IN the wee hours of Friday morning, Quentin Tarantino stood in a West Village bar that had opened for him and his entourage — cast members of his new movie, “Inglourious Basterds,” and his longtime producers, Bob and Harvey Weinstein. Swinging a blue cocktail in one hand, he held forth about the time that Harvey told him he’d like to invest in a restaurant.
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Francois Duhamel/Weinstein Company
Eli Roth, left, and Brad Pitt in “Inglourious Basterds,” a make-it-or-break-it gambit for the Weinstein Company.
The goal, Harvey explained to Mr. Tarantino at the time, wasn’t to schmooze, or to get the best table. New York City had just banned cigarettes from restaurants and Harvey, then an avid smoker, didn’t approve.
“He said, ‘I want to light up in my own restaurant and blow smoke in the fire marshal’s face,’ ” Mr. Tarantino recalled.
Vintage Harvey chutzpah. The story killed, and when the laughing died down, Bob smiled, waited a beat and added another punch line.
“A million dollars,” he sighed, “for a cigarette.”
Ah, the flush years. They must seem kind of distant now. Because four years after Disney bought the Weinsteins out of Miramax, the company that first ushered indie films into the multiplex, the brothers are under serious stress.
A full accounting of their agita begins, naturally, with a batch of underperforming movies. Since opening its doors in 2005, the Weinstein Company has released about 70 films, and more than one quarter of them failed to break the $1 million box-office mark in the United States. Thirteen of these took in less than $100,000.
To complicate matters, the company’s beloved reality television show, “Project Runway,” was until recently sidelined by litigation. Harvey decided last year to move the show from Bravo to Lifetime, prompting NBC, which owns Bravo, to sue, contending that it had the right to match Lifetime’s bid and keep the program. In April, the Weinstein Company settled for an undisclosed sum, and those backstabbing fashionistas will return to the air, at long last, on Thursday night.
Yes, the brothers have had triumphs as well. Bob, who handles the lowbrow genre stuff, scored with the supernatural thriller “1408” and “Scary Movie 4.” (These brought in $72 million and $91 million, respectively.) Harvey showed a bit of the maestro’s touch with “Hoodwinked,” and with “The Reader,” which has taken in $101 million around the world, despite some tepid reviews, and won Kate Winslet an Oscar.
But the Weinsteins’ flop-to-jackpot ratio has been high enough to prompt the brothers to hire Miller Buckfire & Company, financial advisers who help troubled clients restructure. Last week, the firm finished its review and is urging Team Weinstein to release and promote only 10 movies a year, unload unpromising titles from its film library and avoid empire-building.
To shore up their finances, the brothers received a bridge loan a few months ago estimated at $75 million from Ziff Brothers Investments, according to two people familiar with the loan who requested anonymity because they weren’t authorized to speak publicly about it.
“We are a private company and aren’t going to comment on unsubstantiated claims from unnamed sources,” Harvey says of the bridge loan. He points over and over to what he describes as a robust pipeline of film, theater and television projects, not to mention a library of 250 films. Sit tight, he advises, and don’t bet against us.
But some backers of the Weinstein Company say they’re getting anxious. They were corralled in 2005 by Goldman Sachs, which helped raise $1 billion for the company. At the time, filmmaking had acquired a certain cachet in private equity circles, and here was a chance to bankroll what were arguably two of the greatest movie producers in modern cinematic history.
Starting in the late ’80s, the Weinsteins produced “Pulp Fiction,” “Shakespeare in Love,” “The English Patient,” “My Left Foot,” “Good Will Hunting,” “The Piano” and hundreds of other movies, garnering 249 Academy Award nominations and three Oscars for best picture. In one 11-year stretch, they racked up 13 best-picture nominations.
SO what happened? In part, the Weinstein Company is coping with the same problems facing every other studio, most notably the grim slowdown of the DVD market. But plenty of the Weinsteins’ wounds are also self-inflicted. Instead of using their lush, Goldman-fueled pile of start-up money to focus on filmmaking, the brothers ventured into such new realms as fashion (buying part of Halston, the once-storied label), online social networking (through A Small World, known informally as MySpace for Millionaires) and a piece of Ovation, the cable network.
These were all Harvey’s ideas — his attempt, he says, at a Barry Diller-style conglomerate. The problem wasn’t just that the companies failed to generate vast profits. It’s that they took Harvey’s eye off the film ball, which is why he kept whiffing.
“What happened was, I got more fascinated by these other businesses and I figured, ‘Making movies, I can do that in my sleep,’ ” he says in an interview in his office in downtown Manhattan. “I kind of delegated the process of production and acquisitions. Yes, I had a say in it, but was I 100 percent concentrating? Absolutely not. I thought I could build the company and delegate authority, and that’s where it went wrong.”
Bob, meanwhile, has disavowed his goal of becoming the next king of African-American urban comedies, an unlikely ambition for a Jewish guy from Queens. But a few years ago, he took note of Tyler Perry’s success, and it looked like easy money. Bob produced “Long Shots,” with Ice Cube, and “Soul Men” with Bernie Mac and Samuel L. Jackson.
“Did like $15 million gross,” Bob says of “Soul Men,” “and it was a relatively expensive, $20 million movie. And for an African-American movie, there’s no foreign business. So those were two bad missteps, definitely.”
For months, the brothers have ignored media requests for comments, leaving lots of “Are the Weinsteins goners?” articles and blog posts with boilerplate denials offered up by their representatives. The two broke their silence to deliver this very simple message: We’re back to what we know. Bob is planning three new “Scream” films, the most profitable franchise in the Weinsteins’ history. Harvey has sworn off interest in the nonmovie parts of his business, sounding a bit like a married man lamenting a fling.
“I’m going to just do this and nothing else,” he says.
Saturday, August 15, 2009
American who visited Suu Kyi to be freed from Burma
The authorities in Burma have told a US senator that they intend to release John Yettaw , the American who created outrage when he swam to the home of Aung San Suu Kyi, leading to her being confined to house arrest for a further 18 months.
Senator Jim Webb, a Democratic senator who heads the Senate Foreign Relations Sub-Committee for East Asia and Pacific Affairs, met both regime leader General Than Shwe and Ms Suu Kyi on a visit to Burma on Saturday.
EDITOR’S CHOICE
UN expresses concern at Suu Kyi verdict - Aug-13
Verdict dashes hope of change in Burma - Aug-12
Suu Kyi sentenced to further 18 months - Aug-12
American who sparked Burma’s wrath - May-16
US urged to re-engage with Asia - Mar-05
“It is my hope that we can take advantage of these gestures as a way to begin laying a foundation of goodwill and confidence-building in the future,” Mr Webb said in a statement on Saturday.
Mr Webb’s visit to Burma comes less than a week after the Burmese authorities defied intense international pressure to convict Ms Suu Kyi of breaching the terms of her house arrest.
The charges arose in early May when Mr Yettaw, a 54-year-old Vietnam War veteran who suffers from diabetes and post-traumatic stress disorder, swam the lake that backs on to her dilapidated villa to warn her that he had had a vision in which she had been killed by terrorists and she allowed him to stay the night to overcome his exhaustion.
Mr Yettaw was sentenced to seven years in prison at the same trial. He was given three years for breaching security regulations, three years for immigration violations and a year for illegal swimming. Mr Webb said he expects Mr Yettaw to be released Sunday and will accompany him on a US military flight to Bangkok, the capital of neighbouring Thailand.
Mr Webb’s visit was highly controversial.
“The meeting will certainly serve to validate the junta at a time when international revulsion has reached one of its periodic, crisis driven peaks,” said Walter Lohman, the Director of The Heritage Foundation's Asian Studies Centre.
Exiled opposition activists say that they are happy to see anybody escape the brutalities of the Burmese prison system, but there is a smouldering anger that the west’s scant diplomatic capital had to be spent on releasing another delusional foreigner rather than bringing real pressure on the regime or getting any of the 2,100 Burmese political prisoners released.
However, the visit is part of Mr Webb’s belief that the previous administration’s policy of trying to isolate the Burmese regime has failed . It was a view which was reinforced by a visit he made to Burma in 2001.
“It was fairly clear that by ceasing our economic engagement in Burma we were allowing particularly the Chinese presence to solidify – because they have a very amoral foreign policy – and so I have been saying for several years that we need to have a different approach with Burma,” Mr Webb told the Washington Post in May.
There is an increasing consensus that the sanctions have not isolated the regime but pushed them into the economic and political orbit of nations which have little regard for human rights, such as China and North Korea.
Senator Jim Webb, a Democratic senator who heads the Senate Foreign Relations Sub-Committee for East Asia and Pacific Affairs, met both regime leader General Than Shwe and Ms Suu Kyi on a visit to Burma on Saturday.
EDITOR’S CHOICE
UN expresses concern at Suu Kyi verdict - Aug-13
Verdict dashes hope of change in Burma - Aug-12
Suu Kyi sentenced to further 18 months - Aug-12
American who sparked Burma’s wrath - May-16
US urged to re-engage with Asia - Mar-05
“It is my hope that we can take advantage of these gestures as a way to begin laying a foundation of goodwill and confidence-building in the future,” Mr Webb said in a statement on Saturday.
Mr Webb’s visit to Burma comes less than a week after the Burmese authorities defied intense international pressure to convict Ms Suu Kyi of breaching the terms of her house arrest.
The charges arose in early May when Mr Yettaw, a 54-year-old Vietnam War veteran who suffers from diabetes and post-traumatic stress disorder, swam the lake that backs on to her dilapidated villa to warn her that he had had a vision in which she had been killed by terrorists and she allowed him to stay the night to overcome his exhaustion.
Mr Yettaw was sentenced to seven years in prison at the same trial. He was given three years for breaching security regulations, three years for immigration violations and a year for illegal swimming. Mr Webb said he expects Mr Yettaw to be released Sunday and will accompany him on a US military flight to Bangkok, the capital of neighbouring Thailand.
Mr Webb’s visit was highly controversial.
“The meeting will certainly serve to validate the junta at a time when international revulsion has reached one of its periodic, crisis driven peaks,” said Walter Lohman, the Director of The Heritage Foundation's Asian Studies Centre.
Exiled opposition activists say that they are happy to see anybody escape the brutalities of the Burmese prison system, but there is a smouldering anger that the west’s scant diplomatic capital had to be spent on releasing another delusional foreigner rather than bringing real pressure on the regime or getting any of the 2,100 Burmese political prisoners released.
However, the visit is part of Mr Webb’s belief that the previous administration’s policy of trying to isolate the Burmese regime has failed . It was a view which was reinforced by a visit he made to Burma in 2001.
“It was fairly clear that by ceasing our economic engagement in Burma we were allowing particularly the Chinese presence to solidify – because they have a very amoral foreign policy – and so I have been saying for several years that we need to have a different approach with Burma,” Mr Webb told the Washington Post in May.
There is an increasing consensus that the sanctions have not isolated the regime but pushed them into the economic and political orbit of nations which have little regard for human rights, such as China and North Korea.
The Corporate Lab as Ringmaster
THE Internet has changed many things, of course, but one of its more far-reaching effects has been to transform the economics of innovation.
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Peter DaSilva for The New York Times
Under Prith Banerjee, Hewlett-Packard’s laboratories have placed larger bets on fewer projects, and have systematically sought outside ideas.
The nation’s big corporate research and development laboratories — at I.B.M., General Electric, Hewlett-Packard and a handful of other companies — have their roots and rationale in the industrial era, when communication was costly, information traveled slowly and social networks were fostered at conferences and lunchrooms instead of over the Web.
Crowdsourcing and other new, more open models of innovation are really byproducts of the low-cost communication and new networks of collaboration made possible by the Internet.
So, in the Internet era, what is the continuing role and comparative advantage of the corporate R.& D. lab?
Its role will be smaller and its advantage diminished, suggests Michael Schrage, a research fellow at the Center for Digital Business at the Sloan School of Management at M.I.T. The idea-production process, according to Mr. Schrage, will continue to shift away from the centralized model epitomized by large corporate labs, going from “proprietary innovation to populist innovation.”
Much of traditional corporate R.& D. spending, he said, has been subsidized by profits that are increasingly under Internet-era pressures. “The economic case for a lot of in-house R.& D. no longer makes sense,” Mr. Schrage said.
The best bet for corporate R.& D. labs, he said, is to adopt a “federated” model that leverages all the innovative work by outsiders in universities, start-ups, business partners and government labs. The corporate lab’s role, then, is to be more of a coordinator and integrator of innovation, from both outside and inside the company walls.
Though hardly alone, Hewlett-Packard has aggressively adopted that approach in the last two years, after Prith Banerjee became the senior vice president for research. Under Mr. Banerjee, former dean of engineering at the University of Illinois at Chicago, H.P. Labs has not only narrowed its focus, placing larger bets on fewer projects, but has also systematically sought outside ideas.
H.P. now runs a yearly online contest, soliciting grant proposals from universities worldwide. The company lists eight fields in which it is seeking advanced research, and scientists suggest research projects in those fields.
The H.P. grants are typically about $75,000 a year, and many of the collaborative projects are intended to last three years. In June, the company announced the 61 winners from 46 universities and 12 countries, including 31 projects receiving a second year of funding. “We are tapping the collective intelligence, selectively, of leading academics around the world,” Mr. Banerjee said.
Alan E. Willner, an electrical engineer at the University of Southern California, is one of those academics. He is an expert in photonics, using light photons instead of electrons to transmit information. The goal of the project with H.P. is to cut power consumption and increase data-transmission speeds between computers in data centers, and eventually even inside of chips.
The H.P. project, he said, supports a research student, provides insights from H.P. scientists and has helped double the productivity of his research team, whose members have co-authored 21 conference and journal papers related to the project in the last year.
Another name on all those papers is Raymond G. Beausoleil, an H.P. research fellow. The U.S.C. team, Mr. Beausoleil said, has helped fill a gap in photonics expertise in the company’s research program and accelerated its progress. He noted that H.P. Labs has long worked with university professors, but that the outreach tended to be informal and ad hoc. “Before,” he said, “there wasn’t necessarily a mandate to collaborate.”
Opening up is a good approach to some problems. But tight-knit teams inside corporate labs, experts say, can outshine the open model when working on multidisciplinary challenges in projects soon heading to market.
G.E. built up a biosciences unit, starting in 2004, to help push its diagnostic imaging technology to new commercial frontiers. Last year, G.E. and the University of Pittsburgh Medical Center developed a prototype scanner that sharply cuts the time needed to digitize images on pathology slides.
Now, the G.E. researchers are working on the software and data analysis tools to look into such images for a deeper understanding of diseases. G.E. is collaborating with Eli Lilly and the Memorial Sloan-Kettering Cancer Center. But the core is a 15-person team at G.E. Research that includes computer scientists, molecular biologists, chemists and statisticians.
“It really helps to have the close and constant communications loops within the team, because engineers have to learn a lot of biology and biologists have to learn a lot of engineering,” said Fiona Ginty, a bioinformatics scientist who leads the project.
Probably more than any other company, I.B.M. has successfully reinvented its R.& D. labs over the years, analysts say. Jolted by its early-1990s tailspin, I.B.M. opened its labs to the outside world and to customers. Since the mid-’90s, it has sharply shifted its research focus toward its growth engines of software and services.
I.B.M. is a major underwriter of open research in universities, but also collects more patents for its own use than any other company, year after year.
The open innovation model, says John E. Kelly, senior vice president and director of research, has many advantages. But he points to several innovations that became products after originating in I.B.M. labs.
“You can’t leave discovery completely to others and to chance,” he said.
Skip to next paragraph
Add to Portfolio
* International Business Machines Corporation
* Hewlett-Packard Co
* General Electric Co
Go to your Portfolio »
Enlarge This Image
Peter DaSilva for The New York Times
Under Prith Banerjee, Hewlett-Packard’s laboratories have placed larger bets on fewer projects, and have systematically sought outside ideas.
The nation’s big corporate research and development laboratories — at I.B.M., General Electric, Hewlett-Packard and a handful of other companies — have their roots and rationale in the industrial era, when communication was costly, information traveled slowly and social networks were fostered at conferences and lunchrooms instead of over the Web.
Crowdsourcing and other new, more open models of innovation are really byproducts of the low-cost communication and new networks of collaboration made possible by the Internet.
So, in the Internet era, what is the continuing role and comparative advantage of the corporate R.& D. lab?
Its role will be smaller and its advantage diminished, suggests Michael Schrage, a research fellow at the Center for Digital Business at the Sloan School of Management at M.I.T. The idea-production process, according to Mr. Schrage, will continue to shift away from the centralized model epitomized by large corporate labs, going from “proprietary innovation to populist innovation.”
Much of traditional corporate R.& D. spending, he said, has been subsidized by profits that are increasingly under Internet-era pressures. “The economic case for a lot of in-house R.& D. no longer makes sense,” Mr. Schrage said.
The best bet for corporate R.& D. labs, he said, is to adopt a “federated” model that leverages all the innovative work by outsiders in universities, start-ups, business partners and government labs. The corporate lab’s role, then, is to be more of a coordinator and integrator of innovation, from both outside and inside the company walls.
Though hardly alone, Hewlett-Packard has aggressively adopted that approach in the last two years, after Prith Banerjee became the senior vice president for research. Under Mr. Banerjee, former dean of engineering at the University of Illinois at Chicago, H.P. Labs has not only narrowed its focus, placing larger bets on fewer projects, but has also systematically sought outside ideas.
H.P. now runs a yearly online contest, soliciting grant proposals from universities worldwide. The company lists eight fields in which it is seeking advanced research, and scientists suggest research projects in those fields.
The H.P. grants are typically about $75,000 a year, and many of the collaborative projects are intended to last three years. In June, the company announced the 61 winners from 46 universities and 12 countries, including 31 projects receiving a second year of funding. “We are tapping the collective intelligence, selectively, of leading academics around the world,” Mr. Banerjee said.
Alan E. Willner, an electrical engineer at the University of Southern California, is one of those academics. He is an expert in photonics, using light photons instead of electrons to transmit information. The goal of the project with H.P. is to cut power consumption and increase data-transmission speeds between computers in data centers, and eventually even inside of chips.
The H.P. project, he said, supports a research student, provides insights from H.P. scientists and has helped double the productivity of his research team, whose members have co-authored 21 conference and journal papers related to the project in the last year.
Another name on all those papers is Raymond G. Beausoleil, an H.P. research fellow. The U.S.C. team, Mr. Beausoleil said, has helped fill a gap in photonics expertise in the company’s research program and accelerated its progress. He noted that H.P. Labs has long worked with university professors, but that the outreach tended to be informal and ad hoc. “Before,” he said, “there wasn’t necessarily a mandate to collaborate.”
Opening up is a good approach to some problems. But tight-knit teams inside corporate labs, experts say, can outshine the open model when working on multidisciplinary challenges in projects soon heading to market.
G.E. built up a biosciences unit, starting in 2004, to help push its diagnostic imaging technology to new commercial frontiers. Last year, G.E. and the University of Pittsburgh Medical Center developed a prototype scanner that sharply cuts the time needed to digitize images on pathology slides.
Now, the G.E. researchers are working on the software and data analysis tools to look into such images for a deeper understanding of diseases. G.E. is collaborating with Eli Lilly and the Memorial Sloan-Kettering Cancer Center. But the core is a 15-person team at G.E. Research that includes computer scientists, molecular biologists, chemists and statisticians.
“It really helps to have the close and constant communications loops within the team, because engineers have to learn a lot of biology and biologists have to learn a lot of engineering,” said Fiona Ginty, a bioinformatics scientist who leads the project.
Probably more than any other company, I.B.M. has successfully reinvented its R.& D. labs over the years, analysts say. Jolted by its early-1990s tailspin, I.B.M. opened its labs to the outside world and to customers. Since the mid-’90s, it has sharply shifted its research focus toward its growth engines of software and services.
I.B.M. is a major underwriter of open research in universities, but also collects more patents for its own use than any other company, year after year.
The open innovation model, says John E. Kelly, senior vice president and director of research, has many advantages. But he points to several innovations that became products after originating in I.B.M. labs.
“You can’t leave discovery completely to others and to chance,” he said.
Pakistan Cuts Rate for Second Time This Year as War Hits Growth
Aug. 16 (Bloomberg) -- Pakistan cut interest rates for the second time this year as a war against Taliban insurgents threatens an already “anaemic” economy.
State Bank of Pakistan lowered its benchmark discount rate to 13 percent from 14 percent, Central Bank Governor Salim Raza said at a news conference in Karachi yesterday. All 12 economists surveyed by Bloomberg News expected the central bank to reduce borrowing costs.
The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of militancy in the northwest region and a near-stagnant economy. The International Monetary Fund this month agreed to increase a loan to Pakistan to $11.3 billion from the $7.6 billion approved in November to bolster the nation’s “anaemic” growth.
“The challenge for policy makers is growth,” said Sayem Ali, an economist at Standard Chartered Plc in Karachi. “The inflationary cycle appears to be coming to an end.”
Raza has this year lowered borrowing costs by two percentage points from a decade high, taking advantage of the slowest inflation in 19 months.
“The revival will be slow and sporadic,” Raza said yesterday. “Power shortages and security issues have hurt growth. The likely increase in oil and power costs may renew inflationary pressure.”
Six Times
The central bank will announce monetary policy six times a year every alternate month instead of every quarter, Raza said. The next announcement will be in the last week of September.
The monetary policy committee will be expanded to include independent experts, in line with “best international practices,” he said.
The governor unexpectedly postponed State Bank of Pakistan’s monetary policy statement to yesterday from its initially scheduled release on July 25.
The delay may have been due to “fiscal slippages” resulting from declining tax revenue and “substantial” military expenditure that forced the government to borrow from the central bank for deficit financing, according to Ali from Standard Chartered.
The central bank also introduced a “corridor” for the overnight repurchase rate, Raza said. The discount rate will be a ’’ceiling’’ and the rate on the new overnight deposit facility, 300 basis points below the discount rate, will provide a “floor,” he said.
Policy makers last raised borrowing costs by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan and to curb inflation that reached a 30-year high.
Consumer Prices
Consumer prices rose 11.17 percent in July from a year earlier, the slowest pace since December 2007. Large-scale manufacturing output fell 8.5 percent in the 11 months ended May 30, according to the statistics agency.
“It is very critical that finance costs be lowered now,” said Asad Farid, an economist at AKD Securities Ltd. in Karachi. “If they aren’t, industry, which is already facing huge problems, will not be competitive.”
South Asia’s second-largest economy was forced to turn to the IMF for a rescue package to avoid defaulting on its debt, after the country’s foreign-exchange reserves shrank 75 percent in a year to $3.5 billion and the current-account deficit widened to a record.
The loan outstanding from the IMF is equivalent to about 6.3 percent of Pakistan’s gross domestic product, according to estimates from the Washington-based lender. The entire standby arrangement was also extended by about two months until the end of 2010.
Economic Growth
The $146 billion economy may expand as little as 0.8 percent in the fiscal year to June 2010, according to HSBC Holdings Plc, the weakest pace since 1952. The government estimates growth of 3.3 percent.
“Monetary policy needs to strike the right balance between supporting growth and keeping inflation in check,” said Ali from Standard Chartered.
State Bank of Pakistan lowered its benchmark discount rate to 13 percent from 14 percent, Central Bank Governor Salim Raza said at a news conference in Karachi yesterday. All 12 economists surveyed by Bloomberg News expected the central bank to reduce borrowing costs.
The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of militancy in the northwest region and a near-stagnant economy. The International Monetary Fund this month agreed to increase a loan to Pakistan to $11.3 billion from the $7.6 billion approved in November to bolster the nation’s “anaemic” growth.
“The challenge for policy makers is growth,” said Sayem Ali, an economist at Standard Chartered Plc in Karachi. “The inflationary cycle appears to be coming to an end.”
Raza has this year lowered borrowing costs by two percentage points from a decade high, taking advantage of the slowest inflation in 19 months.
“The revival will be slow and sporadic,” Raza said yesterday. “Power shortages and security issues have hurt growth. The likely increase in oil and power costs may renew inflationary pressure.”
Six Times
The central bank will announce monetary policy six times a year every alternate month instead of every quarter, Raza said. The next announcement will be in the last week of September.
The monetary policy committee will be expanded to include independent experts, in line with “best international practices,” he said.
The governor unexpectedly postponed State Bank of Pakistan’s monetary policy statement to yesterday from its initially scheduled release on July 25.
The delay may have been due to “fiscal slippages” resulting from declining tax revenue and “substantial” military expenditure that forced the government to borrow from the central bank for deficit financing, according to Ali from Standard Chartered.
The central bank also introduced a “corridor” for the overnight repurchase rate, Raza said. The discount rate will be a ’’ceiling’’ and the rate on the new overnight deposit facility, 300 basis points below the discount rate, will provide a “floor,” he said.
Policy makers last raised borrowing costs by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan and to curb inflation that reached a 30-year high.
Consumer Prices
Consumer prices rose 11.17 percent in July from a year earlier, the slowest pace since December 2007. Large-scale manufacturing output fell 8.5 percent in the 11 months ended May 30, according to the statistics agency.
“It is very critical that finance costs be lowered now,” said Asad Farid, an economist at AKD Securities Ltd. in Karachi. “If they aren’t, industry, which is already facing huge problems, will not be competitive.”
South Asia’s second-largest economy was forced to turn to the IMF for a rescue package to avoid defaulting on its debt, after the country’s foreign-exchange reserves shrank 75 percent in a year to $3.5 billion and the current-account deficit widened to a record.
The loan outstanding from the IMF is equivalent to about 6.3 percent of Pakistan’s gross domestic product, according to estimates from the Washington-based lender. The entire standby arrangement was also extended by about two months until the end of 2010.
Economic Growth
The $146 billion economy may expand as little as 0.8 percent in the fiscal year to June 2010, according to HSBC Holdings Plc, the weakest pace since 1952. The government estimates growth of 3.3 percent.
“Monetary policy needs to strike the right balance between supporting growth and keeping inflation in check,” said Ali from Standard Chartered.
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