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Inflation in Pakistan could average 33% in first half of 2023, says Moody’s economist

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  • Economy needs persistent and sound economic management.
  • Consumer price index rose 27.5% year-on-year in January.
  • Current foreign exchange reserves barely cover 18 days worth of imports.

MUMBAI/ISLAMABAD: Inflation in Pakistan could average 33% in the first half of 2023 before trending lower, and a bailout from the International Monetary Fund (IMF) alone is unlikely to put the economy back on track, a senior economist with Moody’s Analytics told Reuters.

“Our view is that an IMF bailout alone isn’t going to be enough to get the economy back on track. What the economy really needs is persistent and sound economic management,” senior economist Katrina Ell said in an interview on Wednesday.

“There’s still an inevitably tough journey ahead. We’re expecting fiscal and monetary austerity to continue well into 2024,” she added.

Pakistan and the IMF could not reach a deal last week and a visiting IMF delegation departed Islamabad after 10 days of talks, but said negotiations would continue. Pakistan is in dire need of funds as it battles a wrenching economic crisis.

An agreement on the ninth review of the programme would release over $1.1 billion of the total $2.5 billion pending as part of the current package agreed in 2019 which ends on June 30. The funds are crucial for the economy whose current foreign exchange reserves barely cover 18 days worth of imports.

“Even though the economy is in a deep recession, inflation is incredibly high as (result of) part of the latest bailout conditions,” Ell said.

“So what we’re expecting is that through the first half of this year, inflation is going to average about 33% and then might trend a little bit lower after that,” she added.

The consumer price index rose 27.5% year-on-year in January, its highest in nearly half a century.

Low-income households could remain under extreme pressure as a result of high inflation on account of being disproportionately exposed to non-discretionary items.

“Food prices are high and they can’t avoid paying for that, so we’re going to see higher poverty rates as well feed through,” the economist said.

No overnight fix

Ell said Pakistan has not has a great track record when it comes to IMF bailouts, so infusing additional funds alone may prove to be of little use.

“If we’re going to see any improvement, it’s going to be very gradual. There’s just no overnight fix,” she said.

The weaker rupee, which is plumbing record lows, is adding to imported inflation while domestically high energy costs on the back of tariff increases and still elevated food prices is likely to keep inflation high.

Moody’s expects economic growth for the 2023 calendar year of around 2.1%.

“It is likely that we will see further monetary tightening in Pakistan to try and stabilise inflation and also with the weakness in the FX they might kind of intervene there to try and force in stability, but again it’s not going to be a silver bullet,” Ell said.

Last month, the central bank raised its key interest rate by 100 basis points (bps) to 17% in a bid to rein in persistent price pressures. It has raised the key rate by a total of 725 bps since January 2022.

With significant recession-type conditions in Pakistan, skyrocketing borrowing costs could really exacerbate domestic demand struggles, she said.

“You really need to see sustained sound macroeconomic management, and just injecting further funds in there without decent backing is not going to deliver the results that you’re looking for.”

Pakistan

Pakistan to ‘ascertain facts’ on Afghan minister using its passport

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  • Haqqani possessed a Pakistani passport until recently: report.
  • FO says the answer will come only after facts are ascertained.
  • US officials are set to visit Pakistan to discuss several matters.

ISLAMABAD: Pakistan said Thursday it will first ascertain facts before issuing a comment on a report that claims that Afghanistan’s acting Interior Minister Sirajuddin Haqqani possessed a Pakistani passport until recently.

In her weekly press briefing, Foreign Office (FO) spokesperson Mumtaz Zahra Baloch said: “I have seen the report on the use of a Pakistani passport by the Afghan minister. The matter will be answered after [ascertaining] the facts.”

A report published in The News today revealed that Haqqani was issued a Pakistani passport for five years which he used to travel abroad, particularly to Qatar for negotiations with the United States for the signing of the Doha Agreement that resulted in the latter’s exit from Afghanistan.

The publication, via the interior ministry officials, learnt that these passports were issued from different cities of Khyber Pakhtunkhwa, Balochistan, and Sindh.

Meanwhile, two passport officials involved in issuing Haqqani’s passport have been arrested, one of whom had retired from service by the time the action was initiated against him.

The issue around the minister using the Pakistani passport comes at a time when Pakistan continues to repatriate illegal foreigners, most of whom are undocumented Afghan migrants.

Baloch also briefed the presser about top officials from the United States visiting Pakistan this week.

“The focus of these visits is not only Afghanistan. These visits are related to the multifaceted aspects of Pakistan-US relations,” she said, adding that Pakistan has decided to talk to America.

Pakistan and the US will conduct consultations over several issues including the situation in Afghanistan, the FO said last week.

In the meetings between Pakistan and US officials, reservations of both sides will be discussed. “We will also discuss the issues on which we have objections.”

Updated list of Afghans from US

The spokesperson further shared that Pakistan has received an updated list from the American authorities regarding the transfer of Afghan nationals to the US.

Last month, a coalition comprising former high-ranking United States (US) officials and resettlement organisations issued an urgent appeal to Pakistan, urging it to not deport Afghan individuals applying to seek refuge in and visas for the US.

The appeal came weeks after Pakistan announced November 1 as the deadline for all undocumented migrants — a substantial number of whom are Afghans — residing in the country to either leave on their own or face expulsion once the ultimatum ends.

The population of the aforementioned migrants includes roughly 20,000 or potentially more Afghans, who escaped their homeland following the Taliban’s return to power in 2021. Many of these migrants in Pakistan are awaiting their applications for the US Special Immigration Visas (SIVs) or refugee resettlement in the United States to be processed.

Commenting on regular skirmishes at the Pakistan-Afghanistan border, the spokesperson said: “There are often misunderstandings between the border authorities. These misunderstandings are cleared through communication channels.”

She added that the Torkham border was opened for all kinds of traffic yesterday.

Israels’ ‘barbaric attacks’

The FO yet again condemned the continuous Israeli aggression in the Gaza Strip, stating that the situation in the Strip is rapidly deteriorating.

“No place in Gaza is safe for the public,” Baloch said.

The UN Security Council must perform its primary responsibility under the Charter, impose an immediate and unconditional ceasefire and protect the people of Gaza from an impending genocide, the FO spokesperson said.

“We call on Israel’s backers to urge Israel to end its barbaric attacks and inhumane siege against Gaza,” she added.

The spokesperson further stated that Pakistan calls for an international conference for long-term peace on the Palestinian question.

“Durable peace in the region will emerge from the internationally agreed two-state solution and from the creation of a secure, viable, contiguous, and sovereign state of Palestine on the basis of the pre-June 1967 borders, with Al-Quds Al-Sharif as its capital,” she said.

Baloch also spoke about the United Nations Secretary-General Antonio Guterres’s efforts for Palestinians.

The head of the UN warned that he expects “public order to completely break down soon due to the desperate conditions” in Gaza, currently under relentless Israeli bombardment and invoked Article 99 of the UN Charter for the first time in his tenure owing to the gravity of the humanitarian crisis in the Strip.

‘Pakistani citizens welfare top priority’

During the presser, Baloch commented on the recent revelations regarding Dr Aafia Siddiqui, a Pakistani neuroscientist jailed in the United States for over a decade.

According to her lawyer, the Pakistani doctor has been sexually assaulted at least two times during her incarceration.

“The statements related to Aafia Siddiqui are serious,” the spokesperson said.

She further added that Caretaker Prime Minister Anwaar-ul-Haq Kakar has instructed that the matter should be taken up with the US Department of State and investigations should be conducted.

“The welfare of Pakistani citizens is among our priorities,” Baloch reiterated.

She also spoke about the acid attack on former special assistant to the prime minister Shahzad Akbar last week.

“Shahzad Akbar did not seek help from the Pakistani High Commission in this regard,” she said.

The FO strongly rejected the allegations of involvement of Pakistani agencies in the incident. “Pakistan has faith in the British authorities’ investigation.”

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Bahawalpur Zoo closed after man mauled to death by lions

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  • CM Punjab forms committee to probe Bahawalpur incident.
  • Victim has not been identified yet; zoo closed till probe is completed.
  • Postmortem carried out at Bahawal Victoria Hospital.

LAHORE: Bahawalpur’s Sherbagh Zoo was closed till the investigations are completed into an incident in which the lions mauled a man to death, Curator Ali Usman Bukhari told Geo News Thursday.

Caretaker Chief Minister Punjab Mohsin Naqvi and Commissioner Bahawalpur have constituted separate committees to investigate the shocking development.

According to the zoo administration, the body has not been identified yet.

Meanwhile, the preliminary postmortem report, that was carried out at the Bahawal Victoria Hospital revealed that the man was ripped apart by the big cats. It further stated that the man attempted to defend himself but the animals mauled him to death.

The administration shared that it has yet to be figured out how the man was able to get inside the enclosure.

On Wednesday, a man was found dead inside the enclosure by staff carrying out routine cleaning.

The body was found after the staff spotted a shoe in the mouth of one of the big cats.

“When they cleaned the zoo and the dens, they found the (animal) holding a shoe in its mouth,” Zaheer Anwar, a senior government official in Bahawalpur, told the media.

“The staff got suspicious and then they found a body inside the den,” he said.

The official described the big cat using a word that in Pakistan can mean tiger or leopard, and both are believed to be housed inside the zoo.

“Our assessment so far is that this appears to be a lunatic, because a sensible person would not jump into the den,” Anwar said.

“You can see that the den is secured. There are stairs behind the den, maybe he jumped from there.

“(The) staff are all accounted for.”

Zafarullah, an official of the rescue service 1122 in Bahawalpur, told AFP that the victim’s legs had been heavily mauled.

“It is yet not known who he is and how he got there. It is being investigated. The body looked several hours old,” said Zafarullah, who goes by one name.

He said forensic experts were examining the body.

The zoo is run by Punjab’s wildlife department, according to its website, and costs adults 50 rupees (18 cents) to enter.

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Housing societies to get RLNG amid ban on new gas connections

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  • About 3.3 million applications currently pending with gas companies.
  • Local gas may cater to country needs for 6-7 years only.
  • New LNG terminal needed for RLNG supply to all applicants.

In a significant development, the government has decided to issue instructions to the northern and southern Sui gas companies to provide Re-Gasified Liquefied Natural Gas (RLNG) connections to all housing societies that are not currently connected with the natural gas distribution network.

The RLNG connections will be provided at the full price, which is estimated to be over $12 per MMBtu (Rs3700 per MMBtu), reported The News on Thursday.

It has been decided that the cost of RLNG connections, including transportation and distribution losses, will be fully recovered from the residents of the housing societies.

“About 200 housing societies require gas connections, but the government has asked them that local gas production has tumbled to just 3.2bcfd which is further dwindling at a fast pace and only RLNG can be provided to them. The local gas may cater to country needs for six to seven years only,” top officials of the Energy Ministry told The News.

About 3.3 million applications are currently pending with the gas companies which also include those applicants who reside in areas that are connected to gas transmission and distribution networks.

“We will not provide the RLNG connection to those who are connected with the existing gas distribution network as after getting the RLNG gas connection, consumers can take the gas companies to court on the grounds of discrimination in charges.”

If the government provides, the official said, the RLNG supply to all 3.3 million applicants, then it will have to import 800 mmcfd of gas for which a new LNG terminal is needed to import the LNG.

However, for housing societies with just 50,000 applicants, only 10-20 mmcfd RNLG is enough.

The officials said, “So we have decided to provide the RLNG at full price to the housing societies instead of local gas.

“There has never been a moratorium on the provision of RLNG to housing societies, but gas companies were under the wrong impression because of the moratorium imposed on local gas connections despite a decision by the federal cabinet in 2017 under which the ban on gas connections based on local gas was imposed, but not on RLNG connection.”

They said, “Now the Petroleum Division authorities have decided to issue clear directions to the gas companies to this effect so that they can start giving the RLNG gas connections to housing societies that are not connected to the existing distribution network.”

“We are in the process of making a summary which after more consultation will be put before the CCoE for the decision of issuance of the direction to gas companies for RLNG connections,” the officials said.

“Another option is to keep in view the federal government’s decision of 2017, based on which the Petroleum Division may be asked to issue the clarification to the gas companies. This way, fresh approval by CCoE won’t be required,” the officials added.

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