ISLAMABAD: From cutting power subsidies to forcing currency devaluations that stoke inflation, the hard choices facing Pakistan as it seeks a bailout from the International Monetary Fund (IMF) pose a major headache for populist new Prime Minister Imran Khan.
Pakistani officials met IMF representatives this week in Bali and formally requested Islamabad’s 13th bailout since the late 1980s to give the economy breathing room, while they implement reforms aiming to end decades of boom and bust cycles.
On top of lending the nuclear armed state billions of dollars to avert another balance of payments crisis, the IMF is this time expected to push Islamabad much harder to enact structural reforms needed to rebalance the economy, and rein in spending that has boosted growth but blown out the government budget.
Talks with the IMF have been launched and managing director Christine Lagarde has already said she would require “absolute transparency” of Pakistan’s debts, including those owed to close ally China.
Any reforms prescribed by the IMF would threaten Khan’s lofty campaign promises, like his vow to create 10 million jobs and establish an “Islamic welfare state” modelled on the ideas first voiced by the Prophet Muhammad in the holy city of Medina.
Khan was elected in July with the support of many poorer Pakistanis desperate for a change in a nation where the illiteracy rate hovers above 40 percent, health care is shoddy, and joblessness or underemployment rife among the country’s 208 million people.
Creating 10 million jobs would require the economy to grow at 8 percent but that can only be achieved with economic shock therapy that in the short term will smother growth to far below the 5.8 percent achieved in the year to June, economists say.
“The path to Medina is full of thorns, not roses,” said one expert at an international donor agency, who declined to be identified as he is not authorized to speak on the issue.
“To get there, they have to go through these painful measures now.”
The IMF predicted this week Pakistan’s growth will slow to 4 percent in 2019 and fall to about 3 percent in the medium term.
A sharp increase in oil prices — Pakistan imports about 80 percent of oil needs — has contributed to a current account deficit that widened 43 percent to $18 billion in the fiscal year that ended June 30. The weakening Pakistan rupee also contributes to a rise in local energy prices.
On Wednesday, Khan blamed the previous government for the economic mess and urged Pakistanis to remain calm.
“I want to tell all of you to stay strong and not to panic. This is a very short period of time which will go away.”
“FEND FOR OURSELVES“
As an opposition leader, Khan vowed to never “beg” for money from the IMF and swept to power on an anti-corruption platform that was coupled with a promise to enact badly needed reforms, including widening the nation’s taxation net and reforming loss-making state-run enterprises.
But local and foreign investors have welcomed the bailout talks, saying Pakistan’s economy needs the IMF’s protective blanket because of rising oil prices and emerging markets turmoil. However, they also warned of tougher conditions compared to 2013, when Islamabad was given repeated wavers and avoided harsh reforms after receiving a $6.7 billion IMF loan.
“Better that we enter into a well-structured IMF program than try to fend for ourselves,” the Pakistan Business Council said in a statement.
In a nod to the IMF, which called the rupee “over-valued,” Pakistan’s central bank on Tuesday carried out its fifth devaluation since December, sending the rupee tumbling 7.5 percent to take its losses to 26 percent in the past 10 months. More devaluations are expected.
The bank has also hiked its main interest rate by 275 basis points since January, to 8.5 percent, and analysts say more rises are on the horizon.
The devaluations have stoked inflation worries and are putting extra pressure on debt servicing, which is a major concern for the new government. Debt service costs are set to account for 35 percent of the budget in the fiscal year to next June, according to forecasts from the previous government. Officials now expect the debt to GDP ratio to rise above 70 percent.
“We really have to get out of this debt dependency trap,” Muhammad Hammad Azhar, Pakistan’s state minister for revenue, told Reuters.
He said the government was considering the possible restructuring of some foreign loans but did not give details.
Khan’s government blames many of Pakistan’s current economic woes on the previous administration’s “strong rupee” policy, which rendered Pakistan’s exports uncompetitive. The central bank also burnt through currency reserves defending the rupee.
Reserves have plummeted 41 percent this year to stand at $8.3 billion, or about 1.6 months of import cover, despite China lending billions of dollars to Islamabad to prop up the currency.
CHINA LOANS
China has made Pakistan a flagship country in its vast Belt and Road infrastructure building program, pledging about $60 billion in financing for ports, railways and roads. But rising debt levels have caused Islamabad to cut the size of the biggest Belt and Road project by about $2 billion.
US Secretary of State Mike Pompeo has said there would be “no rationale” for an IMF bailout of Pakistan that pays off Chinese loans.
Khan’s administration had also approached China and Saudi Arabia, Islamabad’s other historical ally, for help to prop up the economy but they appear to have balked at coming to Pakistan’s rescue on their own.
Though the size of any bailout is not clear, Khan this week suggested Pakistan needs $10-12 billion. On top of the IMF, the World Bank and the Asian Development Bank are expected to lend money, as they did in 2013. China and Saudi Arabia may also contribute.
The IMF last week commended Pakistan for curbing gas and electricity subsidies, raising interest rates and devaluing the currency. But it warned that Islamabad needs to go even further in all those areas.
Pakistani officials say they are braced for tough measures but hope to expand the tax base and raise more revenue rather than rely purely on austerity to patch up a budget deficit which hit 6.6 percent of GDP in the fiscal year to end June. They also want to help further stimulate exports.
Azhar said Khan’s party was elected on a reforms agenda and would push through changes “irrespective of any IMF bailout.”
On Wednesday, Khan launched a program aiming to construct five million homes for the poor, a top campaign promise. But he didn’t explain how the government will pay for it. (Reporting by Drazen Jorgic Editing by Martin Howell and Raju Gopalakrishnan)
‘Path of thorns’: An IMF bailout set to impede Pakistan PM’s populist agenda
‘Path of thorns’: An IMF bailout set to impede Pakistan PM’s populist agenda
- IMF expected to push Pakistan to make some hard choices
- Measures likely to crimp new PM Khan’s social spending plans
Pakistani naval ships visit Kuwait and Iraq, conduct joint exercises in Arabian Gulf
- Pakistan regularly holds joint exercises with allies to increase synergy and deter piracy, drug trafficking and other illicit activities
- The visit of Pakistan Navy flotilla to Kuwait and Iraq will further enhance the existing diplomatic and naval relations, the military says
ISLAMABAD: Pakistani naval ships have visited Kuwaiti and Iraqi ports to conduct joint exercises with both navies in the Arabian Gulf, the Pakistani military said on Sunday, adding the visits would enhance existing relations.
Pakistan Navy Ships (PNS) Rasadgar and Azmat visited the Kuwaiti port of Al-Shuwaikh, while Pakistan Maritime Security Agency (PMSA) ship Dasht visited the Iraqi port of Umm Qasr, according to the Inter-Services Public Relations (ISPR), the Pakistani military’s media wing.
On arrival at both ports, Pakistani diplomatic and host naval officials warmly welcomed the Pakistan Navy ships and the mission commander, along with commanding officers of the ships, held meetings with the naval leadership of both countries.
“Later, naval exercises were also conducted together with Kuwaiti and Iraqi navy ships,” the ISPR said in a statement. “The exercises were aimed at improving mutual cooperation between the navies and developing the capacity for joint operations.”
During the meetings, naval officials discussed matters of mutual interest, cooperation in maritime security and communication, according to the statement.
“The visit of Pakistan Navy flotilla to Kuwait and Iraq will further enhance the existing diplomatic and naval relations with friendly countries,” it read.
Pakistan Navy regularly collaborates and holds joint military exercises with allies to increase synergy, promote regional peace and stability and deter piracy, drug trafficking and other illicit maritime activities.
This month, Pakistan Navy conducted joint naval exercises and drills with Royal Oman ship ‘Alseeb.’ The bilateral naval exercise, “Samar Al-Tayeb,” is conducted regularly between the navies of the two nations.
In July, Pakistan Navy also assumed command of a multinational task force responsible for ensuring maritime security in the southeastern waters of the Middle East, operating in the Arabian Sea, Gulf of Oman and Gulf of Aden.
Pakistan’s army vows to hunt down militants a day after attack kills 16 soldiers
- Pakistan has struggled to contain militancy in its northwest since a fragile truce with Pakistani Taliban broke down in 2022
- Islamabad has frequently blamed the surge in militancy on militants operating out of Afghanistan, Kabul denies the allegation
ISLAMABAD: Pakistan’s army chief, General Asim Munir, on Sunday vowed to hunt down militants waging attacks against security forces and their facilitators, the Pakistani military said, a day after the killing of 16 soldiers in an ambush in the country’s northwest.
Gen. Munir said this during his visit to the South Waziristan district in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province, which has been battling a surge in militancy.
The visit came a day after the killing of 16 soldiers and eight militants during a gunfight in South Waziristan after a group of militants ambushed an army outpost in Makeen area.
Interacting with officers and troops, the army chief commended their resilience and steadfastness in the face of militancy, according to the Inter-Services Public Relations (ISPR), the military’s media wing.
“The army chief highlighted that the courage, resilience, and unyielding determination of Pakistan’s armed forces are the cornerstone of the nation’s sovereignty,” the ISPR said in a statement
“COAS reaffirmed Pakistan Army’s commitment to pursuing Fitna Al Khwarij [militants] which shall continue to be hunted down till its elimination along with the facilitator, abettors and financier who will be made to pay the price for their nefarious activities against the state.”
The brazen raid on the outpost near the border with Afghanistan was claimed by the Pakistani Taliban, who said it was staged “in retaliation for the martyrdom of our senior commanders.”
The development came days after the Pakistani military said it had killed 11 militants in separate operations in KP’s Tank, North Waziristan and Mohmand districts.
Pakistan has witnessed a surge in militancy in KP since November 2022, when a fragile truce between the Pakistani Taliban and the government in Islamabad broke down.
Islamabad has frequently accused neighboring Afghanistan of sheltering and supporting militant groups that launch cross-border attacks. Afghan officials deny involvement, insisting Pakistan’s security issues are an internal matter of Islamabad.
On Saturday, the Pakistani military also urged the Taliban administration in Kabul to ensure robust border management after a group of militants tried to infiltrate from Afghanistan, leading to a skirmish that left four militants and a soldier dead a day earlier.
Pakistan national airline aims to expand its fleet to improve flight operations
- PIA has 23% of Pakistan’s domestic aviation market, but its 34-plane fleet has failed to compete globally
- The airline has faced a lack of direct flights, despite having agreements with 87 countries and key landing slots
KARACHI: Pakistan International Airlines (PIA) is aiming to expand its fleet to improve flight operations, the national flag carrier said on Sunday, following the addition of another Airbus 320.
PIA has 23 percent of Pakistan’s domestic aviation market, but its 34-plane fleet has failed to compete with carriers internationally.
The Pakistani airline has been facing a lack of direct flights, despite having agreements with 87 countries and key landing slots.
“The 11th Airbus 320 AP-BOM has been inducted into the operational fleet with new engines. The aircraft was rolled out from the hangar with new paint and cabin decoration,” PIA said in a statement.
“PIA’s operational fleet will also include long-grounded Boeing 777 and ATR aircraft in the next few days.”
The fleet revival will greatly improve the expansion of PIA’s network and product quality, according to the statement. From this week, PIA has also introduced an in-flight Internet system in domestic flights, which is gaining popularity among passengers.
The airline said strict adherence to flight schedules, providing safe and high-quality products to passengers was its top priority.
“PIA’s flight schedule has achieved 90 percent regularity,” PIA Chief Executive Officer Khurram Mushtaq said. “Measures for operational fleet expansion and product improvement are part of our commitment.”
Earlier this month, PIA said it would resume flights to Europe in January, starting with Paris, after the EU aviation regulator lifted a ban on the national flag carrier.
PIA’s authorization to operate in the EU was suspended in June 2020 over concerns about the ability of Pakistani authorities and its Civil Aviation Authority to ensure compliance with international aviation standards.
The ban cost the loss-making airline 40 billion rupees ($144 million) annually in revenue. Pakistan’s attempts to privatize PIA fell flat this year, when it received only a single offer, well below its asking price.
Pakistani province launches helicopter service to evacuate people, dispatch aid to clashes-hit district
- Clashes between Sunni, Shia tribes have killed over 100 people in Kurram since last month
- On Friday, authorities set a deadline of Feb. 1 for the warring tribes to surrender weapons
PESHAWAR: Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province has launched a helicopter service to evacuate people and transport aid to Kurram district that has been hit by sectarian clashes in recent weeks, officials said on Sunday.
Kurram, a tribal district of around 600,000 near Pakistan’s border with Afghanistan where federal and provincial authorities have traditionally exerted limited control, has been a flashpoint for sectarian tensions between Shia and Sunni tribes for decades.
Fresh clashes that erupted last month have killed more than a hundred people, triggering a humanitarian crisis with reports of starvation, lack of medicine and oxygen shortages following the blocking of the main highway connecting Kurram’s main city of Parachinar to the provincial capital of Peshawar.
In response to the problems being faced by residents, the KP administration has been facilitating travel between Parachinar and Peshawar. On Sunday, two flights evacuated 27 individuals as well as carried 16 government staffers and members of a tribal council, which has been striving to achieve peace, to Kurram.
“There is no fare involved in transportation of people or medicines via the helicopter, rather it is a voluntary service by the KP government to meet the emergency situation,” Nisar Muhammad Khan, a KP government official, told Arab News.
The helicopter service was also being used to dispatch medicines to Parachinar. A day ago, 53 individuals, including 14 patients, were shifted to Peshawar from Kurram via helicopter, according to the provincial authorities.
A third flight was scheduled to bring people stranded in the Tal area back to Parachinar, while five more flights were expected to relocate over a hundred people on Sunday, according to the provincial government.
Chief Minister Ali Amin Gandapur’s office said the government had so far dispatched 1,850 kilograms of medical supplies to Kurram, assuring that it would mobilize all resources to ease problems of the people and ensure durable peace in the region.
The development comes days after the KP authorities set a deadline of Feb. 1 for warring Sunni and Shia tribes in the district to surrender all weapons and dismantle their bunkers to stem sectarian clashes in the region.
The decision was made at a meeting of the KP apex committee, which comprises civilian and military officials, to discuss a sustainable solution to the issue. It allowed the launch of a special air service for temporary evacuation from some parts of Kurram to protect people’s lives, according to the apex committee declaration.
“The agreement outlines that both sides will submit a detailed action plan within 15 days for voluntary submission of weapons,” read a declaration issued after the apex committee meeting.
“All weapons are to be deposited with the local administration by February 1. Additionally, it was decided that all bunkers in the area will be dismantled by the same deadline.”
In the meantime, land routes to the area would be opened intermittently on humanitarian grounds and a mechanism was put in place for secure transportation, according to the statement.
“Personnel of police and Frontier Corps will jointly provide security to the convoys,” it read.
Last month’s clashes erupted after rival tribes attacked convoys of passengers on the Parachinar-Peshawar road, which were followed by attacks on each other’s villages.
The apex committee asked both sides to avoid any violent action in the future to keep the land route safe and open at all times, hoping that the parties would fully cooperate with the government for a lasting solution to the issue.
Champions Trophy preparations in full swing as Karachi stadium upgradation nears completion
- PCB Chairman Mohsin Naqvi says the National Stadium will be ready well before the ICC tournament
- He says the PCB is improving facilities for Pakistani cricket fans to ensure they have a better experience
ISLAMABAD: Preparations for the ICC Champions Trophy 2025 are progressing rapidly, with the upgradation of Karachi’s National Stadium nearing completion, Pakistan Cricket Board (PCB) Chairman Mohsin Naqvi said on Sunday during a visit to the venue.
The tournament, scheduled for February 2025, has been at the center of controversy following India's reluctance to play in Pakistan due to strained political ties.
The International Cricket Council resolved the impasse by approving a hybrid model, allowing India’s matches to be held at neutral venues while other teams play in Pakistan. The decision ensured India’s participation while retaining Pakistan as the official host.
“Remarkable progress has been made in a very short time,” Naqvi was quoted in a PCB statement. “The upgradation of the National Stadium will be completed well before the Champions Trophy tournament.”
During the visit, Naqvi reviewed ongoing projects, including the installation of new seats in enclosures, enhanced parking facilities for 2,700 vehicles and finishing work on the stadium building.
He also instructed officials to expedite the installation of LED lights and scoreboards.
“We are improving facilities for cricket fans to ensure they have a better experience,” he added.
The PCB is under pressure to ensure the country is ready to host the major ICC tournament.
Security concerns and political tensions had previously kept high-profile international cricket events away, but recent improvements in safety and infrastructure have bolstered Pakistan’s case as a venue.
Praising the rapid progress at the National Stadium, Naqvi lauded the project team for their dedication.
“I congratulate the entire team for their outstanding and swift work,” he said.
The Champions Trophy is seen as a pivotal moment for Pakistan cricket, with the PCB aiming to deliver a world-class tournament to reaffirm the country’s ability to host international events successfully.
