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Friday, 3 March, 2023 I 10 Shaban, 1444 New electricity charges challenged by NEPRA
‘Generous’ arms supplies to India threatening regional instability: Mrs Khar
Pakistanis paying heavily for Bajwa’s ‘regime change conspiracy’: Imran
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Rs 15.00 | Vol XIII No 244 I 12 Pages I Islamabad Edition
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Pakistan’s credit rating falls, hinting at default g
neGLiGence, bad Luck and Low rate oF returns; can pakistan crawL back? KArACHi
a
MoMina ashraf
s pakistan struggles to negotiate a bailout from iMF and sees an overnight fall in the rupee, another grave problem in the background is its credit rating. Moody investment services has downgraded pakistan’s credit rating to caa3, the lowest in three decades. “in the current extremely fragile balance of payments situation, disbursements may not be secured in time to avoid a default,” the global rating agency said in a statement on tuesday. similarly, looking at the data of the first six months of Fy 2022-2023, pakistan’s ability to generate foreign loans shrank significantly up to 50% compared to the same period of the last financial year mainly because of stalled iMF programme. Just before the commencement of the last budget, the government sought a deal of $22.8 billion but the actual disbursement of dollar inflow remained low. the inflow of commercial loans also declined to a meagre $200 million compared to $2.62 billion in the same period last year. there is no surprise that pakistan is going through a severe liquidity crunch, and the iMF staff-level agreement still sees no resolution. in such a situation, it’s important to understand what brought pakistan to its heels in the last year. profit reached out to Javed hassan, macroeconomist and investment banker, who explained pakistan’s non-accessibility to the credit market is a major reason for the liquidity crisis. “although pakistan has been surviving on debts for the last two decades, situation has gotten a lot worse since it lost access to the credit market following the political instability due to a vote of no confidence,” he said. political instability of last year broke the trust of bilateral countries to give loans and invest,
PM orders action as inquiry report on power breakdown suggests ‘human, tech error’ ISLAMABAD: prime Minister shehbaz sharif on thursday directed the power division to hold a departmental action after the findings of an inquiry report held responsible the ‘human and technical error’ for the countrywide power breakdown of January 23. the prime minister gave the order as the inquiry report of the massive power breakdown was presented in the cabinet meeting. chairing the meeting, pM sharif said the nation was awaiting strict action against those responsible for the incident that left the country in a power blackout for several hours. the inquiry report also said that an abnormal increase in the frequency of the alternate current line tripped the automatic security system of power plants. it also said that the kot addu power plant had the facility of ‘black start’, however due to expiry of the contract of the plant, it could not be made operational. black start is the procedure to recover from a total or partial shutdown of the transmission system which has caused an extensive loss of supplies. the prime minister ordered the authorities concerned to take necessary steps to line the power system with supervisory control and data acquisition (scada). staff report
delayed negotiation with the Fund, and essentially reduced the confidence in pakistan’s economy. the loans taken from 2013 onwards under two regimes, amounting to almost $60 billion, also reach maturity. so there has been a lot of outflow in form of servicing or repayment, but not enough inflow. “but this is an opportunity to rebuild the house,” says hassan, while suggesting restructuring. debt restructuring essentially means an admission with all the bilateral lenders that the borrower can not repay the debt. it calls for either reprofiling the debt (delaying the maturity period), reducing the rate of interest or reducing the overall principal amount. historically, a lot of countries have done such as Mexico, Ghana, sri Lanka and even pakistan in 2003. this calls for equal treatment with everyone, including china, paris club, and arab countries. the conditions set for the proportion of debt to be repaid or nego-
tiated are similar. however, mutual borrowers such as the iMF and world bank are not included in debt restructuring. in fact, these lenders help make a debt sustainability analysis, which decides the nature of debt restructuring: from strictly preemptive debt restructuring, starting negotiation for reductions while making the payments, to full declaration of default. in return, the creditors ask for a guarantee of following the sustainability plan in form of reducing subsidies, and inefficiencies to see that the borrower country will stand at a point where to promise to in a set number of years. “pakistan has reached beyond the stage of strictly preemptive debt restructuring, unfortunately, but it can still settle for something else,” pointed hassan. such a condition sets tough conditions for the country, similar to what pakistan is currently witnessing, but promises support from iMF in helping in revival.
Govt expects to sign staff level agreement with IMF next week profit report Finance Minister ishaq dar on thursday claimed that the government is expecting to sign a staff level agreement with the international Monetary Fund (iMF) next week. “our negotiations with the iMF are about to conclude and we expect to sign a staff Level agreement with the iMF by next week,” dar said, adding that all economic indicators are slowly moving in the right direction while foreign commercial banks have started extending facilities to pakistan. he further said that sbp forex reserves have been increasing and are almost
up by $1 billion as compared to four weeks ago despite making all the due payments on time. he said that anti-pakistan elements are spreading malicious rumors that pakistan may default. “this is not only completely false but also factually incorrect,” dar added. it is pertinent to note that the government’s economic team and the iMF have been negotiating to finalise the deal for a month now. Later in the day, the state bank of pakistan (sbp) raised the benchmark interest rate by a significant 300 basis points (bps) to 20%, which was one of iMF’s main conditions.
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Rupee sheds highest ever value against dollar, but what is the reason? g
Greenback appreciates by 7pc in interbank trade to reach rs285.1 iSLAMABAD shahnawaz ali
when the historic devaluation, in the last week of January, settled down. not a lot of people had foreseen another devaluation in such a near future. and even those who did, were hoping that it happens in the worst possible circumstances. by the looks of it, the worst possible circumstances are here and the debate on “pakistan has seen worse”, seems to have been settled, once and for all. the pakistani currency now stands at its weakest level in history against the us dollar. the
Concocted story about plot to kill Imran Khan is ridiculous: Marriyum
market closed at rs. 285.1 per dollar and the greenbacks are reported to hit the 287 mark at one point during the day. in the open market, the dollar is being sold for as much as rs. 293, but even at this price, the buyers outnumber the sellers. throughout the calendar year, the rupee has depreciated various times, cumulatively by more than 60% since March, 2022. but what is the reason for the depreciation this time and who is to blame? there is no one reason as to why the currency has depreciated again. but the elephant in this room, also stands out to be the iMF. the iMF has had a
strong emphasis on a market based exchange rate for pakistan ever since the start of the extended Fund Facility. as per the fund, the rate is the true depiction of the supply and demand for the currency. however, in pakistan’s case, a peg on the exchange rate, low reserves, a potential store of value and an excessive demand of the dollar across the afghan border, forced the market to just keep on demanding. despite various crackdowns, it has been reported that the smuggling of dollars across borders has not completely stopped.
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Dear Readers, owing to the current import curbs, and the subsequent shortage of newsprint, specially our Berliner format, Pakistan Today has been temporarily shifted to an eight-page broadsheet format. The quality of our coverage, however, will remain what it always has been.
PM, cOas discuss country’s economic, security situation iSLAMABAD staff report
chief of army staff (coas) General syed asim Munir thursday called on prime Minister shehbaz sharif on thursday and discussed various issues including the country’s economic and security situation. according to express news, regional as well as country’s situation came under discussion during the meeting which took place at pM house in islamabad. the meeting comes as the country is facing a resurgence of terrorism. however, the security forces have multiple attempts by inimical elements to disrupt hard-earned peace in the country. they have conducted numerous operations across the country in the past three months, arresting terrorists and their facilitators and foiling several attacks. in balochistan alone, 3,414 operations were conducted, including 2,980 area domination operations, 67 intelligence-based operations, and 367 area sanitisation operations. during these operations, security forces arrested 112 terrorists and killed 40 others. a total of 1,960 operations were conducted in k-p, out of which 1,516 were area-domination operations, 301 were intelligence-based operations, and 143 were area-sanitisation operations. as a result of the operations conducted by security forces, 98 terrorists were killed and 540 were arrested in k-p. the government and people of pakistan continue to stand behind their security forces in their fight against terrorism and violent extremism.
sanaullah: imran’s hiding place is no more iSLAMABAD staff report
Minister for interior rana sanaullah khan made a statement claiming that imran khan, the chairman of pakistan tehreek-i-insaf (pti), would soon be arrested and would not be able to find a place to hide. while speaking to a tV station, he also said the pakistan Muslim League-nawaz (pML-n) had always respected the courts, and deposed prime minister nawaz sharif had attended dozens of court hearings. the minister further accused khan of putting political opponents in jail on false charges and stated that when he was found guilty in the toshakhana case, he started making baseless allegations. sanaullah khan added that khan would face a transparent probe for selling an expensive wristwatch. he also stated that due to khan’s involvement in the sale of gifts, he would be presented in court and made to answer for the details.
State Bank hikes policy rate by 300 basis points g
centraL bank's interest rate touches 20pc Mark For First tiMe in 27 years iSLAMABAD shahnawaz ali
in a move that was much anticipated by the state bank, the policy rate has been raised by 300 basis points. From now on the effective policy rate in the country stands at 20%. in a session that was preponed by 14 days, the Mpc made the historic decision, this is the first time since the 22nd october 1996 that the Mpc has touched the 20% mark. the current hike is also a record for aggression in the policy rate hike. the last time the Mpc hiked the policy rate by at least 300 basis points was also in october 1996. as per reports, it was the iMF that wanted pakistan to have a policy rate that was comparable to the country’s core inflation. as per the monetary policy statement, recent fiscal adjustments and
exchange rate depreciation had led to a significant deterioration in the nearterm inflation outlook, with the national cpi inflation surging to 31.5 % in February 2023. the Mpc emphasised that anchoring inflation expectations was critical and warranted a strong policy response. ironically, the exchange rate also fell, rather significantly, even while the meeting was taking place. the statement points out that vulnerabilities continue to persist on the external side, including pressure on FX reserves and the exchange rate. however, as per the committee, the recent fiscal measures are expected to help contain the otherwise widening fiscal and primary deficits. the monetary policy statement also goes on to say that the committee envisaged fiscal consolidation which is critical for economic stability and will complement the ongoing monetary
tightening in bringing down inflation over the medium-term. however, with ramadan around the corner and multiple elections approaching, fiscal consolidation might just be hard to achieve. the Mpc also assessed the impact of further monetary tightening on financial stability and the near-term growth outlook, acknowledging the trade-off between inflation and growth. the committee reiterated from previous statements that the short-term costs of bringing down inflation are lower than the long-term costs of allowing it to become entrenched. “the committee expects inflation to rise further in the next few months as the impact of these adjustments unfolds before it begins to fall, albeit at a gradual pace.”, said the Mpc statement. with the real interest rate now in positive territory on a forward-looking basis, the Mpc hoped to steer inflation
to the medium-term target of 5 – 7 percent by the end of Fy25. the next Mpc meeting is set to take place on april 4, 2023, instead of its original date which was april 27, 2023. while responding to a question about
the anticipated hike in the next meeting, the head of equity research, Fahad rauf told profit that there was too much uncertainty to make a claim as of now. the decision will become clearer by looking at how the inflation moves.