KARACHI: Pakistan’s central bank on Tuesday decided to the keep the key policy rate unchanged at 9.75 percent, citing an improved outlook for inflation after cuts in fuel and electricity prices announced last week.
The central bank had increased the policy rate by 100 basis points to 9.75 percent in December 2021. Since then, the rate has been kept unchanged.
“This decision reflected the MPC’s view that the outlook for inflation has improved following the cuts in fuel prices and electricity tariffs announced last week as part of the government’s relief package,” the central bank said in its policy statement.
“At the same time, high-frequency indicators suggest that growth continues to moderate to a more sustainable pace. This moderation should help keep at bay demand-side pressures on inflation and contain non-oil imports, notwithstanding the significant uncertainty about the future path of global energy and food prices due to the Russia-Ukraine conflict,” the statement added.
The monetary policy committee (MPC) noted while the current real interest rates on a forward-looking basis were appropriate to guide inflation to the medium-term range of 5-7 percent, support growth, and maintain external stability, the Russia-Ukraine conflict had introduced a high degree of uncertainty in the outlook for international commodity prices and global financial conditions.
“Continued adverse conditions on these fronts could pose challenges to the outlook for the current account deficit and inflation expectations, which could necessitate changes in the policy rate,” the statement read. “Since the Russia-Ukraine situation remains fluid, the MPC noted that it was prepared to meet earlier than the next scheduled MPC meeting in late April, if necessary, to take any needed timely and calibrated action to safeguard external and price stability.”
The country’s agricultural prospects have somewhat weakened, with key inputs such as fertilizer off-take and water availability during the Rabi season lower than last year. Cotton and wheat production will likely be less than previous estimates.
“Growth in FY22 is still expected around the middle of the previously forecast range of 4-5 percent,” the central bank stated.
Looking ahead, the central bank said the non-oil current account deficit was expected to decline, as import growth continued to slow with moderating demand, while exports and remittances remained resilient.
“The outlook for the overall current account deficit is dependent on the path of international oil prices, according to the central bank,” the statement added.
The central bank said the MPC continued to expect inflation to average between 9-11 percent this fiscal year before declining toward the medium-term target range of 5-7 percent in FY23 as global commodity prices normalized.
This baseline outlook is subject to risks from the path of global prices, domestic wage developments, and the fiscal policy stance.
Pakistan central bank keeps key policy rate unchanged at 9.75% amid improved inflation outlook
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Pakistan central bank keeps key policy rate unchanged at 9.75% amid improved inflation outlook
- Russia invasion of Ukraine has introduced high degree of uncertainty in outlook for international commodity prices
- Since the situation remains fluid, monetary policy committee prepared to meet earlier than next scheduled meeting
Pakistan prepares to terminate take-or-pay contracts with independent power producers
- Pakistan approved a decade ago dozens of mostly foreign-financed private projects by IPPs to tackle chronic power shortages
- PM Sharif’s cabinet this month approved settlement agreements with eight IPPs with the aim to reduce power tariff, expenses
ISLAMABAD: Pakistan is making preparations to stop capacity payments to independent power producers (IPPs) by dissolving the mechanism of take-or-pay, Pakistani state media reported on Friday.
Take-or-pay is referred to as capacity payments in Pakistan where the government has to pay private companies irrespective of how much of the power they generate is transferred to its grid.
Pakistan approved dozens of private projects by IPPs, financed mostly by foreign lenders, a decade ago to tackle chronic power shortages. But the deals, featuring incentives such as high guaranteed returns and commitments to pay even for unused power, ultimately resulted in excess capacity after a sustained economic crisis slashed consumption.
This month, Prime Minister Shehbaz Sharif’s cabinet approved settlement agreements with eight bagasse-based IPPs with the aim to reduce electricity prices and save the national exchequer billions of rupees, the Radio Pakistan broadcaster reported.
“The agreement between IPPs and the government’s Energy Task Force is a significant milestone, which can result in saving of 300 billion rupees ($1.07 billion) of the national exchequer,” the broadcaster said.
Short of funds, successive Pakistani governments have built those fixed costs and capacity payments into consumer bills, sparking protests by domestic users and industry bodies.
In October, PM Sharif said his government was terminating purchase agreements with five IPPs to rein in electricity tariffs as households and businesses buckled under soaring energy costs, according to state media. Pakistan’s Central Power Purchasing Agency was due to approach the National Electric Power Regulatory Authority (NEPRA) for a reduction in the electricity tariff generated from these power plants.
There is a possibility of Rs3.50-6.50 decrease in the electricity tariff as a result of government reforms as the government has pledged to pay outstanding dues within 90 days as prescribed in the agreements, Radio Pakistan reported on Friday.
“The government has also expressed resolve to promote private partnership for development of energy sector,” the report read.
The need to revisit power deals was a key issue in talks for a critical staff-level pact in July with the International Monetary Fund (IMF) for a $7-billion bailout. The program was approved in September.
Pakistan has also been holding talks on reprofiling power sector debt owed to China and structural reforms, but progress has been slow. It has also vowed to stop power sector subsidies.
Pakistan stocks bounce back strongly a day after ‘massacre’ at bourse
- The KSE-100 index gained 3238 points to close the weekend trading session at 109,513 points
- Stock analysts attribute strong recovery of the market to easing pressure at local mutual funds
ISLAMABAD: The Pakistan Stock Market on Friday bounced back strongly and gained more than 3,000 points, stock analysts said, a day after it witnessed a “massacre” on the back of significant redemptions from local mutual funds and year-end profit-taking.
The benchmark KSE-100 index gained 3238.17 points to close the weekend trading session at 109,513.14 points. On Thursday, the index plummeted by 5,132 points, or 4.32 percent, to close at 106,274.97 points, compared to Wednesday’s close of 111,070.29 points.
Stock analysts attributed the strong recovery to easing pressure at local mutual funds.
“Likely easing redemption pressure at local mutual funds together with the opening up of attractive valuations encouraged value buyers to reenter the market,” Raza Jafri, head of equities at Intermarket Securities, told Arab News.
Thursday’s slump was led by Hub Power Company Limited, United Bank Limited, Oil and Gas Development Company, and ENGRO, cumulatively contributing a staggering 1,556 points to the index’s overall decline, according to Topline Securities.
The sharp sell-off was triggered by significant redemptions from local mutual funds, compounded by year-end profit-taking by institutions, that dragged the market into a “turmoil,” it added.
The decline came days after Pakistan’s central bank cut its key interest rate by 200 basis points to 13 percent, marking the fifth straight reduction since June.
Yousuf M. Farooq, head of research at Chase Securities, said the market had entered a corrective phase, following a significant rally over the past year.
“We believe that earnings will now drive market performance rather than valuation rerating,” he added.
Pakistan province sets deadline to surrender weapons, dismantle bunkers to stem sectarian clashes
- Kurram, a tribal district near Pakistan’s border with Afghanistan, has been a flashpoint for sectarian tensions for decades
- Last month’s clashes between Sunni, Shia tribes killed over 100, triggered a humanitarian crisis with reports of starvation
PESHAWAR: Authorities in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province on Friday set a deadline of Feb. 1 for warring Sunni and Shia tribes in the Kurram district to surrender all weapons and dismantle their bunkers to stem sectarian clashes in the region.
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 for decades.
Fresh clashes last month 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 Peshawar.
On Friday, the KP apex committee, which comprises civilian and military officials, met to discuss a sustainable solution to the issue and decided that both sides would have to surrender their weapons and sign a peace agreement facilitated by the government.
“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.”
The decision is aimed at reinforcing the government’s writ and establishing peace in the region, according to the statement. In the meantime, land routes to the area would be opened intermittently on humanitarian grounds and a mechanism had been put in place for secure transportation.
“Personnel of police and Frontier Corps will jointly provide security to the convoys,” the statement 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.
On Thursday, KP Governor Faisal Karim Kundi criticized the provincial government’s handling of the Kurram issue, accusing it of adopting an “indifferent approach.”
“The provincial government has maintained a criminal silence on the Kurram issue,” he said. “This matter should have been addressed in the provincial assembly.”
Talimand Khan, a senior analyst on tribal affairs, told Arab News on Friday that Pakistan’s tribal districts, including Kurram, had remained a “launching pad for proxy wars, especially the Soviet-Afghan war and the so-called War on Terror.”
“The issue is not merely a law-and-order situation,” he said. “It is deeply rooted in the state’s foreign and security policies, domestic political dynamics.”
A special air service would be launched on an emergency basis, for which the federal and provincial governments would provide helicopters. Temporary evacuation may be carried out from some areas to protect people’s lives, according to the apex committee declaration.
Both sides must avoid any violent action in the future to keep the land route safe and open at all times, otherwise the administration would be forced to close the route again.
“All social media accounts spreading sectarian hatred in the region will be closed,” it read. “No one will be allowed to play politics on this issue.”
The apex committee hoped that the parties would fully cooperate with the government for a lasting solution to the issue.
Pakistan PM orders action against officials aiding human traffickers after Greek boat tragedy
- Five Pakistani nationals drowned last week after a boat carrying migrants capsized off Greece
- Four districts of eastern Punjab province identified as ‘most vulnerable’ to human traffickers
ISLAMABAD: Prime Minister Shehbaz Sharif on Friday directed action against government officials who were facilitating human traffickers, his office said, following the death of five Pakistani nationals in a migrant boat capsize off Greece.
The boat tragedy, which occurred last week, underscored the perilous journeys many migrants undertake due to conflicts around the world. In the case of Pakistani nationals, the movement is mostly driven by economic reasons, with many young individuals attempting to reach European shores in search of better financial prospects.
Sharif presided over a meeting on Friday to discuss the measures the government needed to take to prevent human trafficking, which he said had brought disgrace to Pakistan worldwide.
“PM directs identification of Federal Investigation Agency officials involved in facilitating human traffickers and strict action against them,” Sharif’s office said in a statement.
The participants were briefed on the Dec. 14 boat incident off Greece and the steps taken to combat human trafficking, including parliamentary efforts to improve legislation on the issue.
The prime minister was informed that only five Pakistanis had been identified so far, while the identities of the others were still being verified, according to his office. The Pakistani embassy in Athens was in constant contact with Greek authorities regarding the migrant boat incident.
“For information and assistance regarding boat accident, Pakistan Embassy in Athens can be contacted on helpline +30-6943850188 and Ministry of Foreign Affairs Crisis Management Unit number 0519207887,” the statement read.
Sharif directed government authorities improve coordination to prevent human trafficking, highlighting that the Gujranwala, Gujrat, Sialkot and Mandi Bahauddin districts of Pakistan’s eastern Punjab province were the “most vulnerable” to traffickers.
He ordered action against officials who conducted a delayed investigation into those responsible for a 2023 boat capsizing incident in Greece that involved hundreds of migrants, including 262 Pakistanis, according to the statement.
The migrants drowned when an overcrowded vessel capsized in international waters off the southwestern Greek coastal town of Pylos. It was one of the deadliest boat disasters ever recorded in the Mediterranean Sea.
Sharif directed authorities complete the ongoing investigation into human traffickers at the earliest and submit a report in this regard.
Pakistan plans to set up 35 special economic zones to facilitate businesses, industry
- Pakistani officials say over 200 B2B agreements reached with several Chinese companies, signed MoUs worth $70 million
- PM Shehbaz Sharif calls for accelerating work on regulatory reforms to provide a conducive environment for businesses
ISLAMABAD: Pakistan plans to establish 35 special economic zones (SEZs) to facilitate businesses and industry, officials said on Friday, amid Islamabad’s efforts to boost foreign investment.
The statement came at a meeting of Board of Investment (BOI) officials, presided over by Prime Minister Shehbaz Sharif, to review progress of various ongoing projects, according to Sharif’s office.
Officials briefed the prime minister that they had conducted a survey of the 35 SEZs under the Geographical Information System (GIS) and had extensive data to accelerate the progress of projects in these zones.
More than 200 business-to-business (B2B) agreements have been reached with several Chinese companies and memorandums of understanding (MoUs) worth $70 million have been signed, they added.
“Work on regulatory reforms should be accelerated to provide a conducive environment for business in the country,” Sharif was quoted as saying by his office.
“An effective and comprehensive roadmap should be created for the completion of B2B agreements with international investors and the implementation of signed memorandums of understanding.”
Pakistan, which has been facing an economic crisis, has been making attempts to boost foreign direct investment in a bid to support its $350 billion fragile economy, with Islamabad seeing a flurry of high-level exchanges with China, Saudi Arabia, Japan, Tajikistan, Azerbaijan, Qatar and other countries in recent months.
During the BOI meeting, PM Sharif instructed officials to set investment targets that could be achieved at the earliest.
“Effective marketing of investment opportunities in Pakistan is essential to attract foreign investors,” he said. “Construction of business facilitation centers, organization of road shows and other such measures are very important to bring foreign investment to the country.
