KARACHI: The International Monetary Fund’s (IMF) $3 billion bailout deal will provide much-needed fiscal space to Pakistan but not solve the country’s long-term problems, financial experts and economists said on Saturday.
Subject to the IMF’s board approval in July, the stand-by arrangement (SBA) provides breathing space to a Pakistani economy staring at default and in dire need of external financing. The staff-level pact was announced a day before Pakistan’s previous $6.5 billion loan program with the IMF expired.
Cash-strapped Pakistan will get $1.1 billion in funds under the new financing arrangement right after the IMF’s board meeting in mid-July. The new deal provides Pakistan more than the $2.5 billion disbursement it expected to receive under the Extended Fund Facility (EFF) program that concluded incompletely on June 30, 2023.
“The SBA provides some much-needed space to the Pakistani economy and will most certainly dampen near-term uncertainty,” Uzair Younus, director of the Pakistan Initiative at the Washington-based think tank, the Atlantic Council, told Arab News.
“However, the economy remains in a precarious situation and the government has to try and sort out some of the major issues in the energy sector, reduce distortion in the exchange rate market, and adopt a policy framework that doesn’t just burn the external financing the country has unlocked to achieve near-term political objectives.”
Economists say the deal will only offer Pakistan short-term respite.
“It will not solve long-term problems of paying on average around $25 billion per year for the next three years,” Dr. Ikram ul Haq, a Lahore-based senior economist, told Arab News.
The new deal came through after Finance Minister Ishaq Dar revised the federal budget the government passed on June 9, 2023. Dar increased Pakistan’s 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.
Authorities have taken 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 amnesty on foreign exchange inflows, while the central bank jacked up policy rate by 1 percent to record high at 22 percent in an emergency meeting.
Economists said the high cost of the IMF bailout package would be borne by the masses rather than the elite.
“The key to success of SBA and next program will be structural reforms that is Waterloo of our elites,” Haq said, adding that “the real victims will be masses who will pay higher indirect taxes and bear high cost of utilities as has happened under previous program.”
For now, the SBA has had a positive impact on local and international investors’ confidence, with Pakistan’s sovereign dollar bond, maturing in 2024, gaining its value as fears of default subsided.
“Significant upward movement in bond prices demonstrates growing optimism among investors regarding Pakistan’s ability to address its economic challenges and implement necessary reforms under the IMF-supported program,” Tahir Abbas, head of research at Arif Habib Limited told Arab News.
Pakistani analysts and currency dealers expect that the country’s capital markets may rally from next week in response to positive the development, which would unlock further funding from bilateral and multilateral partners.
Malik Bostan, president of the Exchange Companies Association of Pakistan (ECAP) hoped the IMF deal would help Pakistan’s national currency regain its lost value.
“The rupee is expected to recover about Rs5 to Rs10 on the opening day of trading and will further strengthen by Rs10 to Rs20 with the inflow of funds,” Bostan told Arab News. “Those hoarding dollars for gains will not suffer losses if they don’t come out to sell.”
IMF’s $3 billion bailout deal will not solve Pakistan’s long-term problems, say experts
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IMF’s $3 billion bailout deal will not solve Pakistan’s long-term problems, say experts
- Economists say IMF agreement provides much-needed space to Pakistani economy, will dampen near-term uncertainty
- Pakistani rupee to recover by Rs10-20 against the US dollar when the IMF funds are received, says currency dealer
Two police officers killed in drive-by shooting in Pakistan’s militancy-wracked northwest
- Latest attack near Tanda Dam in Kohat district killed two inspectors working wit counter-terrorism department
- Pakistan government has struggled to contain militancy since collapse of truce with Tehreek-e-Taliban Pakistan group
PESHAWAR: Two police officers with the counter-terrorism department (CTD) were killed by unidentified gunmen in a drive-by shooting in Pakistan’s northwestern Khyber Pakhtunkhwa province, police said on Monday.
The Pakistan government has struggled to contain rising militancy in Khyber Pakhtunkhwa since the collapse of a fragile truce with the Pakistani Taliban, or Tehreek-e-Taliban Pakistan (TTP), in November 2022. Pakistan says the takeover of Kabul by the Afghan Taliban with whom the TTP is allied has emboldened the group as it is able to operate out of and launch attacks from safe havens in neighboring Afghanistan, whose government denies the charges.
The Center for Research and Security Studies said in a report in December last year Pakistan experienced a 40 percent surge in militant attacks in 2024 compared to the previous year, recording 905 incidents that resulted in 1,177 deaths and 1,292 injuries. These included 444 militant attacks that killed 685 soldiers and police officers and 927 civilians.
The latest incident took place near the Tanda Dam in KP’s Kohat district.
“Two CTD officials, Zahid ur Rehman and Ghulam Mustafa, who were an inspector and assistant sub-inspector respectively, died on the spot following an attack,” Dr. Zahidullah, Kohat District Police Officer (DPO), told Arab News, saying the gunmen were on a motorbike and fled after killing the officers.
Another police officer, Shahid Khan, added that the attackers had been monitoring the movement of the CTD officers.
“The incident took place all of a sudden and in a comparatively populated area,” he said.
While no group has claimed responsibility for the attack, suspicion is likely to fall on the TTP, who almost daily targets security forces, police convoys and check-posts and carries out targeted killings and kidnappings of law enforcement and government officials in KP.
Islamabad has frequently blamed the surge in militancy in KP on Afghanistan, accusing it of sheltering and supporting militant groups that launch cross-border attacks. Afghan officials deny involvement and insist Pakistan’s security issues are an internal matter.
Pakistan president thanks Saudi Arabia, UAE for support through economic crisis
- Debt rollovers from Saudi Arabia, UAE have bailed Pakistan out of crisis, helped secure IMF loans
- President’s speech marred by loud chanting and sloganeering by opposition throughout the address
ISLAMABAD: President Asif Ali Zardari thanked Saudi Arabia, the United Arab Emirates and Turkiye for supporting Pakistan through its economic challenges, reiterating Islamabad’s push to further strengthen ties with the friendly countries.
Debt rollover commitments from Pakistan’s regional allies Saudi Arabia, UAE and China have been instrumental in helping Islamabad secure financial bailout packages from the International Monetary Fund (IMF), including a $7 billion program that was approved last year and is currently in its first review. Saudi Arabia and UAE have also bailed Pakistan out through loans and deferred oil payments.
“We deeply appreciate the support of our trusted friend Saudi Arabia, the United Arab Emirates, Turkiye and others who have stood by us in times of economic challenges,” Zardari said in an address to a joint session of Pakistan’s parliament in Islamabad.
“We are committed to further strengthening long standing historical and cultural, and economic ties with these friendly nations.”
Zardari addressed parliament as Pakistan navigates a tricky path to economic recovery after a prolonged macroeconomic crisis and faces a spike in terror attacks, particularly in its Balochistan and Khyber Pakhtunkhwa provinces. The government says its economic reforms over the past one year have yielded fruit, pointing to improving macroeconomic indicators such as GDP growth recovering in FY24 and continuing into this year, fueled by sound macroeconomic management and inflation control.
Speaking about internal affairs, the president acknowledged the surge in militancy in Pakistan in recent years but credited the country’s armed forces for dismantling terror networks, paying tribute to security forces battling militants and sacrificing their lives for the homeland.
Zardari also addressed recent counter-terrorism cooperation between Pakistan and the United States, which led to the arrest of key Daesh operative Mohammad Sharifullah, accused of planning an attack at Kabul airport in 2021 which killed at least 170 Afghans and 13 US soldiers as they sought to help Americans and Afghans flee in the chaotic aftermath of the Taliban takeover. The attack was claimed by Daesh-K, the Afghan branch of the Daesh group.
“The recent successful counterterrorism cooperation between the US and Pakistan is encouraging,” Zardari said. “And the two countries should build on this success to renew and enhance cooperation for joint goals.”
Besides economic challenges and terrorism, Pakistan’s coalition government is also grappling with a long political stalemate marked by worsening tensions with the opposition Pakistan Tehreek-e-Insaf of jailed ex-premier Imran Khan.
Khan was ousted from power in a parliamentary vote of no confidence in 2022, which plunged the country into prolonged political uncertainty, with his PTI emerging as a thorn in the side of the federal government and the military and keeping the country’s politics on razor’s edge by holding regular protests and speaking about the party’s alleged persecution and rights abuses at international platforms.
Zardari’s speech on Monday was also marred by loud chanting and sloganeering by the opposition throughout, particularly parliamentarians from the PTI whose noisy protests made it difficult for the president to be heard.
Karachi’s Peetal Gali, once a buzzing market for brass wares, dies slow death
- Peetal Gali used to have around 70 handicrafts shops but now only houses seven
- Craftsmen blame low demand, inflation, frequent power outages for market’s decline
KARACHI: Brass, silver and copper animal figurines, plates and vases were on display earlier this month on the side of a narrow, sequestered alley in the southern Pakistani port city of Karachi.
The slender winding street, not visible from the main road, is known as ‘Peetal Gali,’ or Brass Market, once a go-to area for anyone looking for utensils and decoration pieces made from brass and copper.
A bustling home for decades to over 70 shops and run by artisans who had originally migrated from Moradabad in India after the partition of the Indian subcontinent in 1947, today Peetal Gali in the Gulbahar area of Karachi is dying a slow death. Only seven or eight shops remain, while the others have shut down due to dwindling demand for brass wares, inflation and frequent power outages.
“We have been working for 22–23 years, but in these 22–23 years, this craft has been completely ruined,” brass artisan Sharjeel Khan, 38, told Arab News as he carved a floral design on a vase. “There used to be a high demand for this work. Tourists from abroad, the British and Chinese used to come.”
Khan’s Khan’s family migrated from Moradabad after the 1947 partition and set up a brass shop at Peetal Gali.
“Whatever style you ask for [in brass] we can make it in that style. Even if you want figurines made, like an animal or a bird, we can craft it for you by hand,” he boasted.
But now there are no customers.
“There are neither shops nor customers, and only about 50 to 60 craftsmen remain here,” Khan lamented, saying he made less than $5 a day and would not encourage others to take up this line of work.
Wilayat Shah, a shopkeeper who has been in the brass business since 1993, also blamed unreliable power supply for the decline of the industry.
An energy network desperately in need of an upgrade can lead to frequent blackouts and electricity rationing in Pakistan. Millions of Pakistanis suffer partial blackouts almost daily, including scheduled “load shedding” power cuts aimed at conserving electricity.
“The main reason is electricity, there is no power here,” Shah told Arab News. “From morning till evening, we only get electricity for about 4.5 hours. How can work be done in such conditions?“
The lack of “fair” wages for brass craftsmen and inflation had also forced many to leave the profession.
Pakistan’s annual inflation rate slowed to 1.5 percent in February, the lowest in nearly a decade, below the finance ministry’s estimates and down from a multi-decade high of around 40 percent in May 2023.
“Some started working in factories, some became rickshaw drivers, and others started selling fruits,” Shah said of artisans leaving the profession.
Muhammad Shamim, 67, a veteran trader born in Karachi to a family of Moradabad craftsmen, remembered when exports of brassware was thriving and locals and foreigners alike flocked to Peetal Gali.
He blamed multiple factors for the decline of Peetal Gali, mainly the fall of brass exports to Europe due to the withdrawal of NATO forces from Afghanistan, and an increase in the costs of materials due to inflation.
After the 9/11 terror attacks on the United States and the subsequent invasion of Afghanistan which borders Pakistan, NATO assumed command of the International Security Assistance Force in Afghanistan in 2003, initially focused on securing Kabul, but later expanded its role and troop presence to cover the entire country, culminating in a peak of over 130,000 troops. NATO troops withdrew with US forces after the Afghan Taliban took Kabul in 2021.
“When NATO forces were here, they used to buy a lot of our products, and the business thrived,” Shamim explained. “But ever since the Afghan Taliban took over, demand has dropped significantly.”
But the trader was hopeful that the market could be revived if craftsmen were provided with the necessary infrastructure and power supply was ensured.
Khan, the brass worker, however, was less optimistic.
“If someone comes and asks us to teach this craft to their children, we refuse,” he said. “Why should such an art form not disappear when it cannot help a person sustain his household?”
Pakistan central bank surprises with hold on key policy rate
- In widely unexpected move, Pakistan’s central bank held key policy rate at 12 percent
- Central bank has slashed rates by 1000 bps from all time high of 22 percent in June 2024
KARACHI: Pakistan’s central bank held its key policy rate at 12 percent on Monday, it said in a statement, a widely unexpected move which halted an easing cycle that witnessed six straight reductions since June.
The central bank has slashed rates by 1000 bps from an all time high of 22 percent in June 2024, to revive economic sentiment and growth, while navigating reforms under a $7 billion facility from the International Monetary Fund (IMF) in September.
“On balance, the MPC (monetary policy committee) assessed the current real interest rate to be adequately positive on forward-looking basis to sustain the ongoing macroeconomic stability,” the bank statement said.
The State Bank of Pakistan (SBP), despite the halt in cuts, is one of the most aggressive central banks among central banks of emerging markets during the current easing cycle and has topped the 625 bps in rate cuts it did in 2020 during the COVID-19 pandemic.
At its last policy meeting, SBP kept its forecast of full-year GDP growth at 2.5 percent to 3.5 percent, and predicted faster growth would help boost foreign exchange reserves that had been lacklustre.
Pakistan’s economy grew by 0.92 percent in the first quarter of the fiscal year 2024-25 which ends in June.
Ten of 14 analysts surveyed by Reuters expected the central bank to cut its key rate, while four expected it to hold the rate. Analysts surveyed said they expect inflation may pick up in May as the base year effect wears off.
Pakistan’s consumer inflation rate slowed to a near decade low of 1.5 percent in February, largely due to a high year-ago base. That was below the government’s forecast and significantly lower than a multi-decade high of around 40 percent in May 2023.
PM calls for improving awareness of digital wallet use for full utilization of Ramadan package
- Previously, annual Ramadan package used to be administered by utility stories that sold essential food items at reduced rates
- Under new system, government has deposited Rs5,000 in digital wallets for four million families to make withdrawals from
ISLAMABAD: Prime Minister Shehbaz Sharif on Monday directed relevant ministries, the central bank, and private partners to improve awareness of using digital wallets so that poor families could fully utilize a Rs20 billion ($71.4 million) Ramadan relief package.
Announcing the package at the start of this month, the government said it would credit Rs5,000 ($17.87) into digital wallets for around 4 million families across the country to support them in the holy month of Ramadan.
During a visit on Monday to the National Telecommunication Corporation Headquarters to monitor the execution of the Ramadan program, Sharif was informed that around 2.8 million entitled accounts had been credited with Rs5,000 each but money had only been withdrawn from 683,000 accounts.
“As 94 percent of accounts have been established, the withdrawal ratio is just 22 percent,” the PM was quoted as saying by state-run APP news agency.
“There is a big gap between disbursement and withdrawal, which shows a lack of awareness among the people,” the PM added, calling on the governor central bank to join the campaign to ensure that maximum people benefitted from the program.
In the past, the annual Ramadan relief package would be implemented through state-run utility stores, from where low-income households could buy essential commodities such as wheat, sugar, oil, and pulses, among other items, at reduced prices. However, each year, consumers complain of long queues at the stores, limited stock availability, substandard food items, and difficulties with the process of identification verification needed to receive the discounted package at utility stores, which led the government to announce it would no longer utilize utility stores to administer its Ramadan program.
Other than in Ramadan also, utility stores have been plagued by reports of corruption and mismanagement for years, with consumers complaining of substandard merchandise being sold and staff accused of vending subsidized products in the open market.
During Ramadan in Pakistan, there is a significant increase in the demand for essential food items at subsidized prices, which overwhelms the capacity of utility stores, causing long lines and potential shortages.
Ensuring equitable distribution of the package across different regions and demographics can also be difficult in a country of 241 million people, sometimes leading to some areas receiving less benefits than others. To prevent abuse, the government implements strict verification processes like CNIC checks, which also leads to delays and inconvenience for customers.
The allocated stock of subsidized items at utility stores is also often not sufficient to meet the high demand during Ramadan, leading to disappointment for customers who cannot purchase everything they need.
“This [digital wallets] was a new concept to say goodbye to the utility stores forever due to the massive complaints of worst corruption of public money, which was also an injustice to the common man,” Sharif said. “The issue of poor quality and corruption have been done away with through a new modern digital wallet.”
The PM also urged people to call the program helpline at 9999 to get their financial support without any delay.
