Lebanon central bank audit demanded by creditors to resume

Lebanon's President Michel Aoun and Lebanon's Finance Minister Youssef Khalil meet with a delegation from Alvarez & Marsal (A&M) consulting firm at the presidential palace in Baabda, Lebanon October 20, 2021. (Dalati Nohra)
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Updated 20 October 2021

Lebanon central bank audit demanded by creditors to resume

  • The Alvarez & Marsal (A&M) auditing firm had launched an audit in September last year but was forced to pull out

BEIRUT: A New York-based firm contracted by the Lebanese government is to resume its audit of the central bank Thursday in line with creditors’ demands, the Lebanese presidency and a top official said.
The International Monetary Fund and France are among creditors demanding an audit of Banque du Liban as part of urgent reforms to unlock financial support to deal with an economic crisis branded by the World Bank as one of the planet’s worst since the mid-19th century.
The Alvarez & Marsal (A&M) auditing firm had launched an audit in September last year but was forced to pull out some two months later because the central bank failed to hand over necessary data.
On Wednesday, President Michel Aoun met with A&M managing director James Daniell, who informed him that “the company will begin tomorrow its forensic financial audit of Lebanon’s central bank after all arrangements were completed,” the presidency said.
Finance ministry official Georges Maarawi told AFP that the auditing firm “will have 12 weeks to collect information and draft a report,” under the terms of its contract with the Lebanese government.
The contract with A&M was signed by Finance Minister Youssef Khalil last month only days after he took up his post.
In December, parliament approved a bill that suspends banking secrecy laws for one year to allow for the forensic audit — which is widely seen as a necessary prelude to any agreement with the IMF over financial assistance.
Maarawi, the finance ministry official, said that Lebanese authorities are currently holding “technical meetings” with the IMF, without elaborating.
Following a meeting with IMF executive director Mahmoud Mohieldin on Tuesday, Prime Minister Najib Mikati said that Lebanon was betting on an IMF plan to help it survive its unprecedented financial crunch.
“We hope to clinch a cooperation agreement before the end of the year,” he said.


Turkish lira skids to new low after Erdogan cites Islamic usury

Updated 20 December 2021

Turkish lira skids to new low after Erdogan cites Islamic usury

  • Currency fell to as far as 17.6 to the dollar, an all-time low
  • Inflation jumped to 21 percent last month, expected to pass 30 percent next year

ISTANBUL: Turkey’s lira sputtered to another record low on Monday despite $6 billion in central bank interventions this month, after President Tayyip Erdogan doubled down on his unorthodox low-rates policy by referring to Islamic usury doctrine.
The president’s push for 500 basis points of interest rate cuts since September has set off Turkey’s worst currency crisis in two decades, with the lira crashing 35 percent in the last 30 days. read more
The currency fell to as far as 17.6 to the dollar, an all-time low, and was at 17.44 at 0747 GMT.
Erdogan defended his economic policy on Sunday and likened the currency volatility to attacks on the country’s economy that have roots in 2013 nationwide protests, which began in Istanbul’s Gezi Park over access to green space. read more
“We’re lowering interest rates. Don’t expect anything else from me. As a Muslim, whatever (Islamic teaching) requires I will continue to do that,” he said, referring to Islamic finance in which high interest, or usury, is typically avoided.
Despite widespread criticism and rapid fallout for the economy — including Turks’ fast eroding incomes and savings — Erdogan has forged ahead with his so-called new economic program that prioritizes exports and lending.
Under pressure from the president, the central bank cut rates again last week by 100 points, sending real rates deeper into negative territory, a red flag for investors and savers.
Inflation jumped to 21 percent last month and is expected to pass 30 percent next year. Economists and opposition lawmakers say the rapid monetary easing is reckless and it has sent import prices soaring.
The lira has lost more than half of its value this year and is by far the worst performer among peers for three years running, due largely to damaged monetary credibility, analysts say.
In an attempt to slow the selling and address what it called “unhealthy” prices, the central bank has intervened five times this month. Bankers’ calculations show it has sold more than $6 billion from its already depleted foreign reserves.


Pakistan’s finance chief says IMF program won’t hurt economic growth

Updated 06 November 2021

Pakistan’s finance chief says IMF program won’t hurt economic growth

  • Shaukat Tarin maintains the country is likely to surpass the Rs6 trillion mark in revenue collection
  • The finance chief informs the country is not too far away from the IMF’s recommended reforms

ISLAMABAD: Pakistan’s finance chief said on Friday the International Monetary Fund (IMF) bailout package was not likely to impede the country’s economic growth while addressing a gathering in Karachi.
The IMF provided a $6 billion lifeline to Pakistan in 2019 to ease the country’s economic challenges caused by a massive current account deficit.
However, the loan was offered under strict economic conditions that required the government to end subsidies, generate greater tax revenue and implement painful structural reforms.
Experts warned the IMF program would undermine Prime Miniter Imran Khan’s promise to build a future welfare state where underprivileged segments were going to find a more comfortable economic life.
“I do not think the IMF program is going to impede our 5 percent growth rate,” The Express Tribune quoted Tarin as saying. “If we remain within the range of 5, 5.25 and 5.5 percent, we will be fine.”
He said the government had already surpassed its revenue collection target by Rs230 billion until the current stage of the fiscal year, adding it was likely to cross the Rs6 trillion mark by the end of it.
The country’s finance chief also maintained a comprehensive economic plan and political will were imperative for Pakistan’s progress, reported the APP news agency.
He said the country was not too far away from the IMF’s recommended reforms, as the international financial institution continues to scrutinize the economic performance of the country.


Pakistan Stock Exchange plunges amid political, economic uncertainty

Updated 13 October 2021

Pakistan Stock Exchange plunges amid political, economic uncertainty

  • Local media reported the benchmark KSE-100 index lost about 800 points before bouncing back toward the end of the day
  • Financial experts attributed the market’s erratic behavior to recent political and economic developments

ISLAMABAD: The Pakistan Stock Exchange lost about 661 points on Wednesday due to the growing political and economic uncertainty in the country, reported the local media.
According to Dawn newspaper, the market opened on a positive note before the benchmark KSE-100 index started declining in the afternoon.
The stock exchange even lost about 800 points during the intra-day trade before bouncing back toward the end of the day.
Financial experts attributed the market’s erratic behavior to recent developments taking place on the country’s political and economic fronts.
Mohammad Sohail of Topline Securities told Dawn that “investors were worried over the controversy surrounding the appointment of the Inter-Services Intelligence chief.”
He was referring to the widespread media speculation about an alleged rift between Prime Minister Imran Khan and Army Chief Gen. Qamar Javed Bajwa over last week’s appointment of Lt. Gen. Nadeem Ahmad Anjum as the ISI director general which was not notified by the political administration.
Ahsan Mehanti from Arif Habib Corporation mentioned the country’s negotiations with the International Monetary Fund (IMF) over a bailout package while explaining the decline of the stock market.
“Uncertainty over outcome of ongoing Pak/IMF talks under EFF [Extended Fund Facility] and economic uncertainty amid surging trade deficit, bond yields played a catalyst role in the bearish close,” he said.
Pakistan has also witnessed a decline of its national currency in recent months due to import payments and flight of the US dollar to neighboring Afghanistan.
The country’s finance minister Shaukat Tarin is also visiting Washington to hold a policy-level dialogue with top IMF officials to secure the next installment of the $6 billion bailout package


World Bank says Pakistan’s external debt stock rose to over $108 billion in 2020

Updated 12 October 2021

World Bank says Pakistan’s external debt stock rose to over $108 billion in 2020

  • According to the bank’s International Debt Statistics 2022 report, Pakistan’s foreign debt has increased by 16 percent since 2018
  • On average, the external debt stock of low- and middle-income countries rose by 5.6 percent to $8.7 trillion in 2020

KARACHI: Pakistan’s accumulated debt stock rose by 7.6 percent to $108.53 billion in 2020 from $100.83 billion a year before that, said a study conducted by the World Bank on Monday.
The global lending agency said its report, International Debt Statistics 2022, showed the debt vulnerabilities of low-income countries had significantly increased as a result of the COVID-19 pandemic.
Pakistan was among the top 10 countries that became eligible for debt relief under the Debt Services Suspension Initiatives announced by the G20 creditors after the emergence of the pandemic.
Data presented in a tabulated form in the report showed the overall rise in the country’s debt last year.
“Net inflows from other private creditors rose 15 percent in 2020 to $14 billion but were highly concentrated and also reflected rollovers and extension of new credits by commercial bank loans to Pakistan in the context of the IMF program,” the report added.
Pakistan’s debt stock was $63.09 billion in 2010 which rose to $93.5 billion by 2018, up by 48 percent while stock of debts rose by 16 percent between 2018 and 2020, according to the figures quoted in the World Bank report.
The external debt stock of low- and middle-income countries in 2020 rose, on average, by 5.6 percent to $8.7 trillion.
However, for many countries the increase was in double digits.
The external debt stock of countries eligible for the G-20 debt service initiative rose on average by 12 percent to $860 billion. In certain cases, the increase was even recorded at 20 percent or more.
For most countries, the rise in external indebtedness was not matched by the growth of gross national income (GNI) and exports, the report informed.
The external debt-to-GNI ratio of low- and middle-income countries’ rose to 42 percent in 2020 from 37 percent in 2019 while their debt-to-export ratio increased to 154 percent in 2020 from 126 percent in 2019.
Governments around the world responded to the COVID-19 pandemic with massive fiscal, monetary, and financial stimulus packages.
“While these measures were aimed at addressing the health emergency, cushioning the impact of the pandemic on the poor and vulnerable and putting countries on a path to recovery, the resulting debt burden of the world’s low-income countries rose 12 percent to a record $860 billion in 2020,” said a World Bank statement.
Even before the pandemic, many low- and middle-income countries were in a vulnerable position, undergoing a slowdown of economic growth and public and external debt at elevated levels.
Taken together, external debt stocks of low- and middle-income countries rose by 5.3 percent in 2020 to $8.7 trillion.
“We need a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency,” said David Malpass, the president of the World Bank Group in a statement, adding: “Sustainable debt levels are vital for economic recovery and poverty reduction.”
Overall, in 2020, net inflows from multilateral creditors to low- and middle-income countries rose to $117 billion, the highest level in a decade.
Net debt inflows of external public debt to low-income countries rose by 25 percent to $71 billion, also the highest level in a decade.
Multilateral creditors, including the International Monetary Fund, provided $42 billion in net inflows while bilateral creditors accounted for an additional $10 billion.


Pakistan offers ‘all possible’ utility, tax incentives to attract more Chinese investment

Updated 11 October 2021

Pakistan offers ‘all possible’ utility, tax incentives to attract more Chinese investment

  • Prime Minister Imran Khan says his country needs investment to accelerate industrialization
  • It is vital to creating employment opportunities in South Asian nation of roughly 220 million

ISLAMABAD: Pakistani Prime Minister Imran Khan has directed authorities to take “all possible” measures to provide land, electricity and gas connections as well as tax incentives to attract more Chinese companies to invest in the special economic zones (SEZs) in Pakistan, his office said on Monday. 
The directives were issued at a meeting PM Khan presided over in Islamabad on facilitating Chinese investors in Pakistani SEZs. It was attended by China’s Ambassador to Pakistan Nong Rong, Pakistani Finance Minister Shaukat Tarin, Planning Minister Asad Umar, PM’s aide on China-Pakistan Economic Corridor (CPEC) Khalid Mansoor and other officials. 
The development comes after PM Khan’s assurance to several Chinese business leaders last month that he would hold monthly meetings to “review progress regarding issues faced by Chinese investors.” 
“Pakistan needs investment to accelerate industrialization,” he told participants of Monday’s meeting in Islamabad. “It is critical to create maximum employment opportunities for our growing population, 65 percent of which is under the age of 35.” 
The attendees were informed that out of a total of 27 SEZs in Pakistan, work on five industrial zones in Sindh’s Dhabeji, Khyber Pakhtunkhwa’s Rashakai, Bostan in Balochistan, Allama Iqbal Industrial City in Punjab and Balochistan’s Gwadar was in full swing. 
“An effective one-window operation facility is being set up at each of these SEZs and a facilitation center in the CPEC Authority to resolve all issues of potential Chinese investors under one roof,” the PM’s office said in a statement. 
In a Twitter post, Chinese Ambassador Nong said a successful webinar, titled “Political Economy of Pakistan and Business Environment,” had attracted nearly 200 participants from Chinese companies on Sunday. 
“It has enhanced mutual understanding and strengthened their confidence in a win-win cooperation between Chinese and Pakistani business communities,” he said.