Current Final

Category: Business

  • Pakistan to receive $2 billion deposit from Saudi Arabia in State Bank within next few days

    Pakistan to receive $2 billion deposit from Saudi Arabia in State Bank within next few days

    Muhammad Jawad Sohrab Malik, the Special Assistant to the Prime Minister, had a meeting with Nawaf bin Said Al-Malki, the Ambassador of the Kingdom of Saudi Arabia to Pakistan, in Islamabad. The objective of the meeting was to discuss the ways to enhance bilateral collaboration between the two countries.

    During the meeting, Jawad expressed gratitude for Saudi Arabia’s consistent support for Pakistan. He thanked the ambassador for confirming that the $2 billion pledged by the Kingdom would be deposited within the next seven working days in the SBP account. Both parties showed a commitment to strengthening bilateral ties between Pakistan and Saudi Arabia.

    The SAPM highlighted the significance of Saudi Arabia’s assistance and stated that the $2 billion loan would help Pakistan overcome the current financial crisis. He further explained that this would pave the way for securing similar assurances not only from the IMF but also from other friendly countries such as the United Arab Emirates, Qatar, and others, which would lead to the much-awaited staff-level agreement (SLA) with the IMF and unlock multilateral disbursements.

    Nawaf bin Said Al-Malki emphasized the Kingdom’s commitment to building long-term, sustainable investment transactions between Saudi Arabia and Pakistan. He reiterated Saudi Crown Prince Mohammed bin Salman’s pledge to increase Saudi Arabian investments in Pakistan’s energy and IT sectors to $10 billion within the next few years.

    The Saudi envoy expressed keen interest on behalf of the Saudi government in recruiting more manpower from Pakistan during the current and next year for various sectors of the kingdom. He stated that the Saudi labor market is continuing to expand, mainly due to the launch of several mega projects under Saudi Vision 2030.

    While highlighting the diverse business landscape in Pakistan, the SAPM expressed that Pakistan has a lot to offer in both the goods and services sectors. He commended the Kingdom’s commitment to providing enhanced employment opportunities for the Pakistani workforce in its future development ventures, as well as the valuable contributions of Saudi FDI in boosting the country’s economic outlook.

    During the meeting, both dignitaries engaged in fruitful discussions on the further strengthening of bilateral business relations, recruitment of more workforce from Pakistan, and enhancing FDI in potential sectors of the economy. Both the Saudi Ambassador and SAPM Jawad Sohrab Malik expressed confidence that their discussions would pave the way for a new era of deeper and more meaningful collaboration between Pakistan and Saudi Arabia.

  • IMF seeks further assurances from Pakistan despite Saudi Arabia and UAE confirmation

    IMF seeks further assurances from Pakistan despite Saudi Arabia and UAE confirmation

    The International Monetary Fund (IMF) is seeking further assurances from Pakistan, despite confirmation of financial assistance from Saudi Arabia and the United Arab Emirates (UAE), to ensure that Pakistan has met the condition of arranging $6 billion financing in order to reach a staff-level agreement.

    Nathan Porter, the IMF’s Mission Chief to Pakistan, welcomed the announcement of financial assistance from the two “key” friendly countries, stating that the IMF supports the efforts of the Pakistani authorities. A Pakistani delegation is currently in Washington attending the Spring meetings of the IMF to discuss the revival of the loan programme. Pakistan’s Finance Minister Ishaq Dar was unable to attend due to domestic issues.

    Pakistan had been asked to arrange $6 billion in external financing, which it needed from now until June to avoid default. Saudi Arabia has pledged $2 billion, while the UAE has committed $1 billion, thus reducing the now-required amount to $3 billion. Pakistan’s foreign exchange reserves have fallen to cover barely a month of imports after the IMF funding stalled in November, hit by snags over fiscal policy adjustments after officials of the lender visited Islamabad in February for talks. The IMF programme will disburse another tranche of over $1 billion to Pakistan before it concludes in June.

    IMF’s Director of the Middle East and Central Asia Department, Jihad Azour, during a press conference, briefed the media about the current status of the $6.5 billion programme with Pakistan, saying that Pakistan is at a critical juncture and decisive actions are required to stabilise the economy. Azour emphasized the need for Pakistan to address inflation, reduce the constraints on trade and export, and maintain macroeconomic stability. He also stated that financing is required, and the financing needs are about what is currently in the programme, and the IMF is working with the authorities and bilateral supporters of Pakistan to ensure that the financing needs for the programme and beyond are assured.

    Central bank governor Jameel Ahmad told investors in Washington at the spring meetings of the lender and the World Bank that programme loans from other multilateral agencies await completion of the IMF review. Pakistan is at a critical juncture, and decisive actions are required to stabilise the economy.

  • Govt expected to increase petrol price by up to Rs14 per litre for the next fortnight

    Govt expected to increase petrol price by up to Rs14 per litre for the next fortnight

    Petroleum prices are expected to jump by approximately Rs10-14 per litre for the upcoming two weeks. Credible industry sources suggest that the government may contemplate increasing the prices of petroleum products in response to the increasing oil prices in the global markets.

    If the government considers compensating for exchange rate losses, as opposed to the previous review where the authorities did not transfer the impact of rupee devaluation to the public, the hike in prices could increase to as much as Rs14 per litre.

    The ex-depot price of petrol in the country is currently Rs272 per litre, and according to the workings of the oil sector, it is expected to reach Rs286.77 per litre in the next review if the government passes on the impact of global oil prices and exchange rate losses. However, even if the government does not adjust for exchange losses, petrol prices are still likely to increase due to higher global oil prices. The anticipated increase in the price of petrol is based on the current rate of taxes, with the government levying an Rs50 per litre charge on petrol and zero general sales tax.

    The expected rise in petrol prices is based on the Rs5 per litre exchange loss adjustment of Pakistan State Oil (PSO), which the government did not include in the past to keep petrol prices low. The prices of petroleum products would have been higher following the massive depreciation of the rupee against the dollar in the last two and a half months when, under International Monetary Fund (IMF) conditions, the market-based exchange rate was allowed.

    On the other hand, the price of high-speed diesel (HSD) is expected to remain unchanged in the next review of prices, as the current ex-depot price of HSD is the same as the expected price for the next fortnightly period. The anticipated unchanged price of HSD is based on the Rs17.50 exchange loss adjustment of PSO, which was pending when the dollar price increased massively in the last few weeks. Sources suggest that if the government does not adjust for exchange rate losses, the diesel price may decrease by Rs15 per litre.

    The government raised the petroleum levy on HSD to Rs50 per litre under IMF conditions in the last review of prices and charged no GST on it. According to sources, while the oil sector’s workings reflect a rise in petrol prices and no change in HSD, it is up to the government to decide. In the current scenario, the government has no option but to increase the price of petrol, as its financial space is already squeezed. Additionally, the government is making desperate efforts to revive the IMF program to shore up forex reserves.

  • ECC approves interest-free loan scheme for electric bikes and rickshaws to empower youth

    ECC approves interest-free loan scheme for electric bikes and rickshaws to empower youth

    On Thursday, the Economic Coordination Committee (ECC) of the cabinet approved a loan scheme with 0 per cent markup for environment-friendly electric bikes (e-bikes) and electric rickshaws (e-rikshaws) in a bid to facilitate youth and promote self-sufficiency.

    The approval was given during a meeting chaired by Finance Minister Senator Ishaq Dar, where various financial proposals of ministries and divisions, including the loan scheme, were approved.

    The Ministry of Industries and Production submitted a summary on the financing facility for e-bikes and e-rikshaws, presenting details on viability, demand, and incentives to make them affordable. In order to create a sustainable demand for these vehicles, the ECC approved the Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS) model for two and three-wheelers.

    Under this scheme, interest-free loans worth Rs0.5 million will be provided to youth for a period of three years. The Ministry of Industries and Production will work out the modalities of the scheme in coordination with PMYB&ALS.

    During the meeting, the Ministry of National Food Security and Research tabled a summary on the price of sugar during the month of Ramadan and briefed the attendees on the outcome of the Sugar Advisory Board’s meeting with the Pakistan Sugar Mills Association (PSMA) regarding the retail price of sugar.

    The ECC endorsed the decision that PSMA Punjab Zone will provide 20,000 metric tonnes of sugar at a retail price of Rs95 per kg during the holy month of Ramadan for sale to the general public through the government of Punjab at the district level. The ECC also directed to make similar arrangements with other provincial PSMA for the provision of sugar in other provinces/areas.

  • IMF receives assurance of $1 billion from UAE to support Pakistan’s economy

    IMF receives assurance of $1 billion from UAE to support Pakistan’s economy

    In a significant development towards reviving the stalled bailout programme, the authorities in the United Arab Emirates (UAE) have pledged to provide $1 billion in bilateral support to Pakistan, according to Finance Minister Ishaq Dar.

    Dar tweeted, “UAE authorities have confirmed to the IMF for their bilateral support of $1 billion to Pakistan.” He also stated that the State Bank of Pakistan is currently in the process of completing the necessary documentation to receive the deposit from the UAE authorities.

    Pakistan was required to provide assurance that its balance of payments deficit is fully financed for the remaining period of the IMF programme, which has been stalled since November last year. Last month, the IMF’s Director of Strategic Communications, Julie Kozack, emphasised that “timely financial assistance from external partners will be critical to support the authorities’ policy efforts and ensure the successful completion of the review [with Pakistan].” She added, “Ensuring that there is sufficient financing to support the authorities is the paramount priority. A Staff Level Agreement (SLA) will follow once the few remaining points are closed.”

    Earlier this month, Saudi Arabia also pledged to provide a $2 billion loan to Pakistan, according to Pakistan’s Minister of State for Finance Aisha Ghaus Pasha. The country’s economic situation has been further exacerbated by months of political and economic turmoil, crippling floods last year and record inflation. Pakistan has been grappling with a debt crisis and foreign exchange reserves have fallen to less than four weeks of imports.

    In an effort to ease the situation, China has agreed to refinance $2 billion, of which $1.7 billion has already been credited to Pakistan’s central bank. China also rolled over a $2 billion loan last month, providing relief during Pakistan’s acute balance of payments crisis. However, talks with the IMF for a delayed $1.1 billion loan tranche, part of the bailout agreed in 2019, have been ongoing.

  • Pakistan’s sustainable policy framework crucial to avoid default risk, says IMF

    Pakistan’s sustainable policy framework crucial to avoid default risk, says IMF

    Whilst serving as Finance Minister, Ishaq Dar has repeatedly assured the public that Pakistan has not defaulted and will not do so in the future. Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), has endorsed Dar’s views and stated that Pakistan has not yet reached the level of default.

    Speaking at a news conference during the spring meeting of Breton Wood Institutions at the Fund’s headquarters in Washington, Georgieva said that the Fund was seeking confirmation from international partners to meet Pakistan’s financing gap requirements. Responding to a question about Pakistan’s looming default risk, she stated that the country had not yet reached that level, but required a sustainable policy framework to avert such risks.

    Georgieva emphasized that the lender has been working closely with the authorities in Pakistan, within the context of the current programme, to ensure that the country has the policy framework in place to prevent reaching the point of unsustainable debt. Pakistan has less than a month’s worth of foreign exchange reserves and is awaiting a $1.1 billion bailout package from the IMF that has been delayed since November due to issues related to fiscal policy adjustments.

    Georgieva expressed hope that, with the goodwill of all parties involved and the implementation of what has already been agreed upon by the Pakistan authorities, the current programme can be completed successfully. Islamabad is required to provide assurance that its balance of payments deficit is fully financed for the fiscal year ending in June in order to unlock the next tranche of IMF funding.

    During the IMF-World Bank spring meetings, Dar attended via Zoom from Islamabad with IMF Deputy Managing Director Antoinette Moniso Sayeh. Sources report that Sayeh stated that Pakistan has yet to meet its external financing gap of $6 billion, of which $3 billion would need to be financed before striking a staff-level agreement.

    At this point, the State Bank of Pakistan’s Jameel Ahmed, who is presently in Washington, reportedly told participants that the United Arab Emirates (UAE) had shared a draft agreement for the provision of an additional $1 billion deposit to meet the requirement for signing the staff-level agreement. A top official expressed hope that the UAE deposit would be confirmed shortly and suggested that it may be confirmed as early as next week.

    Regarding the cross-fuel subsidy, the IMF was informed that it was only an idea floated by a relevant ministry and would be implemented only after an agreement on the salient features of the scheme. The Pakistani authorities agreed with the IMF that the scheme appeared good on paper but its transparent implementation would be challenging.

  • Pak Suzuki extends shutdown of motorcycle plant due to lack of raw materials

    The Pak Suzuki Motor Company (PSMC) has confirmed that it will keep its motorcycle plant closed until April 28 due to ongoing import restrictions that have impacted the auto sector, resulting in low inventory levels. A notice to the Pakistan Stock Exchange (PSX) stated that “the management of the company has decided to extend the shutdown period of its motorcycle plant till April 28, 2023.”

    The company had already shut down its motorcycle plant from April 4 to April 15 due to a lack of raw materials, while the automobile plant was shut from April 7 to April 14. PSMC assembles, manufactures, and markets Suzuki cars, pickups, vans, 4x4s, motorcycles and spare parts. The Suzuki brand originates from Japan.

    Pakistan’s auto sector is facing several crises, with other listed companies such as Indus Motor Company Limited and Honda Atlas Cars halting production in recent months due to economic difficulties. Honda Atlas Cars Pakistan extended the shutdown of its plant by another 15 days. Similarly, other automakers, including Indus Motor Company Limited, have announced temporary production shutdowns. According to the Pakistan Automotive Manufacturers Association (PAMA), Pakistan’s auto industry reported a 66 per cent decline in car sales in March 2023 compared to March 2022.

    JS Research analyst Wasil Zaman has predicted a cumulative volume decline of over 50 per cent year-on-year in fiscal year 2023, extending to the first half of fiscal year 2024. Zaman stated that “with foreign exchange reserves at critically low levels leaving little room for improvement on the supply side for auto manufacturers.”

  • Pakistan moves closer to finalising oil deal with Russia as team arrives in Karachi

    Pakistan has taken a step forward in its efforts to secure a loan deal with Russia, as a delegation has arrived in Karachi to finalise a crude oil deal with Pakistan State Oil (PSO). However, the Energy Ministry has not yet revealed the payment method or the discount rate for the crude oil prices, keeping it confidential for now.

    Technical teams from the Operational Services Centre held talks with the PSO team last month, but progress was not made on the constitution of a Special Purpose Vehicle responsible for importing crude and making payments. The Russian delegation is now in Pakistan to finalise the government-to-government agreement, including the mode of payment. Pakistan wants to pay in rupee, while Russia is asking for payment in China’s Yuan or Ruble. Once the deal is done, Pakistan will place an order with Russia for crude oil purchase.

    According to sources, the Russian ship will arrive in mid-May, and the current Brent price in the international market is $85.16 per barrel, while Russian oil is available at $47-48 per barrel. The State Bank of Pakistan (SBP) is asking local banks to open letters of credit for importing Russian oil, but they are hesitant to do so mainly because of the G7 countries’ regulations of following the price cap of $60 per barrel or below it and making payments under Society for Worldwide Interbank Financial Telecommunications (SWIFT) arrangement.

    PSO has never imported crude oil before, and refineries have been importing crude under long-term agreements from ADNOC and Saudi Aramco. However, in the case of Russian crude, refineries will not be involved in the import, but it will be an SPV with representatives from PSO and PSC. Pakistan may get Russian crude price with a discount close to $50 per barrel, $10 per barrel below the cap price imposed by G7 countries on Russian oil in the wake of the war on Ukraine.

    One of the top officials in the coalition government suggests that the decision to import Russian crude under the government-to-government agreement at a 30 per cent discount may not provide the required relief as shipping and refining costs will erode the maximum discount. Additionally, Pakistan refineries will only be able to extract 10 per cent MS out of Ural crude and 50 per cent furnace oil.

    The government needs to conduct a commercial analysis to determine if importing Russian oil will benefit Pakistan’s economy and to what extent. Industrial sources suggest that the government should evaluate the economic benefits of importing Russian oil carefully.

  • Pakistan’s auto sector records 98% sales growth in March despite high prices

    Pakistan’s auto sector records 98% sales growth in March despite high prices

    Despite high car prices, Pakistan’s auto sector has seen a growth of 98 per cent in March, selling about 7,201 units compared to 3,642 units sold in the previous month. The increase has provided a ray of hope to the auto sector, which has picked up some pace after several months.

    However, car sales, including sales of non-Pakistan Automotive Manufacturers Association (PAMA) vehicles, plunged 68 per cent in March compared to the same month last year, due to non-production days and a decline in purchasing power.

    The monthly growth is due to better volumetric sales of Pak Suzuki Motor Company (PSMC) and Indus Motors, which increased by 475 per cent and 6 per cent respectively on a month-on-month basis. Arif Habib Limited also stated that due to rising inflationary pressure, consumers have switched to affordable vehicles of below 1000cc, which increased by 423 per cent.

    Despite the recent growth, fears of a slowdown still exist due to measures taken by the State Bank of Pakistan (SBP) to curb imports, resulting in production limitations as auto assemblers require prior permission to import completely knocked-down (CKD) units and raw materials.

    Sales of all other variants of cars, jeeps, tractors, pick-ups, three-wheelers and two-wheelers have also witnessed a year-on-year decline in March 2023, according to data released by PAMA a day earlier.

    In the first nine months of fiscal year 2022-23, 85,776 units were sold, down 50 per cent from 172,612 units sold during the same period in FY22. Sales of 1300cc and above cars were recorded at 2,913 units, down 67 per cent compared to the same month of the previous year’s sales of 9,280 units. In March 2023, 1,000cc cars recorded sales of 964 units, including 475 units of Suzuki Cultus and 489 units of Suzuki WagonR, against 2,410 units in the same month last year.

    Further breakdown of the data reveals that below 1000cc vehicles recorded a sale of 3,324 units, lower by 70 per cent than 11,109 units sold last year. Suzuki’s new Alto sold 2,542 units in March 2023 compared to 9,814 units in March 2022.

    Buses and trucks saw a decrease to 308 units in March from 565 units in the same month last year, while sales of jeeps and pick-ups decreased to 2,150 units from 4,403 units sold during the same period last year. Sales of tractors dropped to 2,984 units from 5,651 units in March 2022, while sales of rickshaws and motorbikes also decreased to 84,307 units in March against 151,010 units in the same period last year.

    PSMC recorded a jump of 475 per cent on a monthly basis to 5,628 units primarily due to the availability of CKD parts amid an easing of LC issues, while Indus Motors reported an increase of 6 per cent month-on-month to 1,912 units in March. However, Honda Car (HCAR) sales declined by 49 per cent month-on-month to 835 units in March due to the closure of the plant for 23 days on account of CKD issues.

    Hyundai sales were down 34 per cent month-on-month, with Tucson down 46 per cent month-on-month to 380 units and Sonata down 40 per cent month-on-month to 118 units in the period under review.

  • Pakistan to receive written guarantee from UAE for $1 billion loan

    Pakistan to receive written guarantee from UAE for $1 billion loan

    Pakistan is making progress towards securing a loan from the International Monetary Fund (IMF) with a $1 billion financing pledge from the United Arab Emirates (UAE) expected this week. Sources suggest that the UAE will provide written confirmation of the financing to the IMF through the Finance Secretary during the current annual meeting in Washington.

    To secure external financing for this fiscal year, the IMF has asked Pakistan to seek assurances from friendly countries and multilateral partners for funding its balance of payment gap. In addition to Saudi Arabia’s $2 billion pledge, the agreement with the IMF is also contingent on the UAE’s $1 billion commitment.

    According to sources within the Ministry of Finance, the UAE has finalised the agreement, and as soon as Pakistan receives a written guarantee from the Gulf state, the IMF will also be informed. This development follows requests from Pakistan’s Prime Minister and Finance Minister to UAE officials to complete the necessary prerequisites for the Fund.

    Pakistan is currently facing one of the most severe economic crises in its history, with consumer prices at a record high and interest rates raised to an all-time high. Due to a dollar shortage, the IMF has revised its growth forecast for Pakistan to 0.5% from the earlier estimate of 2%, causing supply chain disruptions and companies to halt production.

    The IMF is also assessing the coalition government’s proposed fuel discount for lower-income groups, which is planned to be financed by raising fuel prices for wealthier motorists. The finance minister has assured that the IMF has received all the required information.

    The finance minister had cancelled his scheduled in-person meetings with IMF officials in Washington but has repeatedly claimed that the staff-level agreement with the lender would be reached soon. Islamabad has been hosting an IMF mission since January to negotiate policy measures and secure $1.1 billion in funding for the cash-strapped economy, which is on the verge of collapse.

    The funds are part of a $6.5 billion bailout package approved by the IMF in 2019, which analysts argue is crucial for Pakistan to avoid defaulting on external payment obligations. The deal will also unlock other financing options to shore up Pakistan’s foreign exchange reserves, which have fallen to four weeks’ worth of import cover and help resolve the balance of payment crisis.