Pakistan approves major natural gas price hike to meet key condition ahead of IMF review 

The picture posted on April 24, 2021 shows a gas field run by OGDCL in Pakistan. (OGDCL/Facebook)
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Updated 24 October 2023
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Pakistan approves major natural gas price hike to meet key condition ahead of IMF review 

  • The proposed hike is expected to raise gas prices by more than 173 percent from Nov, generate Rs57 billion additional revenue 
  • Financial experts say it will help Pakistan complete upcoming first review of the $3 billion short-term financing facility by the IMF 

KARACHI: Pakistan’s caretaker government has given a go-ahead for a substantial rise in the gas tariff to meet a key condition of the International Monetary Fund (IMF) ahead of the first review of a $3 billion bailout facility, financial experts said on Tuesday. 

The hike in gas tariffs was approved by the Economic Coordination Committee (ECC) of the federal cabinet that was chaired by Caretaker Finance Minister Dr. Shamshad Akhtar on Monday. 

The move is likely to impact millions of people across Pakistan, which has faced a number of energy-related issues in recent years. 

“A summary submitted by the Ministry of Energy (Petroleum Division) regarding the revision of the natural gas sale pricing for the FY 2023-24, was also considered by the forum,” said an official statement circulated after the meeting. 

The gas tariff for non-protected domestic consumers would increase by up to 173 percent, commercial by 136 percent, export industry by 86 percent, non-export industry by 117 percent, fertilizer by 14 percent, and CNG by 144 percent, according to the summary. 

There will be no increase in tariff for the protected category (57 percent of the domestic consumers) however, the fixed monthly charge is proposed to be increased from Rs10 to Rs400 for this category. The new gas tariff will be implemented from November 2023, instead of October 2023. 

The recommendation will now be presented before the federal cabinet for final approval, after which the Oil and Gas Regulatory Authority (OGRA) will issue a notification regarding the revision of the tariff, an OGRA spokesman told Arab News on Tuesday. 

After the approval, the average gas price is expected to go up by 53 percent to Rs1,397/MMBtu from Rs914/MMBtu, according to a report by Arif Habib Limited (AHL), a Pakistani securities brokerage, investment banking and research firm. 

“The revenue impact of the proposed price hike would be Rs57 billion,” AHL said. “As per the estimates the revenue requirement of Sui Southern Gas company (SSGC) and Sui Northern Gas Pipeline (SNGPL) is Rs697 billion, while [their] annual revenue would be Rs755 billion with the tariff hike.” 

Pakistan is bracing for the upcoming first review of the $3 billion short-term financing facility it availed from the IMF to stave off a looming default in July this year. The Fund’s team is expected to visit the South Asian country for the review by the end of this month. 

The IMF has frequently raised concerns over the country’s mounting circular debt in the energy sector, asking the government not to give any subsidies while calling for raised tariffs. 

“It was one of the key conditions of the IMF which the government has met,” Tahir Abbas, head of research at AHL told Arab News. “With this last major hurdle removed, we expect that the review of the $3 billion program will be smoothly completed. The government has already achieved other major targets.” 

Pakistan has faced a number of energy woes in recent years, including frequent gas shortages in the winter season. The problem not only creates hardships for domestic consumers but also affects local industries by bringing down their production levels. 

It is pertinent to mention here that Pakistan’s oil and gas reserves have been fast depleting and are likely to be fully consumed in the next 15 years, according to the Pakistan Petroleum Information Services. 

The country has not made any major new discovery of oil and gas reserves and the government has been looking for cheaper sources of energy imports to meet the growing demand. 


Central bank chief briefs foreign investors on ‘substantial improvement’ in Pakistan’s macroeconomic outlook

Updated 6 sec ago
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Central bank chief briefs foreign investors on ‘substantial improvement’ in Pakistan’s macroeconomic outlook

  • Ahmad is accompanying Finance Minister Muhammad Aurangzeb to IMF and World Bank spring meetings in Washington
  • Meets investors during multiple events organized by leading financial firms, including JP Morgan, Citibank and Jefferies

ISLAMABAD: State Bank Governor Jameel Ahmad on Thursday met key international investors in the United States capital, Washington DC, and informed them about “substantial improvement” in Pakistan’s macroeconomic outlook in the last year.
Ahmad is accompanying Finance Minister Muhammad Aurangzeb to IMF and World Bank spring meetings in Washington, where he met investors during multiple events organized by leading global banks and financial firms, including JP Morgan, Citibank and Jefferies. 
While in DC, the Pakistan team will also be starting negotiations for a new three-year multi-billion-dollar bailout deal from the IMF. 
“Governor SBP informed the participants about the substantial improvement in Pakistan’s macroeconomic outlook achieved over the past year as a result of a prudent monetary policy, backed adequately by fiscal consolidation and beginning of the implementation of key structural reforms,” a statement from the Pakistani economic affairs division said. 
Inflation declined sharply in Pakistan, reaching a two-year low of 20.7 percent in March 2024 from a peak of 38 percent in May 2023. 
“Deceleration in inflation is broad-based, reflecting the combined impact of monetary tightening, fiscal consolidation, ease in import supplies, improved agriculture output and base effect,” Ahmad told investors.
“More importantly, core inflation declined markedly, reaching 15.7 percent in March, after persistently staying above 20 percent throughout last year.”
He also said the external sector had stabilized, as reflected in a sharp reduction in the current account deficit (CAD) to $1 billion during Jul-Feb FY24 from $3.8 billion in the same period last year.
In addition to stabilization policies, improved agriculture output had contributed to higher food exports, while lowering the import demand of agri commodities like wheat and cotton. 
Workers’ remittances had also risen consistently since October 2023 on a year-on-year basis, driven by incentives and regulatory measures to divert inflows toward formal channels. 
“These qualitative improvements in the external account have allowed the SBP to more than double its FX reserves from January 2023 ($3.1 billion) to around $8 billion on 12 April 2024 despite the repayment of a $1 billion Eurobond on the same day. At the same time, the SBP’s forward liabilities have also reduced significantly from $5.7billion in January 2023 to $ 3.4billion in February 2024.”
Ahmad also spoke about the improvement in the country’s external debt dynamics, with a reduction in the gross financing requirements due to sizable CAD contraction. Moreover, the maturity profile of external debt had also improved, with the share of relatively costly short-term commercial loans declining while the share of long term concessional financing from multilateral agencies, coupled with support from bilateral partners, which was rising.
“Ahmad also noted a recent pickup in inflows from overseas Pakistanis via Roshan Digital Accounts and also by other foreign investors, on the back of strong performance in achieving the targets and benchmarks under the IMF SBA program,” the statement said.
“Going forward, the government is hopeful of signing a long term IMF program, which will facilitate additional external financing and the adoption of structural reforms to deal with longstanding issues in the economy.”
The governor also highlighted SBP’s efforts to provide a conducive macroeconomic environment for the private sector to invest in the economy. 
The SBP’s Strategic Plan 2028 aims to facilitate growth by achieving price and financial stability.
“In this regard, Mr. Ahmad highlighted the widespread adoption of digital technologies to address gaps in access to financial services and to revolutionize the domestic payments system,” the economic affairs division said. “These time-bound reforms are expected to put the economy on the path of sustainable economic growth.”


Pakistan has pitched ‘epic menu’ of $30 billion investment projects to Riyadh — foreign minister

Updated 18 April 2024
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Pakistan has pitched ‘epic menu’ of $30 billion investment projects to Riyadh — foreign minister

  • Ishaq Dar says Iranian President Ebrahim Raisi will visit Pakistan for three days from April 22-25
  • Says Saudi crown prince has accepted PM’s invitation to visit Pakistan, timing being discussed 

ISLAMABAD: Foreign Minister Ishaq Dar said on Thursday Pakistan had pitched an “epic menu” of investment projects worth $30 billion to Saudi Arabia during a visit this week by the Kingdom’s foreign chief, adding that Iranian President Ebrahim Raisi would visit Islamabad from April 22-25.
Saudi Foreign Minister Prince Faisal bin Farhan Al Saud was in Islamabad earlier this week where he said Riyadh would be “moving ahead significantly” to invest in projects in the South Asian nation. His visit followed a meeting in Makkah between Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammed bin Salman in which the Kingdom had pledged to expedite $5 billion in investments.
Speaking to journalists at an informal meet-and-greet on Thursday afternoon, Dar said Pakistan had pitched projects worth $30 billion to the Saudi delegation, which would “take time” to materialize. 
“It’s a process, it doesn’t happen overnight,” the foreign minister said. “We have given them a big epic menu to select [from]. After that their expression of interest has been indicated. On that, we will get details on [April] 28, so it takes time. But all vibes are very positive.”
Dar said PM Sharif had invited the Saudi crown prince to visit Pakistan during their meeting in Makkah earlier this month:
“He has very kindly accepted the invitation. The timing of the visit will obviously be sorted out between diplomatic channels of the two countries.”
Responding to a question about a planned visit by Iran’s Raisi to Pakistan, Dar said it had been in the works for “weeks and months.”
“He is coming. The visit is on the cards on 22, 23, 24 [April] and we are preparing fully for this.”
Dar also said Afghan Interim Foreign Minister Mawlawi Amir Khan Muttaqi had invited him to visit Afghan when the two leaders spoke on the telephone last month.
No country has recognized Taliban rule since they seized power in August 2021, after the Western-backed government collapsed as the last US-led international troops departed following two decades of war.
When asked if he would accept Muttaqi’s invitation to visit Kabul, Dar responded: 
“By not interacting we will achieve nothing … so my own fundamental thinking is this, but obviously it [visit] is subject to clearance by the prime minister and MOFA [ministry of foreign affairs] advice that at the appropriate time we will definitely visit.”
Dar also spoke about tensions in the Middle East as the Israeli military has pledged a response to Iran’s retaliatory strikes last week for a suspected Israeli airstrike on its embassy compound in Damascus on April 1. 
Israel and its allies mostly shot down all missiles and drones and there were no deaths, but Israel says it must retaliate to preserve the credibility of its deterrents. Iran says it views the matter as closed but will retaliate again if Israel does.
“Our policy guidelines are about peace, we don’t want any confrontation, we want a peaceful resolution, we want a Gaza solution as soon as possible,” Dar said when asked about the possibility of escalation. 
“We want a ceasefire in Gaza, we want a Palestinian permanent state.”


Pakistan expects to avoid rupee devaluation in new IMF talks — finance minister

Updated 18 April 2024
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Pakistan expects to avoid rupee devaluation in new IMF talks — finance minister

  • No reason for rupee to depreciate more than the range of about 6 percent to 8 percent seen in a typical year, Aurangzeb tells Bloomberg 
  • Pakistan expects IMF mission to visit in May, would like to reach staff-level agreement on new loan by end of June or early July

ISLAMABAD: Pakistan’s new government does not anticipate any significant currency devaluation as part of its negotiations with the International Monetary Fund to unlock billions of dollars in lending and bolster the nation’s economic reform agenda, Finance Minister Muhammad Aurangzeb said in an interview to Bloomberg published on Thursday. 
While massive devaluations have accompanied some of Pakistan’s previous IMF loans and are often a condition of the crisis lender’s programs around the world, nothing comparable should be necessary this time around, Aurangzeb said in an interview on the sidelines of the IMF and World Bank spring meetings in Washington.
“I don’t see the need for any step change,” Aurangzeb said, citing solid foreign-exchange reserves, a stable currency, rising remittances and steady exports. “The only thing which can be a wild card, although in our projections we should be OK, is the oil price.”
He added there would be no reason for the rupee to depreciate more than the range of about 6 percent to 8 percent seen in a typical year. 
Pakistan last devalued its currency in January 2023.
Aurangzeb, 59, said the new government in Islamabad was looking to bolster industries including agriculture and information technology with support that it hopes will help push the nation’s growth above 4 percent in the coming years.
In its talks with the IMF, Pakistan plans to seek a traditional IMF loan through the institution’s so-called extended fund facility. It also wants to get money via the IMF’s new Resilience and Sustainability Trust, which works to strengthen low-income and vulnerable countries against external shocks like floods that devastated Pakistan in 2022.
One of the new government’s tasks will be to steer the country out of a high-inflation and low-growth pattern. It also faces about $24 billion in external financing needs in the fiscal year starting July, about three times its reserves. 
Aurangzeb said Pakistan was in “relatively good shape” to make those payments.
Pakistan needs to repay “a couple of billion dollars” in the present fiscal year but reserves are expected to reach around $10 billion by the end of June from $8 billion now, said Aurangzeb. The dollar reserves currently cover about two months of imports.
Pakistan expects an IMF mission to visit in May and would like to reach a staff-level agreement on its next loan by the end of June or early July, Aurangzeb said, without specifying how much the nation was seeking. Bloomberg News earlier reported that the nation plans to ask for at least $6 billion.
Securing a new deal may also boost Pakistan’s dollar bonds and stock market, which have handed investors one of the best gains globally since the nation began the current IMF loan last July. The IMF executive board is expected to approve the final disbursement this month from the nation’s existing $3 billion loan that helped it avert a default on its debt last year.
Key objectives in the loan negotiations will include broadening the tax base, improving debt sustainability and restoring viability to the energy sector, the IMF said last month. These are steps that Pakistan has avoided for decades because of their unpopularity among a nation of more than 250 million people.
Pakistan in recent years increased tax revenue and energy prices to meet IMF demands but hasn’t been able to make progress on long-term structural issues such as privatizing state-owned companies.


Pakistani PM orders ‘action plan’ to finalize investments discussed with Saudi FM’s delegation

Updated 18 April 2024
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Pakistani PM orders ‘action plan’ to finalize investments discussed with Saudi FM’s delegation

  • Prince Faisal has said Riyadh would be “moving ahead significantly” to invest in projects in Pakistan
  • Mining, agriculture, energy, IT and infrastructure development projects discussed during FM’s visit 

ISLAMABAD: Prime Minister Shehbaz Sharif on Thursday chaired a meeting on Saudi investments in Pakistan and directed top officials to devise an “action plan” to complete projects discussed during a visit by Foreign Minister Prince Faisal bin Farhan Al Saud to Islamabad this week.
Prince Faisal arrived in Pakistan on Monday on a two-day visit aimed at enhancing bilateral economic cooperation and pushing forward previously agreed investment deals. Addressing a press conference on Tuesday, he said Riyadh would be “moving ahead significantly” to invest in projects in the South Asian nation.
His trip followed a meeting between Crown Prince Mohammed bin Salman and Sharif in Makkah, in which the Saudi leader reaffirmed the Kingdom’s commitment to expedite investments worth $5 billion.
Pakistan and Saudi Arabia enjoy strong trade, defense and cultural ties. The Kingdom is home to over 2.7 million Pakistani expatriates and the top source of remittances to the cash-strapped South Asian country.
“I will personally monitor the completion of projects with Saudi investment,” Sharif was quoted as saying at a meeting of top officials from relevant ministries and the Special Investment Facilitation Council (SIFC), a body consisting of Pakistani civilian and military leaders set up last year to promote investment in Pakistan.
During the FM’s visit this week, investments in the sectors of mining and minerals, agriculture, energy, information technology and infrastructure development were discussed.
“Any type of negligence regarding international investment projects is not acceptable … Outdated procedures and red tape will not work at all,” Sharif added.
“In this regard, a comprehensive action plan should be presented to increase the capacity of ministries. The Investment Board, SIFC and relevant ministries should formulate a plan of action for the completion of the projects decided in the discussions with the Saudi delegation.”
The PM said a delegation of well-known businessmen from Saudi Arabia was expected to arrive in Pakistan soon, and more investment opportunities also would be finalized during an upcoming visit by Sharif to Saudi Arabia.
Cash-strapped Pakistan desperately needs to shore up its foreign reserves and signal to the International Monetary Fund (IMF) that it can continue to meet requirements for foreign financing that has been a key demand in previous bailout packages. Pakistan’s finance minister, Muhammad Aurangzeb, is currently in Washington to participate in spring meetings of the International Monetary Fund and World Bank and discuss a new bailout program. The last loan deal expires this month.
Saudi Arabia has often come to cash-strapped Pakistan’s aid in the past, regularly providing it oil on deferred payments and offering direct financial support to help stabilize its economy and shore up forex reserves.
Last year, however, Saudi Arabia’s finance minister said the Kingdom was changing the way it provides assistance to allies, shifting from previously giving direct grants and deposits unconditionally and moving toward mutually beneficial investment deals backed by internal economic reforms.


PIA says flights ‘severely affected’ as UAE reels for third day after record-breaking storm

Updated 18 April 2024
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PIA says flights ‘severely affected’ as UAE reels for third day after record-breaking storm

  • Operations at the Dubai airport remain disrupted after Tuesday’s storm flooded the runway
  • The rains were the heaviest experienced by the UAE in 75 years that records have been kept

ISLAMABAD: Pakistan International Airlines (PIA) flights to the United Arab Emirates (UAE) have been affected by the recent torrential rains in Sharjah and Dubai and would resume once the situation improves in the Gulf country, a PIA spokesperson said on Thursday.
The United Arab Emirates was still grappling on Thursday with the aftermath of a record-breaking storm this week, with emergency workers trying to clear water-clogged roads and people assessing damages to homes and businesses.
In Dubai, operations at the airport, a major travel hub, remain disrupted after Tuesday’s storm flooded the runway. The airport resumed receiving inbound flights on Thursday morning, but flights continue to be delayed and disrupted.
The PIA said its flight operations were “severely affected” in the wake of the rains, which were the heaviest experienced by the UAE in 75 years.
“Pakistani airlines, including the PIA, await restoration of facilities at Dubai airport,” the PIA spokesperson said in a statement.
“PIA will immediately start its operations as soon as the situation improves.”
Passengers of canceled flights are being accommodated on the next flights on priority, according to the statement. Apart from this, more flights are also being planned.
The national flag-carrier requested travelers to reach its call center at 786 786 111 for information about their flight readjustments.