KARACHI: Concerns are at peak over the health of Pakistan’s economy as foreign reserves run out, inflation stands at decades-high levels and industrial growth slows down, with experts and industry leaders raising alarm and calling on the government to take decisive action, particularly on a stalled IMF bailout plan.
The biggest worries center around Pakistan’s ability to pay for imports such as energy and food and to meet sovereign debt obligations abroad. Right now, foreign exchange reserves with the central bank stand at just $4.6 billion, barely enough to cover a month’s imports, compelling the government to restrict the import of goods, including industrial raw materials, to stop dollar outflows.
Before devastating floods last year, an estimated $33.5 billion was needed to fulfil external financing needs for the 2022-23 financial year, according to the central bank, to be arranged through the daunting target of almost halving the current account deficit and receiving debt rollovers from friendly countries.
But in the aftermath of the floods, exports have slumped and imports have grown to make up for essential commodities lost in the flooding of millions of hectares of farmland.
Meanwhile, the Pakistani rupee has weakened 20 percent since the start of the year and the decline in the currency is pushing up the cost of imports, borrowing and debt servicing, and in turn will further exacerbate inflation running already at a multi-decade high.
“The situation is alarming,” Tariq Yousuf, President of the Karachi Chamber of Commerce and Industry (KCCI), told Arab News. “More than 7,500 containers [of imports] are stuck at ports and our industries are facing an acute shortage of raw materials, bringing them almost to the verge of collapse.”
Last year, the cash-strapped country imposed a ban on the import of luxury goods to avoid a balance of payment crisis but lifted some of the restrictions after pressure from the industrial sector.
Experts warn that a dire dollar crunch in Pakistan may further hurt the import of essential items in the coming months and lead to a shortage of several food items. The fast-depleting forex stockpile has currently left banks refusing to issue new letters of credit (LCs) for importers, hitting an economy already squeezed by soaring inflation and lackluster growth. The central bank has also restricted overseas payments and halved the amount of foreign currency that a person can carry overseas to $5,000.
Qaiser Ahmed Sheikh, chairman of the standing committee of the National Assembly (NA) on Finance and Revenue, told Arab News Pakistan was in a “dire situation.”
“There are problems opening LCs, approved by the State Bank of Pakistan, affecting raw material imports.”
Without an LC as a financial guarantee to foreign exporters, import clearances rarely go through.
Sheikh said thousands of import containers were stuck at various ports, which was affecting the manufacturing industry and fueling a fear of industrial closure and further inflation hikes.
The inflation rate in Pakistan is already worryingly high, recorded at 24.5 percent in December 2022, double the figure from around 12 percent in December 2021.
“Both industrialists and the masses are concerned that commodity prices are rising on a daily basis,” Sheikh said. “The inflation will increase further if the State Bank of Pakistan does not allow new LCs opening and the clearance of older LC contracts.”
The situation is particularly precarious for the country’s pharmaceutical industry, currently left with only a few days of stock.
“Pharmaceutical industries keep inventory for three months, but since November 2022 raw material arrival has stopped due to the LCs issue,” Dr. Sheikh Kaiser Waheed, spokesman of the Pakistan Pharmaceutical Manufacturers’ Association (PPMA), told Arab News.
“Due to resource constraints, the drugs for diabetes, cardiac patients, cancer patients etc, are in short supply,” he said. “This shortage is also partly due to excessive buying by patients as precautionary measures after reports of the import situation came out.”
The economic strain has caused a number of textile units, car assemblers, and other industries to suspend or scale down their operations while fears of petroleum product shortage from next month loom, according to industrialists and government sources.
In a meeting with industrialists at the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the central bank governor this week announced that a joint committee would be set up with the FPCCI to resolve the “huge backlog in LCs,” according to a statement from the Chamber.
Pakistani senior economists interviewed by Arab News said the current economic situation was a result of the government’s “indecisiveness” with regards to negotiations with the International Monetary Fund (IMF).
A 9th IMF review to clear the release of the next tranche of funds to Pakistan has been pending since September.
“The economic situation of Pakistan is alarming … but the indecisiveness of government officials further compounds the situation,” Dr. Ashfaque Hassan Khan, a senior economist, said.
Current Minister of Finance Ishaq Dar and Minister of State for Finance, Aisha Ghaus Pasha, did not respond to requests for comment for this story.
“The only options before the government now are to either accept the IMF program (with all its conditions) or leave it,” Khan added. “Pakistan is now in a catch-22 position. The government ahead of the general elections would be reluctant to burn its political capital (by imposing more taxes and raising the rate of inflation).”
There is also talk of a mini-budget being announced to meet IMF conditions after its 9th review of the $7 billion IMF Extended Fund Facility (EFF).
“The government is negotiating with the IMF on an energy tariff increase and setting a market based exchange rate of the US dollar, which will increase inflation and there are discussions on the interest rate hike also,” Sheikh, the chairman of the NA standing committee, said.
“A mini-budget will be announced, as without it the IMF’s conditionalities cannot be fulfilled”.
The chairman denied having knowledge of the exact measures and proposed date of the mini-budget, amid speculation about a new petroleum levy and more taxes on imported and local vehicles.
“Hopefully ‘terms of engagement’ with the IMF finalized by the government of Pakistan are solid enough to finalize the 9th review,” Dr. Khaqan Najeeb, former adviser to the finance ministry, said.
“To get out of the present economic crisis, Pakistan must work on getting the IMF back, have a market determined exchange rate, rollover, reprofiling or restructuring of debt and effective social protection,” Dr. Sajid Amin, a senior economist, said.
With Pakistan’s economy in a tailspin, experts call for end to ‘indecisiveness’ on IMF program
https://arab.news/2s7cj
With Pakistan’s economy in a tailspin, experts call for end to ‘indecisiveness’ on IMF program
- More than 7,500 containers stuck at Pakistani ports create acute deficit of industrial, pharmaceutical raw materials
- Government may announce mini-budget to meet demands of the International Monetary Fund and break import deadlock
Pakistan, Iran agree to strengthen bilateral ties to tackle regional militancy
- Pakistan’s planning minister meets Iran’s Ambassador to Pakistan Dr. Raza Amiri Moghaddam
- Pakistan, Iran both blame each other for not doing enough to root out militancy in border areas
ISLAMABAD: Pakistan’s Planning Minister Ahsan Iqbal and Iran’s Ambassador to Pakistan Dr. Raza Amiri Moghaddam on Thursday agreed to strengthen bilateral relations between their countries to reduce militancy in the region, state-run media reported.
Pakistan and Iran are often at odds with each other over instability on their shared border. Both countries have routinely blamed each other for not rooting out militancy. Small separatist groups in Pakistan have been behind a long-running insurgency, calling for gas and oil-rich Balochistan’s independence from the central government in Islamabad.
Pakistani anti-Iran militants have also targeted the Iranian border in recent years, increasing friction between the countries.
“Pakistan and Iran have agreed to strengthen bilateral relations to reduce tendencies of terrorism and extremism in the region,” the state-run Radio Pakistan said.
Radio Pakistan said the agreement to bolster bilateral ties was reached between Moghaddam and Iqbal during a meeting in Islamabad.
“The Planning Minister emphasized the importance of enhancing connectivity through trade routes, considering the 900-kilometer shared land and maritime border,” he said.
Tensions reached a head in January between Pakistan and Iran after they exchanged airstrikes against alleged militant targets in each other’s territories. Both countries since then have made efforts to ease tensions and promote bilateral trade with each other.
Pakistan’s stock exchange closes at all-time high amid expectations of fresh IMF deal
- Pakistan Stock Exchange closes at all-time high of 67,142.12 points, registering an increase of 594.34 points from Wednesday
- Analysts link recent surge to possibility of Pakistan reaching another bailout agreement with IMF, privatizing national airline
ISLAMABAD: The Pakistan Stock Exchange (PSX) witnessed its highest closing in history on Thursday as the benchmark KSE-100 index closed at 67,142.12 points, with analysts linking the recent surge to market expectations of the possibility of a successful deal with the International Monetary Fund (IMF) for another bailout program.
The benchmark index settled at 67,142.12 points on Thursday at the close of trading, registering an increase of 594.34 points or 0.89 percent. This makes it the stock market’s highest closing in history, the previous highest being 66,547.78 points a day earlier.
Pakistan and the International Monetary Fund (IMF) reached a staff-level agreement last Wednesday which would pave the way for the release of $1.1 billion for the cash-strapped South Asian country. Pakistan has expressed its interest in securing a new loan under the Extended Fund Facility (EFF) program with the IMF.
Financial expert and journalist Faseeh Mangi said the Pakistan Stock Exchange is one of the best performers in the world “in a rally that started last year after Pakistan avoided a default.”
“The latest surge is on possible IMF deal, PIA sale,” Mangi wrote on X on Wednesday, referring to the government’s plans to privatize Pakistan International Airlines, its national airline.
Topline Securities’ Deputy Head of Sales Ali Najib said the index had finally breached the 66,000 barrier, saying it could be attributed to “positive vibes from the IMF, rejuvenated foreign interest at historically low valuations and progress on SOE privatization.”
Shehbaz Sharif, who was elected prime minister for a second term earlier this month, faces the daunting challenge of negotiating a long-term financial bailout program with the IMF. Pakistan’s fragile $350-billion economy is in desperate need of external financing to shore up its foreign exchange reserves and escape a looming macroeconomic crisis.
For Pakistan, committing to a new IMF program, however, will mean committing to steps needed to stay on a narrow path to recovery. This would limit policy options to provide relief to a deeply frustrated population and cater to industries that are looking for government support to spur growth.
Inflation touched a high of 38 percent with record depreciation of the rupee currency under Sharif’s last government from April 2022 to August 2023, mainly due to structural reforms necessitated by the IMF program. Pakistan continues to be enmeshed in economic crisis with inflation remaining high, hovering around 30 percent, and economic growth slowing to around 2 percent.
Tickets for Pakistan’s home series against New Zealand to go on sale from today
- Pakistan will play against New Zealand in Rawalpindi and Lahore venues from April 18-27
- Series will help prepare both sides for the upcoming T20 World Cup 2024 in USA and West Indies
ISLAMABAD: The tickets for Pakistan’s upcoming T20I home cricket series against New Zealand will go on sale from tooday, Friday, the Pakistan Cricket Board (PCB) said in a statement on Thursday.
The five-match series is scheduled to be played in Rawalpindi on April 18, 20 and 21 and in Lahore on April 25 and 27.
“In the first phase, the pre-booking of the online tickets will start on Friday at 5pm at pcb.tcs.com.pk,” the PCB said. “The sale of physical tickets along with outlet addresses will be announced in due course.”
The PCB said tickets for the Rawalpindi leg of the matches will be available at a minimum cost of Rs500 ($1.80) and the maximum will be available for Rs7,500 ($26.98) for the VVIP Gallery. Additionally, hospitality seats will be available at a maximum amount of PKR 15,000 ($53.97) except for the first T20I where the hospitality seats will be available for PKR 12,000 ($43.17).
For the Lahore leg, ticket prices start at Rs300 ($1.08) for the general seats while the maximum ticket prices will be Rs6,000 ($21.59) for the fourth T20I while Rs7,000 ($25.19) for the fifth T20I (VVIP Gallery).
The series will be important for both sides as they gear up for this year’s ICC T20 World Cup 2024 which is scheduled to be held in June in the USA and West Indies.
Pakistan will lock horns with arch-rivals India on June 9 for a big-ticket clash at New York.
Pakistani interior minister, KP CM vow to improve coordination amid surge in attacks
- Five Chinese nationals were killed in northwestern Pakistan on Tuesday in a bombing
- Interior minister, KP chief minister vow to bring perpetrators of attack to justice
ISLAMABAD: Pakistan’s interior minister and Khyber Pakhtunkhwa (KP) Chief Minister Ali Amin Gandapur on Thursday vowed to strengthen coordination between the center and the province to improve the law-and-order situation, the KP CM’s office said, amid a surge in terror attacks in the province.
Interior Minister Mohsin Naqvy arrived in Peshawar to meet Gandapur on Thursday to review the province’s law and order situation two days after five Chinese nationals and their Pakistani driver were killed in the country’s volatile northwest.
The incident took place in KP’s Shangla where a bomber rammed his explosive-laden car into the vehicle of Chinese engineers and construction workers on Tuesday.
The attack occurred in an area vital to the China-Pakistan Economic Corridor (CPEC), which encompasses various mega projects crucial for Pakistan’s economy. The victims were en route to Dasu Dam, Pakistan’s largest hydropower project, when they were targeted.
“To improve the law-and-order situation in the province, both agreed to improve the coordination between law enforcement institutions on the federal and provincial levels,” a statement from the KP chief minister’s office said.
The two condemned the attack on the Chinese nationals and expressed their condolences to Beijing and the families of those who had been killed in the attack.
“The two expressed their resolve to bring all those involved in the incident to justice and put an end to terrorism,” the statement said.
Gandapur said it was his government’s top priority to ensure law and order in the province and to safeguard people’s lives.
Pakistan’s foreign office said on Thursday that Islamabad had enhanced the security of Chinese nationals after the attack.
Foreign Office Spokesperson Mumtaz Zahra Baloch said both Pakistani and Chinese governments were in contact after the tragic incident on March 26, adding they were fully committed to bringing the terrorists, along with their facilitators and abettors, to justice.
No group had claimed responsibility for the attack but suspicion was likely to fall on separatists and the breakaway Gul Bahadur faction of the Pakistani Taliban, known as Tehreek-e-Taliban Pakistan or TTP.
The TTP is a separate group, but a close ally of the Afghan Taliban.
The TTP denied being behind the suicide bombing in a statement Wednesday, saying: “We are in no way related to the attack on the Chinese engineers.”
Tuesday’s attack came less than a week after Pakistani security forces killed eight Balochistan Liberation Army separatists who opened fire on a convoy carrying Chinese citizens outside the Chinese-funded Gwadar port in the volatile southwestern Balochistan province.
Pakistan says security of Chinese nationals enhanced after deadly attack
- Pakistan’s foreign office says the government fully understands Chinese security concerns after the attack
- It points out Pakistan has built a fence, introduced one document regime to secure its border with Afghanistan
ISLAMABAD: Pakistan’s foreign office said on Thursday the government has further enhanced the security of Chinese nationals only days after a deadly suicide bombing killed five of them along with their Pakistani driver in the country’s volatile northwest.
The incident took place in Shangla, located in Khyber Pakhtunkhwa province, where the bomber rammed his explosive-laden car into the vehicle of Chinese engineers and construction workers on Tuesday.
The attack occurred in an area vital to the China-Pakistan Economic Corridor (CPEC), which encompasses various mega projects crucial for Pakistan’s economy. The victims were en route to Dasu Dam, Pakistan’s largest hydropower project, when they were targeted.
“I can reassure you that Pakistan has further enhanced the security of Chinese nationals,” foreign office spokesperson Mumtaz Zahra Baloch told reporters in a weekly media briefing in Islamabad.
She said both Pakistani and Chinese governments were in contact after the tragic incident on March 26, adding they were fully committed to bringing the terrorists, along with their facilitators and abettors, to justice.
“At this point, we are focusing on investigating the terror attack and ensuring that the dead bodies of the deceased are transported to their home country,” she added. “This is the first priority at this stage.”
Asked about the security concerns raised by the Chinese officials following the attack, Baloch said the Pakistani government fully understood their concerns.
“We are engaged with the Chinese officials at very senior level to discuss the arrangements for the safety of Chinese nationals and for the investigation of this particular terror incident,” she informed.
The foreign office spokesperson said Pakistan would continue to work with the Chinese authorities to ensure the safety and security of Chinese nationals, projects and institutions in Pakistan.
“We have no doubt that the … terror attack [in Shangla] was orchestrated by the enemies of Pakistan-China friendship and together, we will resolutely act against all such forces and defeat them,” she emphasized.
In response to a question regarding Defense Minister Khawaja Muhammad Asif’s statement regarding the necessity for stronger border controls between Pakistan and Afghanistan, she clarified he was elaborating measures already taken by Pakistan to regulate travel between the two neighboring countries.
“Pakistan-Afghanistan border is an important border, and Pakistan has, over time, taken several measures to secure the border, including erecting a fence along the border,” she continued.
“Pakistan has also introduced one document regime under which individuals can travel to Pakistan on the basis of valid visas on their passports,” Baloch added.