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
Pakistan approves Hajj Policy 2025, adds new role to improve pilgrim services
- Pakistan will send 179,210 pilgrims, equally divided between the government and private sector
- Government will prioritize first-time pilgrims in the official balloting process, says a statement
ISLAMABAD: Pakistan’s federal cabinet on Tuesday approved the Hajj Policy 2025, said an official statement, specifying a quota of 179,210 pilgrims and introducing a new position of the “nazim” or administrator to ensure improved services for those embarking on the spiritual journey.
Hajj, one of Islam’s five pillars, is an annual pilgrimage to Makkah undertaken by millions of Muslims. Pakistan has one of the largest Hajj quotas provided by Saudi Arabia to any Muslim country amid immense demand for the pilgrimage, with many citizens waiting years for an opportunity to participate.
“The federal cabinet approved the Hajj Policy 2025 on the recommendation of the Ministry of Religious Affairs and Interfaith Harmony,” an official handout from the Prime Minister’s Office said. “The cabinet was informed that Pakistan’s Hajj quota for 2025 will be 179,210, divided equally between the government and the private sector.”
The new policy includes the creation of a “nazim” position, aimed at ensuring the well-being of pilgrims throughout the journey.
“For every 100 pilgrims, one nazim will be appointed from the welfare staff,” the handout added, underscoring the government’s intent to improve the pilgrimage experience.
Under the policy, children under 12 will not be allowed to travel for Hajj. Government quota allocation will be conducted through computerized balloting, with 1,000 seats reserved for hardship cases and 300 for laborers or low-income employees registered with the Workers Welfare Fund or the Employees Old-Age Benefits Institution.
Additionally, the Makkah Route Initiative, offering streamlined immigration services, will be available at Islamabad and Karachi international airports. To further enhance the experience, Hajj Group Organizers will sign service agreements with the Ministry of Religious Affairs, with close monitoring of service quality.
In light of previous challenges, the cabinet has increased compensation for pilgrims who may pass away or get injured during the pilgrimage. The families of deceased pilgrims will receive Rs1 million to Rs2 million, while injured pilgrims will receive Rs1 million in compensation.
A specialized Hajj management app has also been developed to support pilgrims, along with extensive training initiatives.
The cabinet directed priority in the balloting process to first-time pilgrims and emphasized the importance of ensuring top-quality services for all participants.
Pakistan government defends bills extending tenure of armed services chiefs
- Parliament has approved bills to extend tenure of army, navy, and air force chiefs from 3 to 5 years
- Opposition fears extending tenure will consolidate the hold of already all-powerful army chief
Defense Minister Khawaja Asif has defended the passage this week by Pakistan’s parliament of bills that extend the tenures of the army, navy and air force chiefs, saying the move would check against services chiefs granting themselves extensions and “formalize” the duration of their service.
The bills, approved by Pakistan’s National Assembly and Senate on Monday, have been pushed by the coalition government led by Prime Minister Shehbaz Sharif which argues that they are aimed at building continuity and avoiding some of the political turmoil that usually surrounds the appointment of the army chief every three years. The bills also extend the tenure of the heads of the navy and air force, though those positions hold less influence in Pakistan.
The office of the army chief is considered to be the most powerful in the country, with the army having ruled Pakistan for almost half of its 75-year -long history. Even when not directly in power, the army is considered to be the invisible guiding hand in politics and holds considerable sway in internal security, foreign policy, and economic affairs, among other domains. Several army chiefs in the past have been given extensions in service.
“What we did [passage of bills], these extensions [in army chief’s term] started from Ayub Khan’s time,” Defense Minister Khawaja Asif said, referring to a Pakistani general who carried out a military coup in 1958 and ruled until 1969.
“That thing has been formalized now, and we have increased the tenure. You pick up the rest of the institutions. [...] the National Assembly [term] is also for five years.”
“Now the trend of extensions, how it was in the past that people gave an extension to themselves [will be ended],” Asif added, referring to now retired Gen Qamar Javed Bajwa, who served as army chief from 2016-22 after getting a three-year extension.
Speaking to a Pakistani news channel, Information Minister Ataullah Tarar also said the uncertainty surrounding the army chief’s appointment had been addressed through the new legislation.
“The five-year tenure [of the services chiefs] will not affect the institution’s merit-based system … The amendments are not introduced suddenly, instead the consultation on them was underway, and this legislation is not done for any individual.”
OPPOSITION STANCE
As the bills were passed on Monday in the National Assembly, opposition lawmakers from the PTI party of imprisoned former Prime Minister Imran Khan chanted against the measure. Some of them tore up copies of the bills and threw them at Speaker Ayaz Sadiq for not allowing debate. A similar protest by lawmakers from Khan’s party took place when the bill was quickly passed by the Senate, where Sharif’s party also holds a majority. The bill will now go to the president for his approval.
Omar Ayub Khan, a top leader of Khan’s Pakistan Tehreek-e-Insaf party, or PTI, told reporters after the bill passed that the legislation “is neither good for country nor for the armed forces.”
The PTI is widely believed to be against an extension in service particularly for incumbent Army Chief Gen. Asim Munir, who it considers to be behind the ouster of Khan from the PM’s office in a parliamentary vote of no-confidence in 2022. The PTI also says the army is behind legal cases against Khan that have kept him in prison since August last year. The military denies any interference in politics.
The passage of the new bills follows controversial amendments made to the constitution last month, granting lawmakers the authority to nominate the chief justice of Pakistan, who previously used to be automatically appointed according to the principle of seniority.
The amendments allowed the government to bypass the senior-most judge of the Supreme Court, Justice Mansoor Ali Shah, and appoint Justice Yahya Afridi as the country’s top judge.
The opposition and the legal fraternity had opposed the amendments, arguing that they were aimed at granting more power to the executive in making judicial appointments and curtailing the independence of the judiciary. The government denies this.
Pakistan sends delegation to Saudi Arabia following PM Sharif’s high-profile visit
- Saudi Arabia has pledged to invest $2.8 billion in Pakistan to ensure sustainable economic growth
- PM urges his team to take maximum benefit from the fruits of Pakistan’s ongoing economic diplomacy
ISLAMABAD: A Pakistani delegation departed for Saudi Arabia after recent high-level talks between the two countries, Prime Minister Shehbaz Sharif said on Tuesday, as he highlighted the gains of his administration’s economic diplomacy during the federal cabinet meeting.
Pakistan has grappled with a prolonged economic crisis in recent years, addressing it through external financing from allies like Saudi Arabia, the United Arab Emirates and China, along with support from the International Monetary Fund (IMF).
To secure sustainable economic growth, the country has sought trade and investment partnerships, with Sharif visiting Saudi Arabia and Qatar earlier this month to discuss collaborative opportunities across multiple sectors.
During these talks, Saudi Arabia pledged $2.8 billion through 34 memoranda of understanding (MoUs) and agreements on the sidelines of the Future Investment Initiative conference. Pakistan is now focused on implementing these initiatives, with five projects already underway.
“Our delegation has left for Saudi Arabia,” Sharif told cabinet members. “My visit and meeting with the crown prince [Mohammed bin Salman] went well, with positive intent for Pakistan.”
Sharif highlighted potential collaboration in mines, minerals and solar energy, while noting a demand for Pakistani information technology experts in Saudi Arabia and Qatar.
“I hope the [IT] ministry can prepare a plan [to capitalize on that],” he said.
The prime minister stressed the need to develop a highly skilled workforce to meet global standards while pointing out it was essential to “rapidly move forward” on MoU implementation with other countries.
He also mentioned $2 billion in MoUs with Azerbaijan, saying Baku had expressed readiness to proceed with these initiatives.
“These are good signals, and it’s up to us now to maximize their benefits,” he added.
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.”
