South Korea defers Pakistan’s loan worth $19.91m
- Pakistan inks Debt Service Suspension Agreement with Korea.
- This amount will now be repaid over a period of six years.
- Pakistan has already signed 104 pacts with 21 bilateral creditors.
ISLAMABAD: In a sigh of relief, the Republic of Korea deferred Pakistan’s loan worth $19.911 million, under the G-20 Debt Service Suspension Initiative (DSSI) framework on Monday.
The cash-strapped country inked a Debt Service Suspension Agreement with Korea on Monday. This amount, initially had to be repaid between July and December 2021, will now be repaid over a period of six years (including a one-year grace period) in semi-annual instalments, said a statement issued by the Economic Affairs Division (EAD).
Due to the support extended by the development partners of Pakistan, the G-20 DSSI has provided the fiscal space which was necessary to deal with the urgent health and economic needs of the country.
The total amount of debt, that is to be suspended under the DSSI framework, covering the period of repayment from May 2020 to December 2021, stands at $3,686 million.
Pakistan has already concluded and signed 104 agreements with 21 bilateral creditors for the deferment of its debt repayments under the G-20 DSSI, amounting to $3,633 million.
The signing of the above-mentioned agreement brings this total to $3,653 million. Negotiations for the remaining agreements to be signed under the G-20 DSSI are ongoing.
It is pertinent to mention here, as the International Monetary Fund (IMF) is reluctant to strike a staff-level agreement without seeking confirmation on the external financing gap, Pakistan, meanwhile, conveyed to the global creditor’s staff to conclude the ninth review otherwise budgetary framework for 2023-24 would not be shared.
The lingering differences between the IMF and Pakistan are heading towards an “unbreakable deadlock” whereby Pakistani authorities claim that the confirmation of $4 billion financing was shared with the IMF even with its full details and break-up but the Fund was playing “politics” by not moving towards striking an agreement despite passing six months period.
The ninth review was due in November 2022 but the two sides have not yet reached consensus.
The patience of Pakistani high-ups is running out as they argue before the IMF officials that Islamabad should be treated as a member of the Washington-based creditor, not a beggar.
The Pakistani authorities are hopeful that the current account deficit would remain surplus for April 2023 when the numbers would come out in the next few days.
The financing gap of $4 billion was fulfilled by getting confirmation as the Kingdom of Saudi Arabia conveyed to the IMF that they were ready to provide an additional $2 billion in deposits and UAE $1 billion.
The World Bank is committed to providing $450 million RISE-II after fulfilment of four prior conditions and $250 million by the AIIB. Pakistan also received firm commitments for getting $350 million out of total Geneva pledges for flood-affected areas.
The only remaining amount is $1 billion from commercial banks and they are waiting for IMF’s deal.
The Pakistani officials argue that the external financing requirements had been fulfilled, so there was no justification for using delaying tactics to avoid signing the agreement.
Keeping in view this situation, the Ministry of Finance is all set to share the Budget Strategy Paper (BSP) with the federal cabinet without sharing it with the IMF in its meeting scheduled to be held today (Monday).
Gold rate declines for second consecutive day
- Rate of gold reaches Rs232,800 per tola.
- International rate up by $11 per ounce.
- The silver price remains unchanged.
Despite an increase in the international rate, gold’s value declined in Pakistan for the second consecutive day Tuesday.
Data provided by the All Pakistan Sarafa Gems and Jewellers Association (APSGJA) showed the price of gold (24 carats) decreased by Rs1,700 per tola and Rs1,458 per 10 grams to reach Rs232,800 and Rs199,588, respectively.
The gold rate cumulatively lost Rs1,100 per tola last week, and a further Rs1,700 on the opening day this week.
Meanwhile, the international price went up $11 to settle at $1,956 per ounce.
The safe-haven bullion’s value has remained volatile in the international market recently. However, it bounced back from its lowest level in over two months Tuesday after the US dollar’s value declined from a high and investors remained anxious about negotiations on the US debt ceiling.
If the debt ceiling — which is currently capped at $31.4 trillion — is not raised in the next few days, it would trigger the first-ever US default.
Investors also remained wary about a possible hike in the interest rate, which would negatively affect gold’s value.
Meanwhile, the gold rate has been volatile in Pakistan recently amid continued political and economic uncertainty, high inflation, and currency depreciation. People prefer to buy the yellow metal in such times as a safe investment and a hedge.
The rupee gained Re0.07 or 0.02% against the US dollar in the interbank market Tuesday, closing at Rs285.35, according to State Bank of Pakistan data.
Data shared by the jeweller’s body showed that the rate of silver remained unchanged at Rs2,850 per tola and Rs2,443.41 per 20 grams, respectively.
France launching electric car battery factory to dent Chinese dominance
Under a plan of reindustrialisation by President Emmanuel Macron, France is to inaugurate a factory for manufacturing batteries for electric cars Tuesday in Billy-Berclau — the first of its kind — challenging the Chinese dominance in the industry, according to an AFP report.
Battery industry buildup is a component of the plan by Macron with a clutch of factories set to emerge in the north of the country over the next three years.
The “gigafactory” is owned by Automotive Cells Company, a partnership between French energy giant TotalEnergies, Germany’s Mercedes-Benz and US-European automaker Stellantis, which produces a range of brands including Peugeot, Fiat and Chrysler.
The inauguration will be attended by French Economy Minister Bruno Le Maire and the country’s energy transition and industry ministers along with German and Italian officials.
The heads of Mercedes, Stellantis and TotalEnergies will also be at the event.
The factory is as large as football pitches in which production will commence this summer.
Elected officials and business leaders intend to turn the Hauts-de-France region into “Battery Valley” — the electric car industry’s answer to Silicon Valley.
AESC-Envision — a Sino-Japanese group — is building a plant near the city of Douai which will supply French automaker Renault from early 2025.
French startup Verkor is scheduled to begin production at a facility in Dunkirk from mid-2025 while Taiwan’s ProLogium has also chosen the coastal city for its first European factory, with output to start in 2026.
Competition between US and China
As European Union (EU) has marked a deadline of 2035 to phase out fossil fuel-run cars, the countries are racing to step up the production of batteries and electric vehicles to meet the target of electric vehicles within the deadline.
In recent years, around 50 battery factory projects have been announced in the EU and the French government has set a target of producing two million electric vehicles per year by 2030, as per the economy ministry.
The ministry said that “the ACC plant will supply 500,000 vehicles per year by then.”
China is the world leader in electric car battery production and also dominates the production of the raw materials needed to make them.
Europe also faces stiff competition from the United States, which is heavily subsidising the sector through the Inflation Reduction Act, which includes $370 billion in clean energy incentives.
Govt mulls slashing duty on mobile phones in budget
ISLAMABAD: The Federal Board of Revenue (FBR) is mulling options to reduce the duty on mobile phones in the federal budget for the fiscal year 2023-24 — which is expected to be unveiled on June 9 — keeping in view the suggestions of Pakistan Mobile Phone Traders, The News reported Monday.
Previously, the government was obliged to raise the duty on mobile phones by 100% to 150%, and resultantly, only Rs5 billion to Rs10 billion were being deposited in the national exchequer instead of Rs85 billion.
The number of mobile phone users in Pakistan has exceeded 186.9 million.
In order to cope with the financial crisis of the current financial year, in the new budget, a proposal for a conspicuous reduction in the rates of duties on cellular phones is under consideration, which is about 100% to 150% at present on small and big mobile phones.
The mobile industry is on the brink of collapse due to an increase in taxes. It not only affected traders but also made the life of millions of people difficult to earn a livelihood.
It has been learnt that a delegation of the Mobile Phones Traders Association has given recommendations to Finance Minister Ishaq Dar and other senior officials.
The delegation ensured that efforts would be made to include the recommendations in the budget. These proposals and recommendations are being reviewed to make them a part of the new budget.
It has been learnt that a 75% duty was imposed on cellular phones in Pakistan as compared to other countries of the region like Singapore, Bangladesh and Turkey where it is not at that level. That is the reason people are using smartphones without paying duties in connivance with FBR.
The additional 100% to 150% duty on cell phones has made it out of reach of the poor, labourers, daily wagers, students, professionals, the lawyer community, and civil society.
All Pakistan Mobile Phones Traders Association General Secretary Munir Beg Mirza said that due to the ban on the import of used mobile phones, smuggling has increased to give favour to a few companies.
Also, people are using smartphones illegally without paying heavy taxes to enjoy all functions of smartphones, which is inflicting a loss on the national kitty.
He said that not only every consumer would pay tax but also the government would get Rs100 billion instead of Rs5 billion on phones if an appropriate duty was imposed in the new financial year.
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