KARACHI: An international credit rating agency on Thursday termed the ongoing no-confidence motion against Prime Minister Imran Khan as “credit negative” for the country, saying it was casting doubt on policy continuity in Pakistan while creating an overall environment of uncertainty.
Pakistan’s opposition parties tabled a no-trust resolution against the prime minister on Monday, accusing his administration of mismanaging economy and failing to provide good governance.
As the opposition claimed the government had lost its parliamentary majority, Moody’s, a credit rating corporation, raised concern over the economic ramifications of the prevailing political situation.
“We view the no-confidence motion as credit negative because it raises significant uncertainty over policy continuity, as well as the government’s ability to continue to implement reforms to increase productivity growth and secure external financing, including from the International Monetary Fund (IMF),” it said in a statement.
The no-trust motion comes at a time when Pakistan is encumbered with surging inflation and widening current account deficit amid rising global commodity prices. A further deterioration in its external position, including an erosion of foreign exchange reserves, would threaten the government’s external repayment capacity and heighten liquidity risks, according to Moody’s.
Pakistan has faced significant pressure on its foreign exchange reserves in recent months, amid elevated global commodity prices and a recovery in domestic demand. The Russia-Ukraine military conflict, which has driven up global commodity prices, has also amplified pressure on the country’s external position. Pakistan is a net oil importer, with petroleum and related products accounting for about 20 percent of its total imports.
Its current account deficit amounted to more than $12 billion between July 2021 and February 2022, a stark contrast to a $1 billion surplus in the same period a year before.
“We now expect the deficit to widen to 5-6 percent of GDP in fiscal 2022 compared with our previous forecast of 4 percent,” Moody’s statement said.
The further widening of the current account deficit would put greater pressure on Pakistan’s foreign reserves, which declined to $12 billion as of March 25, 2022, from $18.9 billion in July 2021, according to Moody’s and the State Bank of Pakistan.
Officials of the country’s finance ministry also said the economic situation was moving in the right direction before the no-confidence move, adding the alarm bells of uncertainty were now beginning to ring.
“So far, there was no impact on the economy,” Muzammil Aslam, the ministry’s spokesperson, told Arab News on Thursday. “The foreign investors were confident which was reflected in the Reko Diq gold mine dispute settlement and credit off-take was up.”
“Now it seems the deadlock which is prevailing will make things worse because the IMF is silent and the Chinese rollover [of $2.3 billion] has been agreed, but the payment made to China has not been returned yet which will cause a major dip in the reserves,” he said.
Pakistan’s reserves decreased by $2.915 billion to $12 billion, the country’s central bank said on Thursday. It informed that this decline reflected repayment of external debt, adding the rollover facility provided by China was being processed and was expected shortly.
Pakistan is also undergoing its seventh review under the IMF Extended Fund Facility program, which has disbursed $3 billion out of the stipulated $6 billion. However, discussions between Pakistan and the IMF appear to have stalled since the beginning of March when the global lending agency expressed concerns over the government’s recent relief package in response to rising inflation, according to Moody’s.
Pakistani economists said the current political situation had made local and foreign investors nervous who were waiting for the political dust to settle down.
“The state of uncertainty has been prevailing for almost a month and the government’s focus is on its defense,” Dr. Ashfaque Hassan Khan, senior economist, told Arab News.
Some experts said people who had invested in Pakistani bonds and sukuk were also feeling jittery which was reflected in the huge depreciation of the national currency.
The rupee on Thursday plunged to a new historic low of Rs183.46 against the US dollar in the interbank market.
“The dollar is going up and the oil prices are high,” Khurram Schehzad, senior financial analysts, commented, adding none of this was good for the economy.
However, Miftah Ismail, the country’s former finance minister and member of the opposition Pakistan Muslim League-Nawaz party, said things would get better after the formation of the new government.
“We are fully aware of the situation,” he said. “The markets, currency and bond, will settle down once the new setup is formed.”
However, Moody’s said anyone managing Pakistan’s government would find it difficult to balance revenue-raising reforms to secure external financing and political pressure from people facing rising cost of living.
Moody’s calls no-confidence motion ‘credit negative’ for Pakistan as finance ministry says ‘no impact’
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Moody’s calls no-confidence motion ‘credit negative’ for Pakistan as finance ministry says ‘no impact’
- Moody's says no-confidence motion raises uncertainty over policy continuity, government’s ability to continue to implement reforms
- Economists say current political situation has made local and foreign investors nervous, awaiting the political dust to settle
Modi says India has only ‘paused’ military action against Pakistan
- India won’t “tolerate nuclear blackmailing” by Pakistan, would take stern action for any future militant attack, Modi says
- His comments were the first since Saturday’s understanding between India and Pakistan to stop all military actions
NEW DELHI: Indian Prime Minister Narendra Modi said on Monday India has only “paused its military action” against Pakistan and would “retaliate on its own terms” if there is any future militant attack on the country.
His comments were the first since Saturday’s understanding between India and Pakistan to stop all military actions on land, in the air and at the sea in a US-brokered ceasefire.
The escalating hostilities between the two nuclear-armed rivals after a deadly attack on tourists in Kashmir had threatened regional peace.
“We will be monitoring every step of Pakistan,” Modi said in an address to the nation, adding that India won’t “tolerate nuclear blackmailing” by Pakistan and would take stern action for any future terror attack.
“This is not an era of war, but this is not an era of terrorism either. There should be zero tolerance for terrorism,” Modi said.
The PM’s comments come from as Indian and Pakistani authorities both said Monday there was no firing reported overnight along the heavily militarized region between their countries, the first time in recent days the two nations were not shooting at each other.
“The night remained largely peaceful across Jammu and Kashmir, and other areas along the international border,” the Indian army said in a statement, adding that no incidents had been reported.
Senior military officials from India and Pakistan spoke via a hotline on Monday, the state-run Pakistan Television reported. It gave no details, but the two sides were to assess if the ceasefire was holding and how to ensure its implementation. There were fears it would not hold after they accused each other of violations just hours after it was announced.
Local government officials in Pakistan-administered Kashmir, called Azad Kashmir, reported no incidents of cross-border firing along the Line of Control and said that civilians displaced by recent skirmishes between Pakistani and Indian forces were returning to their homes.
Pakistan’s military spokesperson, Lt. Gen. Ahmad Sharif, said late Sunday that Pakistan remains committed to upholding the ceasefire and will not be the first to violate it.
Soon after the ceasefire announcement on Saturday, Pakistan reopened all of its airports and restored flight operations. India followed up Monday with reopening of all the 32 airports that were shut temporarily across northern and western regions due to the flare up in tensions.
“It’s informed that these airports are now available for civil aircraft operations with immediate effect,” the Airports Authority of India said in a statement.
The militaries of the two countries have been engaged in one of their most serious confrontations in decades since last Wednesday, when India struck targets inside Pakistan it said were affiliated with militants responsible for the massacre of 26 tourists in Indian-controlled Kashmir. The tourists, mostly Indian Hindu men, were brutally killed in front of their families in the meadow town of Pahalgam last month.
India accused Pakistan of backing the militants who carried out the massacre, a charge Islamabad denied. The incident first led to a spat of tit-for-tat diplomatic measures by both the nations, sending their bilateral ties to a near historic low.
The two expelled each other’s diplomats, shut their airspace, land borders, and suspended a crucial water treaty.
After Wednesday’s strikes in Pakistan, both sides exchanged heavy fires along their de facto border in the restive Kashmir region followed by missile and drone strikes into each other’s territories, mainly targeting military installations and air bases. Dozens of civilians were killed on both the sides in heavy shelling, the two countries said.
The Indian military on Sunday for the first time claimed its strikes into Azad Kashmir and Pakistan last week killed more than 100 militants, including prominent leaders.
Lt. Gen. Rajiv Ghai, the director general of India’s military operations, said India’s armed forces struck nine militant infrastructure and training facilities, including sites of the Lashkar-e-Taiba group that India blames for carrying out major militant strikes in India and the disputed region of Kashmir.
Ghai said at least 35 to 40 Pakistani soldiers were killed in clashes along the Line of Control, the de facto border that divides the disputed Kashmir region between India and Pakistan. Five Indian soldiers were also killed, he said.
Pakistan’s Information Minister Attaullah Tarar on Thursday said his country’s armed forces had killed 40 to 50 Indian soldiers along the Line of Control. Pakistani military also claimed to have shot down five Indian fighter jets and inflected heavy losses on Indian military installations by targeting 26 locations in India.
The Associated Press couldn’t independently verify the claims made by India and Pakistan.
Air Chief Marshal AK Bharti, the director general India’s air operations told a news conference on Monday that despite “minor damage (s) incurred, all our military bases and air defense systems continue to remain fully operational, and ready to undertake any further missions, should the need so arise.”
Bharti reiterated that New Delhi’s fight was “with terrorists, and not with Pakistan military or its civilians.”
Trump says used US trade ties to persuade India, Pakistan on ceasefire
- India and Pakistan last week used fighter jets, drones, missiles and artillery to attack each other in the worst fighting between them in decades
- The two countries reached an understanding to stop all military actions on land, in the air and at the sea on Saturday in a US-brokered ceasefire
ISLAMABAD: President Donald Trump said on Monday he had used United States (US) trade ties with India and Pakistan to persuade the nuclear-armed nations to back off from further military confrontation and agree to a ceasefire.
India and Pakistan reached an understanding to stop all military actions on land, in the air and at the sea on Saturday in a US-brokered ceasefire to cease escalating hostilities that had spiraled alarmingly, threatening regional peace.
The two sides used fighter jets, drones, missiles and artillery to attack each other in the worst fighting between them since the 1999 Kargil war, leaving around 70 people dead on both sides of the border.
Speaking at an event at the White House, Trump said the countries ended hostilities for a lot of reasons “but trade is a big one,” adding that Washington was already negotiating a trade deal with India and would soon start negotiating with Pakistan.
“On Saturday, my administration helped broker a full and immediate ceasefire, I think a permanent one, between India and Pakistan, ending a dangerous conflict of two nations with lots of nuclear weapons. They were going at it hard and heavy, and it was seemingly not going to stop,” he said.
“I said, ‘Come on, we are going to do a lot of trade with you guys. Let’s stop it. Let’s stop it. If you stop it, we will do trade, if you don’t stop, we are not going to do any trade.’ People have never really used trade the way I used it.”
While Trump thought his administration had brokered a permanent ceasefire between India and Pakistan, Indian Prime Minister Narendra Modi said in a Monday evening speech India had only “paused” military action against Pakistan.
Pakistan will have to get rid of its “terrorist infrastructure” if it wants to be “saved,” Modi said in his first comments since the ceasefire.
“I will tell the global community also, if we talk to Pakistan, it will be about terrorism only...it will be about Pakistan-occupied Kashmir,” Modi said, referring to Azad Kashmir.
Pakistan and India have a history of bitter relations and both countries have fought three wars, two of them over the disputed region of Kashmir. Last week’s military conflict between them was also triggered by a militant attack in Indian-administered Kashmir that killed 26 tourists on April 22.
India struck multiple Pakistani cities on Wednesday, blaming the April 22 attack on Pakistan. Islamabad denied any complicity in the assault and reciprocated with similar strikes against Indian military targets.
Modi’s comments came a day after Pakistan said its response to Indian strikes was a “great example” of the coming together of all elements of Pakistan’s national power, warning of a similar response to any future attempts to challenge the country’s sovereignty and integrity.
“No one should have any doubt that whenever our sovereignty would be threatened and territorial integrity violated, the response would be comprehensive, retributive and decisive,” Pakistani military spokesman Lt Gen Ahmed Sharif Chaudhry said at a presser.
On Sunday, Trump also said he would try to work with both India and Pakistan to see if they can resolve their dispute over Kashmir.
“I will work with you both to see if, after a ‘thousand years,’ a solution can be arrived at concerning Kashmir,” Trump wrote on his social media platform, Truth Social, referring to India and Pakistan.
India has for years insisted Kashmir is a bilateral issue and not allowed any third-party mediation.
Pakistan stocks record single-day gain, bonds rally after ceasefire with India, IMF tranche approval
Pakistan stocks record single-day gain, bonds rally after ceasefire with India, IMF tranche approval
- Pakistan and India last week traded air, ground and drone strikes, leading to aggressive selloffs by investors
- On Monday, Pakistani rupee marked first gain since the start of May as Pakistan’s dollar bonds rose 5.7 cents
KARACHI: Pakistan’s stocks rose more than 9 percent, the highest single-day gain in decades, and its international bonds rallied on Monday, analysts said, following a ceasefire with India and the approval of $1 billion tranche by the International Monetary Fund (IMF).
The Pakistan Stock Exchange (PSX) suffered losses in the last three sessions since India struck multiple Pakistani cities with missiles on Wednesday. Pakistan responded with fighter jet, drone and artillery strikes and four days of conflict between the two sides came to a halt on Saturday evening after the United States announced a surprise ceasefire.
On Monday, the benchmark KSE-100 index rose by 9.45 percent, or 10,123 points, to close at 117, 297 points, compared to Friday’s close of 107,174 points. The country’s currency and international bonds also surged, paring their losses since tensions rose with India over an attack in Indian-administered Kashmir on April 22.
“The highest single-day gain in almost three decades comes after the ceasefire announcement of India and Pakistan,” Shankar Talreja, head of research at Karachi-based Topline Securities brokerage firm, told Arab News.
The KSE-30 index, which includes the top 30 most liquid companies, increased about 9.7 percent during the intraday trade, forcing the bourse to halt trading at 9:37am Pakistan time for an hour.
The geopolitical tensions had led to aggressive selloffs and fueled widespread investor concerns at the bourse which lost more than 12 percent between April 22 and May 8.
Monday’s rally triggered the upper circuit breaker for the second time in the PSX’s history since July 2023, according to Adnan Sami Sheikh, an analyst at Pakistan Qatar Investment Company Ltd. The otherwise risk-averse investors went on a buying frenzy primarily on the back of a US-brokered ceasefire agreement between India and Pakistan.
“Local individual investors who had been net sellers in the recent past were aggressive buyers,” Talreja said, adding that according to Bloomberg-compiled data, PSX had become the world’s third best performing stock index over the last one year.
The other factor behind Monday’s rally was the IMF’s approval of $1.4 billion loan to Pakistan under its climate resilience fund, and the release of a $1 billion as part of the country’s $7 billion bailout program secured in Sept. last year, taking the total disbursements under the program to $2.1 billion, according to analysts.
The much-awaited inflows will boost the cash-strapped nation’s foreign exchange reserves, which Islamabad seeks to increase to $14 billion by June. The IMF, which the once-near-default Islamabad has visited frequently in recent years, wants Pakistan to hold enough dollars for at least three months of imports.
PAKISTANI RUPEE AND BONDS
Pakistan’s currency marked the first gain in the last seven sessions this month and rose 0.1 percent, with the US dollar closing at Rs281.57, according to the State Bank of Pakistan.
The rupee had devalued 0.3 percent since last month, when Pakistan’s now-de-escalating border tensions with India had first resurfaced.
The South Asian nation’s global bonds also rallied sharply and rose as much as 5.7 cents globally, Reuters news agency reported, citing Tradeweb data. Most of the bond maturities have clawed back the losses sustained since April 22.
“The investors are now perceiving lower country risk premium for Pakistan,” Talreja added.
Commenting on the developments, Pakistan’s finance adviser Khurram Schehzad said the South Asian nation has much more to offer.
He said positives like the IMF board’s approval, declining interest rate, spillover effect of a potential settlement of the US-China tariff issue, and Pakistan’s “measured and responsible” response in terms of narrative and the actions on ground against India have caught the attention of investors.
“Renewed investor confidence...enhanced IMF funding and support, renewed regional investor interest, one of the lowest inflation rates and stable currency parities in the region all position Pakistan for a more meaningful economic upside moving forward,” he said.
Four killed in car, gas tanker collision in Pakistan’s northwest
- Road accidents are common in Pakistan, where highways and roads are poorly maintained and traffic laws are widely ignored
- Last month, a speeding truck carrying laborers, women and children fell into a ravine in Sindh, killing at least 13 people
ISLAMABAD: At least four people were killed on Monday when a car collided with a gas tanker in Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province, the provincial rescue service said.
The collision took place in Daraban area of KP’s Dera Ismail Khan district and the deceased included a nine-year-old child, according to a Rescue 1122 spokesperson.
The cause of the accident could not be immediately known.
“Bodies of all those killed were shifted to hospital,” the spokesperson said. “All deceased person hailed from Darazanda tehsil.”
Road accidents are common in Pakistan, where highways and roads are poorly maintained and traffic laws are widely ignored.
Last month, a speeding truck carrying laborers, women and children fell into a ravine in the southern Sindh province, killing at least 13 people and injuring 20 others, police said.
In Dec., at least 18 passengers were killed in two separate road crashes in Pakistan’s eastern Punjab and southern Sindh provinces, authorities said.
Pakistani textile industrialists expect Trump to cut export tariffs after India ceasefire
- President Donald Trump said he will “substantially” increase trade with Pakistan and India after the US brokered a ceasefire between both nations
- Pakistan industrialists say they support Washington’s efforts and remain committed to promoting peace through Pakistan-US trade-led engagement
KARACHI: Pakistani textile mill owners on Monday expressed their hopes that United States (US) President Donald Trump will reduce tariffs on Pakistan’s exports, in line with his announcement to “substantially” increase trade with Pakistan and India following a ceasefire between the two nations.
Trump’s announcement came a day after Washington brokered the ceasefire after four days of fighter jet, missile, drone and artillery strikes by India and Pakistan against the other, leaving nearly 70 people dead on both sides.
The US president has imposed a 10 percent baseline tariff on all imports to the US and higher duties on dozens of countries. Pakistan faces a 29 percent tariff due to a trade surplus with the US of about $3 billion, though the US last month announced a 90-day pause in reciprocal tariffs.
The All-Pakistan Textile Mills Association (APTMA) said Trump’s message was an “encouraging signal” for the future of US-Pakistan economic engagement, especially in the textile sector that serves as the backbone of Pakistan’s export economy.
“His statement is a timely recognition of the crucial role trade can play in this regard. The US remains Pakistan’s largest export destination, with textiles accounting for nearly 80 percent of total exports to the American market. Additionally, Pakistan is the second-largest importer of US cotton and has taken proactive steps to increase cotton imports in response to concerns over the trade imbalance,” APTMA said.
“In line with these increased imports, we expect the US to reduce existing and proposed tariffs on Pakistan’s exports, thereby enhancing market access and unlocking greater trade opportunities.”
Trump said on Sunday he would try to work with both India and Pakistan to see if they can resolve their dispute over Kashmir, which had been divided between India and Pakistan but claimed in full by both.
The two countries have fought two of their three wars over the region, while last week’s military conflict between them was also triggered by a militant attack in Indian-administered Kashmir that killed 26 tourists on April 22.
“While not even discussed, I am going to increase trade, substantially, with both of these great Nations,” Trump wrote on his social media platform, Truth Social, referring to India and Pakistan.
“Additionally, I will work with you both to see if, after a ‘thousand years,’ a solution can be arrived at concerning Kashmir,” he added.
APTMA said it supports international efforts, particularly those led by the US, aimed at fostering lasting peace in South Asia, including the resolution of long-standing disputes through dialogue and mutual understanding.
“We recognize that economic cooperation and regional stability are deeply interconnected and remain committed to promoting peace through trade-led engagement,” it said.
“Building on this momentum, we look forward to strengthening a resilient and mutually beneficial US-Pakistan trade partnership, grounded in respect, national sovereignty, and shared economic goals.”
