Devaluation and its impact on different economic sectors

Devaluation and its impact on different economic sectors We are proudly presenting the assigned report. We hope you will find it up to the specified mark. The central thrust of this report is about devaluation and its impact on different sectors of economy. More specifically, this report seeks to analyze the extent to which the current devaluation of Pak rupee has affected the economy on micro as well as macro levels. Information needed to address these issues was obtained from different trade economic journals and also from internet. We also interviewed different professionals and industry people. Well say that this study has been an educating experience, eventually giving us a real sense of achievement. Thank you, Table Of Contents: Description Page # Background and History Devaluation and its functions International Trade and devaluation Foreign exchange Rates International Trade Devaluation and its effects on Export Declining Export and current devaluation Is massive devaluation is avoidable Recent Devaluation and its short term impact Repercussion of competitors devaluation of Pak Economy Advantages and disadvantages of devaluation Recommendations to Govt Conculsion Back Ground and History: Pakistan has unusual history of successive devaluation. The rupee was first devalued in 1950 in response to a similar move by India. Later in 1972, Z.A. Bhuttos government massively devalued the rupee by 133%. The rupee was further devalued in early 1980s during General Zia regime. Moeen Qureshis caretaker government in 1993 also devalued the rupee by 7%. After that it was Benazir Bhuttos government that further devalued the rupee and finally same measure are being taken by the present government of Prime Minister Mian Muhammad Nawaz Sharif. Pakistan has been on a system of managed float since January 8, 1982. For most of the past decade the rupee had been fixed in relation to the US dollar at the rate of Rs 9.9= US$1. The new exchange regime commenced with an official nominal depreciation of 5 percent in the month of January, and a cumulative 30 % for the year 1982. This was accompanied by the abandonment of the fixed peg to the US dollar and its replacement by a flexible basket peg whereby the authorities manage the nominal exchange rate actively. The exchange rate system has remained unlettered up to the present and the Government has periodically re-affirmed its commitment to this flexible management in stabilization and adjustment programs negotiated with the IMF. Since the introduction of the new system there has been a continuous downward slide in our exchange rate. At present the rate of Pak RS in 2010. This represents a depreciation of 260 percent since Devaluation and its function: Depreciation or devaluation refers to the downward movement of the rate at which the home currency exchanges against the foreign currency or an increase in the domestic price of one unit of the foreign currency. Depreciation is the name given to this drop when it occurs in a free market; devaluation is the same thing resulting from government actions in a market that is not free. Since 1973 most of the currencies are on the floating currency system, through the system of dirty floating still allows government/ central banks to interfere to some extent. The question of devaluing the external value of the currency is one of the hotly debated issues in public policy discussions. On the one hand, the IMF and the World Bank supports devaluation as an important component of their recommended policy package for less developed countries (LDCs). On the other hand many economist and economic policy makers are strongly opposed to devaluing currencies has become a dirty word in many countries. Technically, devaluation of a currency is the last resort when other fiscal and monetary measures like demand management , financial incentive, trade restrictions have proved to be less effective in solving problem of balance of payment, by boosting the countrys exports and decreasing imports. In countries like Pakistan where major economic problem is lack of growth, exports are low because of poor quality of goods rather than the value of the currency. The mechanism of the open market keeps on adjusting exchange rate automatically and has made devaluation obsolete. Balancing Mechanism: Basically devaluation is a measure to correct a fundamental disequilibrium in countrys balance of payments. Equilibrium in a countrys balance is a result of restraint on imports and foreign payments of all sorts and an expansion of exports and foreign exchange earning of all sorts. The restraint on import cannot be achieved through appeals. It has to be done through direct restriction and/or through operation of the price mechanism, that is to say through making imports costlier by operating on import duties, and this in fact has been extensively done in many developing countries, including Pakistan. However, this is open to some objections and limitations so a simple way of making imports costlier is not adjustment of the exchange rate. The entire burden of making imports costlier is not generally placed on the exchange rate mechanism. It is shared by the device of import duties and also quantitative regulations. The import duty mechanism can also be used to make transition to the n ew exchange rate and to give a certain amount of discretionary treatment to individual items of import. The Price Factor: The other major objective of devaluation is to promote export. It should be noted that what is contemplated is an increase in exports in foreign exchange; in term of domestic currency. Exports on the whole will have to increase by more than the percentage of devaluation. Expansion of exports depends upon a number of factors, the elasticity of supply in devaluing country and of demand for the products of that country abroad. Much depends on the prices at which the devaluing country is able to offer its goods. Contractionary Impact: Reluctance to adjust the exchange rate in downward direction is due to its possible contractionary impact on output and employment, re-distribution of income from wages earner to property owners, cost-push inflationary pressure and the initial favourable effect on the balance of payment. All of the above will eventually reserved through a process of domestic inflation and larger imports. When quantitative controls on imports duties are reduced along with the devaluation, imports and exports are not particularly sensitive to price changes especially in the short run. This is particularly applicable in the case of UDCs whose imports are often consist of essential capital goods, intermediate inputs including fuel and fertilizer and sometimes basic consumer goods like food grains, edible oils etc. There is little scope for cutting down these imports. The exports of UDCs on the other hand mainly consist of primary commodities and processed materials whose supply elasticity are rather low in short run. If devaluation has to improve the balance of trade in short run, it should come through a reduction in the level of output and changes in the distribution of income towards high saver which would reduce the demand for imports and generate a bigger exportable surplus. Recession, unemployment and unequal distribution of income are the costs of a successful devaluation. Inflationary Pressure: The ineffective of exchange rate adjustment in securing improvement in the external balance primarily comes from the fact that changes in costs arising from exchange rate movements feed through quickly and extensively into the economy and contribution to the accerlation of prevailing inflationary pressure associated with an improvement of the monetary conditions. The rigid climb in price over a long period has stimulated defensive inflationary responses amoung industrialists, agriculturalist, business mens, and wage earner and has nullified the impact of exchange rate adjustments on the international competitiveness of our exports. It should be taken into account that devaluation corrects the past inflationary and other economic development that led to adverse movement in the balance of payment. This does not protect the balance of payments against further inflationary and other adverse developments. Frequent devaluation of a currency is undesirable. It stimulates speculation and res ults in distortion in income, consumption, industrial growth and public finance. This also erodes the confidence in the currency. DEMAND Management: Unfortunately, for keeping our external accounts disequilibrium within sustainable limits, we have relied rather heavily on exchange rate adjustment and not paid attention to the efficiency dimension of our economic system. Economic efficiency at the macro and micro levels requires high productivity, technological efficiency, high rates of saving and investment, and incomes policy that does not lead to cost-push inflation and fiscal-monetary policy that provides a stable environment for careful demand management. These are the simple and inflexible economic laws that were recognized and grasped. Neither negative controls nor artificial stimuli like frequent depreciation of external value of the currency with help except a little and temporarily. International trade and Devaluation: Globalization is the strategy of todays world. The concept of information sharing has reinforced the process of globalization throughout the world. The consultant and analysts are, therefore, working on the integration of the entire system to run smoothly without any hindrances. Looking at the economic activity in this scenario, there is two major classifications, good and services. The globalization of goods can be seen in the prospective of international trade. By international trade we mean exchange of goods between the nations. Looking at the economies of the world we find that the states are broadening their activities by offering investors to share their share of excellence and encouraging their local manufacture to explore the possibilities of selling their goods in the foreign markets. International trade is very important in terms of increasing the foreign exchange of the country which ultimately prospers the people. The Government of Pakistan has liberalized its trade policy with devaluation of Pak rupee and encouraged the manufacturers to export their goods and invited foreign companies to compete in the local market. The key reason for international trade is provided by the theory of Comparative costs importance of relative cost saving in the production of one item over the other. Obviously it would be better to buy a product from china at the price of Rs 1/= instead of producing it at the cost of Rs. 2/- that can be ultimately be sold for Rs 2.50 in the market. There are various other reasons which strongly support the trading among the countries, few of which are: Decreasing cost Consumption of excess production Difference in taste Foreign Exchange rate: From international trade, we mean buying and selling the goods among nations. The deal cannot, of-course, be taken place without availability of currency to be accepted by the seller, on the other hand an exporter/importer would definitely like to know how the exchange rate of Pakistan rupee into dollar is being fixed, and how can her benefit from it?. At present in Pakistan we have managed float of currency to determine exchange rate as an independent policy instrument. We need some criteria to fix the exchange of currency amoung the countries. It is important to note that only a favourable exchange can really benefits the nation and by favourable exchange, we mean, getting more foreign currency by paying less local currency. Theoretically there are two type of exchange rates: Stable Exchange rate: Altough stable exchange rate has no pratical value now a days, yet it helps in understanding the determination of exchange theory. A stable exchange rate was set by the value of gold. However, with passage of time, the limitation and deficiencies of gold standard started emerging. Few of these were carrying inconvencies, remelting of gold, shipment of gold, different valuation of gold by different countries, and unavailability of sufficient gold to meet with the heavy demand. That is why the gold system was found inadequate ans was replaced with the flexible exchange rate. Flexible or floating exchange rate: Flexible exchange rate is set by the interaction of demand and supply schedule for foreign exchange indepently. The optimum level in demand and supply teory is set at the point where supply equal to the demand. So if a person want to buy electric equipment from America worth $ 100000/- and an American in contrast wants to buy cotton and the parity between US$ and Pak rupee is 1:1, the equation will be somehow similar to as follows: Demand for US$ by Pakistan 100,000 Demand for Rs. By America 50,000 Pakistan is demanding more dollars than America wants to supply. The demand and supply are not in balance, consequently Pakistan shall have to refix the parity between $ and rupee at a level where our demand for $ will become equal to the supply of $. Now if we reduce the price of our goods by half of the existing price: Demand for US$ by Pakistan 100,000 Demand of Rs by America 25,000 This reduction price will have dual effects: Dollas will become more expensive, the American goods will become more costly. Pakistani Rupee will become more cheaper, our goods will become cheaper and as a result the demand for our goods will increase. From the above it can be included that demans for imports should be in line with supply of exports. Total value of imports and exports of a country can also help manufacturers to design their plans for future expansion. With an expensive foreign currency, export may be increased with relatively low price supply of goods and quality production within the country. At the same time with a cheap currency investment can be made in foreign countries to utilize the cheap resources and ultimately increases the value of the firm. DEVALUATION its effects on Exports: As the reason for the devaluation has been to strengthen the countrys balance of payment by stimulating exports, curtailing imports and by encouraging overseas Pakistanis to remit their earning through banks by narrowing the wedge between the official exchange rate and the kerb rate in the open market. It is universally accepted concept that the exchange rate mechanism is used to create a balance between the imports and exports but what is lesser known fact is that this mechanism need to be implemented at the right time and for the right economic reasons to be fully effective in achieving the desired purpose. Advantages and Disadvantages of Devaluation Advantages of Devaluation Devaluation helps in obtaining international market demand perfection in quality and reduction in price up to a competitive level. As both developed and underdeveloped countries function in one international market therefore, it is not easy for Pakistan to sell a product which is also produced by France, Germany or Holland if the prices are high. However, we are competing with the underdeveloped countries, it is, therefore, very necessary for us to adjust our prices with the prices of our competitors to serve in the market. Every new product has four stages, out of which the first stage is introduction stage. An introduction stage demands lot of efforts to promote the product and create awareness among the buyers. At this stage it is vital to sell it at even below the cost. That is why the government provides certain duty drawbacks for a specified period, until that time when the product is self-sufficient. Each country maintains an account for its total imports exports schedule along with balance of payment chart. At times when its imports increase from its exports and the balance of payment deteriorates it becomes vital to increase its exports immediately. The reduction in prices is one of the quickest ways of increasing the exports. At times when people tend to buy imported goods and local industry start suffering, it is necessary to discourage the people so that they cut down their expenditure towards foreign buying and direct towards local goods. Devaluation is one of the techniques to decrease imports and encourage the local industry. Reduction in price through devaluation has long term effects, which can be seen over a period of time. All the above conditions are currently prevailing in Pakistan. However the question arises as to why all these conditions have comparatively more drastic affects on our economy. The answer to this question relates to our policy of income projection and receipt from foreign donors and countries. In the past, we were used to manage our budgetary gaps with the help of aids and debts. But this time the situation is different we could not did any foreign source of income. The IMF was used to extend loans for our development programs in the past. However, during the current year the IMF had stopped its $300 million trench of its ESAF credit. The result is quite obvious: devaluation and imposition of new duties/taxes Disadvantages of Devaluation Devaluation with all its disadvantages has become an irregular policy. It is rater an ad-hoc arrangement for less demand. Instead imperfect planning is essential to forecast the future when the original price level will be maintained again. Devaluation involves high risk of inflation with the country for e.g if the exports do not increase as the result of decrease of price the country will suffer losses due to increase cost of all imports as well as local imports. Loss resulted due to decrease in prices in international market. Devaluation automatically increases the value of external debts and correspondingly the amount required for debt servicing Devaluation of a currency is considered as a last step to be taken after failure of all other fiscal and monetary measures. Before devaluing currency to boost economy through increasing exports, other factors need to be evaluated, for example, lower exports may be because of poor quality of goods, trade barrier, lower value added goods, unavailability of export items e.t.c Continued depreciation of currency may result in unlawful import of goods within the country. Such unlawful import and export may creat unlawful parallel economy within the country, which will be completely out of the control of the government. Devaluation is always supported by special incentive package to reduce the internally produced items for export. By critically analyzing all the above referred factors, it is proposed that the following necessary action should be taken to improve the situation: Tax Network should be enhanced by a) levying tax on agriculture, b) improving collection procedure, c) bringing small businessmen under tax nutshell etc. Imports should be discouraged by encouraging locally produced quality goods. Export of value added items should be increased instead of increase of low value exports to compete with the other developing countries. Needless to say that government should reduce drastically its own expenditure. It is vital for government to build up its creditability through investing money in public projects very honestly. The proceed from privatization of public sectors should be utilized to pay off our external as well as internal debts. Rescheduling of the debt should also be requested from the lenders. In case of our low priced items in the international market, we should prove that the reason of our low price quality items is not government support but cost efficiency. This can be done only with the help of very competent professional people i.e management accounts, engineers and managers. With the current devaluation, it is vital that necessary incentives must be given to industry and fixed income group for their survival and to reap the benefit of devaluation. The government should build capacity to deal with economics problems on both macro and micro level. It is generally believed that the government does not possess necessary capabilities, out of elected representative and bureaucrats to deal with it. That is why most of our key position holder is either current of Ex World Bank/IMF officials. It is also suggested that major businessmen and industrialist should be taken into confidence before any major decision. Effectiveness of price control committees very necessary. In countries like Pakistan where every individual has the power to determine the price of his own product, inflation is automatically multiplied Conclusions Clearly, devaluation has not been the answer. It has rather contributed to a further increase in the trade gap. The important consequences of devaluation are the burden it is putting on the repayment of the foreign debts. The ensuing depletion of reserves has such a negative effect that the positive impact, if any, is more than wiped out by the increased foreign exchange burden. Reviewing the policy of devaluation by successive governments in the last 50 years, one finds that devaluation has miserably failed to resolve any problems or improve the macro or micro economic conditions in the country. Rather, devaluation has been counterproductive. In the existing scenario of the forces of demand and supply, the rupee is expected to continue with its downward trend. If the counter measures through cost cutting and efficiency management are not taken to check the inflation, which is already running in double digit, the advantages of devaluation will be offset as in the past, leaving adverse impacts as our economy which mainly depends on imported raw-materials, fuels and capital goods. That will certainly bring more hardships for common Pakistani people because our industry has substantial imported inputs in a wide range of locally produced goods and will also retard the process of industrialization in the country. Similarly defense budget and debt servicing will c ost more due to costlier dollar. Our main problem is still uncontrolled i.e. the rise in non-development expenditures, which has given rise to the culture of living beyond means. This can be countered by adoption of practical harsh measures by the government especially at the top level to set the example for the whole nation.

“Precious” The Movie Review Essay

Precious is a girl who is so shy and shut down, She is very quiet to the point that she hardly speaks to anyone and is nearly illiterate. As the story is told, she conceives a child from a rape that occurred to her. Precious tries her very best to fit in with others, but as she struggles in school is treated with mocking cruelty. She is a girl obviously in a lot of pain and shame. Even though her mother is always angry her she vows to happily find her purpose in life. She feels that she can positively make a life for herself with the help she found in a counselor who treats her with respect and fully understands her pain and suffering. This is such an amazing actress who has powerfully done a remarkable film. I truly recommend those young girls who are going through the same situation to see this wonderfully done film. Second paragraph I have to compare my life as the second paragraph to the first, because I can relate to the worse of situation that Precious went through in her life. In my life I have felt like Precious never having that feeling of being the sweetest person. I always felt cheaper that most girls. It was a hard life to live, but as I got older I became wiser and I felt as though I was the luckiest girl to have survived such an ordeal. Sometimes life never paints the prettiest picture of the life we would like to have live, but being determine and having the faith to survive is the most powerful thing anyone can have. I have a son and a daughter and I vowed to be a strong mom for them. I have two of the smartest kids a mom can have and because of them I live a joyous life.

Case Memo Fashion Channel

Ms Dana Wheeler, Senior Vice President, Marketing subject: Suggestions for forthcoming Marketing Plan date: 10/12/2013 TFH is indeed in a rather tricky situation at the moment. Although I agree with you that there is an undeniable need for some substantial changes, I am equally concerned about the negative reception of these changes by our viewers and even our employees. According to me, the aim right now should be to steer our channel way from the risks of declining viewers and advertising prices.However, in order to achieve this, I do not at the same time think it would be wise to expose ourselves to higher concentration risks than is necessary. Therefore, my recommendation is to opt for the third scenario as mentioned in your projections, which targets both ‘Factionists' and ‘Shoppers & Planners'. This strategy could help maintain or limit the damage to our existing viewers, and potentially increase our network rating by 20%; and our annual CPM average from $2 to nearl y $3.This could result in a consequent increase in ad revenues to upwards of $320 million, which is a much better projected delivery than of the first two options. I have explained some reasons below to support this argument. The current CPM is projected to fall by 10% next year if our present audience-mix endures. Change in this area, is therefore vital to Tech's ability to grow and address increasing competition. Attracting a multi-cluster of viewers, may increase numbers, but will not do much to avoid the probable drop in CPM.It would be necessary therefore to place importance on attracting a specific viewer demographic which has could contribute towards increasing our ad revenues. As you are aware, the demographic segment of female viewers aged 18-34 commands a higher CPM in the market. Additionally, of the four attitudinal clusters identified in the report from SGF Associates, ‘Factionists' are found to be comprised of the highest portion of the demographic mentioned abov e. Planners and Shoppers' on the other hand seem to be comprised more of our existing viewers' demographic, hill ‘Sustainability' and ‘Basics' are broader clusters, with lower involvement and interest in fashion. It is quite clear from this that the first cluster would be an obvious target for our future marketing. However, given that it comprises of a relatively small portion of the television viewing population of the US, targeting ‘Factionists' could jeopardize our current viewer numbers and therefore our network rating.In light of this, I consider it strategically much more sensible to offset this risk by including Planners & Shoppers' in addition to ‘Factionists' in our strategy, which could result in achieving a healthy rating, while increasing the number of higher-value viewer (in terms of CPM) demographic. Also, unlike the first scenario, this would avoid over- expansion of our viewer demographic, which is something most advertisers are weary of. I th erefore would advise you to seriously consider Scenario 3, which seems to be efficient, both, in terms of performance, as well as in terms of risk.

The Matrix And Descartes Theory Of Immaterialism Analysis

In reading both the online synopsis of the Matrix, watching the movie, and reading segments of Descartes’ Meditation I, and Berkeley’s Theory of Immaterialism, a multitude of similarities as well as differences between the them have arisen in my observations. The most striking similarity between them is that they question the reality which is being lived in, or attempt to determine what is reality, or figure what is being controlled by an outside influence. The main difference between them was the thesis of what was controlling reality. In the case of the Matrix, reality was being controlled by a hyper intelligent computer system. While Descartes believed that his perceptions of reality were affected potentially affected by either God or†¦show more content†¦It is as Morpheus points out â€Å"If real is what you can feel, smell, taste and see, then real is simply electrical signals interpreted by your brain.† Of course, Descartes isn’t the only philosopher whose ideas can be compared to those in the Matrix. The Matrix provokes the question of â€Å"What is real?† which relates to Berkeley’s Theory of Immaterialism. A connection found in the film between the Berkeley’s Theory and The Matrix was when Neo and Morpheus visit the Oracle. As Neo peruses the Oracle’s apartment, he walks into the family room and sees a skinny boy bending a spoon. As Neo watches the Spoon Boy, the Spoon Boy tells Neo â€Å"Do no try and bend the spoon. That’s impossible. Instead†¦ only try to realize the truth†¦ there is no spoon†¦ then you will see that it is not the spoon that bends, it is only yourself.† This quote is connected with Berkeley’s Theory because the theory states that there are no objects, but they are instead perceptions of the mind. All objects, from chairs to a glass of water, solely exist in the mind, according to Immaterial ism which fits the Spoon Boy’s statement that â€Å"realize the truth†¦ there is no spoon†. The spoon in the Matrix doesn’t exist. It cannot be changed. However, when Neo’s perception of the spoon changes, it bends essentially changing and making the impossible possible. Further drawing similarity to Immaterialism. Berkeley’s theory also connects to the Matrix when Cypher has a meeting with