmyard manure, in addition to the typical NP fertilizers, improved crop yields. Yields for sugarcane increased by over 60% in some cases when NPK fertilizers, micronutrients and manure were used as compared to when just Urea (N). Read the full article if you want to understand the topic in more depth and see what the public and private sector can do to improve the situation.

What Else We’re Reading (Local)

IMF plan to resume soon – shared understanding required for problems around improvement in tax collection and the changes in the electricity system (Dawn)
Pakistan’s agricultural GDP estimation suffers from a serious trust deficit with significant revisions to exaggerated output figures common (Business Recorder)
Foreign direct investment surges 151% to $317 m in October compared to $127 m in the same month last year while total foreign investment declined (Profit)

What Else We’re Reading (International)

Vaccine arrival expected to trigger dollar slump in 2021 with analysts predicting the currency could fall by 20% if the global economy rebounds (Financial Times)
Free Trade Agreement between 15 countries across Asia Pacific led by China signed, covering 30% of world output but excluding India (withdrew) and the US (Economist)
China urges new era of mass migration back to rural regions, repopulating towns with entrepreneurs and consumers to help eradicate poverty (Wall Street)

Faiz Ahmed

MBA Candidate at Harvard Business School with prior experience at Bain & Company, International Finance Corporation and State Bank of Pakistan. He is also the Founder of Macro Pakistani.

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