Pakistan’s finance minister signals cuts in fuel subsidies amid talks with IMF 

Pakistan's finance minister Miftah Ismail addresses the Atlantic Council in Washington, United States on April 22, 2022. (Ministry of Finance)
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Updated 23 April 2022

Pakistan’s finance minister signals cuts in fuel subsidies amid talks with IMF 

  • Miftah Ismail says there should be some targeted subsidy for poor as things have become very difficult 
  • The minister says Pakistan is ‘elite-benefiting country’ because almost every subsidy goes to the rich 

KARACHI: Pakistan’s finance minister, Miftah Ismail, on Friday signaled a hike in the prices of petroleum products in Pakistan in line with the international prices, following his talks with the International Monetary Fund (IMF).
The finance minister said this while highlighting the economic agenda and priorities of the new government at an event hosted by Washington-based Atlantic Council think-tank. Ismail is in Washington to attend 2022 spring meetings of the IMF and the World Bank Group (WBG), and to meet with IMF officials for the revival of stalled $6 billion loan program.
Pakistan and the IMF have resumed talks for the completion of the seventh review under the IMF’s Extended Fund Facility, which has disbursed $3 billion out of the stipulated $6 billion to the South Asian country.
The discussions were stalled after the IMF expressed concerns over the former government’s around $1.7 billion relief package, including freezing of petroleum prices and cut in electricity tariff in response to rising inflation.
“We actually had good discussions with the fund and they have talked about removing the subsidy on fuel. I agree with them. Yes, there should be some targeted subsidy for the very poor because life has become very difficult because of the Ukraine war,” Ismail said.
“We are an elite-benefiting country that almost every subsidy you speak of goes to richest people. We can’t afford to give the subsidies that we’re giving. So we need to curtail these.”
The finance minister informed participants that Pakistan was unable to achieve the desired results, including the increase in foreign exchange reserves, despite the IMF program.
“In IMF program normally after belt tightening in first year some consolidation takes place in second year and third year of the program normally sees exchange reserve going up and some consolidation taking place,” he said.
“This is completely inverted in Pakistan. We lost lot of forex reserves and the IMF program is delayed quite a bit. One of the reasons I am here is to try and set the program back on the track.”
Ismail said his government’s aim was to bring about economic and fiscal stability, which could lead to recovery and growth. The government would ensure that this growth is all inclusive by taking care of the poor segments of the society, he added.
The finance minister informed about the ballooning accumulated losses in the country’s energy sector and termed it a “management failure.”
“Accumulated loss in power sector is about Rs2400 billion and another Rs1500 billion. I am told about gas sector that is not good way to run the country,” Ismail said.
“These are basic management things we have failed to do that is why we keep going to the fund again and again and until we get our focus right we will not be able to fix those things. We are now absolutely sure that we have to do it.”
To a question about his key areas of focus during his stay in office, the minister described the revival of the IMF program as his “top priority.”
“One success for me would be to get the IMF program back on track,” Ismail said. “We want to leave with 50 percent more (currency) reserves than what we have inherited and most importantly, the measure on control of current account deficit. We still would have the deficit may be at 2-3 percent, which is sustainable ... but 6 percent is beyond to afford.”
The minister reiterated his government’s commitment to attract US investment to all sectors of Pakistan’s economy by creating a business-friendly environment. The government recognized the potential of fintech and digital economy, and the sector would be facilitated further, he said.
Ismail said they would take step-wise measures to ensure a robust increase in Pakistan’s exports to resolve the balance of payment and current account deficit issues.
Frederick Kempe, president of the Atlantic Council, in his introductory remarks said Pakistan and the US had a longstanding partnership based on shared values of democratic governance, regional security and economic growth.
The Atlantic Council was particularly working to promote economic cooperation between the two countries, Kempe added.


Pakistan’s central bank reserves decline to near four-year low

Updated 9 sec ago

Pakistan’s central bank reserves decline to near four-year low

  • Central bank data shows Pakistan’s liquid foreign exchange reserves stand at $6.7 billion
  • Forex reserves can only cover one month of imports, says finance expert Tahir Abbas

ISLAMABAD: As the forex reserves of Pakistan’s central bank decreased by $782 million to a four-year low of $6.7 billion during the week that ended Dec. 2, a financial expert on Friday said the country needed to employ efforts on a “war footing basis” to manage the crisis.

The State Bank of Pakistan’s (SBP) data showed that it was only left with liquid foreign exchange reserves worth 6.7 billion during the week that ended on December 2. The central bank’s net reserves with other banks remained at $5.867 billion, bringing the country’s total reserves to $12.58 billion.

The last time the central bank’s reserves were this low was on January 18, 2019, when it had some $6.64 billion in reserves.

The South Asian nation is already undergoing a financial crunch, largely aggravated by the unprecedented floods that affected more than 33 million people. Results from a damage assessment survey estimated that the deluges have cost the country more than $30 billion in damages.

“Pakistan’s forex reserves have fallen to a critical level that can only cover one month of imports,” Tahir Abbas, head of research at Arif Habib Limited, a Pakistani security brokerage firm, told Arab News.

“The government needs to manage the foreign exchange reserves on a war footing basis by expediting the process to complete the impending review of the International Monetary Fund (IMF),” he added.

He added that the completion of the IMF review will not only help inflows from the global money lender, but also from other multinational lenders.

Abbas said to meet the deficit, the government is also trying to arrange $4.2 billion from Saudi Arabia under an emergency relief package, including $3 billion in deposits and $12 billion worth of oil on deferred payments.

“In addition, the government needs to stop the bleeding on the Current Account Deficit (CAD) because the country has to run the CAD at a minimum side,” Abbas said.

The IMF review for the release of Pakistan’s next tranche of funding has been pending since September, which has left the country in dire need of external financing.

Islamabad has said all targets for the IMF review have been completed and that withholding a tranche despite that would not make sense.


Pakistan’s top court declares agreement for Reko Diq revival legal

Updated 09 December 2022

Pakistan’s top court declares agreement for Reko Diq revival legal

  • Pakistan’s top court blocked Reko Diq’s implementation in 2013 over contractual issues
  • Government consulted experts, Balochistan Assembly taken into confidence, observes court

ISLAMABAD: Pakistan’s top court on Friday declared an agreement between the country and two international firms, for the development of the Reko Diq mine, as legal, local media reported.

The Reko Diq mine is located in Pakistan’s southwestern Balochistan province which is said to have one of the world’s largest undeveloped copper and gold deposits. The development of the project was suspended in 2011 after Pakistan denied the Tethyan Copper Company, a joint venture between Barrick Gold of Canada and Antofagasta Minerals of Chile, license to continue work.

The country’s Supreme Court blocked the Tethyan Copper Company in 2013 from developing Reko Diq following a court case on how the contract had been awarded. However, Pakistan reached an out-of-court settlement with the mining firms in March this year to avoid paying the $9 billion penalty announced by the World Bank’s arbitration court, and the government said it was hopeful that Barrick and its partners would invest $10 billion in the project.

The verdict was announced by a five-member bench headed by Chief Justice Umar Ata Bandial.

“In its 13-page short order issued today, the court observed that the government had entered the agreement after consulting experts, as per the court order, and the Balochistan Assembly was taken into confidence regarding the agreement,” Dawn, a leading newspaper in Pakistan, reported.

The court observed that the Balochistan Assembly lawmakers were briefed on the matter and they did not raise any objections to the agreement, Dawn said. It said the court order noted that Barrick Gold Corporation had assured labor rights would not be violated during the project’s implementation and that the agreement met environmental requirements.

“There was nothing illegal in the new Reko Diq agreement, the court concluded, adding that it was also not in violation of its 2013 judgment,” Dawn reported.

The revival of Reko Diq project is expected to give a fillip to the economy by creating a more positive investment sentiment and increasing employment opportunities in the country.


FM Bhutto-Zardari urges world to shed ‘stereotypical’ image of Pakistan

Updated 09 December 2022

FM Bhutto-Zardari urges world to shed ‘stereotypical’ image of Pakistan

  • Bhutto-Zardari urges countries to lift travel advisories against Pakistan
  • The foreign minister is on a three-day visit to Indonesia and Singapore

ISLAMABAD: Foreign Minister Bilawal Bhutto-Zardari urged the world to let go of Pakistan’s “stereotypical” image and invited countries to look at the country with a fresh perspective, Singaporean English-language daily The Strait Times reported on Friday.

Bhutto-Zardari, who embarked on a three-day visit to Indonesia and Singapore from December 7-9, told the Singaporean publication that Pakistan had many opportunities to offer to the world, therefore, countries should revive their travel advisories against it.

On Friday, the minister held a meeting with his Singaporean counterpart, Dr. Vivian Balakrishnan, reviewing the state of bilateral relations, enhancement of bilateral engagements and cooperation.

Pakistan also offered support to the Association of Southeast Asian Nations (ASEAN) led processes in the Asia Pacific region.

“As a young political leader, I strongly feel that the world needs to have a fresh look at Pakistan, away from its stereotypical image,” Bhutto Zardari said.

“There are so many opportunities in Pakistan awaiting the world, for which the first step is to lift the travel advisories against the country,” he added.

The foreign minister said he felt strongly that the world “needs to look at us more objectively, as a promising emerging market.”

He said exchanges between Singapore and Pakistan over the years had lost momentum.

“[I am going to] to revive that momentum and intensify our bilateral exchanges. Pakistan is keen to strengthen this relationship in all dimensions,” he said.

Highlighting the political and socioeconomic challenges that Pakistan had been facing for the last few decades, Bhutto-Zardari said the country had come a long way.


After devastating floods, World Food Program calls for converting Pakistan’s debt to hunger relief

Updated 13 min 58 sec ago

After devastating floods, World Food Program calls for converting Pakistan’s debt to hunger relief

  • Floods have caused an additional 7.6 million people to become food insecure, WFP official says
  • 20.6 million people, as per UN data, need humanitarian assistance in flood-ravaged Pakistan

ISLAMABAD: The World Food Program (WFP) has stressed converting the debt of disaster-affected countries like Pakistan to hunger relief, as the number of food-insecure people rises to 14.6 million in Pakistan following the devastating floods this year, a senior WFP official said on Thursday.

The cash-strapped South Asian nation had already been going through a serious financial crunch before the heavy monsoon rains hit in mid-June this year, triggering unprecedented floods that, at one point, left a third of the country’s territory submerged. Governmental estimates show the floods affected more than 33 million people or one in every seven Pakistanis.

Raging floods swept away huge swaths of crops, leaving already impoverished families struggling to get access to food and clean drinking water. With the country already undergoing a foreign reserves shortage, farmers and officials have warned that Pakistan now faces serious food shortages at a time when food prices around the world are high.

After a damage assessment survey, Pakistani officials have estimated that the deluges have cost the country more than $30 billion in damages.

“In general, food insecurity has doubled in Pakistan because of the floods, meaning the country has seven million food insecure people, and floods have added almost 7.6 million people more [to that number],” Arif Husain, WFP’s chief economist, and director research assessment and monitoring division, told Arab News in Islamabad.

“So now, we are talking about 14.6 million people, which is a huge jump.”

Based in Rome, Italy, Husain’s work focuses on analyzing food security and welfare conditions in developing countries to inform humanitarian and development responses.

“One thing which we are proposing is that maybe we need to think about debt relief for hunger relief, meaning if we can have debt relief for climate, why not debt relief for hunger relief?” he said.

“These poor countries which have too much debt can use that for exchange, for at least importing their food and fertilizers.”

Speaking about measures needed to bring down food inflation, Husain said Pakistan should consider starting trade with India.

“If China and India can trade then, we should reconsider trade with India too as it will bring food inflation down quickly,” he said, adding that the world needed to help Pakistan to enable it to afford food, fuel, and fertilizers to deal with looming food crisis.

“For Pakistan, relief is required as urgently as possible,” the WFP official said, adding that his organization was running a big operation in the South Asian nation, but others should also extend a helping hand due to the magnitude of the crisis.

“WFP alone is assisting about 2.7 million people in Pakistan right now — including Sindh, Balochistan, and southern Punjab — and that needs to continue, so we can save people’s lives,” he added.

WFP is providing technical assistance and helping in building human capital, Husain said, adding the UN body was also investing in education and nutrition.

“We are working in food for world type projects where you are building livelihoods, you are building the resilience of people, and also working with the government for the system development in terms of technical assistance providing knowledge,” he added.


Pakistan’s ‘Harry Potter’ spinner works his magic, takes fifer on debut

Updated 09 December 2022

Pakistan’s ‘Harry Potter’ spinner works his magic, takes fifer on debut

  • Debutant Abrar Ahmed dismisses seven English batters in Multan Test match
  • He becomes 13th Pakistani bowler to take five or more wickets in an innings on debut

MULTAN: Pakistan debutant Abrar Ahmed mesmerized England on Friday, grabbing five wickets as the visitors reached 180-5 at lunch on the opening day of the second Test in Multan.

The 24-year-old — nicknamed “Harry Potter” by friends because he wears glasses similar to those of the fictional boy wizard — spun magic of his own after England won the toss and decided to bat on a turning pitch.

He dismissed Zak Crawley (19), Ben Duckett (63) and Joe Root (eight) in the first two hours, before sending Ollie Pope (60) and Harry Brook (nine) on their way.

Ahmed became the 13th Pakistan bowler to take five or more wickets in an innings on debut.

At the break, Ben Stokes and Will Jacks were at the crease with 14 and zero respectively after the first session was extended for Friday prayers.

It was in complete contrast to the first Test, when England smashed 174-0 by lunch on the opening day.

Pakistan, aiming to level the series after losing the first Test by 74 runs, included three spinners in the line-up after paceman Naseem Shah was ruled out with a shoulder injury.

Despite losing wickets regularly, England scored at a brisk pace, with Duckett knocking nine boundaries and a six and Pope cracking five to the rope.

Pakistan captain Babar Azam employed spin as early as in the ninth over, and Ahmed bowled Crawley with a sharp incoming delivery with his fifth Test ball.

He then trapped Duckett and Root leg-before — both given out only after Azam reviewed the on-field calls.

Ahmed made it 167-5 when Pope and Brook miscued aggressive shots and were caught.