SHRUGGING off all concerns, Pakistanis celebrated Eid 2018 like never before. All across the country, despite successive heat waves, people thronged the market to boost the Eid economy by about 15 per cent; crossing the trillion rupee mark.
The spike in spending is attributed to a combination of economic, social and political factors.
“Even where salaries are static family income has consistently been increasing. One- job, one- earner households are replaced by multiple- jobs, several- earners households. Those better informed (thanks to internet and television) budget more skilfully to create the financial space needed to indulge on special occasions.
“Expectations of a smooth transition of power and improved security situation has provided comfort, dulled collective anxiety and mobilised Pakistanis to take a calculated risk for pleasure,” an analyst commented.
“The law and order situation has improved significantly. For people starved for outdoor family activity the holy festivals provide an excellent chance that no one wants to miss”, Afnan Shah Khan, Director Operations, Emporium Mall Lahore, told Dawn. He sees a 20pc pickup in the market this year over last year.
He mentioned a record footfall of over a million people in Ramazan 2018 up from 830,000 in his mall in 2017.
“Like despair, the feeling of joy, cuts across all social divides. Groups of people of all ages and classes enjoy a good time in bustling Eid bazaars.” commented a banker
“Pakistan is a big country with deep seated problems. You still hear about disturbing incidents. The scale and frequency of terrorist strikes targeting the public, however, has come down to a level where the public now perceives it as something in the horrific past,” another young expert in the retail business supported the view.
The second factor is the public’s buying power. “People don’t head for shopping with empty pockets. They clearly have a budget for Eid irrespective of their social class. It is illogical to compare budgets across the social spectrum as a small accessory for one person may cost more than the entire Eid budget of a low income family,” commented another market watcher.
There is little empirical evidence to suggest a sudden jump in family income over a year. Still leaders of market associations in several cities assert that majority of the people in markets before Eid were out to make purchases, unlike the norm when window shoppers used to outnumber actual buyers in Pakistan.
“People are not just purchasing clothes, accessories and foods and beverages; they are also actively buying cell phones, home appliances, furniture and crockery,” a trader in Saddar, Karachi’s biggest shopping area, told Dawn three days before to Eid.
Buyer enthusiasm was not limited to in-shop purchasing. Online shopping also made records, according to bankers and fintech experts.
Not everyone concurred with the perception of an expanding Eid economy. Some people thought that expert opinion was based on simple observations. “People see a rush on the roads and in shopping areas and they assume that Pakistan is prosperous. For every shopper in the market there are dozens who can barely make ends meet and have no money to indulge,” an artist insisted.
“It is the insufficient physical infrastructure in densely populated Pakistan that chokes roads and causes traffic jams in shopping areas if even a tiny fraction of the population ventures out of its homes at the same time,” he made his point.
“Like despair, the feeling of joy, cuts across all social divides. Groups of people of all ages and classes enjoy a good time in bustling Eid bazaars. It is a pleasure just to watch that,” commented a banker discussing the probable quantum of spending before Eid.
“Many shoppers use plastic cards and the majority of big business houses and brands record all their transactions. It is, therefore, comparably easy to gauge money movement and assess the total quantum of transaction in a specified period today than at any point in the past. An exact projection is not possible owing to the gigantic cash economy,” a mid career banker commented in his office Karachi’s city centre.
A freelance economist did not find the Eid economy projections absurd.
“A nation that can afford to spend Rs175 billion in the holy month for philanthropic giving, 2.4 million citizens can approach the central back to acquire new currency notes — the SBP has confirmed disbursing Rs350bn worth of new notes generally used as a cash gift at the holy festival — people can get bonuses and advance salaries, can very well spin a trillion rupees collectively for the celebration,” she said.
The projection of Rs1.1tr as a volume of the Eid economy is an intelligent guess based on the data provided by the State Bank of Pakistan and the Federal Bureau of Statistics. These include: cash withdrawals by private account holders from banks, fresh notes issued on peoples’ demand, the official and unofficial flow of remittances from overseas Pakistanis and scores on the consumer’s confidence index.
Commercial bankers confirmed massive withdrawals by account holders before Eid. “The time lag of withdrawal and deposit of cash is reducing over time as more businesses depend on banking services for liquidity handling”, a senior banker commented, admitting a major haemorrhage from the deposit base in Ramazan for Eid shopping.
Remittances this year are said to be better than last year. The ten month data of Financial Year 2017-18 posted last week by the SBP recorded inflows of $18.4bn that comes to a monthly average of $1.8bn. Traditionally during Ramazan inflows almost double the average. If the trend is repeated in 2018 remittance inflows through banking channels will be in the vicinity of $3.5bn.
Assuming even a third of that amount ($1.1bn) is spent in rupee terms; total value will come up to Rs134bn at the rate of Rs122 to a dollar. If remittances arriving through informal channels are inserted in the equation a total of Rs250bn may not be too off the mark to project what overseas Pakistanis pitch in into the Eid economy of Pakistan.
“If we assume that remittances are 20pc of the total spending Rs1.1tr is perfectly believable,” a trend gazer commented who finds the estimate actually conservative.
Published in Dawn, The Business and Finance Weekly, June 19th, 2018