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

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  • 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.

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Changes in the US dollar’s value are directly correlated with variations in gold prices.

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The price of 24-karat gold in Pakistan increased by Rs1500 on Thursday, reaching Rs231,000 per tola. This was another jump in the price of gold in the country.

Dealers reported a comparable surge in the price of 10 grams of 24-karat gold, which is currently trading at Rs198,045 after rising by Rs1285. In addition, the cost of ten grams of 22-karat gold increased significantly, trading at Rs 181,541.

These fluctuations are strongly correlated with shifts in the US dollar’s value, demonstrating the tight connection between gold prices and exchange rates. This emphasizes how local gold markets are impacted by variables related to the global economy.

At Rs2,580, the price of 24-karat silver remains steady right now. The price of gold increased significantly on a global scale as well, rising by $14 to $2,214 per ounce.

It’s critical to understand that changes in the worldwide market can have a substantial impact on gold prices in Pakistan throughout the day. The gold rates that are offered are obtained from reliable sources, mostly situated in Karachi and Multan.

It is recommended that individuals seek the advice of nearby gold merchants and jewellers for the most precise and current information regarding gold prices.

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Pakistan pledged to finish building the TAPI gas pipeline.

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The minister discussed the importance of the TAPI gas pipeline project for Pakistan’s energy needs during a meeting with Turkmenistan’s ambassador to Pakistan, Atadjan Movlamov.

The Minister was congratulated by Ambassador Movlamov on taking office and his commitment to the project was noted.

Dr. Musadik Malik thanked the ambassador for his kind words, acknowledged the support, and promised to maintain the two nations’ friendship. The intergovernmental commission and working group meetings for the project this year were briefed by Atadjan Movlamov.

He invited the Minister to attend the Turkmenistan Energy Forum, which would take place in Paris the following month.

TAPI undertaking
The project is for the construction of a 1,680-kilometer pipeline with a 56-inch diameter that can carry 3.2 billion cubic feet of gas per day (bcfd) from Turkmenistan through Afghanistan and Pakistan to the border between Pakistan and India.

According to the terms of the TAPI agreement, Afghanistan would receive its portion of 0.5 billion cubic feet of gas per day, while Pakistan and India will each receive 1.325 billion cubic feet of gas per day.

In order to carry out the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, Pakistan and Turkmenistan inked a cooperative implementation plan in Islamabad on June 4.

Prime Minister Shehbaz Sharif and a delegation from Turkmenistan, led by Minister of Energy and Water Resources Daler Juma’a, were present at the ceremony.

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The price of gold is still rising in Pakistan.

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According to the All Sindh Sarafa Jewellers Association, the cost of 10 grams of 24 karat gold grew by Rs. 86 to Rs. 196,760 from Rs. 196,674, while the cost of 10 grams of 22 carat gold jumped to Rs. 180,363 from Rs. 180,284.

The price of silver per tola and ten grams stayed at Rs. 2,211.93 and Rs. 2,580, respectively.

According to the Association, the price of gold on the global market rose by $7 to $2,200 from $.2,193.

It is important to note that Pakistani and IMF personnel have agreed at the staff level on the second and final review conducted as part of Pakistan’s Stand-By arrangement.

The International Monetary Fund (IMF) and Pakistan have reached a staff-level agreement on the second and final review of Pakistan’s stabilization program, which is supported by the IMF’s US$3 billion (SDR2,250 million) SBA Agreement. This is according to the official statement released by a team led by Nathan Porter.

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