Revision of Pakistan budget rekindles hopes of getting stalled IMF bailout funds

In this file photo, the International Monetary Fund (IMF) headquarters building is seen ahead of the IMF/World Bank spring meetings in Washington, US, on April 8, 2019. (REUTERS)
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Updated 26 June 2023
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Revision of Pakistan budget rekindles hopes of getting stalled IMF bailout funds

  • Pakistan’s 2023-24 budget revised to meet IMF conditions in last-ditch effort to secure release of bailout funds
  • IMF had expressed dissatisfaction with the initial budget, saying it was a missed opportunity to broaden tax base

KARACHI: Hopes that Pakistan may get stalled bailout funds from the International Monetary Fund (IMF) before the program expires at the end of June have been revived, experts said on Monday, after Pakistan announced last week it had changed its budget for the financial year starting on July 1.

Pakistan’s parliament on Sunday approved the government’s 2023-24 budget which was revised to meet IMF conditions in a last-ditch effort to secure the release of more bailout funds. A day earlier Finance Minister Ishaq Dar also introduced new taxes and expenditure cuts.

The IMF in mid-June expressed dissatisfaction with the country’s initial budget, saying it was a missed opportunity to broaden the tax base in a more progressive way.

With currency reserves barely enough to cover one month’s imports, Pakistan is facing an acute balance of payment crisis, which analysts fear could spiral into a debt default if the IMF funds do not come through.

There are four days to go before the $6.5 billion Extended Fund Facility (EFF) agreed in 2019 expires on June 30. The IMF has to review whether to release some of the $2.5 billion still pending to Pakistan before then. The tranche has been stalled since November.

“The revision of the budget has rekindled the hope that Pakistan’s case would come up in the agenda of the IMF executive board,” Dr. Vaqar Ahmed, Joint Executive Director at the Sustainable Development Policy Institute (SDPI), told Arab News on Monday.

“Now people like me are raising the question that if this [IMF bailout] comes up in the agenda, then what would be the ‘forward modality’ of the program, would the program get an extension or will Pakistan get permission to present the case for a new program.” 

In the changed budget, Dar revised the revenue collection target to Rs9.415 trillion ($33 billion) and put total spending at Rs14.480 trillion ($51 billion), increasing the petroleum levy from Rs50 to Rs60 per liter. 

To boost revenue generation, authorities took Rs215 billion ($752 million) additional tax measures, cut Rs85 billion expenditures, hiked allocations under the social safety Benazir Income Support Program (BISP) by Rs16 billion, and withdrew the amnesty on foreign exchange inflows.

Experts believe the targets set in the revised budget would be hard to achieve as a caretaker government will take over in less than two months before the country goes into a general election in October. The fiscal measures taken in the revised budget are also expected to have an inflationary impact. 

“Budgetary adjustments were required,” Farhan Mahmood, Head of Research at Sherman Securities, told Arab News. “These measures would be inflationary as there are talks of imposing sales tax and excise tax on the fertilizers etcetera.” 

On Friday, Pakistan’s central bank also removed restrictions imposed on imports, which according to analysts was a key sticking point in talks with the IMF. 

“IMF wanted to withdraw the restriction imposed on imports,” Tahir Abbas, Director research at Arif Habib Limited- a brokerage firm, said, adding that lifting the ban would not make much difference due to the low foreign exchange reserves position of the country at $3.54 billion. Around 6,000 containers are currently stuck at the Karachi port, according to the maritime ministry.

Mahmood said the country would continue to give import priority to the oil, food and pharma sectors unless the IMF deal was revived and the country received an around $1.1 billion disbursement.

The country’s share market closed bullish on Monday on the hopes of the revival of the IMF program and the withdrawal of restrictions on imports, which is expected to support industrial activities. 

The benchmark KSE100 index closed at 41,437 points after gaining 1,371 points on Monday, according to the Pakistan Stock Exchange data. The Pakistani rupee also closed a little higher in the interbank market, appreciating 0.01 percent to Rs286.71 against the United States dollar. 


Pakistan demands accountability for Israeli crimes against Gazan children

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Pakistan demands accountability for Israeli crimes against Gazan children

  • UN Human Rights Office has said nearly 70 percent of fatalities it had verified in Gaza were women and children
  • Over a million children live in makeshift tents, many families have been displaced over 15 months, UNICEF says

ISLAMABAD: Pakistan’s Permanent Representative to the UN, Munir Akram, has demanded “strict accountability” for Israeli crimes against Gaza’s children, state broadcaster Radio Pakistan reported on Friday.

UN aid chief Tom Fletcher briefed the UN Security Council meeting on Thursday via video from Stockholm and bluntly assessing the past 15 months of war in Gaza said: “Children have been killed, starved, and frozen to death … They have been maimed, orphaned, separated from their family. Conservative estimates indicate that over 17,000 children are without their families in Gaza. A generation has been traumatized.”

The continued lack of basic shelter combined with winter temperatures pose serious threats to children. With more than a million children living in makeshift tents, and with many families displaced over the past 15 months, children face extreme risks, UNICEF has said. The UN Human Rights Office has said nearly 70 percent of fatalities it had verified in Gaza were women and children. 

“We must try to ensure that such brutal slaughter of children never happens again,” Munir said at the briefing to the UN Security Council this week. 

Palestinian health authorities say Israel’s military campaign in Gaza has killed more than 47,000 people, with another 10,000 believed to be dead and uncounted under the rubble. A United Nations damage assessment released this month showed that clearing over 50 million tons of rubble left in the aftermath of Israel’s bombardment could take 21 years.

Israel and Hamas agreed to a ceasefire deal to halt fighting in Gaza and exchange Israeli hostages for Palestinian prisoners on Jan. 15, opening the way to a possible end to a 15-month war that has upended the Middle East.


Pakistan tax association says foreign investment at risk as authorities deny security clearances

Updated 33 min 50 sec ago
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Pakistan tax association says foreign investment at risk as authorities deny security clearances

  • Pakistan Tax Bar Association says foreign subscribers, directors getting ‘unilateral’ rejection letters with no reason given
  • Union says the actions go against the government’s stated aim of inviting foreign companies to invest in Pakistan

ISLAMABAD: The Pakistan Tax Bar Association (PTBA) has written a letter to the interior minister this week raising concern about the ‘unilateral’ rejection of security clearances for foreign investors, which the union said could jeopardize their business activities in the country.

The government of Prime Minister Shehbaz Sharif says it is committed to improving Pakistan’s investment climate as the South Asian country struggles to meet external financing needs. In 2023, Pakistan set up the Special Investment Facilitation Council to attract foreign funds and projects. In recent months, Saudi Arabia has promised to expedite a $5 billion investment plan for Pakistan, while the UAE and Kuwait have committed $10 billion each in promising sectors and Qatar has pledged $3 billion.

However, potential investors in Pakistan face many challenges such as taxation, persistently high inflation, red tape, weak rule-of-law, inconsistent regulation, corruption, political uncertainty, security concerns and a lack of transparency in public-sector decision-making.

“We are writing to you to raise a very serious issue in terms of rejection of security clearance for foreign investors who have incorporated a 100 percent foreign equity company in Pakistan,” the PTBA, a private body, said in the letter to Interior Minister Mohsin Naqvi on Wednesday. 

As per the Companies Regulations, 2024, every foreign subscriber and director is required to seek security clearance by filing required documents to the interior ministry through the Securities and Exchange Commission of Pakistan. After the incorporation, companies start their investments and set up their premises and factories to commence business operations in Pakistan. 

“Nowadays, companies have been receiving unilateral rejection letters from the SECP, informing them that the security clearance for their foreign subscribers and directors have been rejected,” the PTB said. “These letters neither specify the reasons for such rejection nor any opportunity of hearing to explain the defects/discrepancy if any.”

The union said these actions were sending a “very negative message” to foreign investors.

“Pakistan and one fine morning they are informed that they are not security cleared,” PTBA said. “This jeopardizes their entire business set up in Pakistan, which is against the government’s stated aim of inviting foreign investors to invest in Pakistan.”

The PTBA urged Naqvi to “immediately” address the issue, which was “adversely” affecting Pakistan’s ability to attract foreign investment.

The interior ministry has not yet commented on the PTBA’s letter.

Pakistan in 2023 nearly defaulted on the payment of foreign debts when the International Monetary Fund rescued it by agreeing to a $3 billion bailout to Pakistan. 

Last year, Islamabad secured a new $7 billion loan deal from the IMF. Since then, the country’s economy has started improving with weekly inflation coming down from 27 percent in 2023 to 1.8 percent earlier this month. Sharif has vowed to reduce dependence on foreign loans in the coming years and to seek more foreign investments.


First international flight takes off for Muscat from Pakistan’s Gwadar airport

Updated 24 January 2025
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First international flight takes off for Muscat from Pakistan’s Gwadar airport

  • China-funded airport opened for commercial operations on Monday after months-long delay
  • Opening in August of $246 million airport postponed due to security fears after separatist attacks

KARACHI: The first international flight took off for Muscat from the China-funded Gwadar airport on Friday with 39 passengers aboard, just days after the facility in southwestern Pakistan began commercial operations after a months-long delay.

A security review, prompted by a string of deadly attacks by separatist militants in the southwestern Balochistan province in August last year, had delayed the airport’s opening to the end of 2024 from Aug. 14. The airport was then due to begin operations on Jan. 10 but finally opened this Monday as a Pakistan International Airlines flight arrived from the southern port city of Karachi.

Pakistan hopes the $246-million Chinese-backed project, which will handle both domestic and international flights, will become one of the country’s largest airports.

“First international flight departs from New Gwadar International Airport to Muscat,” national carrier PIA, which operated the flight, said in a statement, adding that it would initially run one weekly flight to Muscat.

“PIA is committed to activating air operations across the country in line with national aspirations and public needs.”

Last month, Prime Minister Shehbaz Sharif’s office said the Gwadar airport would be able to handle A-380 aircraft and accommodate four million passengers annually.

The airport will eventually feature facilities like a cold storage, cargo sheds, hotels and shopping malls, with banking services arranged through the State Bank of Pakistan, according to the PM’s office. PIA has also planned to increase flights between Karachi and Gwadar to three times a week, while discussions are ongoing with private airlines and carriers from China, Oman and the United Arab Emirates to launch both domestic and international services.

China has pledged over $65 billion in infrastructure, energy and other projects in Pakistan under the China Pakistan Economic Corridor (CPEC). Part of President Xi Jinping’s Belt and Road Initiative, the program in Pakistan is also developing a deep-water port close to the new Gwadar airport, a joint venture between Pakistan, Oman and China that is close to completion.

Although no Chinese projects were targeted in the militant attacks in August that delayed the airport’s launch, they have been frequently attacked in the past by separatists who view China as a foreign invader trying to gain control of impoverished but mineral-rich Balochistan, the site of a decades-long insurgency.

Recent attacks, including one in October 2024 in which two Chinese workers were killed in a suicide bombing in Karachi, have forced Beijing to publicly criticize Pakistan over security lapses and media has widely reported in recent months that China wants its own security forces on the ground to protect its nationals and projects, a demand Islamabad has long resisted.


Pakistan says finalizing agreement with Azerbaijan on arms trade, defense infrastructure, intelligence sharing

Updated 19 min 19 sec ago
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Pakistan says finalizing agreement with Azerbaijan on arms trade, defense infrastructure, intelligence sharing

  • There have been a series of visits by Azerbaijani officials to Pakistan in recent months
  • Islamabad is seeking closer trade and investment ties with former Soviet republics

ISLAMABAD: Pakistani Defense Minister Khawaja Asif said on Friday Islamabad and Baku were in the process of finalizing a memorandum of agreement to enhance security ties through cooperation in arms trade, defense infrastructure and intelligence sharing.

Asif was addressing the eighth session of the Pakistan-Azerbaijan joint commission alongside Azerbaijani Defense Industry Minister Vugar Mustafayev who is visiting Islamabad. 

There have been a series of visits by Azerbaijani officials to Pakistan in recent months, as Islamabad seeks closer ties, especially in trade and investment, with former Soviet republics and Central Asian states. 

Last July, Azerbaijan President Ilham Aliyev visited Pakistan and announced that the two nations were working to increase bilateral trade to $2 billion.

“I’m hopeful that once we finalize our memorandums of understanding on cooperation in the field of the defense industry, we will be able to further our security ties through arms trade, defense infrastructure and sharing of intelligence,” Asif said. 

He invited Azerbaijan to join Pakistan’s Strategic Underground Gas Storage (SUGS), a critical component of energy infrastructure, and the White Oil Pipeline project that transports oil from ports to refineries and other distribution points.

Asif also suggested organizing regular trade exhibitions between the two countries to showcase local products in each other’s markets.

Last December, Pakistan waived customs and regulatory duties on imports from Azerbaijan under the Pakistan-Azerbaijan Preferential Trade Agreement. The agreement aimed to boost economic cooperation by reducing tariffs on goods like Pakistan’s sports equipment, leather, and pharmaceuticals and Azerbaijan’s oil and gas products.


On International Day of Education, Pakistan vows to embrace ‘promise of AI’

Updated 24 January 2025
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On International Day of Education, Pakistan vows to embrace ‘promise of AI’

  • Theme of this year’s International Day of Education is “AI and Education: Preserving Human Agency in a World of Automation” 
  • Around the world, AI is being increasingly used in education to improve the learning experience for both students and teachers

KARACHI: Pakistani Prime Minister Shehbaz Sharif on Friday, the International Day of Education, reaffirmed his government’s commitment to advancing an education system that embraced the “promise of AI” and supported the country’s youth in thriving in an evolving technological landscape.

The theme of this year’s International Day of Education is “AI and Education: Preserving Human Agency in a World of Automation.” Around the world, AI is being increasingly used in education to improve the learning experience for students and teachers. AI can automate tasks, provide real-time feedback, and create personalized learning experiences.

“As AI-driven systems become increasingly integrated into our lives, the boundaries between human intervention and machine-driven actions continue to blur,” Sharif said in a statement.

“This presents both opportunities and challenges, raising the critical question of how we can uphold and enhance human agency amidst the growing tide of automation.”

He said his government recognized the transformative power of education in preparing Pakistan’s youth to thrive in the evolving technological landscape. 

“By fostering critical thinking, innovation, and ethical responsibility, we aim to equip our citizens with the tools not only to adapt to technological changes but to shape them in ways that uphold our values, protect our freedoms, and advance our society,” the PM said. 

He highlighted steps taken in Pakistan to prepare its educational institutions to embrace technological advancements. These initiatives include the establishment of High-Impact IT Labs in ICT degree colleges, Digital Hubs in rural ICT schools, the Google Center of Excellence, SMART Classrooms, and the E-Taleem Portal for blended learning. 

“Additionally, we have introduced E-Rozgar Centers, Software Technology Parks, Robotics and Mind Games programs, and STEAM Labs to foster innovation. It is imperative that our schools are equipped with the latest technologies to equip our children with the requisite skills,” the PM said. 

“On this day, while we reaffirm our resolve to advancing an education system that embraces the promise of AI while safeguarding the essence of human creativity, compassion, and purpose.”