‘Inflationary storm’ expected as Pakistan hikes fuel, electricity tariffs to win IMF approval

Auto rickshaw drivers shout slogans during an anti-government demonstration to a protest against the inflation and fuel price hike in Lahore, Pakistan, on June 3, 2022. (AFP)
Short Url
Updated 03 June 2022

‘Inflationary storm’ expected as Pakistan hikes fuel, electricity tariffs to win IMF approval

  • The move has rattled Pakistani industrialists who say many will be forced to close down their units
  • Economists say the price hike would open the “floodgates” of inflation and most affect the country’s poor

KARACHI: Pakistan is bracing for an ‘inflationary storm’ after the government raised fuel and electricity prices this week to secure International Monetary Fund (IMF) bailout money, with industrialists warning the move would dent the viability of industries and lead to mass closures. 

Pakistan entered a three-year IMF deal in 2019, but is struggling to implement tough policy commitments to revive the $6 billion program desperately needed to stabilize the cash-strapped South Asian nation.

A pending tranche of over $900 million is contingent on a successful IMF review, and would also unlock other multilateral and bilateral funding for Pakistan, whose foreign reserves currently cover just two months of imports.

After the IMF pushed Islamabad to roll back its subsidies for the oil and power sectors during talks in Doha last week, the finance ministry raised fuel prices by around 20 percent, and within a week by another 17 percent, effective from Friday, today.

The fuel hikes have come along with an increase in the basic power tariff by 47 percent, rattling Pakistani industrialists who say they will be forced to close down their units.

“No one can think about setting up industries after the steps being taken by the government because it would render the business unviable and industries will be eliminated in large numbers,” Muhammad Idreed, president of the Karachi Chamber of Commerce and Industry (KCCI), told Arab News. 

“The outcome of the tariff and fuel price hike would be detrimental for the industries as it would increase unemployment, lead to a drastic cut in exports and increase inflation in the country as cost of almost all inputs has more than doubled.”

Industrialists have called for remedial measures, including rate cuts, to offset the new price hikes and save the industry, especially small and medium enterprises.

“The sharp rise in prices of petroleum products, excessive power tariff and severe energy crisis are catastrophic for business and industry,” Saqib Naseem, the chairman of the Pakistan Yarn Merchants Association (PYMA), said in a statement.

With the new price hikes, Pakistan’s inflation rate is expected to soar to 19 percent this month — its highest in over a decade.

“The direct impact of the fuel and power tariff hike would be on the Consumer Price Index (CPI), which will add 1.5 percent and 2 percent to the prevailing inflation rate,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News. 

“The combined inflationary impact of the fuel and electricity tariff, if the determined tariff is implemented, would be around 19 percent in June 2022. There would be a second round impact, when the price hike of goods and services after the cost of input is increased.” 

Economists say the price hike would open the “floodgates” of inflation and hit the country’s poor.

“The inflationary storm is going to destroy the purchasing power of ordinary households in the coming days and months,” Uzair Younus, director of the Pakistan Initiative at the Washington-based Atlantic Council, told Arab News. “To mitigate suffering and protect the most vulnerable, the government should redirect resources to direct cash transfers. They have already announced such a measure but the quantum of funding must be increased.”

Adil Jilani, head of the Economic Division at Trust Securities & Brokerage, told Arab News even harsher measures were expected in the future as Pakistan would be asked by the IMF to “do more” to meet pre-conditions and arrange external financing requirements for next year.

“The government has increased petroleum prices to an unprecedented level and now the government needs to ‘do more’ for the IMF bailout package along with external financing requirements of $37-38 billion that the country needs during the next fiscal year FY23,” Jilani said. 

Younus added: “There is still about a Rs9 subsidy on petrol and about Rs23 subsidy on diesel. In addition, the government has to place a 17 percent sales tax and a Rs30 levy, as agreed to with the IMF months ago.

“Assuming oil price stays the same and rupee doesn’t weaken further, we are looking at petrol touching about 285 rupees a liter,” he said. 

Pakistan’s equity market has already reacted to the latest developments, which also include international credit agency Moody’s downgrading Pakistan’s outlook from stable to negative over a “heightened external vulnerability risk” and the inability to secure additional external financing. 

The benchmark KSE 100 index declined by 923 points, or 2.2 percent, to close at 41,314.88 points on Friday.

“Stocks fell across the board after Moody’s cut Pakistan outlook to negative on fiscal risks amid delays in IMF bailout and concerns over global equity selloff,” Ahsan Mehanti, chief executive of Arif Habib Corporation, told Arab News.

“Dismal data of $43.33 billion trade deficit for July 2021 to May 2022, falling forex reserves and surging government treasury bond yields, and saving rate hike played a catalyst role in bearish close.” 

Anger of Muslims at Salman Rushdie understandable, attack ‘terrible’ — ex-PM Khan

Updated 19 August 2022

Anger of Muslims at Salman Rushdie understandable, attack ‘terrible’ — ex-PM Khan

  • Ten years ago, Khan pulled out of event in India because Rushdie would also be appearing, the two men exchanged insults
  • When asked for his response to knife attack that left Rushdie badly wounded, Khan told the Guardian: “It’s terrible, sad“

ISLAMABAD: Pakistan’s former prime minister Imran Khan has condemned the attack on novelist Salman Rushdie, describing it as “terrible” and “sad,” and saying while the anger of the Muslim world over Rushdie’s book The Satanic Verses was understandable, it did not justify the assault.

Ten years ago, Khan pulled out of an event in India because Rushdie would also be appearing and the two men exchanged insults. But in a wide-ranging interview with the Guardian published on Friday, when asked for his response to the knife attack in New York state that left Rushdie badly wounded, Khan said: “I think it’s terrible, sad.”

“Rushdie understood [why his book was offesnive], because he came from a Muslim family. He knows the love, respect, reverence of a prophet that lives in our hearts. He knew that,” Khan said. “So the anger I understood, but you can’t justify what happened.”

The man accused of stabbing Rushdie last week in western New York pleaded not guilty to second-degree attempted murder and assault charges on Thursday and was held without bail.

Hadi Matar, 24, is accused of wounding Rushdie, 75, on Friday just before the author was to deliver a lecture on stage at an educational retreat near Lake Erie. Rushdie was hospitalized with serious injuries in what writers and politicians around the world decried as an attack on the freedom of expression.

The attack came 33 years after Ayatollah Ruhollah Khomeini, then Iran’s supreme leader, issued a fatwa, or religious edict, calling on Muslims to assassinate Rushdie a few months after “The Satanic Verses” was published. Many Muslims saw passages in the book about the Prophet Muhammad as blasphemous.

Rushdie, who was born in India to a Muslim Kashmiri family, has lived with a bounty on his head, and spent nine years in hiding under British police protection.

In 1998, Iran President Mohammad Khatami government distanced itself from the fatwa, saying the threat against Rushdie was over.

But the multimillion-dollar bounty has since grown and the fatwa was never lifted: Khomeini’s successor, Supreme Leader Ayatollah Ali Khamenei, was suspended from Twitter in 2019 for saying the fatwa against Rushdie was “irrevocable.”

Pakistan picks State Bank, Saudi Central Bank veteran Jameel Ahmad as new governor

Updated 49 min 5 sec ago

Pakistan picks State Bank, Saudi Central Bank veteran Jameel Ahmad as new governor

  • Pakistan’s central bank has been without a governor since May
  • New central bank governor will serve a five-year term

KARACHI: Pakistan named Jameel Ahmad, a deputy governor of the State Bank of Pakistan (SBP), as the central bank’s new governor on Friday, appointing him for a five-year term. 
The Pakistani central bank had been without a full-time governor since May and one of Ahmad’s first tasks will be to chair a monetary policy meeting to consider its policy rate. 
Ahmad’s career spans more than 30 years in various positions at the State Bank of Pakistan and the Saudi Central Bank, the country’s central bank said in a profile on its website. 
Among these included his stint as a member of the central bank’s Monetary Policy Committee. Ahmad was also the chairman of the Board of Directors of Deposit Protection Corporation of Pakistan. 
During his career, Ahmad also coordinated with various ministries and represented the central bank in various parliamentary committees including the Senate and National Assembly committees. 
According to the State Bank of Pakistan, Ahmad has significant contributions to his credit in formulating the policy and regulatory framework for the banking systems of Pakistan and Saudi Arabia and monitoring their financial soundness and stability. 
As a deputy SBP governor, Ahmad played an instrumental role in the digitization of banking and payments as well in the enabling of financial technology services, the bank said. 
Prior to his appointment as deputy governor of the Pakistani central bank in 2018, he was executive director of its Banking Supervision and Financial Stability Group.

Major Pakistani internet providers report outages

Updated 51 min 25 sec ago

Major Pakistani internet providers report outages

  • Widespread internet blackouts were reported in the capital, Islamabad, and the eastern city of Lahore
  • Pakistan, a country of about 220 million people, has a large and growing internet user base 

ISLAMABAD: Major Pakistani telecom operators reported that internet connectivity was down in some regions on Friday, including major urban centres, with one company reporting that flooding after heavy rain was responsible for the problem.

The telecoms regulator said it was investigating.

State-owned Pakistan Telecommunication Company Ltd's (PTCL) optical fibre network was experiencing faults and users in northern and central regions were facing an outage, it said on Twitter.

"Due to heavy rains and floods, PTCL's optical fibre network is experiencing some technical faults," it said, adding it was working to restore services.

PTCL's problems had a knock-on effect on other service providers, including on cellular data.

Telenor Pakistan, backed by Norway's Telenor, said its internet network was down because of a network issue at its internet service provider.

Pakistani users posting on social media complained of other telecom providers also being down but there were no statements acknowledging problems from other companies.

Widespread internet blackouts were reported in the capital, Islamabad, and the eastern city of Lahore, Pakistan's second-largest urban centre, where fixed-line broadband users as well as cellular network users reported no connectivity.

But numerous users reported that Pakistan's largest telecommunications provider, Jazz, owned by Amsterdam-listed global provider Veon, was up and running.

"Jazz network is by and large unaffected with our robust architecture and multiple layers of protection to provide consistent experience to our users," Jazz's head of external communications, Khayyam Siddiqi, told Reuters.

He said the provider was experiencing a spike in data traffic following the outages on other networks.

Pakistan, a country of about 220 million people, has a large and growing internet user base.

According to the Pakistan Telecommunication Authority, there are 116 million users of 3G and 4G services and 119 million broadband subscribers. 

Pakistan ‘categorically rejects’ Dehli’s announcement to register new voters in Indian-administered Kashmir

Updated 19 August 2022

Pakistan ‘categorically rejects’ Dehli’s announcement to register new voters in Indian-administered Kashmir

  • India to register over 2 million voters in a move local politicians have called attempt to influence November elections
  • Kashmiris fear rule changes will allow BJP government led by PM Modi to alter demographics of the region

ISLAMABAD: Pakistan said on Friday it rejected what it called New Delhi's attempt at “pre-poll rigging” in Indian-administered Kashmir after announcements over two million new voters would be registered in the contested region, a move local political parties have called an attempt to influence upcoming elections.

The Muslim-majority region is claimed in full but ruled in part by nuclear arch-rivals India and Pakistan, who have fought two wars over control of the territory. New Delhi stripped semi-autonomy from its portion of the region in August 2019, changing the Indian constitution to allow non-Kashmiris to vote and own land there.

In a statement by the Pakistani foreign office, Islamabad said the announcement that even temporary residents in Kashmir, including outside workers and security personnel, would be permitted to register as ‘voters’ was an attempt “to influence the outcome of ‘so-called’ elections.”

“Despite its reprehensible measures that have followed the illegal and unilateral actions of 5 August 2019, India will not be able to break the will of the Kashmiri people or to mislead the world community,” the foreign office said, calling on New Delhi to desist from violating “international law, the UN Charter, and the 4th Geneva Convention,” which relates to the protection of civilians in times of war.

“India must also release all political prisoners detained on trumped-up charges, halt human rights violations … lift the brutal military siege, and let the Kashmiris exercise their legitimate right to self-determination as stipulated in the relevant UN Security Council resolutions,” the foreign office added.

Jammu and Kashmir Chief Electoral Officer Hirdesh Kumar told reporters on Wednesday more than 2 million new voters were expected to be enrolled in the region ahead of local polls due in November. The new registrants could increase the voter count by more than a third, adding to the existing 7.6 million voters in the region.

Kashmiris fear the rule changes will allow the Hindu-nationalist Bharatiya Janata Party (BJP) government led by Prime Minister Narendra Modi to alter the demographics of the region. The BJP says its policies in the region are for the benefit of ordinary Kashmiris.

Islamabad court orders ex-PM Khan aide, facing sedition charges, be hospitalized till Monday

Updated 19 August 2022

Islamabad court orders ex-PM Khan aide, facing sedition charges, be hospitalized till Monday

  • Judicial magistrate orders Gill be reexamined, medical report be submitted in court by Monday
  • Video footage outside local court on Friday showed Gill in a wheelchair saying “I can’t breathe”

ISLAMABAD: A district court in Islamabad on Friday suspended the physical police remand of Dr Shahbaz Gill, the chief of staff of ex-premier Imran Khan, and ordered police to keep him in hospital until Monday.

Police had presented Gill in court today seeking an extension in his physical remand for another eight days to complete investigations in a case against him involving charges of sedition and incitement to mutiny.

“Shahbaz Gill is apparently unwell and he is under treatment. His physical remand is suspended till Monday,” judicial magistrate Raja Farrukh Ali Khan ruled, ordering that Gill be reexamined by doctors and a medical report submitted in court by Monday.

On Friday morning, Islamabad police said in a statement Gill was "pretending to be ill" to obstruct the investigation and a medical board had declared him ‘clinically stable’ after a thorough examination and tests.

Gill, a senior member of Khan’s Pakistan Tehreek-e-Insaf (PTI) party, was brought to PIMS on Wednesday night in an ambulance from Adiala Jail in Rawalpindi for a check-up after Islamabad police took over his custody following a court ordering a two-day physical remand. A government prosecutor had argued that Gill needed to be remanded in police custody for an additional two days so that police could complete their investigation into a sedition case filed against him.

Last Friday, after Gill had been in police custody for two days, the court sent him to jail on judicial remand, rejecting a request by the police to extend the suspect’s physical remand.  But in a rare move on Wednesday, a local court remanded Gill back into police custody.

Gill has been under arrest since last Tuesday for comments he made during a news bulletin that the national electronic media regulator has called “seditious.”

“The medical board declared the accused … medically healthy,” Islamabad police said on Twitter on Friday, saying Gill was “pretending to be ill under false pretences … to obstruct the investigation.”

“After reviewing the reports and opinions from cardiologist and psychiatrist, patient [Gill] is clinically stable,” a six-member medical board of senior doctors said in its report dated August 18. “Although he is a known case of bronchial asthma, currently he has no signs of exacerbation of acute asthma.”

“Pulmonologist advised and discharged on medication,” the report, a copy of which is available with Arab News, said.

A day earlier, doctors who checked Gill at PIMS said he needed to be examined by a cardiologist and pulmonologist.

Video footage made outside a local court on Friday and widely shared on social media showed Gill in a wheelchair, surrounded by policemen, and saying “I can’t breathe.”

Khan and the PTI party have said Gill has been tortured in police custody, which Islamabad police have denied.

The case against the Khan aide relates to comments made on ARY News last Monday asking army officers not to follow orders of their top command if they were “against the sentiments of the masses.”

The country’s national media regulator described the statement as “seditious” and said it was tantamount to inciting revolt within the military. The regulator also issued a show-cause notice to the channel, ARY News, for airing the “illegal” content. The channel has since been off air.