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damaging PAKISTAN SECURES CRITICAL $3BN How was Dar’s eight month delay? NOD FROM IMF IN NICK OF TIME
Profit
Sunday, 2 July, 2023 I 13 Zil Hajj, 1444
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COUNTRY WAS AWAITING RELEASE OF REMAINING $2.5BN FROM A $6.5B BAILOUT PACKAGE AGREED IN 2019
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ISLAMABAD
DAR SAYS PAKISTAN AIMS AT TAKING CENTRAL BANK’S FOREIGN EXCHANGE RESERVES TO $14B BY END OF JULY
STAFF REPORT
HE International Monetary Fund (IMF) has reached a stafflevel pact with Pakistan on a $3 billion stand-by arrangement, the lender said, a decision long awaited by Pakistan, which is teetering on the brink of default. The deal — subject to approval by the IMF board in July — comes after an eight-month delay and offers some respite to Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves. The $3bn funding, spread over nine months, is higher than expected for Pakistan. The country was awaiting the release of the remaining $2.5bn from a $6.5bn bailout package agreed in 2019, which expired on Friday. Pakistan received formal documents on the deal later on Friday, Finance Minister Ishaq Dar told Reuters, which he said he would “sign, seal and return by same night”. The new deal 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. The new stand-by arrangement builds on the 2019 programme, IMF official Nathan Porter said in a statement on Thursday, adding that Pakistan’s economy had faced several challenges in
shocks, preserve macroeconomic stability and provide a framework for financing from multilateral and bilateral partners”. “The new SBA will also create space
recent times, including devastating floods last year and commodity price hikes following the war in Ukraine. “As a result of these shocks as well as some policy missteps — including shortages from constraints on the functioning of the FX market — economic growth has stalled. Inflation, including for essential items, is very high,” he added. “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 in a statement. “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,” he said. Meanwhile, the IMF’s press release states, “The IMF staff and the Pakistani authorities have reached a staff-level agreement on policies to be supported by a Stand-By Arrangement (SBA).” It added that the new SBA will “support the authorities’ immediate efforts to stabilise the economy from recent external
Alibaba co-founder Jack Ma arrives in Pakistan ISLAMABAD
MONITORING REPORT
Jack Ma, the co-founder of Alibaba, has arrived in Pakistan after completing his recent visit to Kathmandu, Nepal. Ma reportedly flew into Pakistan on a chartered aircraft provided by Hong Kong Business Aviation on Thursday. He arrived in Kathmandu on a Tuesday in the late afternoon, and he spent his stay at the Dwarika Hotel. He travelled around Kathmandu during his stay, visiting places like Thamel, the Bhaktapur Durbar Square, and the Kalimati vegetable market. Muhammad Azfar Ahsan, the former state minister of and chairman of the Board of Investment (BOI), revealed in a tweet that Jack Ma “is actually in Lahore on purely a private visit.” He added that even the China Embassy is not aware of the details of his visit and engagements in Pakistan. He is accompanied by a group of seven people who went to Pakistan with him, including one American and five Chinese nationals. Chinese business tycoon, financier, and philanthropist Jack Ma Yun is the co-founder of Alibaba Group, a global conglomerate of technology companies. Additionally, Yunfeng Capital, a Chinese private equity firm, was co-founded by Ma. Ma is the most well-known Chinese billionaire to vanish during a crackdown on tech entrepreneurs. The South China Morning Post reported that he just recently arrived back in China after spending more than a year abroad.
Rs 15.00 | Vol XIV No 2 I 8 Pages I Islamabad Edition
for social and development spending through improved domestic revenue mobilization and careful spending execution to help address the needs of the Pakistani people,” the IMF said. It further said, “Steadfast policy implementation is key for Pakistan to overcome its current challenges, including through greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms, particularly in the energy sector, to promote climate resilience, and to help improve the business climate.”
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Govt jacks up diesel, keeps petrol prices unchanged
ISLAMABAD: The federal government has announced that petroleum prices will be maintained at their current rate of Rs262 per litre, while diesel costs have been raised by Rs7.5 to a rate of Rs260.5 per litre. Finance Minister Ishaq Dar shared the news in a tweet late last night, stating that the newly announced rates would be valid until July 15. The decision was made on the recommendation of the Oil and Gas Regulatory Authority (OGRA), it was claimed. Dar has said that the price of oil has increased significantly in the world market due to which the price of diesel
is being increased by seven and a half rupees per litre. However, the finance minister did not clarify whether there were any changes in kerosene and light-diesel oil prices. He said that OGRA had recommended keeping the prices to a minimum, which was decided after consultation with the prime minister. Earlier, Ogra had sent the summary of the prices of petroleum products for the next fortnight to the finance ministry. It was anticipated that the government would give relief to the people. STAFF REPORT
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Pakistan condemns ‘despicable act’ of Quran burning in Sweden ISLAMABAD
STAFF REPORT
Pakistan vehemently condemned the abhorrent act of burning the Quran in public outside a mosque in Sweden during the celebration of Eid al-Adha, the Foreign Office said. A Swedish militant identified as Salwan Momika, 37, burned a copy of the Muslim holy book under police protection in front of a Stockholm mosque on Wednesday, in a provocative act timed to coincide with Eid celebrations. The act has elicited widespread condemnation from the Islamic world, including Pakistan, Turkey, Jordan, Palestine, Saudi Arabia, Morocco, Iraq, Iran, Senegal, Morocco, and Mauritania.
Expressing strong disapproval of the incident, the Foreign Office said that such deliberate actions inciting discrimination, hatred, and violence cannot be justified under the guise of freedom of expression and protest. According to international law, it is the responsibility of states to prohibit any promotion of religious hatred that leads to incitement of violence. The repeated occurrence of Islamophobic incidents in the West raises serious concerns about the legal framework that allows such hate-driven actions. The statement emphasised that the right to freedom of expression and opinion should not be misused to fuel hatred or disrupt interfaith harmony. Pakistan’s concerns regarding this incident will be con-
veyed to Sweden, it added. The Foreign Office further urged the international community and national governments to take concrete measures to prevent the escalating incidents of xenophobia, Islamophobia, and anti-Muslim hatred. The militant told Swedish media Thursday that he intended to burn another Koran within 10 days. Speaking to newspaper Expressen, Momika said he knew his action would provoke reactions and that he had received “thousands of death threats”. Nonetheless, he was planning further actions in the coming weeks, he said. “Within 10 days I will burn the Iraqi flag and the Koran in front of Iraq’s embassy in Stockholm,” he said.
PM, army chief celebrate Eid with troops at Afghanistan border ISLAMABAD
STAFF REPORT
The prime minister and the army chief celebrated Eid al-Adha with troops stationed in Parachinar town of Kurram district in Khyber Pakhtunkhwa, located along the Afghanistan border. Shehbaz Sharif and Gen. Syed Asim Munir were accompanied by Minister for Finance Ishaq Dar, Minister for Defence Khawaja Muhammad Asif, and Minister for
Information and Broadcasting Marriyum Aurangzeb. They joined officers and troops in offering Eid prayers, followed by exchanging greetings. Sharif commended the army for its unwavering resolve, operational preparedness, and professional standards. Addressing the officers and troops, the prime minister expressed his admiration for their efforts and unwavering commitment to defending the borders of the country with bravery and courage. He acknowledged the sacrifices they make, facing difficult conditions and
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THIS MIGHT BE OUR LAST REAL SHOT AND STRUCTURAL REFORM, AND THERE ISN’T A LOT OF TIME LEFT. BUT HOW WILL THAT GO? LAHORE
ABDULLAH NIAZI
There was a wave of relief that spread all over the country as soon as the news hit that Pakistan had signed an agreement with the International Monetary Fund (IMF). The deal was, of course, expected. The rumour mill had already started churning out reports that a staff level agreement was near for the past week. All of the government’s actions indicated the same. The prime minister had met the director of the fund in Paris, the government amended and bulldozed the budget through parliament, and the State Bank hiked the policy rate in an emergency meeting. Yet even when finance minister Ishaq Dar said on Saturday that the SLA was expected in the next 24 hours, it was hard to believe. The people of this country have been fed the promise of “just around the corner” and the deal being “a few days away” for so long that nothing but concrete, ocular evidence was going to cut it. So when the agreement arrived and the IMF made a statement it was as if a nation that had been holding its breath in nervous anticipation could finally let it out. But in the midst of the relief and jubilation it would, one must be cautious not to forget why things got this bad in the first place. This became necessary only because the agreement should rightfully have been struck eight months ago. The architect of this delay is none other than finance minister Ishaq Dar. After taking charge of the finance ministry in September, Senator Dar spent a good few months trying to prop up the rupee, stomp on inflation, and build a platform for the PML-N to build an election campaign off of. Any criticism of his actions or suggestions that they could derail the hard fought IMF agreement were met with macho posturing and aggressive chest thumping. All of the buffoonish antics ended when the IMF did not respond kindly to Mr Dar’s tactics. When it became clear there was no recourse, the government ended up blinking in the stare off and an IMF team arrived in Pakistan by February and left without signing a staff level agreement. From here on in the fund had the upper hand and ended up essentially dictating the country’s budget. “This should be taken as a lesson,” says Taimur Jhagra, former finance minister of KP. “If the deal had been completed 8 or 9 months ago there would have been far less economic anguish. Instead we spent this time watching silently as the productivity of our industries fell, our foreign exchange reserves were depleted, and our currency took a beating”. “No one is going to be against the IMF deal, but there are some realities we must face. If you just reflect on the budget, the changes came as the result of the IMF’s arm twisting. Now, we need to make these changes to help Pakistan not just because we need to secure a deal with the IMF. If Ishaq Dar had not been dragging his feet, we could have negotiated the budget provisions better. Instead with such little time left the IMF gave us their cookie cutter solutions and we had no option but to accept. This seems to be the general sentiment among analysts. “In the last several months, Pakistan has adopted several measures to limit the decline in reserves amid prolonged talks with the IMF.
CONTINUED ON PAGE 03 challenges while upholding their duty to protect and secure the nation. The prime minister applauded the officers and troops for prioritising the nation’s security, regardless of joyful occasions or solemn events like Eid. He paid tribute to the armed forces, including the army, air force, and navy, for their dedicated service and determination in safeguarding the country’s borders amidst numerous obstacles. Prime Minister Sharif extended Eid greetings to the entire nation, including the officers and troops of the armed forces. He reaffirmed the government’s commitment to eliminating those who disrupt peace, commit acts of terrorism, or aid and abet such activities.
IMF deal comes through after eight months of will-they-won’t-they. What happens now? g
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$3B STAND-BY AGREEMENT MORE THAN WHAT PAKISTAN WAS EXPECTING. RESPONSE ACROSS BOARD HAS BEEN RELIEF PROFIT
ABDULLAH NIAZI
They say better late than never. After more than eight months of delays, uncertainty, market confidence being shot, and the constant threat of default looming ominously by, Pakistan has reached a staff-level agreement with the International Monetary Fund (IMF). The agreement means that Pakistan has averted the threat of default that has been hanging over the country like a dark cloud for over a year. For the past one week the federal government had been working in overdrive as it tried to clinch the long-delayed deal. In the days leading up to the Eid weekend, the prime minister met with the director of the
IMF on the sidelines of an international moot, the government bulldozed an amended budget through parliament, the State Bank of Pakistan convened an emergency meeting of its Monetary Policy Committee, and the IMF released a statement expressing it satisfactions with the steps taken by Islamabad. The deliverance of the anxiously awaited agreement has caused a wave of relief within government circles as well as amongst the general public and the opposition. While the deal still needs the final nod of approval from the IMF’s board which will meet in July, it is expected that the much needed assistance from the fund will bolster market and industry confidence which has been at an all time low.
The only question is, what happens now? Profit spoke to government officials, members of the opposition, market experts, and other sources to try and picture what the immediate future will look like. Safe until elections The agreement clears up a lot of uncertainty that has been plaguing Pakistan. With forex reserves running out (the SBP only has a few weeks worth of import cover left), loan repayments to be made in the coming months, and an election to be held the failure to reach this agreement could have been catastrophic. The current deal is a $3 billion stand-by agreement that will last for a period of nine months and is higher than expected for Pakistan. With the $3 billion from the IMF secured, it has become clear that Pakistan will
not default on its external debts. And since a stand-by agreement has been signed, any caretaker setup that comes in will not have to negotiate with the fund which would be beyond its jurisdiction. Pakistan can simply now call elections, select a caretaker setup, and let the next government negotiate a new programme with the fund. “The delay has been very damaging, but it is good that this deal has come through. It clears the looming uncertainty about what will happen when the country is in the hands of a caretaker set up and preparing for elections while the forex reserves are falling,” explains Khurram Hussain, former editor of Profit and a senior economic journalist. As Mr Hussain explains, the agreement has cleared the path and removed the uncertainty
that was plaguing Pakistan in the short term. Former finance minister and leader of the Reimagining Pakistan platform Miftah Ismail said that the agreement was a harbinger of good news and gave Pakistan a direction to move forward. “I think it’s wonderful news. This is the best insurance against default and gives us a way to move forward,” he told Profit. What does the deal mean for Pakistan? It is worth remembering that the agreement struck between Pakistan and the fund is not in the original shape that it was supposed to be. Pakistan had entered into a $6.5 billion agreement with the IMF back in 2019 with the money due to be released in tranches with periodic reviews near each tranche.
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