‘Inflationary storm’ expected as Pakistan hikes fuel, electricity tariffs to win IMF approval

Auto rickshaw drivers shout slogans during an anti-government demonstration to a protest against the inflation and fuel price hike in Lahore, Pakistan, on June 3, 2022. (AFP)
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Updated 03 June 2022
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‘Inflationary storm’ expected as Pakistan hikes fuel, electricity tariffs to win IMF approval

  • The move has rattled Pakistani industrialists who say many will be forced to close down their units
  • Economists say the price hike would open the “floodgates” of inflation and most affect the country’s poor

KARACHI: Pakistan is bracing for an ‘inflationary storm’ after the government raised fuel and electricity prices this week to secure International Monetary Fund (IMF) bailout money, with industrialists warning the move would dent the viability of industries and lead to mass closures. 

Pakistan entered a three-year IMF deal in 2019, but is struggling to implement tough policy commitments to revive the $6 billion program desperately needed to stabilize the cash-strapped South Asian nation.

A pending tranche of over $900 million is contingent on a successful IMF review, and would also unlock other multilateral and bilateral funding for Pakistan, whose foreign reserves currently cover just two months of imports.

After the IMF pushed Islamabad to roll back its subsidies for the oil and power sectors during talks in Doha last week, the finance ministry raised fuel prices by around 20 percent, and within a week by another 17 percent, effective from Friday, today.

The fuel hikes have come along with an increase in the basic power tariff by 47 percent, rattling Pakistani industrialists who say they will be forced to close down their units.

“No one can think about setting up industries after the steps being taken by the government because it would render the business unviable and industries will be eliminated in large numbers,” Muhammad Idreed, president of the Karachi Chamber of Commerce and Industry (KCCI), told Arab News. 

“The outcome of the tariff and fuel price hike would be detrimental for the industries as it would increase unemployment, lead to a drastic cut in exports and increase inflation in the country as cost of almost all inputs has more than doubled.”

Industrialists have called for remedial measures, including rate cuts, to offset the new price hikes and save the industry, especially small and medium enterprises.

“The sharp rise in prices of petroleum products, excessive power tariff and severe energy crisis are catastrophic for business and industry,” Saqib Naseem, the chairman of the Pakistan Yarn Merchants Association (PYMA), said in a statement.

With the new price hikes, Pakistan’s inflation rate is expected to soar to 19 percent this month — its highest in over a decade.

“The direct impact of the fuel and power tariff hike would be on the Consumer Price Index (CPI), which will add 1.5 percent and 2 percent to the prevailing inflation rate,” Tahir Abbas, head of research at Arif Habib Limited, told Arab News. 

“The combined inflationary impact of the fuel and electricity tariff, if the determined tariff is implemented, would be around 19 percent in June 2022. There would be a second round impact, when the price hike of goods and services after the cost of input is increased.” 

Economists say the price hike would open the “floodgates” of inflation and hit the country’s poor.

“The inflationary storm is going to destroy the purchasing power of ordinary households in the coming days and months,” Uzair Younus, director of the Pakistan Initiative at the Washington-based Atlantic Council, told Arab News. “To mitigate suffering and protect the most vulnerable, the government should redirect resources to direct cash transfers. They have already announced such a measure but the quantum of funding must be increased.”

Adil Jilani, head of the Economic Division at Trust Securities & Brokerage, told Arab News even harsher measures were expected in the future as Pakistan would be asked by the IMF to “do more” to meet pre-conditions and arrange external financing requirements for next year.

“The government has increased petroleum prices to an unprecedented level and now the government needs to ‘do more’ for the IMF bailout package along with external financing requirements of $37-38 billion that the country needs during the next fiscal year FY23,” Jilani said. 

Younus added: “There is still about a Rs9 subsidy on petrol and about Rs23 subsidy on diesel. In addition, the government has to place a 17 percent sales tax and a Rs30 levy, as agreed to with the IMF months ago.

“Assuming oil price stays the same and rupee doesn’t weaken further, we are looking at petrol touching about 285 rupees a liter,” he said. 

Pakistan’s equity market has already reacted to the latest developments, which also include international credit agency Moody’s downgrading Pakistan’s outlook from stable to negative over a “heightened external vulnerability risk” and the inability to secure additional external financing. 

The benchmark KSE 100 index declined by 923 points, or 2.2 percent, to close at 41,314.88 points on Friday.

“Stocks fell across the board after Moody’s cut Pakistan outlook to negative on fiscal risks amid delays in IMF bailout and concerns over global equity selloff,” Ahsan Mehanti, chief executive of Arif Habib Corporation, told Arab News.

“Dismal data of $43.33 billion trade deficit for July 2021 to May 2022, falling forex reserves and surging government treasury bond yields, and saving rate hike played a catalyst role in bearish close.” 


Marathon polo tournament draws huge crowds in Pakistan’s picturesque north

Updated 6 sec ago
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Marathon polo tournament draws huge crowds in Pakistan’s picturesque north

  • Ten-day tournament played among 17 teams of Gilgit-Baltistan as part of independence day celebrations 
  • GB Independence Day celebrated on Nov. 1 every year to mark region’s independence in 1947 from Dogra Raj

KHAPLU, Gilgit-Baltistan: Large crowds have been gathering daily in the northern mountain town of Gilgit for a 10-day polo tournament being held to mark Gilgit-Baltistan’s Independence Day, the military’s media wing and government officials said on Thursday, the last day of the event. 
GB is administered by Pakistan as an administrative territory and consists of the northern portion of the larger Kashmir region, which has been the subject of a dispute between India and Pakistan since 1947. The impoverished, remote and rugged mountainous territory borders Afghanistan and China and is the gateway of the $65 billion China-Pakistan Economic Corridor (CPEC) infrastructure plan. 
The Gilgit-Baltistan Independence Day is celebrated on Nov. 1 every year to mark the region’s independence in 1947 from Dogra Raj, the erstwhile rulers of the now disputed Jammu and Kashmir region.
“The big event of Jashan Azadi Polo Tournament was held at Wahab Shaheed Polo Ground in Gilgit, a remote area of the northern region under the management of Pak Army,” the military’s media wing said in a statement, saying Force Command Northern Areas, Maj. Gen. Syed Imtiaz Hussain Gillani, was the chief guest at the closing ceremony of the event in which 17 teams participated.
“The final match was won by Chilas in civil and NLI teams in departmental categories respectively,” the statement added. 
Gilgit-Baltistan is also known for the annual polo festival at Shandur, an area between the northern Pakistani towns of Gilgit and Chitral, and at over 12,000 feet (3,700 meters) the world’s highest polo ground. 
Polo in GB is played without rules and at a blistering pace, suggesting more of a clash of cavalry than a sport. Locals believe polo was born in their land and Gilgit is home to the famous polo inscription: “Let other people play at other things, the King of Games is still the Game of Kings.”
Faizullah Faraq, the spokesperson for the G-B government, said thousands had come to watch the matches and celebrate the Gilgit-Baltistan Independence Day.
“Polo is the national game of Gilgit-Baltistan. And thousands of people reached Gilgit’s playground to watch the polo matches daily,” he told Arab News on Thursday. 
“Such kinds of activities unite the youth and they play their role to create harmony in the society. The promotion of polo is a need of time to maintain peace in society.”
Afrad Gul, the team captain of the winning Chilas team, appreciated locals who supported the tournament. 
“I have been playing polo for the last 15 years, my son was also part of my team,” Gul said in a phone interview. “We have left no stone unturned to keep this regional game alive.”


Pakistan government slams Imran Khan’s wife for using Saudi Arabia for ‘political point scoring’

Updated 7 min 38 sec ago
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Pakistan government slams Imran Khan’s wife for using Saudi Arabia for ‘political point scoring’

  • Deputy foreign minister urges political forces to desist from compromising Pakistan’s foreign policy for political objectives
  • Khan has been in prison since August last year and facing a slew of legal challenges which he says are politically motivated

ISLAMABAD: The Pakistan government on Friday rejected comments by Bushra Bibi, the wife of jailed former Prime Minister Imran Khan, that Saudi Arabia had been opposed to her husband’s government, calling on political forces to desist from compromising the country’s foreign policy for the sake of “petty” political point scoring. 
In a rare public message on Thursday, Bushra assured state institutions Khan had no plans to seek revenge from opponents if he was freed from jail, as she rallied supporters to join a protest planned by Khan’s Pakistan Tehreek-e-Insaf (PTI) in Islamabad on Nov. 24. In the message, she also made remarks that were widely seen as implying that the Saudi government had been opposed to Khan. 
“Implicating Saudi Arabia for petty political point scoring is regrettable and indicative of a desperate mindset,” Pakistan’s deputy Prime Minister Ishaq Dar said in a statement after Bushra’s video was released. “We urge all political forces to desist from compromising Pakistan’s foreign policy in pursuance of their political objectives.”
“Pakistan and the Kingdom of Saudi Arabia are close friends and brothers. This relationship is based on mutual respect,” Dar added. “We have great admiration for Saudi Arabia’s journey of development and prosperity. The Pakistani nation is proud of its close relationship with Saudi Arabia which has always stood by Pakistan through thick and thin.”
After his ouster from the PM’s office in a parliamentary vote of no-confidence in 2022, Khan had also alleged that he was removed by his political rivals and the all-powerful military with the backing of the United States government. All three deny the charge. 
Khan has been in prison since August last year and facing a slew of legal challenges. He denies any wrongdoing, and alleges all the cases registered against him are politically motivated to keep him in jail.


Pakistan telecom regulator affirms support for ‘positive use’ as VPN ban deadline looms

Updated 54 min 53 sec ago
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Pakistan telecom regulator affirms support for ‘positive use’ as VPN ban deadline looms

  • PTA says businesses can use VPNs by registering with government but unregistered VPNs will be blocked after Nov. 30
  • Rights activists say government wants to block vital tools that allow users to bypass restrictions amid digital crackdown

ISLAMABAD: The chairman of the Pakistan Telecommunication Authority (PTA), Major General (r) Hafeezur Rehman, said this week the body would facilitate the “positive use” of virtual private network (VPN) services even as the government was determined to move ahead with plans to block unregistered VPNs by the end of this month.
The PTA says businesses and freelancers can continue to legally use VPNs by registering with the government, but unregistered VPNs will be blocked in Pakistan after Nov. 30. Authorities say the measures are meant to deter militants and other suspects who use VPNs to conceal their identities and spread “anti-state propaganda” and promote “blasphemous” or other illegal content online.
Digital rights activists say the move is part of government attempts to block vital tools that allow users to bypass restrictions amid a wave of digital crackdowns, particularly since the use of VPNs has sharply risen in Pakistan since February this year when the government banned X. 
The federal government is also moving to implement a nationwide firewall to block malicious content, protect government networks from attacks, and allow the government to identify IP addresses associated with what it calls “anti-state propaganda” and terror attacks. Internet speeds have dropped by up to 30-40 percent over the past few months due to the firewall, according to the Wireless and Internet Service Providers Association of Pakistan (WISPAP).
“We don’t say to block the VPNs but to regulate the VPNs,” the PTA chairman said on Thursday during an address at Youth Safety Summit Pakistan, jointly organized by TikTok and the PTA.
“If somebody needs VPN for the business purposes, for some positive use, nobody will stop him, let me reassure you, we will facilitate him.”
Rehman said the authority issued its first letter for VPN registration back in December 2010.
“It is now 15 years,” he said. “We have been pushing people to please register with us so that their business is not disturbed.”
The PTA chairman urged TikTok and other social media platforms to use artificial intelligence tools to “block anti-state and blasphemous content.”
“This summit marks a significant step in our mission to secure a safe and inclusive digital environment for Pakistan’s youth,” Rehman said. “PTA remains steadfast in its efforts to implement innovative measures that protect children online and promote a digitally responsible society.”
Emir Gelen, the director of government relations and public policy at TikTok for the Middle East, Turkiye, Africa, Pakistan and South Asia, reaffirmed TikTok’s commitment to online safety at the summit. 
“At TikTok, we are committed to ensuring the online safety and well-being of our users, particularly children and youth,” he said.
“We believe that this summit marks an important step toward creating a safer online environment in Pakistan … We’re dedicated to promoting digital literacy and online safety through our initiatives, and we look forward to continuing our collaboration with the PTA to achieve this goal.”
In August, the Pakistan Business Council (PBC) warned that frequent Internet disruptions and low speeds caused by poor implementation of the national firewall had led many multinational companies to consider relocating their offices out of Pakistan, with some having “already done so.” The Pakistan Software Houses Association (P@SHA), the country’s top representative body for the IT sector, warned this week Internet slowdowns and the restriction of VPN services could lead to financial losses and closures and increase operational costs for the industry by up to $150 million annually.
Pakistan’s IT and ITeS exports have been growing at an average of 30 percent per year, and are on the way to achieve over $15 billion in the next 5 years, according to industry data, provided the government ensures continuity in export, fiscal, financial, SME, infrastructure and IT policies.
“If the VPNs are blocked, most of IT companies, Call Centers, BPO [business process outsourcing] organizations of Pakistan will lose all the major Fortune 500 clients, as well as others – as data protection and cybersecurity are of paramount importance to our clients, and connecting to client systems through VPN is a global norm and standard, and is a basic requirement and expectation of clients around the world,” P@SHA Chairman Sajjad Mustafa Syed said in a statement released on Tuesday.
“Additionally, no international company of any size tolerates any intrusion into their security protocols by any private or public institution.”


Pakistan consults UN agency to shape National Intellectual Property Strategy

Updated 22 November 2024
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Pakistan consults UN agency to shape National Intellectual Property Strategy

  • Intellectual Property Organization of Pakistan emphasizes ‘culture of innovation and creativity’
  • Consultations focus on challenges, recommendations, impact of intellectual property policies

ISLAMABAD: Pakistan has held consultation sessions with a United Nations agency to develop the country’s National Intellectual Property Strategy (NIPS), state-run media reported on Thursday.
A NIPS is a comprehensive framework designed to promote and protect intellectual property rights, drive innovation and foster economic growth.
The two-day consultation sessions, which included panel discussions on challenges, recommendations and the impact of various strategies on Pakistan’s geo-economic landscape, were organized by the Intellectual Property Organization of Pakistan (IPO-Pakistan) in collaboration with the World Intellectual Property Organization (WIPO), a specialized UN agency.
“IPO-Pakistan in collaboration with WIPO successfully concluded its two-day consultative sessions for the development of Pakistan’s National Intellectual Property Strategy,” Radio Pakistan reported.
IPO-Pakistan Chairman Farukh Amil emphasized the need to cultivate a “culture of innovation, creativity and respect for intellectual property rights.”
He underscored the importance of integrating intellectual property education into industries and academia, stressing that awareness among youth and students was key to promoting innovation and creativity.
Amil also thanked WIPO for its partnership and expertise in shaping Pakistan’s National IP Strategy.
“The consultative sessions featured insightful panel discussions on three key areas: Summary of Main Challenges and Recommendations for National Intellectual Property Strategy (NIPS), Impact of IP Strategies on Pakistan’s Geo-Economic Situation, and Way Forward for National IP Strategy Development,” state media reported.
Established in 1967, WIPO plays a pivotal role in shaping global intellectual property policies while promoting innovation, creativity and economic development worldwide.
IPO-Pakistan, launched in April 2005, serves as Pakistan’s leading institution for intellectual property protection and promotion.
By streamlining intellectual property management, it contributes to the country’s economic growth and development, supporting innovators, entrepreneurs and artists to position Pakistan as a responsible member of the global intellectual property community.


Pakistan court directs government to engage with Imran Khan’s party over Nov. 24 protest

Updated 21 November 2024
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Pakistan court directs government to engage with Imran Khan’s party over Nov. 24 protest

  • Islamabad High Court says law and order remains government’s priority if there is no breakthrough
  • Chief Justice Aamer Farooq hopes PTI will have ‘meaningful communication’ with the administration

ISLAMABAD: The Islamabad High Court (IHC) on Thursday directed the government to form a committee to engage in talks with Pakistan Tehreek-e-Insaf (PTI) leadership regarding the party’s planned protest in Islamabad on Nov. 24, emphasizing the need to avoid disruptions during the visit of the Belarusian president.
IHC Chief Justice Aamer Farooq issued the directive while hearing a petition by local trade association, instructing the government to constitute the committee that is preferably headed by Interior Minister Mohsin Naqvi, with Islamabad Chief Commissioner Muhammad Ali Randhawa and other officials.
The committee is tasked with negotiating with PTI leaders to address the “sensitivity over the weekend due to the movement of the President of a foreign country.”
“It would be appropriate that respondent No. 1 (government) constitute the committee ... to engage with the leadership of respondent No. 5 (PTI party), informing them of the sensitivity over the weekend,” said the court.
“In case no breakthrough is made, the law and order is the responsibility of respondents No. 1,” it continued, adding: “In this regard, no protest or rally or for that matter sit-in shall be allowed.”
Chief Justice Farooq urged the government to maintain law and order in Islamabad with “minimum disruption to the life of ordinary citizens,” expressing hope that PTI would “engage in meaningful communication” with the committee.
The court also directed a report on the matter to be submitted at the next hearing, scheduled for Nov. 27.
The directive followed a petition filed by Jinnah Super Traders Association (JSTA) President Asad Aziz, who sought the court’s intervention to prevent the PTI protest, citing disruptions to daily life and financial losses for the business community.
“Islamabad is a very expensive city with high property and rent prices,” Aziz told Arab News. “If your business is shut on top business days, how can these businessmen survive?“
He highlighted the financial strain caused by protests, particularly for shopkeepers in areas like Super Market, Jinnah Super Market and Blue Area.
Aziz claimed that 20 percent of shopkeepers had shut their businesses in recent months due to recurring disruptions caused by political demonstrations.
Protests in Islamabad have frequently caused disruptions to their lives of it residents. In September, a similar PTI demonstration led the government to lock down the city with containers, creating significant inconvenience for people and business owners.
Earlier this year, Pakistan’s parliament passed a law regulating public gatherings in Islamabad, specifying timings for rallies and designating specific areas. The law prescribes three-year jail terms for participants in illegal assemblies and 10-year imprisonment for repeat offenders.
Pakistan’s interior ministry has already approved the deployment of paramilitary forces in Islamabad to manage the anticipated law and order situation during the protests.
The security situation has also become a paramount concern due to Belarusian President Aleksandr Lukashenko’s three-day visit to Islamabad starting Monday, during which several investment deals and memorandums of understanding are expected to be signed between the two countries.