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‘IMF giving Pakistan tough time’: Dollar soars to historic high of Rs279 after PM’s comments

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The rupee on Friday plunged to a historic low against the dollar after Prime Minister Shehbaz Sharif’s said that the International Monetary Fund (IMF) is giving Pakistan “a tough time” — as the lender wants the government to do more on the economic front.

“As we speak, an IMF delegation is in Islamabad [holding parleys on loan programme] and giving a very tough time to the finance minister and his team,” the prime minister said while speaking at the Apex committee meeting in Peshawar, and termed the economic challenges “unimaginable”.

Following the PM’s comments, the local currency depreciated further against the greenback in the interbank market.

During intra-day trade, the rupee was changing hands at 279 against the dollar at 12:48pm, according to the Exchange Companies Association of Pakistan (ECAP), up from Rs271.35 a day earlier.

Analysts have stressed that the country needs the Washington-based lender’s bailout programme to avoid default — a threat that has been looming over Islamabad for some months now.

AA Commodities Director Adnan Agar told Geo.tv that the rupee’s downward spiral is expected till Pakistan secures a staff-level agreement with the Washington-based lender.

The analyst said that the market is reacting to the reports coming on the demands being put forward by the IMF to the government.

Agar warned that if the government fails to secure a staff-level agreement with the Fund, then the rupee will incur further losses.

“If the IMF deal is done timely then it would appreciate but not that much,” said Agar.

In a bid to curb the black market and meet IMF demands, the government and exchange companies removed the dollar cap — imposed to stabilise the dollar’s value.

But that did not have a substantial effect on the local currency as the investors remain wary due to a surge in terrorism and the decline in State Bank of Pakistan-held foreign exchange reserves — which now stand at just $3.08 billion and will provide an import cover of 18.5 days.

ECAP General Secretary Zafar Paracha told Geo.tv that when the dollar cap was removed, it was estimated that the rupee would hit 270 and rebound, however, circumstances changed.

“Our reserves are at their lowest in nine years and terrorism — which isn’t restricted to Peshawar — is also surging,” he said, explaining the reason behind investors’ lack of confidence in the government.

The ECAP general secretary added that the ongoing political turmoil was also adding to the country’s woes as opponents are being arrested every other day and being put behind bars.

Paracha added that the black market gap has been met to a certain extent, but since the government has not opened the letters of credit (LCs) for importers, it will persist.

“The government has asked the importers to arrange dollars on their own […] this is why the black market is still active. If this does not stop, the gap might even increase,” he warned, urging the authorities to move towards import rationalisation.

Paracha added that amid the terror threat and other underlying reasons, the exports have not released their payments yet, resulting in the scarcity of dollars in the market.

Pakistan-IMF talks

A day earlier the IMF rejected the government’s circular debt management plan. 

And today it was reported that the Fund has conveyed to the authorities to undertake substantial qualitative and sustainable tax and non-tax revenue measures to fetch additional revenues for filling the projected gap of Rs600 billion in the fiscal framework.

The IMF delegation has asked the government to jack up the Federal Board of Revenue’s (FBR) tax collection target to align it with the projected nominal growth in the current fiscal year mainly with the help of a surge in the CPI-based inflationary pressures.

The Fund seems ready for providing an adjuster on flood expenditures once the fiscal framework is finalised. But it will depend on how much expenditures could be occurred on floods both on the development and non-development side of the budget especially through disbursements of stipends through the Benazir Income Support Programme (BISP).

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Moody’s says the IMF programme will increase Pakistan’s foreign financing.

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Moody’s, a reputable international rating agency, has stated that Pakistan’s chances of acquiring funding will increase as a result of the recent agreement with the International Monetary Fund (IMF), which offers dependable sources for that purpose from both friendly countries and international financial institutions.

According to a recent Moody’s analysis on Pakistan’s economy, social unrest and tensions could result from Pakistan’s ongoing inflation. The country’s economic reforms may be hampered by increased taxes and potential changes to the energy tariff, it continued.

Moody’s, on the other hand, agrees that the coalition government headed by Shehbaz Sharif of the PML-N is in danger of failing to secure an election mandate, which may potentially undermine the successful and long-lasting execution of economic reforms.

The government’s capacity to proceed with economic changes may be hampered by societal unrest and poor governance, according to Moody’s.

In order to appease the IMF by fulfilling a prerequisite for authorising a rescue package, the government raised the basic tariff on electricity, which coincided with the most recent increase in fuel prices announced on Monday. This report was released by Moody’s.

Food costs have increased in the nation, where the vast majority is experiencing an unprecedented crisis due to the high cost of living, following the government’s earlier presentation of a budget that included a large increase in income tax for the salaried classes and the implementation of GST on commodities like milk.

The most recent comments were made following Islamabad’s achievement of a staff-level agreement for a $7 billion contract that spans 37 months and is contingent upon final approval by the IMF Executive Board.

It states that Pakistan will need foreign financing totaling about $21 billion in 2024–2025 and $23 billion in 2025–2026, meaning that the country’s present $9.4 billion in reserves won’t be sufficient to cover its needs.

Therefore, according to Moody’s, Pakistan is in an alarming position with regard to its external debt, and the next three to five years will be extremely difficult for the formulation and implementation of policies.

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Base Of bilateral relations: China And Pakistan Reiterate Their Support For CPEC

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China-Pakistan economic corridor is a major project of the Belt and Road Initiative, and both countries have reiterated their commitment to it. It remains a fundamental aspect of their bilateral relations.

Vice Chairman Zhao Chenxin of the National Development and Reform Commission of China and Minister Ahsan Iqbal of Planning and Development met in Beijing, where Ahsan Iqbal made this assurance.

The summit made clear how committed China and Pakistan are to advancing their strategic cooperative partnership in all weather conditions.

The focus of the discussion was on how the CPEC was going, with both parties reviewing project development and discussing how the agreement made at the leadership level will lead to the launch of an enhanced version of the CPEC.

In order to improve trade, connectivity, and socioeconomic growth in the area, they emphasised the need of CPEC projects.

The Ml-I Project, the KKH realignment, and the Sukkur-Hyderabad motorway—the last remaining segment of the Karachi-Peshawar motorway network—were all to be expedited.

Expanding the partnership’s horizons to include technology, innovation, education, connectivity, and renewable energy sources was another topic of discussion.

Specifically in the special economic zones being built under the Comprehensive Economic Cooperation (CPEX), Vice Chairman NDRC emphasised the possibility of China investing more in Pakistan.

In addition to expressing confidence in the ongoing success of the two nations’ collaboration, Zhao Chenxin reiterated China’s support for Pakistan’s development aspirations.

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Pakistani government raises petrol prices

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A recent announcement states that the price of petrol has increased by Rs 9.99 per litre, to Rs 275.60 per litre.

The cost of high-speed diesel has also increased significantly, rising by Rs 6.18 a litre. Diesel is now priced at Rs 283.63 a litre.

Furthermore, kerosene now costs Rs 0.83 more per gallon.

The cost of products and services is predicted to rise in response to the increase in petroleum prices, further taxing household budgets and jeopardizing the stability of the economy.

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