Pakistan's political uncertainty, IMF loan delay widens exchange rate gap in currency markets — dealers

A dealer counts US dollars at a money exchange market in Karachi, Pakistan on March 2, 2023. (AFP/File)
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Updated 24 May 2023

Pakistan's political uncertainty, IMF loan delay widens exchange rate gap in currency markets — dealers

  • Exchange rate gap widens by Rs22, Rs33 in Pakistan's legal and illegal markets
  • Analysts say persistent gap to hit remittances through official channels

KARACHI: Fueled by political uncertainty and doubts regarding the International Monetary Fund (IMF) loan revival, the rupee-dollar disparities in Pakistan’s interbank and open markets on Wednesday widened by Rs22, with analysts saying the widening gap was an alarming development for the country's remittance inflows through official channels.  

There are three distinct exchange rate markets in Pakistan for currency transactions, and all three have significant disparities in buying and selling rates. 

The rupee closed at Rs309 in the open market and Rs287 in the interbank market against the US dollar on Wednesday, with a difference of Rs22, according to the Exchange Companies Association of Pakistan (ECAP). 

In the third market, known as the grey or illegal market, the disparity in exchange rates is even greater compared to the open and interbank markets. Currency dealers said the rupee is being traded at around Rs320 in the grey market, causing about a Rs33 gap when compared with the interbank market's rate. 

Dealers attributed the widening exchange rate disparities to the dollar crunch in the country and the high demand for import payments. 

“Importers are arranging dollars for payment from the grey market where the demand for the greenback rate has spiked,” Zafar Sultan Paracha, general secretary of ECAP, told Arab News.   

“The Hawala and grey market are flourishing as buyers and sellers are also resorting to the illicit market to benefit from the huge gap.”  

Another reason why currency trading was gaining traction in illegal markets was due to the low rates being offered by money transfer companies, Paracha said. 

“These companies are giving up to Rs15 lower than the official rate or the interbank exchange rate,” Paracha said.  “People are not coming to us for buying and selling, they are going to the grey market as they are getting the best rates.”  

Currency dealers and analysts also attributed the exchange rate disparities to a spike in demand from Hajj pilgrims, and Pakistan's increasingly volatile political situation. 

Analysts said exchange rates were also fluctuating due to uncertainty surrounding the future of the IMF program, as doubts remain whether the international lender would revive the program or replace it with a new one. 

“This IMF program-related uncertainty has also widened the gap between open and interbank market rates,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News.  

Pakistan has been facing delays in securing the latest tranche of a $6.5 billion loan from the IMF. Despite implementing tough conditions, the Fund and Pakistani authorities have not been able to finalize a 9th review of the program that would lead to the disbursement of $1.1 billion in funds that would help unlock financing from other donors and friendly countries. 

Dealers and analysts said the high, attractive exchange rates in open and illegal markets would dent Pakistan's inflow of remittances through official channels.  

“It is detrimental for remittance inflows through official channels and if the gap continues to persist, the inflow of remittances will be hit,” Abbas said. “The remittances inflows are already slowing down.” 

The South Asian country has already received 13% lower remittances in April 2023, recorded at $2.2 billion, data from the central bank showed. 

Remittances fell by 13% during the first ten months of the current fiscal year, FY23, as compared to the same period last year.

Pakistan navy gets third guided missile warship from China

Updated 09 June 2023

Pakistan navy gets third guided missile warship from China

  • Pakistan ordered four Type 054A variants from China in 2017-2018
  • The first of the three ships entered service in November 2021

ISLAMABAD: A third, Type 054A class of guided-missile frigate built in China for the Pakistan navy has arrived in Karachi, state-run Radio Pakistan reported on Friday.

The warship is a further development of the Type 054 frigate, but compared to its predecessor, the Type 054A has medium-range air defense capability in the form of a Type 382 radar and vertically launched HHQ-16 surface-to-air missiles.

“The ship, PNS Shahjahan, reached Karachi port where it was given a warm welcome,” Radio Pakistan said. “Commander Pakistan Fleet Rear Admiral Faisal Abbasi took a round of the ship and congratulated the crew on its commissioning.”

A spokesperson for the Pakistan navy said the inclusion of the new warship in Pakistan’s fleet “will further strengthen the defence of country's maritime borders and interests.”

Pakistan ordered four Type 054A variants from Hudong-Zhonghua in 2017-2018. The first ship entered service in November 2021.

Religious affairs ministry says over 40,000 Pakistani pilgrims in Makkah for Hajj

Updated 09 June 2023

Religious affairs ministry says over 40,000 Pakistani pilgrims in Makkah for Hajj

  • Saudi Arabia has reinstated Pakistan’s pre-pandemic Hajj quota to 179,210
  • Around 80,000 pilgrims using government scheme, rest private tour operators

ISLAMABAD: Over 40,000 Pakistani pilgrims have reached Makkah ahead of the Hajj pilgrimage which begins later this month, the religious affairs ministry said on Friday.

This January, Saudi Arabia reinstated Pakistan’s pre-pandemic Hajj quota, allowing 179,210 pilgrims from the South Asian country to participate in the annual Islamic religious ritual. The kingdom also removed the upper age limit of 65 years.

Out of Pakistan’s total Hajj quota, approximately 80,000 pilgrims will carry out the pilgrimage under a government scheme, while the remaining are using private tour operators.

“There are more than 40,000 official Hajj pilgrims in Makkah today,” a spokesperson for the religious affairs ministry said. “By evening, another 3,000 pilgrims will reach Makkah after completing their stay in Madinah.”

Pakistan launched a special flight operation for aspiring Hajjis on May 22. The first group of flights were directed to Madinah, where people performing Hajj under the government scheme spent approximately eight days before traveling onwards to Makkah. The Madinah flight operation has ended while flights to Jeddah started this week.

On Tuesday, the government announced the establishment of a central control room in Makkah, overseen by its Hajj mission.

“The control room will manage transportation from Jeddah airport to Makkah, as well as other logistics in Makkah and Madinah such as residence management, medical facilities, food, and other necessities,” Muhammad Umer Butt, a ministry spokesperson, told Arab News from Saudi Arabia.

The government has also made other arrangements, including the establishment of two hospitals and twelve dispensaries in Makkah and Madinah, to ensure the well-being of pilgrims. On Thursday, Pakistan’s religious affairs ministry said pilgrims were being provided round-the-clock transportation facilities through 190 modern buses to and from the Great Mosque of Makkah or Masjid al-Haram.

Prior to the commencement of Hajj, which is expected to begin on June 26, the ministry said it would increase the number of buses to 360 once all intending Pakistani pilgrims reached Makkah. Bus stops had been set up at various locations around Haram, including Ajyad, Ghaza, Jorwal, and Kadi, while 28 guides had been appointed to instruct pilgrims about internal and external routes of the Haram.

Pakistan army hasn’t yet requested military court trial of ex-PM Khan — law minister

Updated 09 June 2023

Pakistan army hasn’t yet requested military court trial of ex-PM Khan — law minister

  • Law Minister Tarrar says army has so far asked for 70 people for trial by military courts
  • When asked if Khan was among those 70 suspects, law minister said, “Not until today”

ISLAMABAD: Pakistani law minister Azam Nazeer Tarar said in an interview broadcast on Friday that the army had so far not requested that former prime minister Imran Khan be handed to them for a military trial in any of the cases related to attacks on army properties last month.

Since being ousted from the PM’s office in a no-trust vote in April last year, Khan has launched an unprecedented campaign of defiance against the military, which independent analysts say helped him rise and fall from power.

His tensions with the military reached a crescendo last month when Khan was arrested in a land fraud case on May 9, prompting violent nationwide protests in which rioters attacked an air base, military properties, including the army’s headquarters, and burnt a top general’s home. Khan was released on bail four days later but the military has since said it will punish the enactors and masterminds of the violence, including by trying them in military courts under the Army Act and the Official Secrets Act.

In an interview to Urdu News, Law Minister Tarrar said the army had so far asked for 70 people to be handed over for trial before military courts.

When asked if Khan was among these 70 suspects, the law minister said: “Not until today.”

“The decision of where the trial will be held, that is made by the law, this decision will not be the decision of the federal government, it’s not the decision of provincial governments.”

He said cases against Khan related to the violence of May 9 were ongoing, including under the anti-terrorism act.

In a strongly-worded statement released this week and widely seen as a reference to Khan, the army said it was time to tighten the “noose of law” against those who had masterminded the attacks of May 9.

“While the legal trials of perpetrators and instigators have commenced, it is time that noose of law is also tightened around the planners and masterminds who mounted the hate ripened and politically driven rebellion against the state and state institutions to achieve their nefarious design of creating chaos in the country,” the army’s media wing, ISPR, said on Wednesday.

Responding for the first time to widespread accusations that the army was behind a crackdown against Khan, his party and its supporters and carrying out human rights violations, the military called this “fake news and propaganda” that it would defeat with the support of the Pakistani public:

“Unfounded and baseless allegations on Law Enforcement Agencies and Security Forces for custodial torture, human rights abuses and stifling of political activities are meant to mislead the people and malign Armed Forces in order to achieve trivial vested political interests.”

Pakistan’s donkey population continues to steadily rise, reaches 5.8 million 

Updated 09 June 2023

Pakistan’s donkey population continues to steadily rise, reaches 5.8 million 

  • Pakistan's economic survey reveals there has been no change in number of camels, horses and mules for four years 
  • Livestock contribution to foreign exchange earnings was recorded at around 2.1 percent of Pakistan's total exports 

ISLAMABAD: The population of donkeys in Pakistan has increased by around 100,000 to 5.8 million as compared to the previous year, the country's economic survey revealed on Thursday, also showing a significant jump in the population of other animals including cattle, buffalo and sheep.

The fresh data shows that the population of donkeys has steadily increased over the past few years from 5.5 million in 2019-2020 to 5.6 million in 2020-21 and 5.7 million in 2021-22. This year it reached 5.8 million.

Unlike donkeys, there has been no change in the number of camels, horses and mules during the same period, which remains at 1.1 million, 0.4 million and 0.2 million, respectively. 

The cattle population in the country has increased to 55.5 million, buffalo to 45 million, sheep to 32.3 million and goats to 84.7 million, according to Pakistan Economic Survey 2022-23, which shows the trend of macro-economic indicators, development policies and strategies as well as sectoral achievements of the economy.

“The livestock sector has emerged as the largest contributor to agriculture, accounting for approximately 62.68 percent of the agriculture value-added and 14.36 percent of the national GDP (Gross Domestic Product) during FY2023,” the latest survey reads. 

The survey says that animal husbandry is a critical economic activity for rural dwellers in Pakistan, with over 8 million rural families engaged in livestock production and deriving up to 40 percent of their income from this sector. 

The gross value addition of livestock has increased to Rs5,593 billion ($19.8 billion) in FY2023 from Rs5,390 billion in FY2022, indicating a growth of 3.8 percent.  

“The net foreign exchange earnings of the livestock sector contribute around 2.1 percent of the total exports in the country,” it said. 

The government has recognized the potential of this sector for economic growth, food security, and poverty alleviation in the country, and has accordingly focused on its development, it stated. 

The overall strategy for livestock development revolves around promoting “private sector-led development with public sector providing enabling environment through various policy interventions,” according to the survey.

The government said it has implemented regulatory measures to enhance per unit animal productivity by improving veterinary health coverage, husbandry practices, animal breeding practices, artificial insemination services, use of balanced ration for animal feeding, and controlling livestock diseases of trade and economic importance.

Amid attacks on vaccinators, health authorities detect poliovirus in Pakistani megacity

Updated 09 June 2023

Amid attacks on vaccinators, health authorities detect poliovirus in Pakistani megacity

  • Polio has no cure, repeated vaccination is most effective remedy against it
  • Pakistan and Afghanistan remain the only two endemic countries in the world

ISLAMABAD: Officials have detected poliovirus in an environmental sample collected from the southern Pakistani city of Karachi, health authorities said on Thursday, amid attacks targeting anti-polio vaccinators in the South Asian country.

Polio is a highly infectious and incurable disease caused by the poliovirus, which mainly affects children under the age of five. The virus invades the nervous system and can cause paralysis or even death in some cases.

Pakistan’s National Polio Laboratory at the National Institute of Health (NIH) in Islamabad confirmed the detection of Type-1 Wild Poliovirus (WPV1) in an environmental sample collected from Karachi’s East district in May 2023.

“The environmental (sewage) sample was collected on 15th May 2023 from the ‘Sohrab Goth” environmental sample collection site. This is the first positive environmental sample from Karachi Division this year,” the NIH said in a statement.

Previous positive sample from Karachi Division was collected in August 2022 (from “Landhi” environmental sample collection site in District Malir). The last Wild Poliovirus case from Karachi East was reported in September 2018.”

The genetic sequencing results of the sample are under process, while a polio vaccination campaign in the district was conducted on 15– 21 May, according to the statement.

Attempts to eradicate polio in Pakistan have been hit by attacks targeting inoculation teams that have claimed hundreds of lives in over a decade.

Late last month, a Pakistani soldier was killed when militants opened fire on a polio vaccination team, while a policeman guarding vaccinators was shot dead in the country’s southwest on May 19.

The crippling disease has no cure and repeated vaccination is the most effective way to protect children against it. To date, the polio vaccine has protected millions of children, allowing almost all countries in the world to become polio-free.

Pakistan and Afghanistan remain the only two endemic countries in the world.