World Bank links approval of $450 million Pakistan loan with IMF review

A man is walking in front of the World Bank Building in Washington DC on September 25, 2020. (Photo courtesy: AFP/File)
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Updated 12 May 2023
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World Bank links approval of $450 million Pakistan loan with IMF review

  •  Pakistan and IMF have been in ninth review since February, aiming to resume stalled funding of $1.1 billion from $6.5-billion bailout
  • IMF funding is crucial for Pakistan to avert default on its external payment obligations during a balance of payment crisis

KARACHI: The World Bank has linked the approval of a $450 million loan for Pakistan with the completion of the ongoing ninth review of the international monetary fund’s $6.7 billion bailout program, the global lender has said. 

The second Resilient Institution for Sustainable Economy (RISE-II) is a policy loan for budgetary support for which the government of Pakistan is expected to receive $450 million from the World Bank. The program was expected to be approved in 2021 but has been delayed.

Nearly 100 days have passed since the last IMF staff level mission to Pakistan and the two sides have yet to strike a preliminary deal - a key step to secure the next funding tranche of a bailout deal signed in 2019. That is the longest such gap since at least 2008.

Meanwhile foreign exchange reserves at $4.457 billion cover barely a month's worth of imports.

A World Bank spokesperson told Arab News this week that considerable progress had been made and the RISE program would now be linked to the completion of the country’s ongoing IMF review. 

“The World Bank continues to work with the Government of Pakistan on the preparation of the RISE-II Development Policy Operation, including discussions around supported policy actions on which there has been considerable progress recently; the adequacy of the macroeconomic framework; the financing amount; and the timeline for approval, in particular, as it relates to the completion of the ongoing IMF review,” WB spokesperson Mariam Altaf said in an emailed response to Arab News.

The global lender had approved $500 million in financing under the RISE-I program for Pakistan to mitigate the impacts of the COVID-19 pandemic, while RISE-II was approved in 2020 to help Pakistan strengthen its fiscal management, promote transparency, increase private sector growth, and undertake foundational reforms in the energy sector to transition to low-carbon energy. 

RISE-II also supports foundational reforms to improve the financial viability of the power sector through a reduction and ultimate elimination of the sector’s circular debt, which was initiated under RISE-I. 

It further aims to improve the investment climate through the implementation of a nationwide harmonized General Sales Tax (GST), a competitive national tariff policy, an inclusive digital payments system that allows fintech companies to undertake electronic money operations, and a better-regulated banking system, according to a World Bank document. 

The South Asian nation is currently negotiating with the IMF for the conclusion of the ongoing review ahead of the fiscal budget for the next year, expected in the first week of June 2023. 

The talks between the Fund and Pakistani authorities are ongoing since November 2022 but no progress is in sight yet, as the IMF calls for more prior actions despite an energy tariff hike, the presentation of a mini budget, and the arrangement of additional financing from friendly countries like China, Saudi Arabia and the UAE.

The deadlock has blocked funding not only from IMF but also from other multilateral and bilateral lenders, including the World Bank. The conclusion of the ongoing review will clear the way for the disbursement of $1.1 billion from the Fund and unleash other bilateral and multilateral financing. 

Nathan Porter, mission chief to Pakistan at the IMF, last week said the lender was working with the Pakistani authorities to bring the ninth review to a conclusion once the necessary financing was in place and the agreement was finalized. 

“In addition, the IMF supports the authorities in the implementation of policies in the period ahead, including in the technical work to prepare the FY24 budget, which is to be passed by the National Assembly before end-June,” he said in a statement shared with Arab News.

In recent negotiations between Pakistan and the IMF, the fuel subsidy scheme announced by Prime Minister Shehbaz Sharif in March 2023 has been a sticking point but after prolonged discussions, Pakistani authorities have finally given up the subsidy, which envisaged charging the country’s rich and subsidizing the poor to mitigate the impacts of high inflation that hit 36.4% in April this year. 

Pakistani authorities have also committed that they will not introduce new tax exemptions and

durably allow a market-based exchange rate for the rupee, according to the report.

The country’s national currency on Thursday breached the psychological barrier of Rs300 against the United State dollar in the interbank market before closing at Rs298.93.

Pakistani analysts believe the recent rupee devaluation against the greenback, among other factors, is the outcome of the government’s assurance of a market-determined exchange rate to the IMF.

“There are three factors that contribute to the rupee depreciation,” Tahir Abbas, the head of research at Arif Habib Limited, told Arab News. “Political instability, market-based exchange rate implementation, and the demand for import payments are the key factors that impact the rupee against the dollar.”

The Pakistani rupee has depreciated by 24.25% so far since January 2023 and by 31.47% since July 2022.


Pakistani firms bank on clinching ‘significant deals’ after debuting at Gulfood Manufacturing 2024

Updated 07 November 2024
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Pakistani firms bank on clinching ‘significant deals’ after debuting at Gulfood Manufacturing 2024

  • Around 29 Pakistani firms participated in Gulfood Exhibition 2024 from Nov. 5-7 in Dubai
  • Pakistani exhibitors say visitors from Middle East showed keen interest in their products

ISLAMABAD: After participating for the first time at the renowned Gulfood Manufacturing 2024 event in Dubai this week, Pakistani exhibitors on Thursday hoped the experience would help them clinch “significant deals” to penetrate markets in the Middle East.
Since 2014, Gulfood Manufacturing has been advancing the global food processing sector through innovation. This year, more than 1,200 suppliers from over 60 countries participated in the event held in Dubai from Nov. 5-7.
In a first, 21 Pakistani exhibitors took part in the tenth edition of the food and beverages trade fair under the Trade Development Authority of Pakistan’s (TDAP) umbrella.
Eight other Pakistani companies participated independently to showcase food ingredients, processing, packaging, printing, labeling, and supply chain solutions for the food and beverage industry.
Abdul Wahab, director of the Faisalabad-based food packaging machine manufacturer Nadeem Engineering Company, said businesses from across the Middle East showed keen interest in his organization’s machinery and other products.
“Our competitive prices and high quality helped initiate many business deals, which we hope to finalize in the coming weeks,” Wahab told Arab News.

Pakistani exhibitors interact with the visitors at Gulfood Manufacturing Expo in Dubai, UAE on November 05, 2024. (Photo courtesy: Pakistan mission UAE)

Wahab thanked the Pakistani mission in the UAE and TDAP for their support, saying it enabled them to create more business opportunities.
“We are optimistic about securing a few significant deals that will help us enter the vast Gulf market,” he added.
A dedicated Pakistan Pavilion at the trade fair helped Pakistani firms showcase their products to visitors from across the globe. 

Pakistani exhibitors interact with the visitors at Gulfood Manufacturing Expo in Dubai, UAE on November 05, 2024. (Photo courtesy: Pakistan mission UAE)

Sheikh Abdul Qayyum, the chief executive officer of the Karachi-based company Lunwa Biz Packaging, praised the Pakistan Pavilion Initiative by saying that it helped generate a “good response” from visitors.
“Some good deals and memorandums of understanding have been signed, and we are working to bring them to final maturity,” Qayyum told Arab News. He said his company hoped to achieve positive results and generate substantial revenue from these agreements.
“We received support from the TDAP, which made the booth valued at Rs2.5 million available to us for Rs0.7 million, allowing us to make efforts to utilize this opportunity,” Qayyum said. 

Pakistani exhibitors interact with the visitors at Gulfood Manufacturing Expo in Dubai, UAE on November 05, 2024. (Photo courtesy: Pakistan mission UAE)

Faraz Tayyab, the project manager of Dubai-based company Menras who designed and managed the Pakistan Pavilion, said over 100,000 people visited Pakistani stalls while exhibitors reported an excellent response for their products.
“One machine manufacturer even sold his display unit and signed a deal to send additional machines to the Dubai-based buyer from Pakistan,” Tayyab told Arab News.
Although it was their first time participating, Tayyab said Pakistani companies have made an impressive impact and will benefit greatly from this experience.
“It has opened the gateway for a bigger participation next year,” he said.


Four soldiers, five militants killed in northwest Pakistan operation — military

Updated 07 November 2024
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Four soldiers, five militants killed in northwest Pakistan operation — military

  • Security forces, militants traded fire in Karama area in South Waziristan, says military’s media wing
  • Pakistani has suffered surge in militant attacks since November 2022 in areas bordering Afghanistan

ISLAMABAD: Four Pakistani soldiers and five militants were killed during a gunbattle in the country’s restive northwestern Khyber Pakhtunkhwa (KP) province, the army’s media wing said on Thursday, as Islamabad grapples with surging militancy.
The exchange of fire between security forces and militants took place in South Waziristan’s Karama area on Wednesday, the Inter-Services Public Relations, the army’s media wing, said in a statement.
The army said four Pakistani soldiers were killed during the exchange of fire. These included Naib Subedar Taib Shah, 38, Lance Naik Gulab Zaman, 30, Lance Naik Muzammil Mehmood, 30 and Lance Naik Habibullah, 28.
“Resultantly, five Khwarij were sent to hell due to effective engagement by own troops,” the ISPR said, referring to the term the military uses for the Pakistani Taliban militants.
The army said it was conducting a sanitization operation in the area to eliminate any other militants.
“Security Forces of Pakistan are determined to wipe out the menace of terrorism and such sacrifices of our brave soldiers further strengthen our resolve,” it concluded.
Pakistan has been witnessing a spike in militant violence in its northwestern and southwestern regions that border Afghanistan, particularly after the Pakistan Taliban or the Tehreek-e-Taliban Pakistan (TTP) called off its fragile truce with the government in Islamabad in November 2022.  
The militant group, which is said to have sanctuaries in neighboring Afghanistan, is separate from but a close ally of the Afghan Taliban. 
Ties between Islamabad and Kabul have been strained as the former accuses the latter of sheltering TTP militants. Afghanistan denies the allegations and has urged Pakistan to resolve its security challenges internally. 


Pakistan says Trump election as US president won’t affect China ties

Updated 07 November 2024
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Pakistan says Trump election as US president won’t affect China ties

  • FO spokesperson says Pakistan wants to strengthen and broaden relationship with US 
  • Says Pakistan and US maintain ties via mutual respect, confidence and non-interference

ISLAMABAD: Pakistan said on Thursday its relations with key longtime ally China would remain “unaffected” by Donald Trump winning the US presidential election, as Islamabad walks a diplomatic tightrope between the two global powers.
Pakistan maintains a delicate balance in its relations with China and the US. While aligned with the US for military cooperation and counter-terrorism efforts, Pakistan has strengthened economic ties with Washington’s rival China through initiatives like the China-Pakistan Economic Corridor (CPEC).
Washington and Beijing’s ties remain strained as they compete for global influence, with the US seeking to maintain its dominance and China aiming to expand its reach. The two countries are often embroiled in disagreements over trade, Taiwan, the South China Sea and China’s Belt and Road Initiative.
This complex rivalry impacts Pakistan as it navigates its strategic partnerships with both world powers while grappling with a prolonged economic crisis.
“Pakistan’s relations with China are all-weather,” Foreign Office Spokesperson Mumtaz Zahra Baloch said during a weekly press briefing when asked if Trump’s victory will affect the country’s China policy.
“They are strategic and a source of stability in our foreign policy.” 
Baloch said Islamabad does not even need to consider the possibility that its relationship with China will be affected by any domestic development in another country.
She stressed that Pakistan’s relations with China have grown and expanded over the last several decades, emphasizing that the relationship remained immune to developments around the world.
Baloch dismissed claims that President-elect Trump could influence Pakistan’s politics as speculative, emphasizing that Pakistan and the US were “old friends” maintaining relations based on mutual respect, confidence, and non-interference.
In response to another question, the spokesperson said President Asif Ali Zardari and Prime Minister Shehbaz Sharif had already congratulated President-elect Trump on his presidential election win.
“Our relations with the United States are decades old, and we look forward to further strengthen and broaden Pakistan-US relationship in all fields,” she added. “As the Deputy Prime Minister said in a tweet yesterday, we look forward to fruitful and mutually beneficial cooperation between Pakistan and the United States.”
Pakistan and the US cultivated strong defense ties during the Cold War days yet their relationship was also tested by divergent priorities on various issues. 
However, tensions between the two countries escalated, particularly after 9/11, when US officials criticized Pakistan for not sufficiently supporting the American military efforts against the Taliban in Afghanistan.
Washington and Islamabad’s ties were further strained as the former suspected the latter of supporting the Taliban in its 2021 takeover of Kabul, allegations which Islamabad rejected. Tensions rose further in 2022 when former PM Imran Khan accused the Biden administration of orchestrating his ouster via a parliamentary vote, a charge the US denied. 
Pakistan, under Shehbaz Sharif’s two separate stints as prime minister in 2022 and 2024, has made attempts to improve its ties with the US.


Pakistan rejects reports of joint military operation with Iran against Baloch militant group

Updated 07 November 2024
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Pakistan rejects reports of joint military operation with Iran against Baloch militant group

  • Militant outfit Jaish Al-Adl claimed Pakistani, Iranian forces killed 12 of its members in joint operation in Saravan on Tuesday
  • Pakistani security forces conducted operation alone within its territory this week against smugglers, says FO spokesperson

QUETTA: Pakistan’s foreign office spokesperson on Thursday rejected reports that Islamabad and Tehran launched a joint military operation in the country’s southwestern border area this week to kill 12 militants, describing it as “fake news” despite a banned militant group claiming the action took place.
The spokesperson’s remarks followed militant outfit Jaish Al-Adl’s statement this week in which it claimed Pakistan and Iran’s forces on Tuesday carried out airstrikes against its fighters in the Iranian border city of Saravan, near Pakistan’s Panjgur district in Balochistan. It said the strikes killed 12 of its members and injured four others.
Iranian rights organization Halvash had also confirmed the development on social media platform X.
“First, I would like to state that this information is not correct. This is fake news,” Mumtaz Zahra Baloch, Pakistan’s foreign office spokesperson, said during her weekly press briefing. 
“Statement by terror groups should not be taken seriously.”
Baloch, however, confirmed Pakistani security forces had conducted an operation west of Panjgur to root out smugglers in southwestern Balochistan province.
“The operation took place 30 kilometers within our territory against smugglers, and this was undertaken by Pakistani security forces alone,” she disclosed.
Balochistan Levies, a paramilitary force responsible for law and order in the restive province, confirmed they received reports of an attack in Koh e Sabz area located 70 kilometers from Panjgur city on Tuesday.
“Three people were injured in the attack but we don’t know who carried out the attack in the remotest bordering area,” Shakeel Ahmed, a Levies soldier in Panjgur, told Arab News.
Ahmed said the paramilitary force did not know how many people were killed in the attack since Levies did not receive any bodies in Panjgur.
A local journalist in Panjgur said three persons injured in the alleged attack on Tuesday belonged to Peshawar, Karachi and Washuk cities of Pakistan. He said they were brought to Panjgur for medical treatment.
“The government officials in the district did not confirm the attack yet,” he told Arab News, speaking on condition of anonymity.
HISTORY OF ROCKY RELATIONS
Pakistan and Iran have had a history of rocky relations despite a number of commercial pacts between the two countries, with Islamabad being historically closer to Washington.
One of Iran’s poorest regions, Sistan-Baluchestan on the border with Pakistan has long been plagued by unrest involving drug-smuggling gangs, rebels from the Baloch minority and religiously motivated militants.
Jaish Al-Adl or “Army of Justice” has claimed responsibility for several attacks on Iranian forces in Sistan and Baluchestan over the years, straining ties between the two Muslim-majority countries.
Pakistan and Iran came to the brink of war in January this year after both countries launched cross-border strikes against armed groups and their hideouts operating in border villages.
Regarding this week’s visit by Iran’s foreign minister to Islamabad, Baloch said both sides had agreed to strengthen coordination on border areas.
“Both sides agreed that we will cooperate to ensure that the border between Pakistan and Iran will be a border of peace and amity, and we will strengthen coordination on all aspects of border security,” she said.


Pakistan stock market closes above 92,000 points thrice in a row after policy rate cut

Updated 07 November 2024
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Pakistan stock market closes above 92,000 points thrice in a row after policy rate cut

  • KSE-100 index climbs 499 points or 0.54 percent to close at 92,520.48 points on Thursday
  • Analysts say market responding to reduced interest rates, move to restart privatizations

ISLAMABAD: The Pakistan Stock Exchange (PSX) closed above 92,000 points for the third time in a row on Thursday, with analysts attributing the bullish trend to market volatility triggered by reduced interest rates and investors selling their stocks for profit. 
Pakistan’s benchmark index settled at 92,304.32 points on Tuesday and 92,021.44 points on Wednesday. As per the stock market’s official website, the benchmark KSE-100 index increased by 499 points or 0.54 percent on Thursday to close at 92,520.48 points. 
The bullish trend has been observed in the market since Monday when Pakistan’s central bank cut its key policy rate by 250 basis points to 15 percent. This was the fourth straight reduction since June, as the country keeps up efforts to revive a sluggish economy with inflation easing.
“The market is responding to reducing interest rates and, importantly, is also picking up on the government’s razor-sharp focus on the economy evidenced by the push to increase tax-to-GDP, attract FDI, and restart privatizations,” Raza Jafri, chief executive officer of leading financial services corporation EFG Hermes Pakistan, told Arab News.
He highlighted how lower interest rates were helping in creating valuation multiples at the KSE-100 but their “positive impact on the real economy will come with a lag.”
Jafri said the rally this year was led by banks, fertilizers and pharmaceuticals, adding that a rotation toward the construction, auto and oil marketing sectors more aligned with economic recovery was witnessed.
“An analyst at Topline Securities said the market showed notable volatility, with the index reaching a peak of 92,967 and dipping to a low of 91,891 as investors capitalized on profit-taking in large-cap stocks,” Topline Securities said in a social media post.

The development comes as the South Asian nation’s economic indicators continue to improve after it secured a $7 billion, 37-month bailout package from the International Monetary Fund (IMF) in September. 
Last year, Pakistan narrowly avoided a sovereign default when it clinched a last-gasp $3 billion IMF bailout program. The country has suffered a prolonged economic crisis that drained its foreign exchange reserves and saw its currency weaken amid double-digit inflation.