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Adviser to PM on Finance and Revenue Mr. Shaukat Tarin addresses a virtual meeting of the Pay and Pension Commission

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Islamabad: November 30, 2021

Adviser to the Prime Minister on Finance and Revenue Mr. Shaukat Tarin addressed a virtual meeting of the Pay and Pension Commission, today. The Commission is headed by Mr. Zafar Ahmed Khan and is composed of senior professionals from public and private sectors as well as serving Federal and Provincial Secretaries, AJK and GB and other senior officers of the governments also attended the meeting.

Speaking on the occasion, the Adviser underscored that current model for pay and pension is not sustainable and there is need to rationalize the salaries, allowances, perks etc. on the basis of performance and quality work. The performance of the employees may be assessed on the basis of setting targets and KPIs and simultaneously best performers may be compensated with rewards. He added.

The Adviser stressed for removal of anomalies in basic pay structure and suggested uniform basic pay structure for all the organizations. He suggested for adoption of internationally accepted practices in the matter of pensions. The Adviser emphasized that there is need to work out ranges for linking compensation with performance. This will ensure meritocracy in the recruitment and result in improved service delivery in the public sector.

The Adviser further extended his full support and cooperation to the Commission. Chairman, Pay and Pension Commission thanked Adviser to the PM on Finance and Revenue on his keen interest and ownership of the work of Pay and Pension Commission. He assured that the Commission will do its best to come up to the expectations of the Government and would present an actionable set of recommendations to the Government for rationalizing the pays of the public servants.

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Economy

The Fed Is Playing with Fire

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By now, it is passé to warn that the US Federal Reserve is “behind the curve” in fighting inflation. In fact, the Fed is so far behind that it can’t even see the curve and may have to slam on the policy brakes to regain control before it is too late.

The US Federal Reserve has turned on a dime, an uncharacteristic about-face for an institution long noted for slow and deliberate shifts in monetary policy. While the Fed’s recent messaging (it hasn’t really done anything yet) is not as creative as I had hoped, at least it has recognized that it has a serious problem.

That problem, of course, is inflation. Like the Fed I worked at in the early 1970s under Arthur Burns, today’s policymakers once again misdiagnosed the initial outbreak. The current upsurge in inflation is not transitory or to be dismissed as an outgrowth of idiosyncratic COVID-19-related developments. It is widespread, persistent, and reinforced by wage pressures stemming from an unprecedentedly sharp tightening of the US labor market. Under these circumstances, the Fed’s continued refusal to change course would have been an epic policy blunder.

But recognizing the problem is only the first step toward solving it. And solving it will not be easy.

Consider the math: The inflation rate as measured by the Consumer Price Index reached 7% in December 2021. With the nominal federal funds rate effectively at zero, that translates into a real funds rate (the preferred metric for assessing the efficacy of monetary policy) of -7%.

That is a record low.

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Only twice before in modern history, in early 1975 and again in mid-1980, did the Fed allow the real funds rate to plunge to -5%. Those two instances bookended the Great Inflation, when, over a five-year-plus period, the CPI rose at an 8.6% average annual rate.

Of course, no one thinks we are facing a sequel. I have been worried about inflation for longer than most, but even I don’t entertain that possibility. Most forecasters expect inflation to moderate over the course of this year. As supply-chain bottlenecks ease and markets become more balanced, that is a reasonable presumption.

But only to a point. The forward-looking Fed still faces a critical tactical question: What federal funds rate should it target to address the most likely inflation rate 12-18 months from now?

No one has a clue, including the Fed and the financial markets. But one thing is certain: With a -7% real federal funds rate putting the Fed in a deep hole, even a swift deceleration in inflation does not rule out an aggressive monetary tightening to re-position the real funds rate such that it is well-aligned with the Fed’s price-stability mandate.

To figure this out, the Fed must hazard an estimate of when the inflation rate will peak and head lower. It is always tough to guess the date – and even harder to figure out what “lower” really means. But the US economy is still running hot, and the labor market, at least as measured by the plunging unemployment rate, is tighter than at any point since January 1970 (on, gulp, the brink of the Great Inflation). Under these circumstances, I would argue that a responsible policymaker would want to err on the side of caution and not bet on a quick, miraculous roundtrip of inflation back to its sub-2% pre-COVID-19 trend.

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Again, consider the math: Let’s say the Fed’s projected policy path, as conveyed through its latest “dot plot,” is correct and the central bank takes the nominal federal funds rate from zero to around 1% by the end of 2022. Couple that with a judicious assessment of the disinflation trajectory – not too slow, not too fast – that foresees year-end CPI inflation moving back into the 3-4% zone. That would still leave the real federal funds rate in negative territory at -2% to -3% at the end of this year.

That’s the catch in all this. In the current easing cycle, the Fed first pushed the real federal funds rate below zero in November 2019. That means a likely -2% to -3% rate in December 2022 would mark a 38-month period of extraordinary monetary accommodation, during which the real federal funds rate averaged -3.1%.

Historical perspective is important here. There have been three earlier periods of extraordinary monetary accommodation worth noting: In the aftermath of the dot-com bubble a generation ago, the Fed under Alan Greenspan ran a negative real funds rate averaging -1.1% for 31 consecutive months. Following the 2008 global financial crisis, Ben Bernanke and Janet Yellen teamed up to sustain a -1.9% average real funds rate for a whopping 62 months. And then, as post-crisis sluggishness persisted, Yellen partnered with Jerome Powell for 37 straight months to hold the real funds rate at -0.9%.Make your inbox smarter.SELECT NEWSLETTERS

Today’s Fed is playing with fire. The -3.1% real federal funds rate of the current über-accommodation is more than double the -1.4% average of those three earlier periods. And yet today’s inflation problem is far more serious, with CPI increases likely to average 5% from March 2021 through December 2022, compared with the 2.1% average that prevailed under the earlier regimes of negative real funds rates.

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All this underscores what could well be the riskiest policy bet the Fed has ever made. It has injected record stimulus into the economy during a period when inflation is running at well over twice the pace it did during its three previous experiments with negative real funds rates. I deliberately left out a fourth comparison: the -1.7% real federal funds rate under Burns in the early 1970s. We know how that ended. And I also left out any mention of the Fed’s equally aggressive balance-sheet expansion.

By now, it is passé to warn that the Fed is “behind the curve.” In fact, the Fed is so far behind that it can’t even see the curve. Its dot plots, not only for this year but also for 2023 and 2024, don’t do justice to the extent of monetary tightening that most likely will be required as the Fed scrambles to bring inflation back under control. In the meantime, financial markets are in for a very rude awakening.

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Economy

Saleem Ahmad Replaces Mohammad Mian Soomro as Chairman Privatization Commission

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Federal Minister for Privatization, Mohammad Mian Soomro, has resigned as chairman of the Privatization Commission. Prime Minister Imran Khan has accepted his resignation.

However, he will continue performing his duties as the minister.

According to a notification issued by the Establishment Division, a copy of which is available with ProPakistani, the government has appointed Saleem Ahmad as the new chairman of the Privatization Commission with immediate effect and until further orders.

Saleem Ahmad is a globally recognized finance professional with a distinguished hedge fund, private equity, venture capital and investment banking career spanning over two decades.

Saleem Ahmed appointed New Chairman Privatisation commission of Pakistan

He has also served as the Managing Director at JPMorgan’s multi-billion dollar hedge fund business, Highbridge Capital, where he managed a global investment portfolio.

He is an alumnus of Lahore University of Management Sciences (LUMS), London School of Economics and Political Science and Wharton School of the University of Pennsylvania.

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China

TikTok begins testing support for paid subscriptions

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TikTok is testing support for paid subscriptions, the company confirmed to TechCrunch on Thursday. As first reported by The Information, the popular short-form video app is exploring the option for creators to charge subscriptions for their content. The feature is part of a limited test for the time being and is not broadly available. TikTok declined to elaborate on the feature or share additional details.

“We’re always thinking about new ways to bring value to our community and enrich the TikTok experience,” a TikTok spokesperson told TechCrunch in an email, when reached for comment.

It’s unclear how the paid subscription model will be implemented in the app. For context, TikTok’s popular algorithmic “For You” page surfaces videos from creators that users don’t follow. If a creator chooses to charge a subscription for their content, it’s likely that their videos won’t appear on users’ For You pages. However, it’s also possible that the subscription will apply to additional content that’s exclusive to paid users, as opposed to being applied to the entirety of a creator’s account.

News of the test comes a day after Instagram launched subscriptions in the U.S. The feature is now in early testing with a small group of creators who are able to offer their followers paid access to exclusive Instagram Live videos and Stories. Creators can choose their own price point for access to their exclusive content. Paid subscribers will be marked with a special badge, differentiating them from unpaid users in the sea of comments.

TikTok’s paid subscriptions test follows recent confirmation that it’s testing an in-app tipping feature on its platform that allows creators to accept money from fans outside of TikTok LIVE streams, where gifting is already supported. Creators who are part of the limited test can apply for the feature if they have at least 100,000 followers and are in good standing. Those who have been approved are given a Tips button on their profiles, which their followers are able to use to send them direct payments.

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The company’s newest test is its latest push toward monetization and helping creators earn a living through its platform. Last year, the company introduced a $200 million fund aimed at helping creators in the U.S. supplement their earnings. TikTok also helps creators sign brand partnerships and sponsorship deals and also provides monetization for livestreams. Considering TikTok’s focus on monetization efforts, it’s no surprise that the company is experimenting with a way for creators to offer paid subscriptions for their content.

TikTok and Instagram’s tests follow Twitter’s launch of “Super Follows,” a paid subscription offering that launched in September 2021. The feature allows users to subscribe to accounts they like for a monthly subscription fee in exchange for exclusive content. Eligible accounts can set the price for Super Follow subscriptions, with the option of charging $2.99, $4.99 or $9.99 per month. Similar to Instagram’s model, subscribers are marked with a special Super Follower badge, differentiating them from unpaid followers.

TikTok, Instagram and Twitter’s paid subscription offerings outline the companies’ efforts to court creator communities. The offerings are also a way for the companies to compete with each other, along with other digital platforms such as YouTube, which offers lucrative ways for creators to make money.

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