KARACHI: The International Monetary Fund’s (IMF) $3 billion bailout deal will provide much-needed fiscal space to Pakistan but not solve the country’s long-term problems, financial experts and economists said on Saturday.
Subject to the IMF’s board approval in July, the stand-by arrangement (SBA) provides breathing space to a Pakistani economy staring at default and in dire need of external financing. The staff-level pact was announced a day before Pakistan’s previous $6.5 billion loan program with the IMF expired.
Cash-strapped Pakistan will get $1.1 billion in funds under the new financing arrangement right after the IMF’s board meeting in mid-July. The new deal provides Pakistan more than the $2.5 billion disbursement it expected to receive under the Extended Fund Facility (EFF) program that concluded incompletely on June 30, 2023.
“The SBA provides some much-needed space to the Pakistani economy and will most certainly dampen near-term uncertainty,” Uzair Younus, director of the Pakistan Initiative at the Washington-based think tank, the Atlantic Council, told Arab News.
“However, the economy remains in a precarious situation and the government has to try and sort out some of the major issues in the energy sector, reduce distortion in the exchange rate market, and adopt a policy framework that doesn’t just burn the external financing the country has unlocked to achieve near-term political objectives.”
Economists say the deal will only offer Pakistan short-term respite.
“It will not solve long-term problems of paying on average around $25 billion per year for the next three years,” Dr. Ikram ul Haq, a Lahore-based senior economist, told Arab News.
The new deal came through after Finance Minister Ishaq Dar revised the federal budget the government passed on June 9, 2023. Dar increased Pakistan’s revenue collection target to Rs9.415 trillion ($33 billion) and put total spending at Rs14.480 trillion ($51 billion), increasing the petroleum levy from Rs50 to Rs60 per liter.
Authorities have taken Rs215 billion ($752 million) additional tax measures, cut Rs85 billion expenditures, hiked allocations under the social safety Benazir Income Support Program (BISP) by Rs16 billion, and withdrew amnesty on foreign exchange inflows, while the central bank jacked up policy rate by 1 percent to record high at 22 percent in an emergency meeting.
Economists said the high cost of the IMF bailout package would be borne by the masses rather than the elite.
“The key to success of SBA and next program will be structural reforms that is Waterloo of our elites,” Haq said, adding that “the real victims will be masses who will pay higher indirect taxes and bear high cost of utilities as has happened under previous program.”
For now, the SBA has had a positive impact on local and international investors’ confidence, with Pakistan’s sovereign dollar bond, maturing in 2024, gaining its value as fears of default subsided.
“Significant upward movement in bond prices demonstrates growing optimism among investors regarding Pakistan’s ability to address its economic challenges and implement necessary reforms under the IMF-supported program,” Tahir Abbas, head of research at Arif Habib Limited told Arab News.
Pakistani analysts and currency dealers expect that the country’s capital markets may rally from next week in response to positive the development, which would unlock further funding from bilateral and multilateral partners.
Malik Bostan, president of the Exchange Companies Association of Pakistan (ECAP) hoped the IMF deal would help Pakistan’s national currency regain its lost value.
“The rupee is expected to recover about Rs5 to Rs10 on the opening day of trading and will further strengthen by Rs10 to Rs20 with the inflow of funds,” Bostan told Arab News. “Those hoarding dollars for gains will not suffer losses if they don’t come out to sell.”
IMF’s $3 billion bailout deal will not solve Pakistan’s long-term problems, say experts
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IMF’s $3 billion bailout deal will not solve Pakistan’s long-term problems, say experts
- Economists say IMF agreement provides much-needed space to Pakistani economy, will dampen near-term uncertainty
- Pakistani rupee to recover by Rs10-20 against the US dollar when the IMF funds are received, says currency dealer
Gaza in the spotlight during Pakistani PM’s regional diplomacy tour
- Sharif is on regional diplomacy tour of Iran, Turkiye, Azerbaijan and Tajikistan
- Sharif has consistently spoken up for people of Gaza while visiting each country
ISLAMABAD: The leaders of Pakistan, Turkiye, and Azerbaijan met on Wednesday at a trilateral summit in Lachin and called for a permanent ceasefire in Gaza, saying Israel’s war on the besieged enclave was the clearest example of the “crisis of legitimacy” of the international system.
The trilateral summit was addressed by Pakistan’s Prime Minister Shehbaz Sharif, Turkish President Recep Tayyip Erdogan and Azerbaijan’s President Ilham Aliyev.
“In these days of deepening polarization and increasing blockization, we are witnessing the international system gradually drifting into a crisis of legitimacy,” Erdogan said during his speech.
“The clearest example of the crisis of the international system is Israel’s relentless cruelty and expansionist policies in Palestine.”
He said countries like Turkiye and Pakistan would continue defending the rights of the people of Gaza.
“We call on the entire world from here [trilateral summit] to increase pressure on the Israeli administration for establishing a permanent ceasefire in Gaza and for taking uninterrupted emergency humanitarian aid into Gaza,” the Turkish leader added.
Earlier, Sharif had also called for an “immediate ceasefire” in Gaza and access to “unimpeded humanitarian aid” for its people.
“They also expressed deep concern over the grave humanitarian situation in Gaza, urgently calling for an immediate ceasefire and unimpeded humanitarian access to the affected Palestinian population,” Sharif’s office said after he met Erdogan.
Israel launched its latest air and ground war in Gaza after a cross-border attack by the Hamas group on October 7, 2023, which killed 1,200 people by Israeli tallies, with 251 hostages abducted into Gaza. The war has killed more than 53,900 Palestinians since, according to Gaza health authorities, and devastated the coastal strip.
The entire 2.1 million population of Gaza is facing prolonged food shortages, with nearly half a million people in a catastrophic situation of hunger, acute malnutrition, starvation, illness and death, according to the World Health Organization.
Food security groups say more than 93 percent of children in Gaza, about 930,000, are at risk of famine. Using satellite data, the United Nations estimated in February that 69 percent of the structures in Gaza have been damaged or destroyed.
Islamabad says Kuwait has lifted 19-year visa ban on Pakistanis
- Kuwait stopped issuing visas to Pakistanis citing difficult security conditions
- Pakistan and Kuwait are in the advanced stages of finalizing a new labor MoU
ISLAMABAD: The government of Pakistan confirmed this week Kuwait had lifted a 19-year-long ban on visas for Pakistani citizens and would resume issuing work, family, visit, tourist, and business visas.
Kuwait had stopped issuing visas to citizens of Pakistan, Iran, Syria and Afghanistan, citing difficult security conditions in the countries.
“Kuwait has lifted 19-year visa ban on Pakistani citizens, resuming the issuance of work, family, visit, tourist, and business visas, a major diplomatic achievement and a step toward deeper bilateral cooperation,” the government of Pakistan announced on its official X account.
“This landmark decision paves the way for enhanced people-to-people contact, workforce opportunities, and stronger economic ties between the two nations.”
In May 2021, Kuwait decided to resume granting visas to Pakistani families and businessmen. It was also decided during the meeting that Kuwait would issue technical visas for Pakistani workers in the medical and oil fields.
Pakistan’s ambassador to Kuwait Dr. Zaffar Iqbal issued a statement on the resumption of visas.
“Community members have already begun receiving approvals, marking a positive step forward,” he said.
Separately, the ambassador said Pakistan and Kuwait were in the advanced stages of finalizing a new labor memorandum of understanding (MoU).
Pakistan established diplomatic relations with Kuwait in October 1963.
At trilateral summit, Pakistan, Turkiye and Azerbaijan pledge to work for ‘strategic partnership’
- Pakistani PM is on regional diplomacy tour to Iran, Turkiye, Azerbaijan and Tajikistan
- Turkiye and Azerbaijan openly pledged support for Pakistan during latest India conflict
ISLAMABAD: The leaders of Pakistan, Turkiye and Azerbaijan met on Wednesday at a trilateral summit in Lachin and pledged to work together for the goal of economic development and regional prosperity and to turn their brotherhood into a “strategic partnership.”
Pakistan’s Prime Minister Shehbaz Sharif arrived in Azerbaijan on Tuesday on the third stopover of a five-day regional diplomacy tour that also saw him visit Iran and Turkiye. Turkiye is a longtime ally of Pakistan, while Baku and Islamabad have moved closer in recent years with a flurry of visits and bilateral agreements.
Turkish President Recep Tayyip Erdogan and Azerbaijan’s President Ilham Aliyev had openly pledged support for Pakistan during its latest military confrontation with archrival India earlier this month.
“I am confident that our time-tested relationship would not only be beneficial for the wellbeing of our own people but also contribute to peace and prosperity in the region and beyond,” Sharif said during his address at the summit.
“This trilateral format is both very timely and of great importance and … gives us the necessary political ownership and the impetus to move forward collectively and in unison in all spheres of our common interest.”
Addressing the summit, the president of Azerbaijan said the three leaders had come together for the “strategic development” of their countries and to work on “shared goals.”
“Political, valid economic, energy, mutual investment, transportation, defense, agriculture, information, technology, and other spheres are the ones where there are ample opportunities to advance cooperation through joint projects,” Aliyev said, adding that Azerbaijan had invested over $20 billion in the Turkish economy and was prepared to invest $2 billion into Pakistan’s.
He also said Azerbaijan envisaged closer cooperation with Pakistan’s defense industry.
“We do believe there is great potential and it’s of great importance. Joint military exercises and projects in the defense industry amplify the potential of our armed forces or defense cooperation ensures peace and stability across a vast geography,” Aliyev said.
There have been widespread reports in recent weeks that Azerbaijan may have dramatically increased its procurement from Pakistan of JF-17 “Thunder” light multirole fighter aircraft from an initial 16 units to a staggering 40, in a deal reportedly valued at $4.2 billion.
The aircraft in question are said to be the latest and most advanced iteration of the JF-17 family— Block III— a 4.5-generation fighter co-developed by Pakistan and China and hailed as one of the most cost-effective combat aircraft in the current global market.
“STRATEGIC PARTNERSHIP”
Speaking at the summit, Erdogan said the three countries had a combined population of approximately 350 million and an economic size of $1.5 trillion.
“I would like to particularly emphasize that we stand behind each and every step toward transforming our relations into a strategic partnership,” he said.
“Our foreign ministers will carry out the required work to institutionalize our trilateral cooperation, and they will prepare a strong framework that reflects the common vision of our countries, particularly in the fields that shape our common agenda such as trade, investments, transportation, energy, defense, industry, and the fight against terrorism.”
He said Turkiye, Azerbaijan and Pakistan would institutionalize their cooperation by holding regular trilateral summits and ministerial meetings.
“We will deepen our cooperation in the field of defense and maintain our common commitment to fight against terrorism and against transnational threats,” the Turkish president said.
“We will aim to take joint steps in the fields of trade facilitation, investment promotion and digital transformation. In the field of transportation, which constitutes a quite strategic dimension of our cooperation, we will jointly contribute to projects such as the development of roads, the Middle Corridor and the North South Transport Corridor.”
The Middle Corridor, also known as the Trans-Caspian International Transport Route, is a major trade route connecting China to Europe. It passes through several countries, including Türkiye, Georgia, Azerbaijan, and Kazakhstan, offering an alternative to the Northern Corridor and the Suez Canal. Türkiye plays a significant role in the Middle Corridor, particularly at the European end, and has invested in infrastructure to improve its connectivity to Central Asia and Europe.
The International North–South Transport Corridor (INSTC) is a 7,200-kilometer multi-modal transportation network that connects India, Iran, Azerbaijan, and Russia, with routes also extending to Central Asia and Europe. It utilizes ship, rail, and road routes to facilitate the movement of freight between these countries.
At least 22 wounded in drone strike in northwestern Pakistani district — officials
- Suspected drone strike killed four children in North Waziristan earlier in May, prompting province-wide protests
- In latest incident, unidentified quadcopter detonated explosive device in Azam Warsak town in South Waziristan
PESHAWAR: At least 22 people, including children, were wounded in a suspected quadcopter attack near a volleyball ground in Pakistan’s northwestern South Waziristan district, police said on Wednesday, adding that it was unclear who was behind the assault.
Earlier this month, a suspected drone strike killed four children and wounded five others in North Waziristan district in the Khyber Pakhtunkhwa province, prompting thousands of residents to stage a protest by placing the children’s bodies on a main road to demand justice. It wasn’t immediately clear who was behind the May 5 attack in the town of Mir Ali, which has been a stronghold of the Pakistani Taliban in the past.
In the latest incident, Lower South Waziristan police spokesperson Habib Islam told Arab News an unidentified quadcopter drone detonated an explosive device on Tuesday evening in the town of Azam Warsak.
The blast occurred just before sunset as residents, including children, were playing a volleyball game nearby, leaving approximately two dozen civilians wounded.
“The origin and operators of the drone remain undetermined at this stage,” Islam said.
“A comprehensive joint investigation involving security forces and civilian authorities is currently underway to establish the chain of command behind this attack. We will pursue all evidentiary leads to conclusively identify and bring the perpetrators to justice.”
Dr. Jan Muhammad Shinwari, the Medical Superintendent at Wana’s District Headquarters Hospital (DHQ) in South Waziristan, said 22 injured had been admitted to the facility.
“Most of the injured have now been discharged after being provided medical treatment,” Shinwari told Arab News. “Two of the children were referred to the adjacent Dera Ismail Khan hospital who were now said to be in stable condition.”
Zubair Wazir, a Member of the National Assembly (MNA) from the South Waziristan district, called the drone strike “a tragic development.”
“It was brutal, inhumane and senseless,” he told Arab News, condemning the killing of civilians on Pakistani soil.
“We hold the government responsible for the deaths of innocent people attacked while playing volleyball. This time, we will launch a forceful protest to prevent such incidents from recurring.”
Wazir said he had held a series of meetings with top security and civil officials, who assured him a thorough investigation would be conducted and those responsible held accountable.
Local elder Saleh Jan called the attack a “flagrant human rights violation.”
“This attack has poured fuel on the fire of local anger. We are trapped in a nightmare, helpless, with no clear path to stop these atrocities,” he said. “Who will answer for our safety? Who will shield us from the next strike?”
There have been civilian casualties in military strikes in some parts of the country in recent years. In March, 11 people, including women and children, were killed when a drone attack targeted a house in the northwestern city of Mardan.
A statement by the provincial government at the time had only said that there was “collateral damage” in an operation that was conducted to target militants in a remote village. Residents in March also rallied until the government agreed to compensate the victims’ families.
Officials say militants have also been using quadcopters to target troops, but it was still unclear who was responsible for the drone attacks in Mir Ali and Azam Warsak.
The latest civilian casualties came amid ongoing military operations against the Pakistani Taliban, which have a strong presence in the northwestern Khyber Pakhtunkhwa province bordering Afghanistan. The Pakistani Taliban, known as Tehreek-e-Taliban Pakistan, are a separate insurgent group from the Afghan Taliban, and they often target troops in the region.
Several districts in KP, especially North and South Waziristan, were long a base for the Pakistani Taliban and other militant groups. The TTP have stepped up attacks in the region in recent months.
With inputs from AP
Pakistan says Modi’s ‘weaponizing’ of water against international norms, its own global ambitions
- Modi has upped rhetoric in standoff over water access triggered by militant attack in Indian-administered Kashmir
- Pakistan has said any attempt by India to stop or block the flow of its waters would be seen as an “act of war“
ISLAMABAD: Pakistan’s Foreign Office said on Thursday Indian Prime Minister Narendra Modi’s most recent remarks “weaponizing” the waters of the Indus river were against international norms and exposed the “stark contrast” between India’s conduct in the region and its declared global ambitions.
Modi on Tuesday upped the rhetoric in a standoff over water access triggered by a deadly attack in Indian-administered Kashmir in April in which 26 tourists were killed. New Delhi said Islamabad was behind the attack — a charge it denies — and announced a raft of punitive measures including unilaterally suspending the 1960 Indus Waters Treaty.
Any move to stop Pakistan accessing the water would have a devastating impact. The Indus treaty, negotiated by the World Bank in 1960, guarantees water for 80 percent of Pakistan’s farms from three rivers that flow from India.
The nuclear-armed neighbors have already clashed in their worst military fighting in nearly three decades before agreeing to a ceasefire on May 10.
“His [Modi] references to weaponizing water, a shared, treaty-bound resource, reflect a troubling departure from international norms and a stark contrast between India’s conduct in the region and its declared global ambitions,” the foreign office said in a statement.
“Pakistan urges India to return to the core principles of international order including respect for sovereign rights of others and its treaty obligations, as well as restraint in both language and action.”
The foreign office said such “jingoism” by Modi would undermine long-term peace and stability.
“India’s youth, often the first casualty of chauvinistic nationalism, would do well to reject the politics of fear and instead work toward a future defined by dignity, reason, and regional cooperation.”
Modi on Tuesday amplified the resolve to use water from the Indus river system for India, saying provisions of the “badly negotiated” Indus Waters Treaty were prejudicial to the interests of the country and did not even let it use the waters earmarked for it.
Calling out “decades of silence” over the treaty, he said it had left Indian-administered Kashmir’s dams clogged and crippled.
Pakistan’s Attorney General, Mansoor Usman Awan, said earlier this month India had written to Pakistan in recent weeks citing population growth and clean energy needs as reasons to modify the treaty. But he said any discussions would have to take place under the terms of the treaty.
Islamabad maintains the treaty is legally binding and no party can unilaterally suspend it, Awan said.
“As far as Pakistan is concerned, the treaty is very much operational, functional, and anything which India does, it does at its own cost and peril as far as the building of any hydroelectric power projects are concerned,” Awan told Reuters.
India and Pakistan have shared a troubled relationship since they were carved out of British India in 1947, and have fought three wars, two of them over the Himalayan region of Kashmir, which they both claim in full but rule in part.
India accuses Islamabad of backing separatists in Kashmir, a claim it denies, in turn accusing New Delhi of backing separatist and other insurgents in Pakistan.
