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Inflation in Pakistan could average 33% in first half of 2023, says Moody’s economist

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  • Economy needs persistent and sound economic management.
  • Consumer price index rose 27.5% year-on-year in January.
  • Current foreign exchange reserves barely cover 18 days worth of imports.

MUMBAI/ISLAMABAD: Inflation in Pakistan could average 33% in the first half of 2023 before trending lower, and a bailout from the International Monetary Fund (IMF) alone is unlikely to put the economy back on track, a senior economist with Moody’s Analytics told Reuters.

“Our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management,” senior economist Katrina Ell said in an interview on Wednesday.

“There’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024,” she added.

Pakistan and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18 days worth of imports.

“Even though the economy is in a deep recession, inflation is incredibly high as (result of) part of the latest bailout conditions,” Ell said.

“So what we’re expecting is that through the first half of this year, inflation is going to average about 33% and then might trend a little bit lower after that,” she added.

The consumer price index rose 27.5% year-on-year in January, its highest in nearly half a century.

Low-income households could remain under extreme pressure as a result of high inflation on account of being disproportionately exposed to non-discretionary items.

“Food prices are high and they can’t avoid paying for that, so we’re going to see higher poverty rates as well feed through,” the economist said.

No overnight fix

Ell said Pakistan has not has a great track record when it comes to IMF bailouts, so infusing additional funds alone may prove to be of little use.

“If we’re going to see any improvement, it’s going to be very gradual. There’s just no overnight fix,” she said.

The weaker rupee, which is plumbing record lows, is adding to imported inflation while domestically high energy costs on the back of tariff increases and still elevated food prices is likely to keep inflation high.

Moody’s expects economic growth for the 2023 calendar year of around 2.1%.

“It is likely that we will see further monetary tightening in Pakistan to try and stabilise inflation and also with the weakness in the FX they might kind of intervene there to try and force in stability, but again it’s not going to be a silver bullet,” Ell said.

Last month, the central bank raised its key interest rate by 100 basis points (bps) to 17% in a bid to rein in persistent price pressures. It has raised the key rate by a total of 725 bps since January 2022.

With significant recession-type conditions in Pakistan, skyrocketing borrowing costs could really exacerbate domestic demand struggles, she said.

“You really need to see sustained sound macroeconomic management, and just injecting further funds in there without decent backing is not going to deliver the results that you’re looking for.”

Pakistan

Haj 2024: Pakistanis to get ‘free SIMs with internet’

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Caretaker Minister for Religious Affairs and Inter-faith Harmony Aneeq Ahmed said Tuesday that the government would provide free-of-cost mobile SIMs with roaming internet packages to Pakistanis performing Haj in 2024.

In conversation with a private news channel, the caretaker minister said abayas would also be given to female pilgrims, having a Pakistani flag on the backside, and 13kg suitcases would be given to all.

The minister called the reduction of around Rs100,000 in the Haj cost a “historic step” taken by the caretaker government, noting that a further Rs50,000 would be slashed and the amount would be refunded to the people in their accounts.

He said a new mobile application has been designed to assist pilgrims, which will provide navigation support and enable constant communication between pilgrims and relevant officials.

Initially available in English and Urdu, the application will later incorporate various regional languages, he said, adding, that the app would also provide digital training programmes to every pilgrim.

The minister also disclosed a project that Haj ministry, with the collaboration of the education ministry, has planned to convert city mosques into schools to enroll out-of-school children where the mosques’ imams would play a leading role.

The minister said that mosques will play their role as community centers in every city areas, adding that imams will resolve community issues as well after offering prayers.

He said that haj ministry is taking all four provinces on board and enhancing the connectivity of mosques.

While describing another project, the minister said that his ministry with the collaboration of the health ministry has another project in the works, in which medical clinics will also be part of mosques.

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Three education board chairmen, several officers sacked in Sindh

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KARACHI: Sindh caretaker Chief Minister Justice (retd) Maqbool Baqir Thursday approved the removal of three chairmen of education boards and ordered the sacking of several officers, Geo News reported, citing notifications from the CM House.

The interim chief executive removed the chairpersons of the Board of Intermediate Karachi, Sindh Technical Board, and Larkana boards. He also ordered the sacking of secretaries and controller examinations of BIEK, Nawabshah, Mirpurkhas, Sukkur, and Larkana boards.

Moreover, Larkana, Sukkur, Nawabshah, and Board of Secondary Education Karachi’s audit officers were also removed from their posts.

The Sindh government has also sought permission from the Election Commission of Pakistan (ECP) to appoint new personnel to the now-vacant positions — as interim rulers need the body’s approval for hiring people.

In the letter addressed to the commission, the government has also said that in several education boards across the province, top posts are being operated on “stop-gap” arrangements and in order for these departments to function better, permanent appointments need to be made.

According to the notifications available with Geo News, Justice (retd) Baqir has removed BIEK Chairman Dr Prof Naseem Memon and appointed him as the Board of Intermediate & Secondary Education Larkana’s (BISEL) chairman — where he will serve till June 30, 2024.

Zaheeruddin Bhutto, interim controller of examination of BIEK, was removed from his post effective immediately, while BIEK Secretary Kashif Siddiqui was also sacked — and he will return to his previous position.

Zahid Lakho, the audit officer of BIEK, was also stripped of his additional charge of the board’s secretary.

BISEL Chairman Sikandar Ali Miraj has also been removed with immediate effect, and he will be returning to his original post of Inspector of Instruction.

BISEL Controller Examination Nadeem Soomro has been removed from his position and directed to report to the Human Settlement and Social Housing Department.

On the instructions of the caretaker CM, Syed Aqash Shah was relieved of the charge of BISEL’s acting secretary.

Hyderabad board’s secretary Shaukat Khanzada was also removed from his post and directed to report to the college education department. Zahiruddin Sheikh, the audit officer of the Hyderabad board, has been sacked and asked to report to the board’s head office.

Ghulam Mustafa was removed from the post of BISEL’s audit officer and directed to report to the post of deputy controller.

Board of Intermediate and Secondary Education Sukkur (BISES) Secretary Mohammad Salman has been removed and asked to report to the deputy secretary’s office. BISES Controller Examination Dr Abdul Fateh Mehr has been removed and asked to report to the secretary’s office.

The caretaker chief minister has also removed Ghulam Qadir Dharijo, the audit officer of BISES, and directed him to report to the chairman’s office.

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Punjab to shut down school, colleges in Punjab’s smog-hit areas on Friday, Saturday

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  • Lahore, Gujranwala among cities hit by smog.
  • Markets and restaurants to open for work at 3pm on Fri and Sat.
  • Govt offices to remain open on Fri; will start work at 3pm on Sat.

LAHORE: All schools, colleges and universities will remain closed on Friday and Saturday, as Punjab on Thursday notified measures to curb smog across the province as it impacts the daily life of citizens.

Punjab Caretaker Chief Minister Syed Mohsin Naqvi, who chaired a high-level meeting of the Punjab Cabinet Anti-Smog Committee today, announced the provincial government’s decision during a presser in Lahore.

The smog-hit cities include Lahore, Gujranwala, Faisalabad, Multan, Sahiwal, Sargodha, Kasur, Sheikupura, Hafizabad, Narowal, Nankana Sahib and Sialkot.

Markets and restaurants, he added, will open for work at 3pm on Friday and Saturday, while all kinds of businesses will have to be closed on Sunday. 

“Markets can remain open till night. We don’t want anyone to suffer loss, but they will have to adjust according to the situation.”

CM Punjab said offices will remain operational on Friday but will open for work at 3pm on Saturday. These measures, the chief minister added, are being taken as Air Quality Index (AQI) levels are higher in the morning and decrease with time.

The government will also install towers to clear smog in Lahore for which, CM Punjab said, a memorandum of understanding (MoU) has been signed.

He added that the government will also provide electric bikes to 10,000 students on subsidy to curb the use of regular motorcycles which cause air pollution for which a committee has been formed to finalise suggestions. Meanwhile, government employees will also be provided e-bikes on lease.

CM Punjab said the government is considering measures for artificial rain if clouds approach Lahore on November 29. 

However, that will only happen if a “specific kind of cloud” moves towards the city. The government has also decided to double the amount of water being sprinkled on the streets.

The chief minister said the main Mall Road on Sunday will only be open for bicycle users from morning till 5pm. Some of the measures, CM Naqvi said, have been taken symbolically, some are long-term, while others have been taken to break the peak of pollution in the city and province.

He also urged people to wear masks to protect their health.

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