Throwing caution to the winds, families were out in the crowded markets haggling with salesmen to secure the best bargain.
The spike in spending is expected to beef up the Eid economy this year by 5pc to an estimated Rs945 billion from Rs900bn in 2016.
Dr Asad Zaman, vice chancellor, Pakistan Institute of Development Economics, agrees that an activity of this magnitude should be monitored and analysed.
“If Eid is as big a money spinner as you claim it to be, it deserves to be looked into”, he said over the telephone from Islamabad without pretending to be interested in the subject or the discussion.
Market watchers including executives of some marketing research companies considered the guesstimates credible, in fact, on the conservative side.
“The economically distressed middle class loosens the purse strings before Eid at the cost of living frugally later”
“The economically distressed middle class that holds every rupee by the teeth to stretch its value loosens the purse strings before Eid at the cost of living frugally later”, observed a lady economist working for the government.
A market researcher cited data of the Centre of Philanthropy to prove overall Eid spending.
“If Pakistani households collectively give as much as Rs250bn per annum to the poor, they sure can afford to spend four times more on themselves and their loved ones to celebrate a festival they value the most. No one expects estimates to be perfectly accurate but for me the number might possibly not be too far off the mark”.
“You are suggesting that Eid spending by households in a month is about as much as the country’s PSDP. It looks improbable”, an economist in Islamabad cast doubts.
“The average Pakistani family struggles to provide basic comfort to the family. It does not have money to burn. Sorry, you can’t sell your invention to me”, he seemed annoyed.
The above mentioned number is an intelligent guess based on some official data. Some relevant indicators provided by officials in Islamabad and the State Bank of Pakistan (SBP) were processed to work out the overall size of the Eid economy.
These include: fresh notes issued by the SBP; the flow of additional remittance from overseas Pakistanis using formal and informal channels during Ramazan; cash withdrawals from banks by private account holders and the average spending by a middle class family in Karachi.
According to the State Bank the disbursement of fresh currency notes through the SBP’s SMS service is expected to be about Rs30bn. “Commercial banks have been provided Rs340bn for disbursement over the counter and ATMS”, Abid Qamar, SBP spokesperson responded to a query by Dawn.
The disbursement of new notes last year dipped for some unexplained reason to Rs161bn from Rs249bn in 2015. Why it shot up drastically to Rs380bn during 2017 was not explained. If even half of this amount is assumed to be spent on Eid, the amount works out to be Rs190bn.
The data on the actual inflow of remittances would be available later but SBP sources confirmed that they do not expect a change in the historical trend.
“Normally the flow of remittances in Ramazan is double the monthly average, so will it be this year. Though I believe the share of remittances in Eid spending may moderate a little as, for a variety of factors, remittances have fallen marginally in 2017”.
Pakistan received remittances of $1.59bn per month in July-May 2016-17 down from monthly $1.8bn last year. In Ramazan, inflows were expected to increase sharply but were still estimated to be less than last year. Out of expected $3bn inflows as much as 60pc, $1.8bn (Rs190.8bn), could enter the market for Eid shopping.
Add to this about half the amount of the total remittance entering the country outside banking channels. Currency dealers said they believe such flows are over 75pc of the formal inflows in Ramazan. That translates to $2bn. Much of it ($1.5bn/Rs150bn) covers the citizen’s Eid expenditures.
Most salaried employees of the public and private sector get advance salary and annual bonuses in Ramazan to ease the pressure of Eid- related spending by the family.
Banks confirm that pre-Eid cash withdrawals are massive in the country. ‘There is nothing to suggest it would be any different this year”, said a banker informing that the actual data of cash withdrawals during the current month will be released by the SBP later. It is expected to be about Rs250bn in 2017 compared to Rs225bn last year and Rs200bn in 2015.
“Eidi is under 5pc of the Eid budget of a family. If even one forth of 380bn fresh notes (Rs145bn) is assumed to be used as Eidi, a reverse calculation would double the amount of Eid spending projected here”, commented an analyst.
“The Nouveau riche are shopaholics. To make up for their unrefined tastes they are forced to spend on designer’s dresses, shoes and accessories. For some, the shopping list includes the latest mobiles, new car models and home renovations”, a retired economist of the Planning Commission said requesting anonymity.
Published in Dawn, The Business and Finance Weekly, June 26th, 2017