KARACHI: Pakistan State Bank on Monday raised the key policy rate by 150 basis points (bsp) to 12.25 percent, a week after the country reached an agreement with the International Monetary Fund (IMF) for a 39-month loan program worth $6 billion.
The hike, which is a record high in nearly eight years, comes amid fears of accelerated inflation under the new bailout plan given by the global lender.
Prime Minister Imran Khan had recently removed his Finance Minister, governor of central bank, and head of tax collecting agency Federal Bureau of Revenue (FBR) amid ongoing talks with the IMF.
The Monetary Policy Committee (MPC) meeting chaired by the new governor of SBP Reza Baqir announced the new policy rate which exceeds the market consensus of 100 bps.
“Further policy measures are required to address underlying inflationary pressures from higher recent month-on-month headline and core inflation out-turns, recent exchange rate depreciation, an elevated fiscal deficit and its increased monetization, and potential adjustments in utility tariffs,” the SBP said in the monetary policy statement.
Pakistan and the IMF entered into a loan agreement on May 12 which has certain conditionalities attached to it including keeping the interest rate higher than the expected inflation in future as compared to the current inflation rate, allow the currency to find its value in the market, and impose higher taxes while controlling government spending in terms of subsidies.
The IMF program is designed to restore macroeconomic stability and support sustainable economic growth, and is expected to unlock considerable additional external financing.
The government, marred by a widening fiscal deficit, has been relying heavily on central bank to finance the deficit which acted to dilute the impact of previous monetary tightening.
Since the last MPC meeting in March this year, the exchange rate also depreciated by 5.93 percent to PKR 149.65 per US dollar, at the close of May 20, 2019, reflecting a combination of underlying macroeconomic factors and market sentiment considerations, according to the central bank.
The SBP estimates show economic growth in FY19 with a modest rise in FY20. This slowdown is mostly due to lower growth in agriculture and industry while more than two-thirds of the real GDP growth in FY19 is expected to come from services.
Despite the improvement in the current account and a noticeable increase in official bilateral inflows, the financing of the current account deficit remained challenging. Consequently, reserves declined to $8.8 billion as of May 10, 2019 from $10.5 billion at the end of March 2019.
The exchange rate also came under pressure in the last few days. In SBP’s view, the recent movement in the exchange rate reflects the continuing resolution of accumulated imbalances of the past and some role of supply and demand factors. “SBP will continue to closely monitor the situation and stands ready to take measures, as needed, to address any unwarranted volatility in the foreign exchange market,” the statement added.
The overall fiscal deficit is likely to be considerably higher during the first 10 months (Jul-Mar) of current fiscal year as compared to the same period last year due to a shortfall in revenue collection, higher than budgeted interest payments, and security related expenditures. From a monetary policy perspective, a growing portion of the fiscal deficit has been financed through borrowings from SBP.
The average headline CPI inflation reached 7 percent in Jul-Apr FY19 compared to 3.8 percent in the same period last year while it is anticipated to increase further in FY20 subject to a number of upside risks from an expected rationalization of taxes in the upcoming budget, potential adjustments in electricity and gas tariffs, and volatility in international oil prices.
The annualized headline month-on-month inflation has also risen considerably in the last three months due to the recent hike in domestic fuel prices, rising food prices and input costs — where these inflationary pressures are likely to continue for some time.
“The inflation outlook suggests a fall in real interest rates on a forward-looking basis,” the central bank noted.
SBP raises policy rate to 12.25% fearing worst inflation post IMF deal
SBP raises policy rate to 12.25% fearing worst inflation post IMF deal
- Hike comes amid anticipation of high inflation under IMF loan program
- Government’s heavy borrowing from central bank diluted the impact of previous monetary tightening
Iranian FM on Islamabad visit, says Tehran reserves right to ‘legitimate defense’ against Israel
- Araghchi is in Pakistan on a two-day visit to discuss Middle East tensions, bilateral ties
- Decries Israel’s “acts of genocide” in Gaza, ongoing attacks in Lebanon, assault on Iran on Oct. 26
ISLAMABAD: Iranian foreign minister Seyed Abbas Araghchi arrived in Pakistan’s capital on Tuesday for a two-day official visit to discuss a range of issues, including tensions in the Middle East, saying at a press conference that Tehran reserved the right to a “legitimate defense” against Israeli aggressions though it did not seek escalation.
Araghchi was addressing a joint media briefing with Pakistani Deputy Prime Minister and Foreign Minister Ishaq Dar in which he spoke about Israel’s “crimes and acts of genocide” in Gaza, its ongoing attacks in Lebanon and its assault on Iran on Oct. 26.
Iran’s supreme leader on Saturday threatened Israel and the US with “a crushing response” over attacks on Iran and its allies. Any further attacks from either side could engulf the wider Middle East, already teetering over Israel’s assault of the Gaza Strip and its ground invasion of Lebanon, into a wider regional conflict as the US goes into a presidential election today, Tuesday.
“Unlike the Israeli regime, the Islamic Republic of Iran does not seek escalation,” Araghchi told reporters. “However, we reserve our inherent right to legitimate defense under Article 51 of the United Nations Charter and we would certainly respond to the Israeli aggression in a proper time and in a proper manner.”
Since the deadliest attack by Hamas in its history on Oct. 7, 2023, Israel has carried out air and ground strikes in Gaza in which over 42,000 people have been killed. Since late September, it has also been at war with Hezbollah in Lebanon. Both Hezbollah and Hamas are allies of Iran.
Pakistan, a major ally of Saudi Arabia, shares a long border with Iran but ties have been frosty over a range of issues, including cross-border militancy.
During Tuesday’s press conference, the Iranian foreign minister appreciated Pakistan’s stance in condemning Israeli aggression against Iran.
“We [Muslim nations] are working toward a solution to stop these atrocities and to alleviate the suffering of the people of Gaza and Lebanon at the upcoming OIC meeting, especially as winter approaches, which will only intensify the hardships of the homeless and refugees in Gaza and Lebanon,” Araghchi added.
Saudi Arabia will also host a joint Arab-Islamic summit on Nov. 11 to address Israeli assaults in the Palestinian territories and Lebanon.
PAK-IRAN TIES
Speaking about bilateral relations, Araghchi reiterated Iran’s commitment to the promotion of ties with Pakistan in all areas, including economic, political, academic, cultural, and tourism.
“The objective of this round of consultation is the promotion of the all-out relations between Iran and Pakistan with a new focus on the bilateral relations, particularly in the areas of trade and economy,” he added.
Speaking at the media briefing, Pakistani FM Dar said during his meetings with Araghchi, he had emphasized the need for an “urgent” ceasefire, de-escalation, and dialogue aimed at realizing the Palestinian people’s right to self-determination.
“We also resolved that in the upcoming joint Islamic summit in Jeddah, which has been scheduled for the 11th of November, we would pool our efforts in order to make sure that we come up with a joint approach to the issues for which this joint summit has been called,” Dar said.
Dar said both sides had also discussed ways to enhance cooperation across several key areas, including trade, energy, and border security.
“We agreed to intensify collaboration on border management and address shared challenges as we underscored that terrorism and extremism pose a serious threat to the regional peace and pledged to coordinate our joint efforts to eradicate these challenges,” he added.
Pakistan and Iran have had a rocky relationship despite several commercial pacts between the two countries on trade, energy, and security. Both countries signed the $7 billion Iran-Pakistan gas pipeline project agreement in 2004 but 20 years on, the project remains incomplete due to funding challenges and threats of US sanctions over doing business with Tehran.
Iran has completed the pipeline’s construction on its side of the border while Pakistan is seeking a US waiver to go ahead with building the project. Pakistan has also hired two prominent US law firms, Willkie Farr & Gallagher and White & Case, to defend its position in an international arbitration case initiated by Tehran over the stalled gas pipeline project, the attorney general confirmed to Arab News on Monday.
Pakistan and Iran are also often at odds over instability on their shared, porous frontier, with both countries routinely trading blame for not doing enough against militants who carry out cross-border attacks.
Tensions surged in January when Pakistan and Iran exchanged airstrikes, both claiming to target alleged militant hideouts in each other’s countries.
Pakistani mechanic fulfills childhood dream of building, flying homemade paraglider
- Muhammad Ashraf completed first successful flight in Balochistan’s Bostan town on Oct. 28, reaching 300 feet
- Ashraf modified 1000cc motor vehicle engine into functional paragliding engine, sourced local materials and parts
BOSTAN, Balochistan: Muhammad Ashraf, a 28-year-old motor vehicle mechanic in Pakistan’s southwestern Balochistan province, was barely a teenager when he had to quit school to help his ailing father support their family.
While Ashraf went on to become a successful technician and set up his own workshop in the rugged town of Kuchlak in the impoverished Balochistan province, his real dream was different: to build a paraglider and fly high in the skies.
In 2021, the mechanic workshop owner got to work making a fan-powered, three-wheel paramotor. He watched paragliding videos on Facebook and YouTube and eventually contacted some fellow mechanics in the provincial capital of Quetta to help him find the required engine and parts.
“I started my work by watching online videos. I didn’t learn from anyone, neither do I have enough education for anyone to teach me, nor is there any such system in our country,” Ashraf told Arab News in an interview this week ahead of a flight of his paraglider.
“I bought an old engine. I opened it and rebuilt it again myself. Once I was fully confident about the engine, I installed it,” he added. “The advantage of the Cultus [compact car] engine is that it’s lightweight yet powerful, with a 1,000cc capacity.”
Other than the car engine, Ashraf used local materials and parts to build the paramotor, spending $5,776 on the project. With a large iron rod hanging in the front to control the movement of the wings and two right-left pedals as the accelerator and brake, Ashraf’s paramotor can fly for half an hour on almost 20 liters of gasoline.
“It was too costly for me to purchase an imported engine and other parts for my paramotor from abroad, hence I used local iron and parts ordered from Lahore, Karachi and Quetta. I used local wood and trimmed it into wings for my paramotor.”
“ACHIEVEMENT FOR PEOPLE OF BALOCHISTAN”
Paragliding is a lucrative business in Pakistan’s picturesque northern areas, annually frequented by hundreds of thousands of tourists. But most people are unfamiliar with paragliding in remote, arid Balochistan, Pakistan’s largest province by area but its most poor and underdeveloped.
Ashraf says he is the first person who has built his own paramotor in the province, completing its first successful flight on Oct. 28 in Killi Qasim, a village in his hometown of Bostan in Pishin district.
“I was quite nervous before taking out my two-seater paraglider for the first flight, but I flew for three minutes and went up to 300 feet in the sky,” he recalled. “My family, friends and other people in my village were very happy when I touched the paraglider down on the ground.”
Muhammad Azam Bazai, a union councilor in Bostan, described Ashraf’s locally made paramotor as an “achievement for the people of Balochistan” and requested the provincial government to support him in building paragliding tourism in the province.
“We were initially mocking him, saying we didn’t believe his aircraft would ever fly or get off the ground,” Bazai said. “But when he flew the paraglider, I was so happy that I can’t even express the joy.”
Shahid Rind, a spokesman for the Balochistan government, said the government would look into the viability of Ashraf’s project.
“In the past, the government has promoted such initiatives and positive steps taken by the youth of Balochistan,” he told Arab News. “And if there is any professional or commercial viability in this, the government of Balochistan will definitely support this individual.”
Having successfully built his flying machine, Ashraf now wants to upgrade it to a three-seater with a more powerful engine, and also aspires to build more paramotors for flying enthusiasts in Balochistan.
“I will try to teach people who want to learn how to make and fly it,” the mechanic said as he climbed into his paraglider, readying for flight.
“Whoever is interested in learning in Balochistan, I am here to help.”
Pakistan to host England, New Zealand and Zimbabwe women's cricket teams in 2026/27
- Zimbabwe to tour Pakistan in Apri-May 2025, New Zealand to tour country in April 2027
- Pakistan will travel to South Africa, Sri Lanka and the West Indies in 2026 for cricket contests
ISLAMABAD: Pakistan will host New Zealand, Zimbabwe and England women’s cricket teams for the first time in 2026 and 2027, the Pakistan Cricket Board (PCB) said this week, saying that the tours were part of the International Cricket Council’s (ICC) Future Tours Programme 2025-29.
Zimbabwe women’s team will tour Pakistan in April-May 2026 while New Zealand will be visiting the country in April 2027, the PCB said in a statement. The English women’s cricket team will tour Pakistan in October 2027 while Bangladesh will be the fourth side to tour the country in October 2028.
“Pakistan will host England, New Zealand and Zimbabwe women’s cricket teams for the first time as ICC announced Future Tours Programme 2025-29,” the PCB said in a press release on Monday.
Eleven countries will participate in the fourth cycle of the ICC Women’s Championship being played from 2026-29 to directly qualify for the ICC Women’s 50-over World Cup in 2029, it said, adding that each team will compete against eight other teams in eight home and away matches.
The fourth cycle of the ICC Women’s Championship, which will be played from 2026-29, will see 11 sides taking part in the event for direct qualification to the ICC Women’s 50-over World Cup in 2029.
In the Women’s Championship, each team will compete against eight other teams, following the format of four home and four away series, similar to the current edition. Across 44 series, a total of 132 ODIs will be played, with each series consisting of three matches.
“The Future Tour Programme will see an ICC Women’s tournament taking place every year, starting with the ICC Women’s Cricket World Cup 2025 in India, the ICC Women’s T20 World Cup 2026 in England, the inaugural ICC Women’s Champions Trophy in 2027 and the ICC Women’s T20 World Cup in 2028,” the PCB added.
Pakistan will travel to South Africa in February 2026 and then play Sri Lanka in July of the same year as part of their away assignments, the board said. In November 2026, Pakistan will visit the West Indies while their final away series in the ICC Women’s Championship 2026-29 cycle will be in Ireland in June 2028.
Saudi Arabia, UAE invest $26.8 million in Pakistan in first quarter of current fiscal year
- Foreign investment surged by 48 percent in first quarter of current fiscal year
- Pakistan, Saudi Arabia signed agreements worth $2.8 billion last month
ISLAMABAD: Pakistan’s foreign investment has surged by 48 percent during the first quarter of the current fiscal year, state-run media reported on Tuesday, with Saudi Arabia and the United Arab Emirates (UAE) contributing $26.8 million during the same period.
Pakistan formed the Special Investment Facilitation Council (SIFC), a hybrid civil and military body, in 2023 to fast-track decisions related to foreign investment in its key economic sectors such as agriculture, mining, minerals, tourism and others. The development took place as Pakistan grappled with a prolonged economic crisis that almost led the country to suffer a sovereign default before a critical $3 billion bailout by the International Monetary Fund (IMF) last year averted the crisis.
As per a breakdown shared by state broadcaster Radio Pakistan, China invested $404 million during the first quarter of the current fiscal year while Saudi Arabia’s investment was recorded at $ 1.8 million. The UAE, meanwhile, invested $25 million, Hong Kong $98 million, the United Kingdom $72 million and the United States $28 million in the same period, the state broadcaster said.
“A significant increase of forty eight percent has been seen in foreign investment in Pakistan in the first quarter of current fiscal year, reflecting the effective strategies of the Special Investment Facilitation Council,” Radio Pakistan said.
Pakistan’s Prime Minister Shehbaz Sharif visited Saudi Arabia and Qatar last week, where he held talks with the leadership of the two countries on enhancing cooperation in trade, investment and energy. Pakistani and Saudi businesses had signed 27 agreements and memorandums of understanding (MoUs) worth $2.2 billion in October. During Sharif’s visit to the kingdom last week, the two countries agreed to enhance that figure to $2.8 billion.
Meanwhile, the UAE is Pakistan’s third-largest trading partner after China and the United States. It is also an ideal export destination for the South Asian nation as the short distance between the two countries limits transportation costs and facilitates commercial exchanges.
Sharif has actively pursued economic diplomacy in the region in recent months, seeking more investments and enhancing trade and regional connectivity for Pakistan. The South Asian country has sought to leverage its position as a transit and trade hub connecting landlocked Central Asian countries with the rest of the world and also pushed for mutually beneficial economic partnerships with Gulf countries.
Security guard shoots and injures two Chinese nationals at Karachi factory — police
- Incident follows two Chinese nationals killed in suicide bombing in Karachi last month
- Beijing has recently publicly spoken out about security threats to its nationals in Pakistan
KARACHI: A security guard at a factory in the southern Pakistani city of Karachi shot and injured two Chinese nationals on Tuesday, police said, in an incident that is likely to put further strain on recently fraying relations between Islamabad and longtime ally Beijing.
China, breaking with tradition, has recently publicly spoken out against security threats to its workers and nationals living in Pakistan, where hundreds of them work on Beijing-funded projects linked to the over $60 billion China-Pakistan Economic Corridor (CPEC).
Last month, two Chinese nationals were killed in a suicide bombing near the international airport in Karachi. In March this year, a suicide bombing killed five Chinese engineers and a Pakistani driver in northwestern Pakistan as they headed to the Dasu Dam, the biggest hydropower project in the country. In 2022, three Chinese educators and their Pakistani driver were killed when an explosion ripped through a van at the University of Karachi. A blast on a bus killed 13 people in north Pakistan in 2021, including nine Chinese nationals.
The latest shooting took place at a factory in Karachi’s SITE industrial area, after which two injured Chinese citizens were rushed to Liaquat National Hospital.
Deputy Inspector General of Police South, Syed Asad Raza, said the factory guard opened fire at the Chinese nationals after an argument. He did not name the factory, specify whether the Chinese nationals were employees there or what the argument was about.
“According to preliminary investigation, the guard opened fire after a heated argument with the Chinese nationals, leaving two Chinese citizens injured,” Raza told Arab News.
“Two Chinese nationals have been brought to hospital. Both are under treatment,” Dr. Amjad Rizvi, a hospital spokesman, told Arab News.
Sindh Home Minister Zia ul Haq Lanjar has directed police to conduct a “thorough investigation,” his office said.
Pakistan said in a joint statement last month it had agreed to increase security for Chinese citizens and projects in the South Asian nation, as Beijing called for urgent security measures following an escalation in militant threats in the country.
China has pumped billions of dollars into Pakistan over the years building infrastructure under the Belt and Road Initiative, while also running a strategic port and a major mine in the country.
