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South Korea defers Pakistan’s loan worth $19.91m

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  • Pakistan inks Debt Service Suspension Agreement with Korea.
  • This amount will now be repaid over a period of six years.
  • Pakistan has already signed 104 pacts with 21 bilateral creditors.

ISLAMABAD: In a sigh of relief, the Republic of Korea deferred Pakistan’s loan worth $19.911 million, under the G-20 Debt Service Suspension Initiative (DSSI) framework on Monday.

The cash-strapped country inked a Debt Service Suspension Agreement with Korea on Monday. This amount, initially had to be repaid between July and December 2021, will now be repaid over a period of six years (including a one-year grace period) in semi-annual instalments, said a statement issued by the Economic Affairs Division (EAD).

Due to the support extended by the development partners of Pakistan, the G-20 DSSI has provided the fiscal space which was necessary to deal with the urgent health and economic needs of the country.

The total amount of debt, that is to be suspended under the DSSI framework, covering the period of repayment from May 2020 to December 2021, stands at $3,686 million.

Pakistan has already concluded and signed 104 agreements with 21 bilateral creditors for the deferment of its debt repayments under the G-20 DSSI, amounting to $3,633 million.

The signing of the above-mentioned agreement brings this total to $3,653 million. Negotiations for the remaining agreements to be signed under the G-20 DSSI are ongoing.

It is pertinent to mention here, as the International Monetary Fund (IMF) is reluctant to strike a staff-level agreement without seeking confirmation on the external financing gap, Pakistan, meanwhile, conveyed to the global creditor’s staff to conclude the ninth review otherwise budgetary framework for 2023-24 would not be shared.

The lingering differences between the IMF and Pakistan are heading towards an “unbreakable deadlock” whereby Pakistani authorities claim that the confirmation of $4 billion financing was shared with the IMF even with its full details and break-up but the Fund was playing “politics” by not moving towards striking an agreement despite passing six months period.

The ninth review was due in November 2022 but the two sides have not yet reached consensus.

The patience of Pakistani high-ups is running out as they argue before the IMF officials that Islamabad should be treated as a member of the Washington-based creditor, not a beggar.

The Pakistani authorities are hopeful that the current account deficit would remain surplus for April 2023 when the numbers would come out in the next few days.

The financing gap of $4 billion was fulfilled by getting confirmation as the Kingdom of Saudi Arabia conveyed to the IMF that they were ready to provide an additional $2 billion in deposits and UAE $1 billion.

The World Bank is committed to providing $450 million RISE-II after fulfilment of four prior conditions and $250 million by the AIIB. Pakistan also received firm commitments for getting $350 million out of total Geneva pledges for flood-affected areas.

The only remaining amount is $1 billion from commercial banks and they are waiting for IMF’s deal.

The Pakistani officials argue that the external financing requirements had been fulfilled, so there was no justification for using delaying tactics to avoid signing the agreement.

Keeping in view this situation, the Ministry of Finance is all set to share the Budget Strategy Paper (BSP) with the federal cabinet without sharing it with the IMF in its meeting scheduled to be held today (Monday).

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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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