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China, Saudi Arabia to provide $13bn financial package: Dar

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  • China, KSA will provide additional amount of $8.8bn and $4.2bn, respectively.
  • During PM’s recent visits, China, KSA assured to take care of Islamabad’s financial requirements till June 2023, says Dar.
  • China assured Pakistan that they would roll over $4 billion sovereign rollover deposits on all coming due dates, says Dar. 

ISLAMABAD: China and Saudi Arabia have assured Pakistan of providing a financial package of $13 billion, with the former pledging $8.8 billion and latter $4.2 billion for the current fiscal year 2022-23.

This is in addition to the rollover of sovereign loan deposits, additional rollovers, commercial loans, additional SWAPS and jacking up oil facilities on deferred payment in line with the International Monetary Fund (IMF) agreement.

Both financial packages will ease the struggling economy of Pakistan as the foreign currency reserves held by the State Bank of Pakistan stand at $8.9 billion at the moment.

“China and Saudi Arabia have given assurances to Pakistani delegations under Prime Minister Shehbaz Sharif during recent visits that they will take care of Islamabad’s financial requirements till June 2023. Now the real effective exchange rate (REER) in terms of rupee against the US dollar has come down to Rs190 against the US dollar and no one will be allowed to play with our exchange rate,” Finance Minister Ishaq Dar told a select group of reporters in his office on Friday, The News reported.

The minister said that China assured Pakistan that they would roll over $4 billion sovereign rollover deposits on all coming due dates. The Chinese authorities, he said, also assured that the commercial loans of $3.3 billion will also be provided in due course of time. He said that China also granted a green signal for jacking up the SWAPS amount by providing an additional $1.45 billion so the total Chinese package would go up to $8.8 billion for the ongoing financial year. The Bank of China, he said, had already provided $200 million recently.

Dar said Pakistan and China agreed to resume the halted work on Mainline-1 from Karachi to Peshawar, which would be constructed at an estimated cost of $9.8 billion. He said that China also agreed to finance Karachi Circular Railway (KCR). He was of the view that the cost of ML-1 had gone up from $6.3 billion to $9.8 billion because of unwarranted delay in its execution during the tenure of PTI led regime. The minister said that China’s president and prime minister especially inquired about the health of PML-N leader Nawaz Sharif during this visit.

Sharing details about the outcome of Saudi Arabia’s visit, the minister said that they also assured to consider Pakistan’s request for additional $3 billion in deposits and jacking up the oil facility on deferred payment by an additional $1.2 billion. Besides, an additional amount of $4.2 billion would be considered by KSA authorities.

He said that KSA would also roll over existing deposits of $3 billion and their oil facility of $1.2 billion on deferred payment ($100 million on monthly basis) would continue till June 2023. Therefore, the total Saudi package is expected to touch $8.4 billion. To another query, the minister said that Saudi Crown Prince Muhammad Bin Salman is going to visit Pakistan within the ongoing month.

He said that Saudi Arabia would also construct a Petrochemical Complex in Gwadar at an estimated investment of $11 to $12 billion. It was agreed with the KSA in 2015 that it would construct an oil refinery at an estimated cost of $6 billion and he had offered to construct that in Hub because at that time Gwadar was not ready for providing the required infrastructure.

He said the government was also considering offering potential investment opportunities to KSA, including selling RLNG-based power plants. Dar said that the Asian Infrastructure Investment Bank (AIIB) was expected to approve $500 million as co-financing of ADB’s BRACE programme of $1.5 billion within the ongoing month.

He said the government would also convene a National Tax Council meeting next week for approving the GST harmonisation on goods and services among the Centre and the provinces, which is the only stumbling block in the way of approving $450 million RISE programme of the World Bank. There is another $500 million loan for Sindh, so the total disbursement of approximately $1.4 billion from WB was awaiting on harmonisation of GST for goods and services.

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‘IMF giving Pakistan tough time’: Dollar soars to historic high of Rs279 after PM’s comments

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The rupee on Friday plunged to a historic low against the dollar after Prime Minister Shehbaz Sharif’s said that the International Monetary Fund (IMF) is giving Pakistan “a tough time” — as the lender wants the government to do more on the economic front.

“As we speak, an IMF delegation is in Islamabad [holding parleys on loan programme] and giving a very tough time to the finance minister and his team,” the prime minister said while speaking at the Apex committee meeting in Peshawar, and termed the economic challenges “unimaginable”.

Following the PM’s comments, the local currency depreciated further against the greenback in the interbank market.

During intra-day trade, the rupee was changing hands at 279 against the dollar at 12:48pm, according to the Exchange Companies Association of Pakistan (ECAP), up from Rs271.35 a day earlier.

Analysts have stressed that the country needs the Washington-based lender’s bailout programme to avoid default — a threat that has been looming over Islamabad for some months now.

AA Commodities Director Adnan Agar told Geo.tv that the rupee’s downward spiral is expected till Pakistan secures a staff-level agreement with the Washington-based lender.

The analyst said that the market is reacting to the reports coming on the demands being put forward by the IMF to the government.

Agar warned that if the government fails to secure a staff-level agreement with the Fund, then the rupee will incur further losses.

“If the IMF deal is done timely then it would appreciate but not that much,” said Agar.

In a bid to curb the black market and meet IMF demands, the government and exchange companies removed the dollar cap — imposed to stabilise the dollar’s value.

But that did not have a substantial effect on the local currency as the investors remain wary due to a surge in terrorism and the decline in State Bank of Pakistan-held foreign exchange reserves — which now stand at just $3.08 billion and will provide an import cover of 18.5 days.

ECAP General Secretary Zafar Paracha told Geo.tv that when the dollar cap was removed, it was estimated that the rupee would hit 270 and rebound, however, circumstances changed.

“Our reserves are at their lowest in nine years and terrorism — which isn’t restricted to Peshawar — is also surging,” he said, explaining the reason behind investors’ lack of confidence in the government.

The ECAP general secretary added that the ongoing political turmoil was also adding to the country’s woes as opponents are being arrested every other day and being put behind bars.

Paracha added that the black market gap has been met to a certain extent, but since the government has not opened the letters of credit (LCs) for importers, it will persist.

“The government has asked the importers to arrange dollars on their own […] this is why the black market is still active. If this does not stop, the gap might even increase,” he warned, urging the authorities to move towards import rationalisation.

Paracha added that amid the terror threat and other underlying reasons, the exports have not released their payments yet, resulting in the scarcity of dollars in the market.

Pakistan-IMF talks

A day earlier the IMF rejected the government’s circular debt management plan. 

And today it was reported that the Fund has conveyed to the authorities to undertake substantial qualitative and sustainable tax and non-tax revenue measures to fetch additional revenues for filling the projected gap of Rs600 billion in the fiscal framework.

The IMF delegation has asked the government to jack up the Federal Board of Revenue’s (FBR) tax collection target to align it with the projected nominal growth in the current fiscal year mainly with the help of a surge in the CPI-based inflationary pressures.

The Fund seems ready for providing an adjuster on flood expenditures once the fiscal framework is finalised. But it will depend on how much expenditures could be occurred on floods both on the development and non-development side of the budget especially through disbursements of stipends through the Benazir Income Support Programme (BISP).

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Pakistan may face shortage of x-ray films, warns importer

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  • Forex crisis worsens in Pakistan.
  • X-ray films importer says banks not opening LCs.
  • Industry has only 20-30 days of stock x-ray films.

KARACHI: A healthcare crisis may take ground in Pakistan as commercial banks are unable to open the letters of credit (LCs) for the import of x-ray films in future — which are used on a daily basis for nearly every medical diagnosis — The News reported on Thursday, quoting an industry insider.

Limited stock of the remaining films strengthens the assumption of a healthcare crisis looming in the near future as these are used for computed tomography (CT) and magnetic resonance imaging (MRI) scans, according to an official from Fujifilm Pakistan, a major supplier of medical x-ray films in the country

“The industry has only 20-30 days of stocks and after that, hospitals will run short of films and diagnoses will be impossible then,” he said.

“Around a month’s stock was stuck at the ports or high seas, which should be cleared at the earliest,” he added.

The official also explained that “medical x-ray films have a yearly import requirement of $20 million or $1.6 million in a month, and urged the government to take measures before the situation gets worst.”

He further mentioned: “Govt hospitals are now asking for the supply of stocks. Our suppliers are ready with the stocks but waiting for LCs to ship the orders.”

While expressing his serious concern over the possible shortages, he said “the situation could lead to smuggling that would rob the government of taxes.” 

“The government is losing revenue of approximately $550,000 per month,” he was quoted as saying. 

The source maintained that a “minimum of $1 million in LCs was required every month to keep the hospitals running.”

X-ray films are used in pinpointing physical injuries among other important diagnoses and such as bone fractures, and chest x-rays for pneumonia or COVID. In operation theatres, the films are used to determine the scope of an operation.

The estimated size of the x-ray market is around 3,500,000 square meters, which translates to almost 100,000 exposures in a day in hospitals across the country.

There are approximately 7,500 govt and private hospitals and clinics in Pakistan, and the entire requirement of medical x-ray films is imported from Europe, Japan, the USA, and China.

The current economic condition of Pakistan, marred by drying foreign reserves, forced banks to be selective in opening LCs even for sectors such as healthcare.

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Rupee loses ground against dollar in interbank market

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KARACHI: The rupee lost its ground against the dollar in the interbank market on Thursday after recovering for two straight sessions as the “optimism surrounding the government and International Monetary Fund (IMF) talks scaled back”.

During intraday trade today, the rupee depreciated by Rs1.17 and was trading at Rs272.17 around 1pm.

The rupee had closed at Rs268.83 on Wednesday.  

Capital market expert Saad Ali told Geo.tv that reports regarding the rejection of the circular debt management plan (CDMP) presented by the government to the International Monetary Fund (IMF) had dented the market’s confidence.

Ali said that these reports created doubts about the possibility of a bottleneck in the ongoing government-IMF talks. 

An IMF mission is currently in Pakistan holding talks on the ninth review that will continue till February 9 after which a staff-level agreement is expected between the two sides.

Fund rejects circular debt management plan

Earlier today, The News had reported that the IMF has rejected the CDMP presented by the government and asked the authorities to raise the electricity tariff by Rs12.50 per unit in order to restrict the additional subsidy at Rs335 billion for the current fiscal year.

During the second day of technical-level talks, the Washington-based lender termed the revised CDMP as “unrealistic”, which is based on certain wrong assumptions. So the government will have to bring more changes in its policy prescription to restrict the losses of the cash-bleeding power sector.

The IMF and the Finance Ministry will work out a gap on the fiscal front after which different additional taxation measures will be finalised through the upcoming mini-budget.

The revised CDMP envisages an increase in the monster of circular debt to the tune of Rs952 billion for the current fiscal year against an earlier projection of Rs1,526 billion.

The government shared its revised plan with the IMF high-ups on Wednesday, which shows the government required an additional subsidy of Rs675 billion despite raising the power tariff in the range of Rs7 per unit through quarterly tariff adjustment in the first two quarters of 2023 and Rs1.64 for the third quarter from June to August.

“The IMF has opposed the certain basis of the revised CDMP and asks the government to raise the tariff in the range of Rs11 to Rs12.50 per unit, so that the requirement of additional subsidy could be reduced to half from its existing levels of Rs675 billion for the current fiscal year,” sources confided to the publication.

The IMF also raised questions on how the government calculated its additional subsidy requirement figure of Rs675 billion for the current fiscal year. The government has understated the exchange rate for calculating the revised CDMP, so with the existing rate the plan would be changed.

According to the report, the newly developed debt management plan seeks to restrict losses of DISCOs to 16.27% on average during the current fiscal year.

The government has envisaged the target to recover Fuel Price Adjustment (FPA) charges deferred last summer to fetch Rs20 billion into the kitty against estimates of Rs65 billion made on the eve of the last summer.

The markup saving due to IPPs stock payment will bring Rs11 billion while the GST and other taxes on a collection basis will help recover Rs18 billion in the current fiscal year.

The circular debt is estimated to hover around Rs2,113 billion till the end of FY2023, including the amount parked in the Power Holding Limited (PHL), Rs765 billion and Rs1,248 billion payables to power producers and Rs100 billion to fuel suppliers.

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