Business

Pakistan’s default odds rise as IMF sours on bailout: Bloomberg

Published

2 years ago

Farwa

Report says without IMF programme, options for fresh funding will likely be “very limited.”
“With forex reserves likely below $4bn, default seems highly likely,” reports mentions.
Negotiations with IMF on any new bailout aren’t likely to start until after elections in October.

KARACHI: The International Monetary Fund’s (IMF) criticism of Pakistan’s latest budget suggests chances are rising that the lender will opt not to deliver long-awaited aid before its bailout programme finishes at the end of June, Bloomberg reported.

“This would cause a severe dollar shortage in the first half of the fiscal year that starts in July, and possibly for longer — significantly raising the odds of default, Bloomberg economist Ankur Shukla said in the report, Pakistan Insight.

“It would also raise the prospect of much lower growth, and higher inflation and interest rates than we currently anticipate in fiscal 2024.”

The IMF criticised the budget for not taking enough steps to broaden the tax base and for including a tax amnesty.

The country’s foreign currency reserves currently stand at $4 billion. With at least around $900 million in debt that must be repaid this month, the reserves will fall by June-end unless the IMF aid comes.

Between July-December, Pakistan must repay an additional $4 billion, which cannot be rolled over. “With foreign exchange reserves likely below $4 billion at the start of fiscal 2024, the default seems highly likely,” the report said.

“Without any IMF programme, the options for fresh external funding will likely be very limited.”

Pakistan’s default odds rise as IMF sours on bailout: Bloomberg

It said that negotiations with the IMF on any new bailout aren’t likely to start until after elections in October. “Reaching an agreement will take time. Any actual aid disbursement from the IMF under a new programme will not happen until December.”

In the meantime, the country will need to conserve dollars by limiting import purchases — and keeping a current account balance in surplus— to have any hope of being able to meet its obligations.

It will also need to seek assistance from friendly nations to avert a default in the first half of fiscal 2024.

The report said Pakistan’s economy will likely be hit hard if the IMF doesn’t deliver aid by June-end.

The authorities will have to keep import restrictions in place. The State Bank of Pakistan will also likely raise rates above the current level of 21% to further curb demand for imports and conserve foreign exchange reserves, it added.

“Our base case currently is that the SBP will likely remain on hold through December (but that assumed the IMF aid coming in by June-end).”

Continued import restrictions and a weaker rupee would lead to higher inflation in fiscal 2024 than currently anticipated.

“We currently expect inflation to average 22%. Higher borrowing costs and restrictions on imports of raw materials would hit production further. Higher inflation would damp consumption,” it added.

The report said if IMF aid doesn’t come this month, the growth will be much weaker in fiscal 2024 than the current forecast of 2.5%.

“Higher rates will also increase the government’s debt servicing costs. The government currently plans to spend half of the fiscal 2024 budget on debt servicing.”

Business

With its second-largest surge ever, PSX approaches 114,000 points.

Published

2 days ago

Farwa

Driven by renewed activity from both private and government financial institutions, the Pakistan Stock Exchange (PSX) saw its second-largest rally in history on Monday.

The market regained many important levels in a single trading session as it rose with previously unheard-of momentum.

Intraday trading saw a top increase of 4,676 points, and the PSX’s benchmark KSE-100 Index gained 4,411 points to settle at 113,924 points. This impressive rebound demonstrated significant investor confidence by reestablishing the 100,000, 111,000, 112,000, and 113,000-point levels.

The market also saw the 114,000-point limit reestablished during the trading session.

The positive tendency was reflected when the market’s heavyweight shares touched its upper circuits. Among the most busiest trading sessions in recent memory, an astounding 85.78 billion shares worth a total of Rs55 billion were exchanged.

Experts credited the spike to heightened institutional investor activity and hope for macroeconomic recovery. Considered a major market recovery, the rally demonstrated the market’s tenacity and development potential.

Business

In interbank trade, the Pakistani rupee beats the US dollar.

Published

1 week ago

Farwa

In the international exchange market, the US dollar has continued to weaken in relation to the Pakistani rupee.

The dollar fell to Rs278.10 from Rs278.17 at the beginning of interbank trading, according to currency dealers, a seven paisa loss.

In the meantime, there was a lot of turbulence in the stock market, but it recovered and moved into the positive zone. The KSE-100 index recovered momentum and reached 116,000 points after soaring 1,300 points.

Both currency and stock market swings, according to analysts, are a reflection of ongoing market adjustments and economic uncertainty.

Business

Phase II of CPEC: China-Pakistan Partnership Enters a New Era

Published

1 week ago

Farwa

The cornerstone of economic cooperation between the two brothers and all-weather friends is still the China-Pakistan Economic Corridor, the initiative’s flagship project.

In contrast to reports of a slowdown, recent events indicate a renewed vigour and strategic emphasis on pushing the second phase of CPEC, known as CPEC Phase-2, according to the Ministry of Planning, Development, and Special Initiatives.

According to the statement, this crucial stage seeks to reshape the foundation of bilateral ties via increased cooperation, cutting-edge technology transfer, and revolutionary socioeconomic initiatives.

Planning Minister Ahsan Iqbal is leading Pakistan’s participation in a number of high-profile gatherings in China, such as the 3rd Forum on China-Indian Ocean Region Development Cooperation in Kunming and the High-Level Seminar on CPEC-2 in Beijing.

His involvement demonstrates Pakistan’s commitment to reviving CPEC, resolving outstanding concerns, and developing a strong phase-2 roadmap that considers both countries’ long-term prosperity.

At the core of these interactions is China’s steadfast determination to turn CPEC into a strategic alliance that promotes development, progress, and connectivity.

Instead of being marginalised, CPEC is developing into a multifaceted framework with five main thematic corridors: the Opening-Up/Regional Connectivity Corridor, the Innovation Corridor, the Green Corridor, the Growth Corridor, and the Livelihood-Enhancing Corridor.

With the help of projects like these, the two countries will fortify their partnership, and CPEC phase-2 will become a model of global economic integration and collaboration that benefits not just China and Pakistan but the entire region.