Pakistan's central bank raises key policy rate by 1 percent amid rising inflation

This undated file photo shows a general view of the State Bank of Pakistan premises, which is now turned into a museum. (Shutterstock)
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Updated 14 December 2021
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Pakistan's central bank raises key policy rate by 1 percent amid rising inflation

  • The State Bank of Pakistan further tightened its monetary stance after the rate of inflation reached 11.5 percent in November
  • The central bank expects inflation to average nine to 11 percent this fiscal year due to the recent higher than expected outturns

KARACHI: Pakistan’s central bank on Tuesday further tightened its monetary stance by raising the key policy rate by 100 basis points to 9.75 percent amid rising inflationary pressure in the economy.
The State Bank of Pakistan (SBP) took the decision after the country’s inflation was recorded at 11.5 percent in November 2021, while core inflation in the urban and rural areas rose to 7.6 and 8.2 percent, respectively.
“At today’s meeting [on Tuesday], the Monetary Policy Committee (MPC) decided to raise the policy rate by 100 basis points to 9.75 percent,” the SBP announced in a statement issued after the policy committee meeting.
“The goal of this decision is to counter inflationary pressures and ensure that growth remains sustainable,” the statement added.
The central bank said the indicators of economic activity had remained robust since its last meeting in November while inflation and the trade deficit had further risen due to high global prices and domestic economic growth.
The SBP expects inflation to average nine to 11 percent due to recent higher than expected outturns during the ongoing fiscal year. The pick-up in inflation has been broad-based, with electricity charges, motor fuel, house rent, milk and vegetable ghee among the largest contributors.
“Looking ahead, based on this momentum and the expected path of energy tariffs, inflation is likely to remain within the revised forecast range for the remainder of the fiscal year,” the statement added.
As global commodity prices retrench, administered price increases dissipate, and the impact of demand-moderating policies materializes, the central bank believes inflation is likely to decline toward the medium-term target range of five to seven percent during FY23.
On the external side, despite record exports, high global commodity prices contributed to a significant increase in the import bill. As a result, the November trade deficit rose to $5 billion based on the data provided by the Pakistan Bureau of Statistics, said the SBP.
The central bank informed the MPC expected monetary policy settings to remain broadly unchanged in the near-term.
It also maintained the economic growth during the current fiscal year was expected to be close to the upper end of the forecast range of four to five percent.
“This projection factors in the expected impact of today’s interest rate decision,” the SBP said, adding: “The emergence of the new Coronavirus variant, Omicron, poses some concerns, but at this stage there is limited information about its severity.”
The bank noted that Pakistan had successfully coped with multiple waves of the virus, which supported a positive outlook for the economy.


Eight Chinese Hangor submarines to enter Pakistan fleet ‘very soon’— naval chief

Updated 21 January 2025
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Eight Chinese Hangor submarines to enter Pakistan fleet ‘very soon’— naval chief

  • Joint construction of eight Hangor-class submarines is key project in China-Pakistan naval cooperation
  • Pakistan signed agreement with China to procure eight Hangor-class conventional submarines in 2015

ISLAMABAD: Chief of the Pakistan Naval Staff, Admiral Naveed Ashraf, has said this month eight Hangor-class submarines built for Pakistan by China would be included in the South Asian country’s fleet “very soon.”
The joint construction of eight Hangor-class submarines is a key project in China-Pakistan naval cooperation. This type of submarine is equipped with the latest weapons and sensors and with an air independent propulsion (AIP) system on board, the submarine has significantly enhanced submerged endurance capabilities.
Pakistan signed a contract with China to procure eight Hangor-class conventional submarines in 2015, with the first four to be constructed by China and the other four to be assembled by Pakistan under a technology transfer agreement. The plan was that Pakistan will obtain the eight advanced submarines between 2022 and 2028. In December 2021, the fifth Hangor-class conventional submarine, also the first one built in Pakistan, officially received a steel cutting ceremony. 
In an interview to China’s Global Times newspaper this month, Ashraf said the Hangor-class submarines would “significantly enhance” Pakistan’s naval capabilities, improving stealth, maneuverability and firepower.
“The project is proceeding as per the timeline. We expect that these submarines will join the Pakistan Navy fleet very soon,” Ashraf said.
The initial Hangor delivery timetable would have seen the four Chinese-built submarines delivered by 2023. But there have been widespread reports that Germany had refused to approve export licenses for its MTU 396 diesel engine, which the submarine was designed to use. The German government had also declined to grant export licenses for its engines in regard to Thailand’s order of the S-26T, a variant of the Chinese Type 039B submarine. The Thai deal eventually fell through.
Neither Germany nor Pakistan have confirmed whether export clearance was ultimately approved or denied.
When Pakistan’s Ministry of Defense (MoD) ordered the eight submarines from China in 2015 at an approximate cost of $4–5 billion, it was the largest arms export contract in China’s military history.


Imran Khan party to boycott talks with Pakistan government unless truth commissions announced

Updated 5 min 11 sec ago
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Imran Khan party to boycott talks with Pakistan government unless truth commissions announced

  • First round of talks aimed at cooling political instability took place on Dec. 23 with follow ups on Jan. 2 and 16
  • Pakistani court last week sentenced Khan to 14 years jail in a land corruption case, a setback to nascent talks

ISLAMABAD: Salman Akram Raja, a lawyer and close aide of former Prime Minister Imran Khan, said the jailed leader had told the party not to participate in the next session of ongoing reconciliatory talks with the Pakistan government unless it announced judicial commissions into accusations Khan’s party and supporters had led violent protests. 
The first round of talks aimed at cooling political instability in the 241-million South Asian nation took place between Khan’s Pakistan Tehreek-e-Insaf and the government on Dec. 23, with follow up talks on Jan. 2 and 16. 
The PTI party’s demands to the government mainly include the release of all political prisoners including Khan, and the formation of two judicial commissions to probe into the events which led to his arrest in August 2023, and violent protest rallies, including one on May 9, when PTI supporters rampaged through military offices and installations, and a second one on Nov. 26 in which the government says four troops were killed. 
A Pakistani court last week sentenced Khan to 14 years imprisonment in a land corruption case, a setback to the nascent talks’ process. 
“He [Khan] has said we will not play committee-committee,” Raja told reporters after meeting Khan at the Rawalpindi Adiala prison on Monday.
“Our demands that judicial commissions be formed, if commissions are not announced into the events of May 9 and Nov. 26, then we will not sit in the next round [of talks].”

The talks opened last month as Khan had threatened a civil disobedience movement and amid growing concerns he could face trial by a military court for allegedly inciting attacks on sensitive security installations during the May 9 protests.
The negotiations also began two days after 25 civilians were sentenced by a military court to periods of two to 10 years of “rigorous imprisonment” in connection with attacks on military facilities on May 9, 2023. Just days later on Dec. 26, another 60 civilians were sentenced by a military court to jail time ranging from 2 to 10 years in connection with the May 9 attacks.
Khan’s first arrest in May 2023 in the land graft case in which he was sentenced last week sparked countrywide protests that saw his supporters attack and ransack military installations in an unprecedented backlash against Pakistan’s powerful army generals. Although Khan was released days later, he was rearrested in August that year after being convicted in a corruption case. He remains in prison and says all cases against him are politically motivated.
Protests demanding Khan’s release in November also turned violent, with the PTI saying 12 supporters were killed while the state said four troops had died.

 


Pakistan’s Reko Diq mine to generate $74 billion in free cash flow over 37 years — Barrick CEO

Updated 21 January 2025
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Pakistan’s Reko Diq mine to generate $74 billion in free cash flow over 37 years — Barrick CEO

  • Bristow says project’s timeline on track, with fencing, accommodation, and surveys already completed
  • Saudi mining firm Manara Minerals could invest in Reko Diq in next two quarters, Pakistani petroleum minister has said

KARACHI: The Reko Diq copper and gold project in Pakistan is expected to generate approximately $74 billion in free cash flow over the next 37 years, based on consensus long-term prices, the CEO of joint owner Barrick Gold said in a media interview.
Barrick Gold owns a 50 percent stake in the Reko Diq mine and the governments of Pakistan and the province of Balochistan own the other 50 percent. Barrick considers the mine one of the world’s largest underdeveloped copper-gold areas, and its development is expected to have a significant impact on Pakistan’s struggling economy.
The project, which was delayed due to a long running dispute that ended in 2022, is expected to start production by the end of 2028. It will produce 200,000 tons of copper per year in its first phase, with an estimated cost of $5.5 billion. The first phase is expected to be completed by 2029, Barrick’s CEO Mark Bristow told Pakistani digital media outlet Dawn News English.
A second phase, estimated to cost $3.5 billion, will double production, he added.
The mine is estimated to have reserves lasting 37 years but Bristow said that through upgrades and expansions it could potentially be mined for much longer.
A free cash flow of $74 billion could generate significant dividends, royalties and taxes for Pakistan, which currently has only around $11 billion in foreign reserves.
Barrick is also in talks with railway authorities and infrastructure providers to revamp the coal terminal in Port Qasim, on the outskirts of Pakistan’s port city Karachi, to develop infrastructure to transport copper in the country and for export.
Bristow said the project’s timeline is on track, with fencing, accommodation, and surveys already completed.
Saudi Arabian mining company Manara Minerals could invest in Pakistan’s Reko Diq mine in the next two quarters, Pakistani Petroleum Minister Musadik Malik said last week.
Executives from Manara visited Pakistan in May last year for talks about buying a stake in the project. Pakistan is also in talks with other Gulf countries about mining opportunities, Malik said.


Pakistan hopes for ‘enduring’ partnership with US under new Trump administration

Updated 21 January 2025
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Pakistan hopes for ‘enduring’ partnership with US under new Trump administration

  • In recent years, Washington and Islamabad’s ties deteriorated over the latter’s alleged support of the Taliban in their 2021 takeover of Kabul
  • Tensions rose further when ex-PM Imran Khan accused Washington of orchestrating his ouster through a parliamentary vote, a charge the US denies

ISLAMABAD: Prime Minister Shehbaz Sharif has said that he looked forward to working with United States (US) President Donald Trump for an “enduring” Pakistan-US partnership, shortly after the latter was sworn in as the 47th US president.
Pakistan and the US collaborated during the Cold War and in the fight against Al-Qaeda after 9/11, yet their relationship was also tested by divergent priorities on various issues. In recent years, Washington and Islamabad’s ties deteriorated as the former suspected the latter of supporting the Taliban in their 2021 takeover of Kabul, allegations which Islamabad rejected.
Tensions rose further in 2022 when former Pakistan premier Imran Khan accused the Biden administration of orchestrating his ouster via a parliamentary vote, a charge the US denied. Since Khan’s ouster in 2022, Sharif’s government has made frequent efforts to repair the damaged relations.
“Over the years, our two great countries have worked together closely to pursue peace and prosperity in the region and beyond for our peoples & we shall continue to do so in the future,” Sharif said on X, extending his best wishes to Trump for a successful second term in office.
“I look forward to working with him to strengthen the enduring Pakistan-US partnership.”
Differences have also emerged between both countries over Pakistan’s nuclear weapons program. Late last year, US Deputy National Security Adviser Jon Finer said nuclear-armed Pakistan’s development of long-range ballistic missiles could potentially target the US.
The statement came after the US said it was imposing new sanctions related to Pakistan’s missile program, including on the state-owned defense agency that oversees the program. The Foreign Office in Islamabad said at the time that Pakistan’s strategic capabilities were solely meant to defend its sovereignty, dismissing the US allegations as “devoid of rationality.”
On Monday, Shafqat Ali Khan, a Pakistani Foreign Office spokesperson, said Pakistan sought to “solidify” its relations with the US, which were marked by multi-layered cooperation in economy, trade, people-to-people connections, security and counter-terrorism.
“Pakistan-US relations have a very long history, and the relations remain rich and dense, and we would continue to work with the new administration to further solidify and strengthen this vital relationship,” Shafqat told Arab News.
“We seek to further strengthen these ties by ensuring the continued positive growth of bilateral relations.”
But many foreign affairs experts believe the new US administration will continue viewing Pakistan through the “China-India lens.”
“The biggest challenge for Pakistan is that the Trump administration will continue its previous policies of looking at Pakistan through the China-India lens,” Dr. Zafar Nawaz Jaspal, a professor at Quaid-e-Azam University’s School of Politics and International Relations, told Arab News.
“Now, the biggest challenge for us is how to convince the Americans that though we will be not a part of the American policies to contain China, but at the same time, we could be a part of Americans’ policies in addressing the non-traditional security challenges and on Afghanistan.”
Senator Sherry Rehman, who has previously served as Pakistan’s ambassador to the US, said every transition offers opportunities for a reset, and Pakistan needed to state its own goals for a broader bilateral path to widen its relationship with the US from a highly “securitized” lens to a more robust economic and commercial one.
“Islamabad should make a clear agenda with defined milestones for consistent engagement over better terms of trade, not just wait for Washington to respond to regional headwinds, in which Pakistan finds itself seeking balance against an Indian arms race in South Asia,” she told Arab News.
Dr. Salma Malik, another foreign affairs expert, said if the US adopts policies directed against China, every action or policy decision it takes will have a “direct or indirect impact on Pakistan.”
“Therefore, it is important not to overreact or panic, instead, we should cautiously approach developments, assess opportunities, and respond accordingly,” she said.


Thousands gather in Pakistan’s Karachi to celebrate Gaza ceasefire

Updated 20 January 2025
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Thousands gather in Pakistan’s Karachi to celebrate Gaza ceasefire

  • The truce took effect on Sunday with the release of first three hostages held by Hamas and 90 Palestinians freed from Israeli jails
  • Jamaat-e-Islami, which organized the Karachi rally, urged the Pakistani people to support its initiative for the rebuilding of Gaza

KARACHI: Thousands of Pakistanis gathered on Monday on a main thoroughfare in the southern port city of Karachi to celebrate a ceasefire between Israel and Hamas in Gaza, describing it as a “victory of resistance forces.”
The truce in the 15-month-old war, which has laid waste to the Gaza Strip, took effect on Sunday with the release of the first three hostages held by Hamas and 90 Palestinians freed from Israeli jails.
Now, attention is starting to shift to the rebuilding of the coastal enclave which the Israeli military has demolished, killing more than 47,000 Palestinians since Oct. 7, 2023 attacks by Hamas on Israel.
To celebrate the ceasefire, the Jamaat-e-Islami (JI) religious party organized a congregation on Shahrah-e-Quaideen thoroughfare in Karachi, which was attended by thousands of men, women, children and elderly.
“What happened in Gaza once again exposed the United States as it was the sponsor of the genocide,” JI chief Hafiz Naeemur Rehman told the attendees. “The freedom fighters [of Gaza] defeated Israel in all the dimensions.”
The attendees at the rally carried the Palestinian flags and chanted slogans in support of the people of Gaza.
Rehman urged them to support a JI initiative for the rebuilding of Gaza and continue their boycott of Israeli products and the products of the countries that sided with Israel.
Pakistan does not recognize nor have diplomatic relations with Israel and calls for an independent Palestinian state based on “internationally agreed parameters.”
The South Asian country has dispatched several relief consignments for Gaza, besides establishing the ‘Prime Minister’s Relief Fund’ that aims to collect public donations for the war-affected people.
In his address with the participants through a video link, Hamas official Khalid Qadoumi said Gaza proved to be “Vietnam for Israel.”
“Israel opted to retreat due its heavy military losses in the strip,” he was quoted as saying by the JI party.
“Israel displaced 90 [percent] population of Gaza, killed around 50,000 innocent, unarmed people, majority of them women and children, but it couldn’t defeat the resolve of Palestinian Muslims.”
Muhammad Farooq, a Pakistani provincial lawmaker, said the Pakistani nation stood by the Palestinians in their struggle for freedom.
“The freedom movement of Palestine has proved that life of nations is linked with resistance against oppression,” he added.