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Pakistan clinches last-gasp $3 billion IMF bailout

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(Last Updated On: June 30, 2023)

Pakistan secured a badly-needed $3 billion short-term financial package from the International Monetary Fund on Friday, giving the South Asian economy respite as it teeters on the brink of default.

In a long-awaited decision for Pakistan, the IMF said it had reached a staff-level deal with the 220 million nation, which will now be subject to approval by its board in July.

The new nine-month standby arrangement came hours before a current IMF agreement expires, offering relief to Pakistan, which is battling an acute balance of payments crisis.

Prime Minister Shehbaz Sharif said it would put Pakistan “on the path of sustainable economic growth”.

With sky-high inflation and foreign exchange reserves barely enough to cover one month of controlled imports, which analysts say Pakistan’s economic crisis could have spiraled into a debt default in the absence of an IMF deal, Reuters reported.

The deal came only after Sharif held marathon meetings with IMF head Kristalina Georgieva on June 22, which he said represented “a turning point” as the fund’s managing director had not initially appeared very forthcoming.

Pakistan will receive formal documents on the deal later on Friday, Finance Minister Ishaq Dar told Reuters, which he said he would “sign, seal and return by tonight”.

The new deal, which Dar said on Thursday was expected soon, will disburse an upfront amount of $1.1 billion shortly after the IMF board’s meeting in July, he said.

Dar said Pakistan aimed to take the central bank’s foreign exchange reserves to $14 billion by the end of July. “We have stopped the decline, now we have to turn to growth,” he added.

Pakistan’s sovereign dollar bonds were trading higher after the announcement, with the 2024 issue enjoying the biggest gains, up more than 8 cents at just above 70 cents in the dollar, according to Tradeweb data.

The gains were most pronounced in shorter-dated bonds, reflecting lingering skepticism over the longer-term fiscal outlook for the country.

The $3 billion IMF funding is higher than expected as it looks set to replace the remaining $2.5 billion from a $6.5 billion longer-term Extended Fund Facility agreed in 2019.

The deal will also unlock other bilateral and multilateral financing. Long-time allies Saudi Arabia, the UAE and China have already pledged or rolled over billions of loans.

“This will support near-term policy efforts and replenish gross reserves,” the IMF said.

The new arrangement builds on the 2019 programme, IMF official Nathan Porter said in a statement, adding that Pakistan’s economy had faced several challenges in recent times, including devastating floods and rising commodity prices.

“Despite the authorities’ efforts to reduce imports and the trade deficit, reserves have declined to very low levels. Liquidity conditions in the power sector also remain acute,” Porter said.

“Given these challenges, the new arrangement would provide a policy anchor and a framework for financial support from multilateral and bilateral partners in the period ahead.”

Porter also pointed out the power sector’s buildup of arrears and frequent power outages, Reuters reported.

Reforms in the energy sector, which has accumulated nearly 3.6 trillion Pakistani rupees ($12.58 billion) in debt, has been a cornerstone of the IMF talks.

The IMF said it would want steadfast policy implementation by Pakistan to overcome challenges, “particularly in the energy sector”, where it expects a rise in electricity prices.

Dar confirmed that the hike will come ahead of the IMF board review of the bailout, saying the rebasing to be done in July will make about three to four rupees a unit difference.

“Reform does not, must not, mean raising tariff endlessly,” Pakistan’s Minister for Power Khurram Dastgir told Reuters.

With the tenure of the current government ending in August, Dastgir said it had put in place an “aggressive medium-to-long-term plan” to increase renewable energy which was only possible if long-term assistance is available.

Reforms taken

Islamabad has taken measures demanded by the IMF since its mission arrived in Pakistan earlier this year, including revising its 2023-24 budget and a key policy rate hike to 22% in recent days.

It also got Pakistan to raise more than 385 billion rupee ($1.34 billion) in new taxation to meet the IMF’s fiscal adjustments.

The IMF said the central bank should remain proactive to reduce inflation and maintain a foreign exchange framework.

The painful adjustments have already fuelled all time high inflation of 38% year-on-year in May.

“The FY24 budget advances a primary surplus of around 0.4 percent of GDP,” Porter said, adding it will be important that the budget is executed as planned, and authorities resist pressures for unbudgeted spending or tax exemptions.

“This new programme is far better than our expectations,” said Mohammed Sohail of Topline Securities in Karachi, adding there while were a lot of uncertainties on what would happen after a new government comes to power it would “definitely help restore some investor confidence”.

‘Tough journey’ ahead

Meanwhile, on Friday night, Pakistan’s Prime Minister Shehbaz Sharif took to twitter and said while the IMF stand-by agreement “is a much-needed breather, which will help the country achieve economic stability, the nations are not built through loans. I pray for this new program to be the last one.”

He went on to thank Pakistan’s “friends & partners such as China, Saudi Arabia, UAE & Islamic Development Fund for standing by Pakistan at the time of massive economic challenges.

“Under a whole-of-the-government approach, we have worked out an Economic Revival Plan, which will focus on unlocking our strategic potential in agriculture, mine & minerals, defense production & information technology. The Plan will bring up investments of billions of dollars & create job opportunities for four million people.

“It may be a tough journey but as they say, ‘When the going gets tough, the tough gets going’,” he said.

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Putin arrives in China to deepen strategic partnership with Xi

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(Last Updated On: May 16, 2024)

Russian President Vladimir Putin arrived in Beijing early on Thursday for talks with Xi Jinping that the Kremlin hopes will deepen a strategic partnership between the two most powerful geopolitical rivals of the United States, Reuters reported.

China and Russia declared a “no limits” partnership in February 2022 when Putin visited Beijing just days before he sent tens of thousands of troops into Ukraine, triggering the deadliest land war in Europe since World War Two.

By picking China for his first foreign trip since being sworn in for a six-year term that will keep him in power until at least 2030, Putin is sending a message to the world about his priorities and the depth of his personal relationship with Xi.

In an interview with China’s Xinhua news agency, Putin praised Xi for helping to build a “strategic partnership” with Russia based on national interests and deep mutual trust.

“It was the unprecedentedly high level of the strategic partnership between our countries that determined my choice of China as the first state that I would visit after officially taking office as president of the Russian Federation,” Putin said.

“We will try to establish closer cooperation in the field of industry and high technology, space and peaceful nuclear energy, artificial intelligence, renewable energy sources and other innovative sectors,” Putin said.

Putin, 71, and Xi, 70, will take part in a gala evening celebrating 75 years since the Soviet Union recognised the People’s Republic of China, which was declared by Mao Zedong in 1949, read the report.

Xinhua confirmed his arrival for what China’s state press has described as a state visit from an “old friend”.

Putin’s arrival and visit is the top trending item on the Chinese social media platform Weibo, with 1.4 million search requests amid a stream of images, videos and comments.

The United States casts China as its biggest competitor and Russia as its biggest nation-state threat while U.S. President Joe Biden argues that this century will be defined by an existential contest between democracies and autocracies.

Putin and Xi share a broad world view, which sees the West as decadent and in decline just as China challenges U.S. supremacy in everything from quantum computing and synthetic biology to espionage and hard military power.

Putin will also visit Harbin in northeastern China, a city with historic ties to Russia. A mall devoted to Russian-made goods representing some 80 Russian manufacturers opened on Thursday, the China Daily reported.

XI AND PUTIN

China has strengthened its trade and military ties with Russia in recent years as the United States and its allies imposed sanctions against both countries, particularly against Moscow for the invasion of Ukraine, Reuters reported.

The West says China has played a crucial role in helping Russia withstand the sanctions and has supplied key technology which Russia has used on the battlefield in Ukraine.

But China, once the junior partner of Moscow in the global Communist hierarchy, remains by far the most powerful of Russia’s friends in the world.

Putin’s arrival follows a mission to Beijing late last month by U.S. Secretary of State Antony Blinken, in part to warn China’s top diplomat Wang Yi against deepening military support for Russia.

Kremlin foreign policy aide Yuri Ushakov said that the two leaders would hold informal talks on Thursday evening over tea and that they would touch on Ukraine, Asia, energy and trade.

Putin’s newly appointed defence minister, Andrei Belousov, as well as Foreign Minister Sergei Lavrov, Security Council Secretary Sergei Shoigu and foreign policy adviser Yuri Ushakov, will also attend, along with Russia’s most powerful CEOs.

It was not immediately clear if Gazprom (GAZP.MM), opens new tab CEO Alexei Miller would go to China as he was on a working visit to Iran on Wednesday, Reuters reported.

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World Court to hold hearings over Israel’s Rafah attacks

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(Last Updated On: May 15, 2024)

The U.N.’s International Court of Justice will hold hearings on Thursday and Friday to discuss new emergency measures sought by South Africa over Israel’s attacks on Rafah during the war in Gaza, the court said Tuesday.

The measures form part of an ongoing case South Africa filed at the ICJ in December last year accusing Israel of violating the Genocide Convention during its offensive against Palestinians in Gaza, Reuters reported.

Israel has previously said it is acting in accordance with international law and has called the genocide case baseless and accused Pretoria of acting as “the legal arm” of Gaza’s ruling Hamas militants.

South Africa will address the court on Thursday after it asked the ICJ, also known as the World Court, last week to order Israel to cease its Rafah offensive and allow unimpeded access to Gaza for U.N. officials, organisations providing humanitarian aid, and journalists and investigators.

Israel will present its side of the case on Friday, according to the court schedule.

The war has killed nearly 35,000 people in Gaza, according to health authorities there. About 1,200 people were killed in Israel and 253 taken hostage on Oct. 7 when Hamas launched the attack that started the war, according Israeli tallies.

The hearings in The Hague will only focus on issuing emergency measures, to keep the dispute from escalating, before the court can rule on the merits of the case, which usually takes years. While the ICJ’s rulings are binding and without appeal, the court has no way to enforce them, read the report.

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UN says Gaza death toll still over 35,000 but not all bodies identified

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(Last Updated On: May 14, 2024)

The death toll in the Gaza Strip from the Israel-Hamas war is still more than 35,000, but the enclave’s Ministry of Health has updated its breakdown of the fatalities, the United Nations said on Monday after Israel questioned a sudden change in numbers, Reuters reported.

U.N. spokesperson Farhan Haq said the ministry’s figures – cited regularly by the U.N. its reporting on the seven-month-long conflict – now reflected a breakdown of the 24,686 deaths of “people who have been fully identified.”

“There’s about another 10,000 plus bodies who still have to be fully identified, and so then the details of those – which of those are children, which of those are women – that will be re-established once the full identification process is complete,” Haq told reporters in New York.

Israel last week questioned why the figures for the deaths of women and children has suddenly halved, read the report.

Haq said those figures were for identified bodies – 7,797 children, 4,959 women, 1,924 elderly, and 10,006 men – adding: “The Ministry of Health says that the documentation process of fully identifying details of the casualties is ongoing.”

Oren Marmorstein, spokesperson for Israel’s Ministry of Foreign Affairs, on Monday accused Palestinian militants Hamas of manipulating the numbers, saying: “They are not accurate and they do not reflect the reality on the ground.”

“The parroting of Hamas’ propaganda messages without the use of any verification process has proven time and again to be methodologically flawed and unprofessional,” he said in a social media post.

Haq said U.N. teams in Gaza were not able to independently verify the Gaza Ministry of Health (MoH) figures given the ongoing war and sheer number of fatalities.

“Unfortunately we have the sad experience of coordinating with the Ministry of Health on casualty figures every few years for large mass casualty incidents in Gaza, and in past times their figures have proven to be generally accurate,” Haq said.

The World Health Organization “has a long-standing cooperation with the MoH in Gaza and we can attest that MoH has good capacity in data collection/analysis and its previous reporting has been considered credible,” said WHO spokesperson Margaret Harris.

“Real numbers could be even higher,” she said.

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