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Pakistan clinches last-gasp $3 billion IMF bailout

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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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New attacks on shipping as Iran war talks hit fresh impasse

Oil prices gained and global shares retreated amid renewed pessimism about a quick end to the conflict. Brent crude futures climbed 1.4% to settle at $88.91 per barrel and U.S. crude rose 1.3% to $83.20.

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The U.S. and Yemen’s Iran-aligned Houthis reported separate attacks on shipping on Tuesday as prospects for ending the Iran war appeared to dim, with Tehran saying the Strait of Hormuz would remain closed unless ​Washington accepts its conditions.

The attacks, in the Gulf of Oman leading to the strait and at the entrance to the Red Sea — both vital chokepoints for global oil supplies — come as ‌the war shows no signs of ending despite repeated assertions from U.S. President Donald Trump of a deal being imminent, Reuters reported.

Oil prices gained and global shares retreated amid renewed pessimism about a quick end to the conflict. Brent crude futures climbed 1.4% to settle at $88.91 per barrel and U.S. crude rose 1.3% to $83.20.

At the southern end of the Red Sea, four crew members were killed in a suspected Houthi attack on a small cargo vessel in the Bab el-Mandeb Strait on Tuesday, Yemen’s Transport Ministry said. Two ​Yemeni rescuers from an anti-Houthi military group were also killed, Yemen’s Coast Guard said.

The fatalities aboard the Egyptian-owned Tihamah would be the first deaths on shipping by Yemen’s Iran-aligned Houthis since the Iran ​war began.

The Houthi-run news agency Saba reported that the group, which said last month it would impose a naval blockade on Saudi Arabia in the Red Sea, attacked ⁠a Saudi ship carrying military equipment in the Bab el-Mandeb Strait. It did not name the ship, and there was no immediate Saudi response to the report.

The U.S. military, meanwhile, said a U.S. Navy MH-60 helicopter fired ​two Hellfire missiles to disable the steering gear of a Panama-flagged cargo ship.

The ship ignored repeated warnings to stop violating a naval blockade on Iranian ports, the U.S. Central Command said. Maritime sources told Reuters the ship was ​hit off Pakistan while sailing into the Gulf of Oman.

STEPPED UP RHETORIC

Both Iran and the United States have stepped up rhetoric in the past two days.

Iran’s top security official, Mohsen Rezaei, said on Tuesday that the vital Strait of Hormuz shipping route will remain closed unless the U.S. accepts Iran’s conditions to end the war – the release of Iran’s frozen assets and an end to conflicts throughout the region, including in Lebanon and Gaza.

That followed a new demand from Trump on Monday that Iran should pay ​compensation for people killed in 50 years of wars, attacks and protests.

Throughout the conflict, Trump has alternated between threats of escalation and claims that a peace deal is imminent.

In an interview released late on Monday, he ​suggested the uncertainty could last for a while, saying he might just “bop along” and let Tehran fail economically, or hit them “really, really hard.”

“I’m sort of negotiating,” Trump told Real America’s Voice. “They’re very devious negotiators.”

Speaking to reporters after a visit to ‌Ohio on Tuesday, ⁠Trump said “Iran is going fine, going just absolutely fine.”

“We totally control the Strait of Hormuz … Nobody else, only us,” he said.

“At some point, maybe they’ll do something and then they get blown away,” he said of Iran. “But right now, we’re in a very good position. We have a country that has been the bully of the Middle East for 50 years, really 51 if you think about it … and they’re no longer the bully of the Middle East.”

Asked about an incident in which he switched planes in Turkey last month because of worries over reports of a potential Iranian assassination threat, Trump suggested the alternative aircraft may have faced greater risk.

“That ​would be the plane I think that they would ​be more likely to go for,” he told ⁠reporters after The Washington Post broke the story about him secretly taking a military flight instead of Air Force One in an operation involving him being moved between aircraft in a catering truck.

“Any consequential president has a lot of threats,” Trump added. “I don’t worry about anything.”

The comments from Rezaei, appointed on Sunday as second-in-command of ​the body that coordinates Iran’s security and foreign policy, were the strongest indication the Strait of Hormuz would not reopen to shipping anytime soon. The waterway ​handled a fifth of global ⁠oil and liquefied natural gas flow before the war.

“As long as America does not change its behaviour and does not accept Iran’s conditions, the Strait of Hormuz will not be opened,” Rezaei said, according to the semi-official Tasnim news agency.

There was no immediate comment from Washington on Iran’s latest comments.

Thousands of people have been killed in the conflict since the U.S. and Israel launched attacks on Iran on February 28.

Iran has struck U.S. assets and infrastructure in countries including ⁠Oman, Jordan, ​Kuwait, Israel, the United Arab Emirates and Saudi Arabia.

Raising the prospect of further escalation, Mohammad Reza Naqdi, an adviser to the commander ​of Iran’s Revolutionary Guards, said on Iranian state TV on Tuesday that the corps was developing the ability to carry out operations “on enemy soil.”

“We need to be able to move the operations to the enemy’s soil, whenever this is needed and ordered,” he said. “This is ​the characteristic of the offensive doctrine that has to be attained.”

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Syria sentences absent Bashar al-Assad to death over killings, torture

Assad fled the capital ​Damascus as rebel fighters approached nearly two years ago, and ​is currently in Moscow.

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A Syrian court sentenced ousted leader Bashar al-Assad to death on Tuesday after a trial in absentia, ​convicting him of crimes including killings, torture, and ‌arbitrary arrest during the country’s nearly 14-year war.

It was the first conviction against Assad, who was ousted in a rebel offensive in ​December 2024 that ended decades of his family’s ​iron-fisted rule over Syria, and the brutal war that ⁠killed hundreds of thousands of Syrians, Reuters reported.

Assad fled the capital ​Damascus as rebel fighters approached nearly two years ago, and ​is currently in Moscow.

In a trial of former government officials on Tuesday, a judge handed down a death sentence to Assad over the ​crimes of “premeditated and intentional murder of more than one ​person and of children, torture, arbitrary arrest and crimes against humanity”.

Atef Najib, ‌a ⁠security official under Assad, was also sentenced to death.

Assad, who was born in 1965, became president in 2000 after his father Hafez died. He maintained the family’s rule and ​the dominance ​of their Alawite ⁠sect in the Sunni Muslim-majority country and Syria’s status as an Iranian ally hostile ​to Israel and the U.S.

Shaped in its early ​years ⁠by the Iraq war and crisis in Lebanon, Assad’s rule was defined by civil war, which spiralled out of the ⁠2011 ​Arab Spring, when Syrians demanding democracy ​took to the streets, to be met with deadly force.

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Iran ties Hormuz reopening to US concessions on several demands

Araqchi said reopening ​the strait would depend in part on the U.S. paying compensation for damage it caused in widespread attacks on Iran.

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Iran said it was nearing a final pact with Oman defining new shipping lanes between them through the Strait of Hormuz ​but repeated that the U.S. must meet other conditions, including compensation and an end to sanctions and military threats, before the strategic waterway is reopened.

A U.S. official told ‌Reuters on Friday that Iran and Oman were close to a deal that could pave the way for restoring safe passage through the strait, a major conduit for oil and gas shipping before Iran blocked Hormuz in response to U.S. and Israeli attacks on Tehran that began in late February, Reuters reported.

Iranian Foreign Minister Abbas Araqchi said on Sunday an agreement with Oman on the strait was in its “final stages” but reiterated comments made on Saturday that Tehran would not reopen the ​channel unless the U.S. met certain demands made by Tehran.

The deal with Iran would set out the new shipping lanes to be used once the U.S. fulfils those conditions ​and the strait is reopened, Iran’s Mehr news agency quoted him as saying.

Iran and the U.S. are not engaged in direct talks, and Tehran will ⁠not start them as long as Washington breaches an interim deal signed in June, Araqchi said, adding that messages were being exchanged through intermediaries.

U.S. President Donald Trump said in an interview with ​Axios that the U.S. was “low-keying” it with Iran. “We are only semi-negotiating with them. We are just watching Iran with its huge inflation and the fact they have no money.”

CONDITIONS INCLUDE COMPENSATION

Araqchi said reopening ​the strait would depend in part on the U.S. paying compensation for damage it caused in widespread attacks on Iran.

The secretary of Iran’s top national security body, Mohammad Baqer Zolqadr, also listed ending further U.S. threats against Iran; halting aggression toward Iran and its Lebanese, Palestinian, Yemeni and Iraqi allies; removing a U.S. naval blockade in the Gulf; lifting sanctions on Iran; and releasing frozen Iranian assets.

The United States and Israel launched air strikes on Iran more than ​five months ago. Trump has said the attacks were aimed at keeping the Islamic Republic from developing nuclear weapons and degrading its ability to threaten the region.

Washington and Tehran agreed to a ​ceasefire in June, but the U.S. reimposed a blockade on Iranian shipping in the Gulf in July, a move that Tehran said violated the truce, which by then had already broken down.

“Once the deal is announced to ‌restore commercial shipping ⁠without impediments, the United States will lift the blockade of Iranian ports,” the U.S. official told Reuters on condition of anonymity.

U.S. actions would be tied to Iran’s implementation of its commitments, the official said.

The U.S. comments indicated delicate sequencing toward a deal that sources had told Reuters appeared to be set to give Tehran control over vessel traffic entering the Gulf through the strait, which shippers have said was not easily workable.

The United Arab Emirates said on Saturday that Iran had attacked a ship affiliated with its state oil company. There was no immediate comment from Iran, whose Revolutionary Guard Corps previously has ​attacked ships that it said tried to cross the ​strait without Iranian permission.

HOUTHI ATTACKS

Iranian strikes on ⁠Strait of Hormuz shipping have been coupled with increased attacks by its Yemen-based allies, the Houthi rebels, who have targeted ships at another oil chokepoint on the other side of the Arabian Peninsula between the Red Sea and Gulf of Aden.

The Houthis also declared a naval blockade against Saudi ​Arabia in the Red Sea last month in response to what they said was a Saudi siege on them in Yemen, an allegation denied ​by Riyadh, which backs ⁠Yemen’s internationally recognised government.

The Yemeni rebel group said they had attacked Saudi Aramco’s Jazan refinery on Sunday, two days after the kingdom signed a defence pact with Sunni Muslim allies Turkey and Pakistan in response to growing regional instability from the U.S.-Israeli war on Shi’ite Iran.

The Saudi energy ministry said a fire had broken out at the refinery but was later extinguished with no injuries, without giving a cause.

Turkish Foreign Minister Hakan Fidan ⁠said the ​new alliance was not directed against Iran or any other country, but rather served as a general pledge to support ​security.

Fighting has escalated between the Houthis and government forces in Yemen, with the Yemeni military on Monday saying seven people including military personnel and civilians were killed in a Houthi attack on the Red Sea port city of Mocha.

Air defences ​intercepted and shot down 11 Houthi drones that participated in the attack, the military said.

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