Pakistan Economy : Updates and Discussions
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Agreed. I just saw last year conversion rates and ratio of 2 was seen at many instances. I took it loosely.
Pakistan's debt worth $27b to mature in two years: IMF
By Shahbaz Rana
Published: April 30, 2019
ISLAMABAD: The International Monetary Fund (IMF) has said that $27 billion worth of Pakistan’s external debt will mature in two years – the mounting repayment burden that carries serious implications for bailout package talks started on Monday.
The technical teams of the IMF and Pakistan have locked into negotiations for 10 days amid authorities hoping to clinch a deal on May 10.
The $27 billion maturing external debt is equal to 27% of Pakistan’s total external debt and liabilities as of end February, highlighting the gravity of challenges that the government of Prime Minister Imran Khan faces.
After including financing requirements of the current account deficit, Pakistan will need $46 billion to $50 billion in next two years to remain afloat, according to assessments of the government and some private sector experts.
The $27 billion external debt repayment figure has been disclosed by the IMF in a new Regional Outlook Report Update on the Middle East, North Africa, Afghanistan that it officially made public on Monday
“Many countries have large foreign currency debt – some $27 billion – set to mature in the next two years, leaving them more exposed to slower growth prospects and financial market volatility,” said the IMF. In a separate chart in the report, the $27 billion figure has been shown against Pakistan – the highest repayment by any country in the region.
Overall, Pakistan’s debt-to-GDP ratio is expected to remain high, at 77% of Gross Domestic Product by June this year, according to another IMF report. The IMF’s Public Debt Sustainability Analysis in Market Access Countries considers emerging market countries to be at higher risk of debt distress where public debt exceeds 70% of GDP. Pakistan has already crossed this dangerous threshold at the end of the PML-N government when debt-to-GDP ratio soared to 72.5%.
The IMF has released the report on the day Pakistan and the IMF began talks for a possible bailout package. Earlier, in November last year both the sides had failed to reach staff level agreement due to serious difference on every important issue.
But this time, the authorities expect that the remaining differences would be bridged and both the countries would conclude a deal for a $6.5 billion Extended Fund Facility, spanning over three years.
Prime Minister Imran Khan on Friday met with IMF Managing Director Christine Lagarde on the sidelines of the Belt and Road Forum at Beijing. It was the second meeting between the two, aimed at breaking an impasse in talks.
“The two leaders agreed on the importance of the Fund programme and to work towards an agreement,” stated an official handout the PM’s Office issued after the meeting.
Former finance minister Asad Umar had said that Pakistan would announce a flexible exchange rate regime where the value of rupee will be determined by the market instead of the State Bank of Pakistan. The flexible exchange rate will have to be announced before implementation of the programme.
The country has already devalued its currency by 35% in the past 15 months.
The $27 billion external debt payments projections by the IMF are likely to result into a tough IMF programme negotiations. The IMF is likely to ask Pakistan for sharing with it a complete picture of gross external financing needs in the next two years.
The higher debt requirements for repayment of maturing loans and financing the current account deficit could lead to stringent conditions by the IMF, said the sources. They added that the IMF could ask steep cut in current account deficit to contain the gross financing needs. This, in turn, would necessitate tight monetary and fiscal policies.
It is estimated that Pakistan will need minimum $20 billion only for current account deficit financing in the next two years.
It will be challenging for the IMF to oversee a programme where Pakistan’s external financing needs in two years will be close to $50 billion and its gross official foreign currency reserves are at the same time protected at a level sufficient to finance three months of imports.
Pakistan’s gross financing needs in the next two years could hit a minimum $50 billion and it will have to get short-term debt rolled over besides securing new loans to meet external obligations, according to Shahid Kardar, former governor of the central bank.
In his assessment, the government would have to contract nearly $35 billion in the next over two years to meet the financing needs. The amount that will have to be rolled over or rescheduled into long-term loans will be over $15 billion in just two years.
The IMF’s new regional outlook update also noted that geopolitical risks are high in the region, in which Pakistan is also a part. “The impact and timing of major geopolitical developments-including tensions between India and Pakistan, are not yet clear,” according to the report.
The report underlined that weaker growth in Pakistan is pulling down the regional aggregate growth rate this year, with large macroeconomic imbalances and ongoing policy adjustment challenges expected to slow Pakistan’s growth from 5.2% in 2018 to 2.9% in 2019.
“Regional inflation is projected to pick up slightly to 11.3% in 2019, primarily due to higher inflation in Egypt (fuel subsidy reform) and Pakistan (weaker exchange rate),” according to the IMF.
A double-digit inflation means the key discount rate will also remain in double digits.
https://tribune.com.pk/story/1962274/2-pakistans-debt-worth-27b-mature-two-years-imf/
By Shahbaz Rana
Published: April 30, 2019
ISLAMABAD: The International Monetary Fund (IMF) has said that $27 billion worth of Pakistan’s external debt will mature in two years – the mounting repayment burden that carries serious implications for bailout package talks started on Monday.
The technical teams of the IMF and Pakistan have locked into negotiations for 10 days amid authorities hoping to clinch a deal on May 10.
The $27 billion maturing external debt is equal to 27% of Pakistan’s total external debt and liabilities as of end February, highlighting the gravity of challenges that the government of Prime Minister Imran Khan faces.
After including financing requirements of the current account deficit, Pakistan will need $46 billion to $50 billion in next two years to remain afloat, according to assessments of the government and some private sector experts.
The $27 billion external debt repayment figure has been disclosed by the IMF in a new Regional Outlook Report Update on the Middle East, North Africa, Afghanistan that it officially made public on Monday
“Many countries have large foreign currency debt – some $27 billion – set to mature in the next two years, leaving them more exposed to slower growth prospects and financial market volatility,” said the IMF. In a separate chart in the report, the $27 billion figure has been shown against Pakistan – the highest repayment by any country in the region.
Overall, Pakistan’s debt-to-GDP ratio is expected to remain high, at 77% of Gross Domestic Product by June this year, according to another IMF report. The IMF’s Public Debt Sustainability Analysis in Market Access Countries considers emerging market countries to be at higher risk of debt distress where public debt exceeds 70% of GDP. Pakistan has already crossed this dangerous threshold at the end of the PML-N government when debt-to-GDP ratio soared to 72.5%.
The IMF has released the report on the day Pakistan and the IMF began talks for a possible bailout package. Earlier, in November last year both the sides had failed to reach staff level agreement due to serious difference on every important issue.
But this time, the authorities expect that the remaining differences would be bridged and both the countries would conclude a deal for a $6.5 billion Extended Fund Facility, spanning over three years.
Prime Minister Imran Khan on Friday met with IMF Managing Director Christine Lagarde on the sidelines of the Belt and Road Forum at Beijing. It was the second meeting between the two, aimed at breaking an impasse in talks.
“The two leaders agreed on the importance of the Fund programme and to work towards an agreement,” stated an official handout the PM’s Office issued after the meeting.
Former finance minister Asad Umar had said that Pakistan would announce a flexible exchange rate regime where the value of rupee will be determined by the market instead of the State Bank of Pakistan. The flexible exchange rate will have to be announced before implementation of the programme.
The country has already devalued its currency by 35% in the past 15 months.
The $27 billion external debt payments projections by the IMF are likely to result into a tough IMF programme negotiations. The IMF is likely to ask Pakistan for sharing with it a complete picture of gross external financing needs in the next two years.
The higher debt requirements for repayment of maturing loans and financing the current account deficit could lead to stringent conditions by the IMF, said the sources. They added that the IMF could ask steep cut in current account deficit to contain the gross financing needs. This, in turn, would necessitate tight monetary and fiscal policies.
It is estimated that Pakistan will need minimum $20 billion only for current account deficit financing in the next two years.
It will be challenging for the IMF to oversee a programme where Pakistan’s external financing needs in two years will be close to $50 billion and its gross official foreign currency reserves are at the same time protected at a level sufficient to finance three months of imports.
Pakistan’s gross financing needs in the next two years could hit a minimum $50 billion and it will have to get short-term debt rolled over besides securing new loans to meet external obligations, according to Shahid Kardar, former governor of the central bank.
In his assessment, the government would have to contract nearly $35 billion in the next over two years to meet the financing needs. The amount that will have to be rolled over or rescheduled into long-term loans will be over $15 billion in just two years.
The IMF’s new regional outlook update also noted that geopolitical risks are high in the region, in which Pakistan is also a part. “The impact and timing of major geopolitical developments-including tensions between India and Pakistan, are not yet clear,” according to the report.
The report underlined that weaker growth in Pakistan is pulling down the regional aggregate growth rate this year, with large macroeconomic imbalances and ongoing policy adjustment challenges expected to slow Pakistan’s growth from 5.2% in 2018 to 2.9% in 2019.
“Regional inflation is projected to pick up slightly to 11.3% in 2019, primarily due to higher inflation in Egypt (fuel subsidy reform) and Pakistan (weaker exchange rate),” according to the IMF.
A double-digit inflation means the key discount rate will also remain in double digits.
https://tribune.com.pk/story/1962274/2-pakistans-debt-worth-27b-mature-two-years-imf/
This is tip of iceberg only my friend, remember the near $10 billion Pakistan took on short term assistance/loan from China/Saudi/UAE outside of formal loan obligations - this will be due too next year, they will try to get it deferred payment to another year at best. So count 27+10
Mark my words - IK will slowly be phased away to bring in Mushi, they are already referring to Pak golden period under him economically, they always need a fall guy to hang, after Nawaz its IK turn. And if I was IK one of these days, I will go on foreign trip & never return home like many predecessors before him till time is right. IK firing ministers is him just buying time... Year & half I give him at best.
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Wait, they took $27 billion from whom ? IMF ? and $10 billion from PRC/KSA/UAE. Shouldn't these loans be at a different interest rates ?
I thought he was out for good, what good will he do for Pakistan Army ?
Yeh kya keh rehe he aap. Khan saab Pathan ka bachha hai, aise thorei na pitch choor kar bhagenge.
The $10 billion is alsmost without interest - more like differed payments, but need to be paid back none the less
They are also issuing assured commercial rate Dollar Bonds to oversees Pakistanis
3 year @6.25% annually interest &
5 year @6.75% annual interest
Overseas Pakistanis can buy dollar saving bonds in their country
These too will have to be paid back But that's a separate matter, as Pak economy funks down line....
Pak logic, why should only Pak domestic citizen only go broke & come on streets begging, why not also include NRP (after all pak believes all NRP are the ones who looted wealth out of Pak, its a good way to get wealth back & like any pyramid scheme at one point of time never pay back
@sarfiz pls invest & tell all ur oversees retired Pakistan general brotherin settled abroad to invest too as well, your country needs your wealth. Eating Grass should not be mutually exclusive.
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The 6 billion taken from UAE and Saudia have an interest of 3.25% per annual. The 4 billion also has interest payment. Last month 2.25 billion dollars , which was in yuan currency was from Chinese commercial bank and will attract interest.The $10 billion is alsmost without interest - more like differed payments, but need to be paid back none the less
They are also issuing assured commercial rate Dollar Bonds to oversees Pakistanis
3 year @6.25% annually interest &
5 year @6.75% annual interest
Overseas Pakistanis can buy dollar saving bonds in their country
These too will have to be paid back But that's a separate matter, as Pak economy funks down line....
Pak logic, why should only Pak domestic citizen only go broke & come on streets begging, why not also include NRP (after all pak believes all NRP are the ones who looted wealth out of Pak, its a good way to get wealth back & like any pyramid scheme at one point of time never pay back
@sarfiz pls invest & tell all ur oversees retired Pakistan general brotherin settled abroad to invest too as well, your country needs your wealth. Eating Grass should not be mutually exclusive.
Don't want to be the harboring of all bad news for Pakistan - so I bring some good news
Good news is total Market capitalization of Pakistan is still 84 billion dollars Vs a mere 2.1 Trillion dollars for India
But the biggest question is:The $10 billion is alsmost without interest - more like differed payments, but need to be paid back none the less
They are also issuing assured commercial rate Dollar Bonds to oversees Pakistanis
3 year @6.25% annually interest &
5 year @6.75% annual interest
Overseas Pakistanis can buy dollar saving bonds in their country
These too will have to be paid back But that's a separate matter, as Pak economy funks down line....
Pak logic, why should only Pak domestic citizen only go broke & come on streets begging, why not also include NRP (after all pak believes all NRP are the ones who looted wealth out of Pak, its a good way to get wealth back & like any pyramid scheme at one point of time never pay back
@sarfiz pls invest & tell all ur oversees retired Pakistan general brotherin settled abroad to invest too as well, your country needs your wealth. Eating Grass should not be mutually exclusive.
Isn't paying/giving and levying/taking interest of any type on capital/money/Loan HARAAM as per Islam?
@safriz @NeoModedit:
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Pakistan market cap is now around 55 billion, Indias around 2.2 trillion:
BSE Ltd. (Bombay Stock Exchange) | Live Stock Market Updates for S&P BSE SENSEX,Stock Quotes & Corporate Information
Market Capitalization of BSE Listed Co. (Rs.Cr.)1,52,54,042.42
About Pakistan Stock Exchange (www.psx.com.pk)
As on April 30th, 2019 there are 559 companies listed in PSX and the total market capitalization is Rs. 7,503.606 billions.
Their listings as far as market cap computation goes are more or less equivalent. I think NSE is a bit higher...but for national market cap since there is very high intersection (esp given the common trade platform etc), can just pick one or the other, there should not be much difference.
Yes as the currency Vs dollar keeps devaluating & industry going in red due to high cost of power generation,
FTA etc with China. In Dollar terms the market cap keeps decreasing. They keep making tremendous progress @safriz, they should put the next target for total market cap to 30 billion by end of the year.
Yes and that's why we are in this trouble.
In zia times all interest loans were banned and economy was far better
Pakistan to be out of FATF's grey list by September: Central Bank
Shah Mahmood Qureshi, Pakistan's Foreign Minister, on Monday said that the South Asian country could suffer $10 billion in losses annually if it remains in the terror financing watchdog's grey list. "The Foreign office in Islamabad is calculating the annual losses if Pakistan is blacklisted by the FATF as India is lobbying for this," Qureshi said.
Shah Mahmood Qureshi, Pakistan's Foreign Minister, on Monday said that the South Asian country could suffer $10 billion in losses annually if it remains in the terror financing watchdog's grey list. "The Foreign office in Islamabad is calculating the annual losses if Pakistan is blacklisted by the FATF as India is lobbying for this," Qureshi said.
Bracing for the Budget
Asad Umar is gone but the budget is still on schedule as Dr Hafeez Shaikh prepares to present it next month. Most insiders say it will have as many as over Rs600 billion worth in new taxes, which include direct and indirect taxes. This would be the PTI government’s third budget in nine months.
The government is also poised to announce its own, kosher version of a tax amnesty scheme. Economic reporters say it might add around Rs250 billion to the national kitty. Tax amnesty, however, is supposed to be announced before the budget and before the IMF program is inked. The fate of the tax amnesty is in a domain unknown as it would be purely on the opposition benches to respond, especially if it is announced as a presidential ordinance. The Opposition, which enjoys majority in the Senate, has the power to strike down the amnesty scheme if it is announced as an ordinance by invoking Article 89.
As the PTI government scrapes for every extra rupee, ministries, divisions and provincial governments are being asked to quickly surrender unspent budgets to help the fledgling finances of the federation. The provinces, especially Sindh, has already been complaining that the federal government has yet to pay their due share of the NFC award going into the tune of over Rs120 billion.
This year, during the first nine months, Pakistan’s budget deficit touched Rs1.6 trillion or 4.2 percent of the size of the national economy, as the Imran Khan’s administration failed to generate revenues to meet debt servicing and defence requirements of the country. In the meantime, the government plans to abolish concessional customs duty regime in the next budget to get an additional Rs100 billion as the IMF keeps telling them to jack up revenues. If the government goes ahead with the measure, it will increase the cost of textile machinery, agricultural equipment, fertiliser factory equipment and power generation plants. All of these will have huge implications.
IMF has said that Pakistan’s $27 billion external debt will mature in the next two years while Pakistan’s debt-to-GDP ratio will soon be reaching 77 percent, the highest ever. That also means that because of the loan repayment and financing needs of the current account deficit, the country would be needing between $46 billion to $ 50 billion to keep its economy afloat.
How will we do that when most international bodies agree that in next few years, Pakistan will be the sick man of South Asia with its GDP dipping to half of what it was just the last financial year?
Sources close to the PTI government say that besides the $6.5 billion Pakistan will get from IMF, the country might get some funding from a consortium of World Bank and Asian Development Bank and also float some international bonds supported by the consortium to help the dwindling economy.
Just before the IMF program, the rupee’s depreciation might hit a new low as oil prices, too, are going up because of the Iran-US tensions. Pakistan’s revenue black hole that was Rs3.3 trillion three years ago now has reached almost Rs5 trillion or almost 26 percent of the GDP. Given the situation, with free fall of the rupee, the economic conditions will dire, something Imran Khan’s administration would not like to see.
“We are in a pretty bad shape. The prime minister has almost lost control. He feels angry and jittery and so do we,” confided a federal minister requesting anonymity. “We have nothing to offer in terms of giving people hope, except perhaps blasting the opposition. The honeymoon is over. What else do we do?” he said.
Chinese officials, who are known to say nothing in public about their resentment, are also venting their frustration with the slow progress of reforms and bureaucratic hurdles. Many good things have happened during the visit of Prime Minister Imran Khan in Beijing but the fact that Foreign Office could only manage two meetings – with Tajikistan and Ethiopia’s heads of the government- says a lot about the dwindling influence of Pakistan. Out of 37 governments represented by their heads, Pakistan also failed to materialise a meeting with Russian President Vladimir Putin.
“The PTI pledges to raise 10 million jobs and build five million houses. This will probably not materialise and instead, there might be unprecedented inflation and massive hikes in prices of utilities. Only God knows, how long people will sustain these hardships. Who knows what straw will break the camel’s back?” said an analyst in Islamabad about the impending economic disasters headed towards the land of the pure.
All this is happening at a time when Pakistan’s fate hangs in balance when it comes to Financial Action Task Force (FATF). The next three months are crucial as things have the potential to get worse. “If God forbid, we fall on the blacklist then things may spiral out of control. How this will government manage things is unimaginable,” said a veteran analyst.
At a time when opposition parties are pushed to the wall, the announcement by the DG ISPR about allegations against the PTM on April 29, created more political uncertainties with Maulana Fazal Rehman of the JUI threatening to march on Islamabad after the month of Ramazan. Nawaz Sharif’s fate and that of his daughter Maryam Nawaz remains uncertain. The Punjab remains unstable with more cracks in the ruling coalition and the PPP, led by young Bilawal Bhutto Zardari, remains defiant.
At a time when Pakistan is going through the worst economic conditions and growing diplomatic isolation, the internal political climate gets more combustible by the day with censorship and self-censorship hitting new levels. “We need some safety valves to release some pressure real quick,” said an Islamabad veteran about the emerging scenarios.
Bracing for the Budget - The Friday Times
@BlackOpsIndia @vstol Jockey @Nilgiri @_Anonymous_ @LoneWolfSandeep et al. Guys give this a read.
- by Murtaza Solangi
- 1 day ago
Asad Umar is gone but the budget is still on schedule as Dr Hafeez Shaikh prepares to present it next month. Most insiders say it will have as many as over Rs600 billion worth in new taxes, which include direct and indirect taxes. This would be the PTI government’s third budget in nine months.
The government is also poised to announce its own, kosher version of a tax amnesty scheme. Economic reporters say it might add around Rs250 billion to the national kitty. Tax amnesty, however, is supposed to be announced before the budget and before the IMF program is inked. The fate of the tax amnesty is in a domain unknown as it would be purely on the opposition benches to respond, especially if it is announced as a presidential ordinance. The Opposition, which enjoys majority in the Senate, has the power to strike down the amnesty scheme if it is announced as an ordinance by invoking Article 89.
As the PTI government scrapes for every extra rupee, ministries, divisions and provincial governments are being asked to quickly surrender unspent budgets to help the fledgling finances of the federation. The provinces, especially Sindh, has already been complaining that the federal government has yet to pay their due share of the NFC award going into the tune of over Rs120 billion.
This year, during the first nine months, Pakistan’s budget deficit touched Rs1.6 trillion or 4.2 percent of the size of the national economy, as the Imran Khan’s administration failed to generate revenues to meet debt servicing and defence requirements of the country. In the meantime, the government plans to abolish concessional customs duty regime in the next budget to get an additional Rs100 billion as the IMF keeps telling them to jack up revenues. If the government goes ahead with the measure, it will increase the cost of textile machinery, agricultural equipment, fertiliser factory equipment and power generation plants. All of these will have huge implications.
IMF has said that Pakistan’s $27 billion external debt will mature in the next two years while Pakistan’s debt-to-GDP ratio will soon be reaching 77 percent, the highest ever. That also means that because of the loan repayment and financing needs of the current account deficit, the country would be needing between $46 billion to $ 50 billion to keep its economy afloat.
How will we do that when most international bodies agree that in next few years, Pakistan will be the sick man of South Asia with its GDP dipping to half of what it was just the last financial year?
Sources close to the PTI government say that besides the $6.5 billion Pakistan will get from IMF, the country might get some funding from a consortium of World Bank and Asian Development Bank and also float some international bonds supported by the consortium to help the dwindling economy.
Just before the IMF program, the rupee’s depreciation might hit a new low as oil prices, too, are going up because of the Iran-US tensions. Pakistan’s revenue black hole that was Rs3.3 trillion three years ago now has reached almost Rs5 trillion or almost 26 percent of the GDP. Given the situation, with free fall of the rupee, the economic conditions will dire, something Imran Khan’s administration would not like to see.
“We are in a pretty bad shape. The prime minister has almost lost control. He feels angry and jittery and so do we,” confided a federal minister requesting anonymity. “We have nothing to offer in terms of giving people hope, except perhaps blasting the opposition. The honeymoon is over. What else do we do?” he said.
Chinese officials, who are known to say nothing in public about their resentment, are also venting their frustration with the slow progress of reforms and bureaucratic hurdles. Many good things have happened during the visit of Prime Minister Imran Khan in Beijing but the fact that Foreign Office could only manage two meetings – with Tajikistan and Ethiopia’s heads of the government- says a lot about the dwindling influence of Pakistan. Out of 37 governments represented by their heads, Pakistan also failed to materialise a meeting with Russian President Vladimir Putin.
“The PTI pledges to raise 10 million jobs and build five million houses. This will probably not materialise and instead, there might be unprecedented inflation and massive hikes in prices of utilities. Only God knows, how long people will sustain these hardships. Who knows what straw will break the camel’s back?” said an analyst in Islamabad about the impending economic disasters headed towards the land of the pure.
All this is happening at a time when Pakistan’s fate hangs in balance when it comes to Financial Action Task Force (FATF). The next three months are crucial as things have the potential to get worse. “If God forbid, we fall on the blacklist then things may spiral out of control. How this will government manage things is unimaginable,” said a veteran analyst.
At a time when opposition parties are pushed to the wall, the announcement by the DG ISPR about allegations against the PTM on April 29, created more political uncertainties with Maulana Fazal Rehman of the JUI threatening to march on Islamabad after the month of Ramazan. Nawaz Sharif’s fate and that of his daughter Maryam Nawaz remains uncertain. The Punjab remains unstable with more cracks in the ruling coalition and the PPP, led by young Bilawal Bhutto Zardari, remains defiant.
At a time when Pakistan is going through the worst economic conditions and growing diplomatic isolation, the internal political climate gets more combustible by the day with censorship and self-censorship hitting new levels. “We need some safety valves to release some pressure real quick,” said an Islamabad veteran about the emerging scenarios.
Bracing for the Budget - The Friday Times
@BlackOpsIndia @vstol Jockey @Nilgiri @_Anonymous_ @LoneWolfSandeep et al. Guys give this a read.
Bracing for the Budget
View attachment 6372
- 1 day ago
Asad Umar is gone but the budget is still on schedule as Dr Hafeez Shaikh prepares to present it next month. Most insiders say it will have as many as over Rs600 billion worth in new taxes, which include direct and indirect taxes. This would be the PTI government’s third budget in nine months.
The government is also poised to announce its own, kosher version of a tax amnesty scheme. Economic reporters say it might add around Rs250 billion to the national kitty. Tax amnesty, however, is supposed to be announced before the budget and before the IMF program is inked. The fate of the tax amnesty is in a domain unknown as it would be purely on the opposition benches to respond, especially if it is announced as a presidential ordinance. The Opposition, which enjoys majority in the Senate, has the power to strike down the amnesty scheme if it is announced as an ordinance by invoking Article 89.
As the PTI government scrapes for every extra rupee, ministries, divisions and provincial governments are being asked to quickly surrender unspent budgets to help the fledgling finances of the federation. The provinces, especially Sindh, has already been complaining that the federal government has yet to pay their due share of the NFC award going into the tune of over Rs120 billion.
This year, during the first nine months, Pakistan’s budget deficit touched Rs1.6 trillion or 4.2 percent of the size of the national economy, as the Imran Khan’s administration failed to generate revenues to meet debt servicing and defence requirements of the country. In the meantime, the government plans to abolish concessional customs duty regime in the next budget to get an additional Rs100 billion as the IMF keeps telling them to jack up revenues. If the government goes ahead with the measure, it will increase the cost of textile machinery, agricultural equipment, fertiliser factory equipment and power generation plants. All of these will have huge implications.
IMF has said that Pakistan’s $27 billion external debt will mature in the next two years while Pakistan’s debt-to-GDP ratio will soon be reaching 77 percent, the highest ever. That also means that because of the loan repayment and financing needs of the current account deficit, the country would be needing between $46 billion to $ 50 billion to keep its economy afloat.
How will we do that when most international bodies agree that in next few years, Pakistan will be the sick man of South Asia with its GDP dipping to half of what it was just the last financial year?
Sources close to the PTI government say that besides the $6.5 billion Pakistan will get from IMF, the country might get some funding from a consortium of World Bank and Asian Development Bank and also float some international bonds supported by the consortium to help the dwindling economy.
Just before the IMF program, the rupee’s depreciation might hit a new low as oil prices, too, are going up because of the Iran-US tensions. Pakistan’s revenue black hole that was Rs3.3 trillion three years ago now has reached almost Rs5 trillion or almost 26 percent of the GDP. Given the situation, with free fall of the rupee, the economic conditions will dire, something Imran Khan’s administration would not like to see.
“We are in a pretty bad shape. The prime minister has almost lost control. He feels angry and jittery and so do we,” confided a federal minister requesting anonymity. “We have nothing to offer in terms of giving people hope, except perhaps blasting the opposition. The honeymoon is over. What else do we do?” he said.
Chinese officials, who are known to say nothing in public about their resentment, are also venting their frustration with the slow progress of reforms and bureaucratic hurdles. Many good things have happened during the visit of Prime Minister Imran Khan in Beijing but the fact that Foreign Office could only manage two meetings – with Tajikistan and Ethiopia’s heads of the government- says a lot about the dwindling influence of Pakistan. Out of 37 governments represented by their heads, Pakistan also failed to materialise a meeting with Russian President Vladimir Putin.
“The PTI pledges to raise 10 million jobs and build five million houses. This will probably not materialise and instead, there might be unprecedented inflation and massive hikes in prices of utilities. Only God knows, how long people will sustain these hardships. Who knows what straw will break the camel’s back?” said an analyst in Islamabad about the impending economic disasters headed towards the land of the pure.
All this is happening at a time when Pakistan’s fate hangs in balance when it comes to Financial Action Task Force (FATF). The next three months are crucial as things have the potential to get worse. “If God forbid, we fall on the blacklist then things may spiral out of control. How this will government manage things is unimaginable,” said a veteran analyst.
At a time when opposition parties are pushed to the wall, the announcement by the DG ISPR about allegations against the PTM on April 29, created more political uncertainties with Maulana Fazal Rehman of the JUI threatening to march on Islamabad after the month of Ramazan. Nawaz Sharif’s fate and that of his daughter Maryam Nawaz remains uncertain. The Punjab remains unstable with more cracks in the ruling coalition and the PPP, led by young Bilawal Bhutto Zardari, remains defiant.
At a time when Pakistan is going through the worst economic conditions and growing diplomatic isolation, the internal political climate gets more combustible by the day with censorship and self-censorship hitting new levels. “We need some safety valves to release some pressure real quick,” said an Islamabad veteran about the emerging scenarios.
Bracing for the Budget - The Friday Times
@BlackOpsIndia @vstol Jockey @Nilgiri @_Anonymous_ @LoneWolfSandeep et al. Guys give this a read.
Looks like it's fun time to be a naya Pakistani. And please remember, gentlemen, this should in no way deter the faithful on the path of jihad or compromise the faithful's stand on Kashmir.
New slogan for Naya Pakistan - Naare Takbeer - Kashmir banega Pakistan.
@zarvan ; @safriz
Cash-strapped Pakistan asks China to shelve US$2 billion coal plant
Haroon Janjua
Published: 2:15pm, 16 Jan, 2019
Since taking office, Pakistani Prime Minister Imran Khan has been trying to scale back the China-Pakistan Economic Corridor. Photo: Bloomberg
Pakistan has officially asked China to shelve a joint US$2 billion coal power project from the US$62 billion China-Pakistan Economic Corridor (CPEC) infrastructure project, claiming it will be too expensive and should not be an immediate priority.
The request was made when Makhdoom Khusro Bakhtyar, Pakistan’s minister for planning and development, travelled to Beijing in December for a CPEC coordination meeting, according to a government official not authorised to speak publicly on the matter.
“The government is evaluating some of the Chinese projects, which are more expensive and not necessary at the moment to save public money,” the official said. “We have to focus on our priorities, including the development of Gwadar port and the western route of CPEC, which connects the hinterlands of Baluchistan and Khyber-Pakhtunkhwa provinces.”
The official said government advisers had pointed out there was more power generation capacity coming online from other projects.
Bakhtyar did not respond to inquiries on Tuesday. He first revealed last September the government’s intention to give up on imported coal energy projects, including the Rahim Yar Khan Coal power project in Punjab province. Then, Yao Jing, China’s ambassador to Pakistan, said Beijing was open to changes proposed by the new government and “we will definitely follow their agenda”.
Lijian Zhao, the deputy chief of mission at the Chinese embassy in Islamabad, on Tuesday said the decision to “abandon” the power plant project was made long ago and by the previous government.
Pakistan’s finance minister Asad Umar told reporters: “The CPEC is now moving from an infrastructure and energy phase to trade and industry sectors.”
The plant, included in the CPEC in January 2016, would have added 1,320 megawatts of energy to the national grid, addressing Pakistan’s electricity shortage. Officials in the previous government led by Nawaz Sharif tried to shelve it due to heavy expenditures but Chinese officials successfully protested.
The CPEC, launched five years ago as part of Beijing’s Belt and Road Initiative, was designed to connect China’s far west region of Xinjiang with Gwadar port in Pakistan via a network of motorways, railways, oil pipelines and trading hubs. It is expected to be finished by 2030, providing China with an important trading route to the Middle East and Africa.
Since he took office in August last year, Pakistani Prime Minister Imran Khan’s government has tried to scale back the CPEC, claiming the country cannot afford all the projects and calling for a greater focus on expanding agriculture and job creation for young people.
Gwadar port in Pakistan. Photo: Reuters
Pakistan is confronting a balance of payments crisis, after the rupee lost 25 per cent of its value against the US dollar in 2018. Khan’s government has approached Saudi Arabia, China, Abu Dhabi and the International Monetary Fund for help. Beijing has reportedly pledged to lend Islamabad US$4 billion.
“Pakistan at the moment is interested in liquid cash instead of investment due to the balance of payment issue and Khan’s government is interested in cash in return for shelved Chinese power projects,” said Qamar Cheema, a political analyst based in Islamabad.
“Building infrastructure is not a priority of Khan’s government as they have reduced and stopped public sector development projects,” Cheema said, adding Pakistan had benefited from the CPEC’s focus on infrastructure projects.
Michael Kugelman, a senior associate for South and Southeast Asia at the Washington based Woodrow Wilson Centre for Scholars, explained Pakistan’s focus on cutting costs.
“Pakistan’s government is wisely trying to bring costs down in its energy sector, and reducing expensive hydrocarbon imports, including coal, is a useful way to do so,” Kugelman said. “The big question for Pakistan is how it compensates for any reductions in expensive coal imports. Does it try to tap into its unexplored reserves in the deserts of Sindh? Does it try to ramp up indigenous supplies of clean energy? Or some combination of both?
“This decision is rooted more in matters of utility and efficiency – a desire not to take on redundant investments – than in financial considerations.”
This article appeared in the South China Morning Post print edition as: Islamabad asks Beijing to axe US$2b coal plan.
Cash-strapped Pakistan asks China to shelve US$2 billion coal plant
- Islamabad is evaluating Chinese projects seen as ’expensive and not necessary’ in an effort to ‘save public money’, says government source
Haroon Janjua
Published: 2:15pm, 16 Jan, 2019
Since taking office, Pakistani Prime Minister Imran Khan has been trying to scale back the China-Pakistan Economic Corridor. Photo: Bloomberg
Pakistan has officially asked China to shelve a joint US$2 billion coal power project from the US$62 billion China-Pakistan Economic Corridor (CPEC) infrastructure project, claiming it will be too expensive and should not be an immediate priority.
The request was made when Makhdoom Khusro Bakhtyar, Pakistan’s minister for planning and development, travelled to Beijing in December for a CPEC coordination meeting, according to a government official not authorised to speak publicly on the matter.
“The government is evaluating some of the Chinese projects, which are more expensive and not necessary at the moment to save public money,” the official said. “We have to focus on our priorities, including the development of Gwadar port and the western route of CPEC, which connects the hinterlands of Baluchistan and Khyber-Pakhtunkhwa provinces.”
The official said government advisers had pointed out there was more power generation capacity coming online from other projects.
Bakhtyar did not respond to inquiries on Tuesday. He first revealed last September the government’s intention to give up on imported coal energy projects, including the Rahim Yar Khan Coal power project in Punjab province. Then, Yao Jing, China’s ambassador to Pakistan, said Beijing was open to changes proposed by the new government and “we will definitely follow their agenda”.
Lijian Zhao, the deputy chief of mission at the Chinese embassy in Islamabad, on Tuesday said the decision to “abandon” the power plant project was made long ago and by the previous government.
Pakistan’s finance minister Asad Umar told reporters: “The CPEC is now moving from an infrastructure and energy phase to trade and industry sectors.”
The plant, included in the CPEC in January 2016, would have added 1,320 megawatts of energy to the national grid, addressing Pakistan’s electricity shortage. Officials in the previous government led by Nawaz Sharif tried to shelve it due to heavy expenditures but Chinese officials successfully protested.
The CPEC, launched five years ago as part of Beijing’s Belt and Road Initiative, was designed to connect China’s far west region of Xinjiang with Gwadar port in Pakistan via a network of motorways, railways, oil pipelines and trading hubs. It is expected to be finished by 2030, providing China with an important trading route to the Middle East and Africa.
Since he took office in August last year, Pakistani Prime Minister Imran Khan’s government has tried to scale back the CPEC, claiming the country cannot afford all the projects and calling for a greater focus on expanding agriculture and job creation for young people.
Gwadar port in Pakistan. Photo: Reuters
Pakistan is confronting a balance of payments crisis, after the rupee lost 25 per cent of its value against the US dollar in 2018. Khan’s government has approached Saudi Arabia, China, Abu Dhabi and the International Monetary Fund for help. Beijing has reportedly pledged to lend Islamabad US$4 billion.
“Pakistan at the moment is interested in liquid cash instead of investment due to the balance of payment issue and Khan’s government is interested in cash in return for shelved Chinese power projects,” said Qamar Cheema, a political analyst based in Islamabad.
“Building infrastructure is not a priority of Khan’s government as they have reduced and stopped public sector development projects,” Cheema said, adding Pakistan had benefited from the CPEC’s focus on infrastructure projects.
Michael Kugelman, a senior associate for South and Southeast Asia at the Washington based Woodrow Wilson Centre for Scholars, explained Pakistan’s focus on cutting costs.
“Pakistan’s government is wisely trying to bring costs down in its energy sector, and reducing expensive hydrocarbon imports, including coal, is a useful way to do so,” Kugelman said. “The big question for Pakistan is how it compensates for any reductions in expensive coal imports. Does it try to tap into its unexplored reserves in the deserts of Sindh? Does it try to ramp up indigenous supplies of clean energy? Or some combination of both?
“This decision is rooted more in matters of utility and efficiency – a desire not to take on redundant investments – than in financial considerations.”
This article appeared in the South China Morning Post print edition as: Islamabad asks Beijing to axe US$2b coal plan.
Cash-strapped Pakistan asks China to shelve US$2 billion coal plant