Business

Pakistan’s debt, liabilities climb 23.7% in first quarter of FY23

Published

1 year ago

Farwa

Total debt and liabilities climb by Rs12 trillion.
Total amount has reached a whopping Rs62.46 trillion.
Analysts cite delay in IMF tranche, rupee depreciation.

KARACHI: Pakistan’s total debt and liabilities have climbed by Rs12 trillion or 23.7% in the first quarter of the current fiscal year, with analysts saying a delay in loan tranche from the International Monetary Fund (IMF) and devaluation of the rupee pushed the numbers up significantly.

The debt and liabilities stood at Rs62.46 trillion in July-September FY2023, compared with Rs50.49 trillion in the same period of last fiscal year, the central bank data showed on Wednesday.

The country’s debt rose 24.7% to Rs59.37 trillion, while total liabilities increased 23% to Rs3.56 trillion.

Fahad Rauf, head of research at Ismail Iqbal Securities said the increase in the debt was mainly coming from external sources. “Mostly the IMF loan tranche of $1.2 billion and the impact of the rupee depreciation on overall external debt.”

The government’s domestic debt increased by 18.7% to Rs31.40 trillion. The foreign debt stood at Rs17.99 trillion in July-September FY2023, 30.2% up from a year earlier, according to the figures from the State Bank of Pakistan (SBP).

Total external debt and liabilities jumped 33.4% to Rs28.94 trillion.

“Managing debt obligations is one of the biggest challenges facing the government,” said Mustafa Mustansir, head of research at Taurus Securities.

He said debt servicing was one of the reasons for the rise in the country’s debt, including the rising fiscal and external obligations. “The rupee depreciation affects external borrowing costs. Similarly, local borrowing costs rise when the policy rate increases.”

The State Bank of Pakistan’s (SBP) data also showed that public debt fell to Rs49.4 trillion at the end of September from Rs49.5 trillion a month ago. The debt rose by Rs9.1 trillion or 22.7% year-on-year in September.

Pakistan’s five-year credit default swap (CDS), the cost of insuring exposure to the country’s sovereign debt, surged to 7,550 basis points (bps) on Tuesday, up 1,929 bps from Monday’s close, according to data from Arif Habib Limited.

During the current week, the government’s CDS level remained high on investors’ concerns that the country might not fulfil its commitment to repay creditors $1 billion because the Sukuk is set to mature on December 5, 2022.

“Pakistan will likely make payment on maturity as it is in the IMF programme,” according to an analyst.

Complications, concerns

However, there are concerns about the conclusion of the ninth review of the IMF’s bailout package.

Although the date has not yet been set, the IMF staff mission is anticipated in Islamabad by the end of the current month because the Fund needs Pakistan to make necessary modifications first.

The government is requesting some exceptions on performance criteria due to flood losses and the Fund’s insistence on maintaining the agreed tax-to-GDP ratio of at least 11%.

The delay in the IMF’s review is making foreign investors more anxious.

The situation seems more complicated as the country is facing many difficulties, including political unpredictability, threats to exports and remittances as a result of the global economic recession, and significant gross financing requirements in the years to come.

“These risks alongside rating downgrades have worsened the perception among investors. Hence the increase in default spreads,” the analysts said.

The country’s external debt and liabilities inched down to $126.9 billion as of September 30, 2022, from $127 billion a year ago.

Due to the repayment of foreign debt, the nation is anticipated to experience significant potential outflows during the current quarter, which might put pressure on both the foreign currency reserves and the currency.

Business

Over 500 points are lost by PSX stocks during intraday trading.

Published

4 hours ago

Farwa

The market saw a bearish trend as it dropped more than 500 points, just hours after Pakistan’s Stock Exchange (PSX) reached a new milestone by reaching the 73,000 mark.

As compared to the previous close of 72,742.75 points, the KSE-100 index dropped to 72,177.22 points, or 565.52 points, or 0.78% lower.
Expectations of an interest rate drop of up to 100 basis points during today’s Monetary Policy Committee (MPC) meeting, according to Intermarket Securities director of research CFA Muhammad Saad Ali, are driving market confidence.

The market is also being driven, he continued, by favourable news flow on upcoming negotiations with the International Monetary Fund (IMF) for a new programme.

Last Friday, the late-session purchasing fueled a 1% advance in the stocks, which helped them close close to 73,000 points. Dealers reported this.

Closed at 72,742.75 points on Friday, the benchmark KSE-100 index saw a gain of 771.35 points, or 1.07%.

Notwithstanding the turbulent session, according to Chase Securities analyst Muhammad Rizwan, “the market rebounded with a strong start and achieved a new all-time high.”.

“This impressive performance was driven by significant contributions from various sectors: fertiliser added 386 points, commercial banks contributed 174 points, the power sector provided 112 points, and cement added 93 points, collectively reversing the previous negative close and boosting market sentiment.”

Business

Despite global tides, Pakistan’s economy is recovering, according to Governor SBP

Published

4 hours ago

Farwa

Ahmad, who was speaking at the ICMA Pakistan Members Convocation, emphasised the country’s economy’s outstanding development while also highlighting the difficult macroeconomic environment of the previous year, which was marked by rising inflation, depleting foreign exchange reserves, pressure on exchange rates, and increased uncertainty.

Nonetheless, in the present times, the PKR has stabilized and the stock market is rising to unprecedented heights, reserves have increased to around US$8 billion despite large debt repayments, and inflation is dramatically decreasing.

Ahmad gave the government and SBP credit for their unwavering commitment to addressing macroeconomic difficulties head-on for this reversal.

Ahmad emphasized that the government’s efforts to reduce spending and achieve fiscal consolidation, together with the need for unpopular but necessary actions like the SBP’s increase of the policy rate to 22%, are producing beneficial results.

As global shocks like climate change, technology improvements, and cyber threats become more complex, he emphasises the significance of new viewpoints and creative solutions in tackling long-standing economic concerns.

Congratulating the graduating accounting professionals, Ahmad emphasized the importance of having a thorough understanding of accounting, finance, and economics in order to create workable solutions. He also urged the professionals to take a proactive approach to addressing new difficulties.

Ahmad emphasized the value of leadership abilities in policymaking and urged graduates to positively impact Pakistan’s economic landscape by working hard, being devoted to excellence, and contributing their full effort.

Along with giving a hearty welcome to Governor Jameel Ahmad and other SBP dignitaries, ICMA Pakistan President Shehzad Ahmed Malik also praised the SBP team’s efforts to stabilize the currency. With that, Ahmad presented the graduating CMAs with their degrees.

Business

The IMF board is anticipated to approve Pakistan’s $1.1 billion payout today.

Published

4 hours ago

Farwa

The IMF executive board meeting is scheduled to go until May 3, according to specifics. Based on the sources, it is expected that the international lender will approve Pakistan’s $1.1 billion payout today.

The State Bank of Pakistan is anticipated to obtain the final tranche from the IMF tomorrow, following approval, they added.

On July 12, 2023, Pakistan took advantage of a $3 billion loan package offered by the International Monetary Fund (IMF).

Thus far, Pakistan has been granted two installments totaling $1.9 billion: $1.2 billion in July and $700 million in January 2024.

On the last assessment of a $3 billion loan plan, Pakistan and the International Monetary Fund (IMF) came to a staff-level agreement last month.

Following their week-long visit to Islamabad, which ended on March 19, the IMF delegation made the announcement.

Global lender expressed its optimism that the incoming caretaker administration and central bank of Pakistan would persist in their efforts to stabilize the country’s economy, complimenting them on their “strong program implementation.”

In order to further solidify economic and financial stability, the new government is dedicated to carrying out the policy initiatives that were initiated under the existing Stand-By Arrangement for the balance of this year, the IMF official stated.

In June of last year, the IMF granted Pakistan’s economic stabilization program support through a critical nine-month agreement.