KARACHI: Pakistan has devalued its national currency, the Pakistani Rupee (PKR), for the fifth time since December 2017, as the country faces mounting pressure over external payments amid diminishing foreign-exchange reserves.
“Today, the exchange rate in the interbank market closed at PKR 133.64 to the US dollar, against the previous day’s closing of PKR 124.27 to the US dollar,” the State Bank of Pakistan said on October 9. “This movement broadly reflects the current-account dynamics and also the demand-supply gap in the foreign-exchange market.
“Although the current-account deficit narrowed in August 2018, a consistent increase in the oil-import bill, on account of rising international oil prices, has exerted pressure in the foreign-exchange market.”
Pakistan has, after much delay, finally decided to approach the International Monetary Fund for help, but the rupee is expected to remain under further pressure this week, with currency experts predicting that a sixth round of devaluation is inevitable as a prerequisite for IMF assistance.
“The rupee was overvalued as compared with dollar and the correction was overdue,” said Zeeshan Afzal, executive director of research at Insight Securities. “It is no coincidence that the rupee devaluation has come at a time when Pakistan has formally announced an approach to the IMF for a bailout package.”
Pakistani Finance Minister Asad Umar on Monday announced the country will approach the IMF for assistance, after foreign-exchange reserves declined to $8.4 billion by September 28.
Information Minister Fawad Chaudhry on Tuesday said turning to the IMF was a “difficult decision.”
He told guests at an event in Islamabad: “The country’s remaining reserves can only serve for one month and 16 days, while the country needs $8 billion for debt servicing. We need $28 billion to run the country for this year.”
However, experts believe that the country’s growth will slow after an IMF intervention.
“The IMF program will come with specific external, fiscal and monetary measures that are likely to slow gross domestic product growth to about 4 to 4.5 percent,” said Saad Hashmey, an analyst at Topline Securities.
The Pakistan stock market reacted strongly to the government’s decision to opt for an IMF program for stabilization and economic recovery, with the benchmark KSE 100 index recovering 606 points.
“Oil and banking stocks outperformed on surging global oil prices and higher banking spreads,” said Ahsan Mehanti, chief executive of Arif Habib Group. “The auto, steel and cement sectors underperformed on a weak earnings outlook, record rupee depreciation and the likely curtailment of China-Pakistan Economic Corridor projects. Late-session buying on likely economic stability post-IMF bailout played a catalyst role in a bullish close.”
This is the fifth round of rupee devaluations since December last year. The government has devalued the currency from PKR 105 against the dollar on December 8, 2017, to PKR 135 on October 09, 2018, making it 27 percent weaker.
“We expect that the currency will further depreciate by up to 5 percent before the country goes to the IMF program,” Afzal said.
Fahad Irfan, head of research at Alfalah Securities, said: “We see the rupee further depreciating to PKR 140 against (the dollar) because the pace of depletion of foreign-exchange reserves is accelerating.”
that the rupee was not adjusted with a basket of other currencies when peer countries took corrective measures, which is why it remains under pressure.
As the devaluation is expected to increase inflationary pressure, analysts expect the State Bank of Pakistan will increase its interest rate from the current 8.5 percent in the next monetary policy announcement.
Junaid Esmail Makda, president of the Karachi Chamber of Commerce and Industry, expressed deep concerns about the serious devaluation of rupee against dollar, saying it will have a devastating effect on all segments of society, particularly middle- and lower-income groups, with the poor likely to particularly suffer as a result of rising inflation.
The central banks said it will continue to closely monitor foreign-exchange markets and stands ready to ensure stability in the financial markets and curb the emergence of speculative pressures.
Pak Rupee plunges to all time low at 133.6 against Dollar ahead of IMF bailout plan
Pak Rupee plunges to all time low at 133.6 against Dollar ahead of IMF bailout plan
- Pak Rupee is still overvalued, might undergo another 5 percent devaluation to PKR 140, say financial experts
- Pakistan needs $8 billion to service its debts and $28 billion to run its financial affairs for the current year
China to issue $2bn bonds in Saudi Arabia amid deepening bilateral ties
RIYADH: China has announced plans to issue dollar-denominated bonds in Saudi Arabia starting the week of Nov. 11, marking its first debt issuance in US currency since 2021.
The Asian country’s Ministry of Finance disclosed on Nov. 5 that it will sell up to $2 billion in bonds in Riyadh.
This issuance comes as China and the Kingdom are strengthening a multifaceted alliance that extends across multiple spheres.
In recent years, both nations have sought to broaden their economic cooperation, aligning strategic initiatives such as China’s Belt and Road Initiative with Saudi Arabia’s Vision 2030 plan.
“With the approval of the State Council, the Ministry of Finance will issue US dollar sovereign bonds of no more than $2 billion in Saudi Arabia in the week of November 11, 2024. The specific issuance arrangements will be announced separately before the release,” the ministry’s statement read.
Strengthening Saudi-Chinese relations
In September, the Kingdom’s Crown Prince Mohammed bin Salman and Chinese Premier Li Qiang co-chaired a pivotal meeting of the High-Level Saudi-Chinese Committee, where they reviewed aspects of joint cooperation and addressed regional and international developments.
The session in Riyadh emphasized opportunities in energy, trade, and investment, as well as well as technology and security, while laying the groundwork for enhanced coordination across these sectors.
Expanding tourism and education links
Tourism has emerged as a significant focus in Saudi-Chinese relations. In October, Saudi officials, including the Minister of Tourism Ahmed Al-Khateeb, engaged with Chinese counterparts to expand travel and investment ties.
The Kingdom received the designation of “Approved Destination Status” from Beijing earlier this year, following participation in key events in China.
To attract 5 million visitors from the Asian country by 2030, Saudi Arabia has introduced Chinese payment processing options, launched tailored tourism campaigns, and increased direct flights between the two countries.
Growing trade and investment
China has been Saudi Arabia’s largest trade partner since 2014, with bilateral trade reaching $97 billion in 2023. This figure includes $54 billion in Saudi exports and $43 billion in imports from China.
Investments between the two nations have also surged, with Chinese investments in the Kingdom rising from $1.5 billion in 2022 to $16.8 billion in 2023. Saudi investments in China are also substantial, totaling $75 billion.
Saudi Arabia and China are exploring new avenues for collaboration, including joint investments in renewable energy, infrastructure, and technology, with a focus on sustainable development.
The crown prince’s 2019 visit to Beijing set a foundation for this strategic partnership, resulting in 12 agreements and memoranda of understanding that continue to shape bilateral cooperation.
Saudi Arabia awards 11 mining exploration permits under accelerated program
JEDDAH: Saudi Arabia has granted 11 mining exploration permits to local and international companies for six sites under its Accelerated Exploration Program, which aims to unlock the Kingdom’s underutilized mineral resources.
On Nov. 5, the Ministry of Industry and Mineral Resources announced that the permits, covering a total area of 850 sq. kim across Riyadh, Makkah, and Asir, were awarded as part of a competitive licensing round designed to boost the country’s mineral sector. This initiative is aligned with Saudi Arabia’s Vision 2030 and the National Industry Development and Logistics Program.
The recent competition concluded with one national company and five alliances consisting of 10 local and international firms being awarded the exploration rights. The competition was designed to maximize the value of the country’s mineral resources and expand the mining industry as a key pillar of the economy.
Transforming the mining sector
Saudi Arabia is aiming to transform mining into the third pillar of its industrial base, alongside oil and petrochemicals. The Kingdom is home to more than 5,300 mineral sites, estimated to be worth around SR5 trillion ($1.33 trillion), and the ministry is actively seeking to harness these resources to fuel economic growth.
Among the winners, the alliance of ANS Exploration and Odyssey Metal Ltd. was granted an exploration license for the Umm Qasr site in Riyadh, known for its deposits of gold, silver, lead, and zinc. Gold and Minerals Co. secured a license for the Wadi Doush site in Asir, an area rich in gold, silver, and copper ore deposits, covering 157 square kilometers.
The alliance of AuKing Mining Ltd. and Barg Al-Saman Mining Co. received a license for the Shuaib Marqan site in Riyadh, spanning 92 square kilometers and noted for its copper, silver, and gold resources. Meanwhile, Metal Bank Ltd. and the Mining Holding Co. were awarded the Wadi Al-Jouna site in Asir, which covers 425 square kilometers and contains copper, zinc, silver, and gold.
Other awarded licenses include the Hazm Shubat site in Asir, granted to the Rawkad and Masharef alliance, which is known for its gold deposits. The Midad Al-Muna for Mining and Tinka Resources alliance was given the license for the Huwaimdhan exploration site in Makkah, which also holds significant gold resources.
Commitment to local development
A total of 44 bids were received from 22 companies — many of them new to the Saudi market—during the competition. Bids were evaluated based on technical expertise, proposed work programs, and social and environmental considerations. As part of their commitment, the winning companies have pledged to invest SR75 million ($20 million) in exploration activities and SR5 million toward community development, aiming to create jobs and opportunities for citizens in underserved areas.
This licensing round marks a significant milestone for Saudi Arabia’s mining sector, with four companies receiving exploration licenses for the first time, further cementing the Kingdom’s appeal as a leading investment destination for mining.
Aligning with Vision 2030
The ministry highlighted that this initiative reflects investors' confidence in Saudi Arabia’s mining investment framework, which adheres to the highest standards of transparency and environmental responsibility. It also underscores the country’s commitment to diversifying its economy in line with Vision 2030, which aims to develop the mining sector as a key economic driver.
In a related development, the ministry recently announced another competition for seven mining exploration licenses, covering regions in Makkah and Riyadh and targeting a range of precious and base metals, including gold, copper, zinc, lead, and silver. The deadline for submitting technical proposals for this new licensing round is at the end of November.
Private sector drives 6.1% rise in Saudi capital investment for Q2
RIYADH: Saudi Arabia’s gross fixed capital formation reached SR296 billion ($79 billion) in the second quarter of 2024, marking a 6.1 percent year-on-year increase, according to recent data.
The Ministry of Investment attributed this growth primarily to the non-government sector, which holds an 86.45 percent share of total GFCF.
This sector saw an 8.2 percent increase, reaching SR255.9 billion, reflecting robust private-sector activity aligned with Vision 2030’s targets to boost private investment. Conversely, GFCF in the government sector declined by 5.2 percent to SR40.1 billion.
GFCF, which measures net investments in assets like infrastructure, machinery, and construction, is a key indicator of long-term economic potential, as it reflects capacity-building investments that drive productivity and growth.
Saudi Arabia’s appeal as a top investment destination continues to grow, with the Ministry of Investment issuing 3,810 licenses in the third quarter — a 73.7 percent annual rise, excluding permits from the Tasattur anti-concealment initiative.
This strong performance highlights the Kingdom’s successful positioning as a competitive market, driven by an increasingly stable and business-friendly environment, according to the report.
The ministry’s October report, which aligns its data with the latest IMF guidelines, showed that Saudi Arabia’s foreign direct investment stock reached SR897 billion in 2023, a 13.4 percent increase from 2022.
Excluding the one-time SR55 billion Aramco pipeline deal, the data showed that net inflows — representing the total new foreign capital coming into the country after accounting for outflows — also surged by 91 percent during this period, reaching SR86 billion.
As Saudi Arabia pushes toward its goal of making FDI 5.7 percent of its gross domestic product by 2030, this upswing in foreign capital not only strengthens the Kingdom’s position as a global investment hub but also reinforces the ongoing expansion in GFCF, contributing to sustainable economic growth.
Saudi Arabia has been advancing a range of initiatives to attract and deepen foreign investment, positioning itself as a hub for international business in the Middle East.
One such measure, announced in 2021, requires foreign companies bidding for government contracts to establish regional headquarters within the Kingdom by 2024.
This mandate has already encouraged major firms to set up shops in Riyadh, underscoring the Saudi government’s commitment to drawing long-term investment.
The Public Investment Fund has also played a critical role in bolstering the investment landscape.
Recently, PIF signed a memorandum of understanding with Brookfield Asset Management to become an anchor investor in Brookfield Middle East Partners.
This private equity platform plans to raise $2 billion to invest in various high-growth sectors, such as technology, healthcare, and industrials. Additionally, at least half of BMEP’s capital will be allocated to Saudi-based companies, facilitating FDI inflows directly into the Kingdom.
Another major win came with BlackRock, the world’s largest asset manager, which recently secured approval to establish a regional headquarters in Riyadh.
This move is set to expand BlackRock’s Middle East operations significantly, reinforcing Saudi Arabia’ appeal as an investment destination for global financial firms.
Energy sector drives GCC IPO gains in Q3, positive year-end outlook: PwC
RIYADH: Initial public offerings across the Gulf Cooperation Council region registered a year-on-year increase in proceeds in the third quarter of 2024, despite a decline in the number of listings, according to a new report.
The energy sector spearheaded this quarter’s growth, led by NMDC Energy’s listing, which raised $877 million — the largest IPO in the UAE this year, stated PwC Middle East.
Saudi Arabia’s parallel market, Nomu, also contributed to the quarter’s performance, with three listings.
PwC forecasts strong aftermarket performance for companies completing IPOs in 2024, predicting that most of the top 10 IPOs by deal size will trade above their initial offering prices.
This outlook suggests a favorable market reception for large IPOs in the coming year, with strong investor demand potentially driving post-IPO stock prices higher.
“As has been the case in recent years, Q3 has seen relatively few companies come to market. Since the end of the quarter, we have seen a number of IPOs either completed or announced across the GCC, including OQ Exploration and Production, Oman’s largest ever IPO, supporting the positive outlook for the remainder of 2024,” said Muhammad Hassan, capital markets leader at PwC Middle East.
In the third quarter, bond issuances in the GCC raised $4.4 billion, marking an almost 30 percent increase over the previous year.
Additionally, $5.2 billion was raised through sukuk issuances, with 88 percent of these bonds listed on the Qatar Stock Exchange or Nasdaq Dubai.
Governments in the region accounted for nearly 65 percent of total bond and sukuk issuances.
“Looking forward, the outlook for the GCC IPO market remains positive with a healthy IPO pipeline of companies from a diverse range of sectors busy preparing for their upcoming IPOs across the region,” the report stated.
Saudi-Portuguese Business Council launches investment regulation initiative to boost trade
RIYADH: Saudi Arabia and Portugal are aiming to increase awareness of investment regulations in both countries to boost trade thanks to a first-of-its-kind initiative.
Announced by the Federation of Saudi Chambers, the Saudi-Portuguese Business Council signed a memorandum of understanding with Ibrahim Al Howishel Law Firm to facilitate the entry of Portuguese companies into the Kingdom.
The MoU will also encourage regional companies to invest in Portugal by acting as a legal advisor. It will be the first of its kind among Saudi foreign business councils within the federation.
Its objective is to increase the number of international investors in the Kingdom by informing them about the positive developments, regulatory environment, and investment landscape.
Walid Al-Balhan, chairman of the Saudi-Portuguese Business Council, emphasized that the recently signed MoU aligns with Saudi Arabia’s Vision 2030, which aims to attract foreign investment and strengthen international business ties.
He also said the advisor would address investor queries and provide guidance on regulations, building confidence among Portuguese companies looking to enter the Kingdom.
He extended his gratitude to the Federation of Saudi Chambers and relevant government bodies for their support of the council’s initiatives.
Under the agreement, both parties will collaborate with the Kingdom’s authorities to host workshops for Portuguese firms interested in the Saudi market.
These sessions are expected to cover key topics, including the Premium Residency system, foreign investment regulations, and company setup processes, as well as strategic investment opportunities and incentives for firms considering relocating their headquarters to Saudi Arabia.
The agreement also includes cooperative efforts to refine investment procedures for Saudi companies in Portugal, propose incentives for entities from the European country to attract investors within the Kingdom, and provide advisory support for companies in both nations.
