Showing posts with label Pakistan. Show all posts
Showing posts with label Pakistan. Show all posts

Friday 19 April 2024

Pakistan: Likely impact of Middle East conflict

Iran’s unprecedented drone/missile attacks on Israel on April 13 has raised the risk of a wider regional conflict in the Middle East. The attacks by Iran were largely intercepted by Israel. Still, any further retaliatory exchanges between the two countries could worsen the disruption of shipping routes through the region and thus lift global freights – in turn leading to higher commodity prices in the coming months. The escalation is likely to affect Pakistan in multiple ways.

From the Pakistan market’s standpoint any escalation will test two key expectations that have driven the YTD rally at Pakistan Stock Exchange, monetary easing and Pakistan’s negotiation with the IMF for another program.

On the flipside, the market will draw comfort from the prospect of fresh bilateral assistance and investments from Saudi Arabia and the release of final tranche of US$1.1 billion by end April.

Global shipping costs and commodity prices are likely to rise. Even in case of a de-escalation of the conflict, it threatens to worsen the disruption of shipping routes through the region, similar to that through the Red Sea. There is an increased risk of the following in the near term:

Surge in global oil prices toward US$100/bbl: The Red Sea disruption since November 2023, along with the extension of OPEC Plus supply cuts, has lifted Brent from US$78/bbl at the start of 2024 to nearly US$90/bbl, despite a weak global economic recovery.

Surge in the global shipping costs, through elevated insurance premiums on shipments through the region.

Global food prices could also rise, because of the rise in shipping costs and higher fertilizer prices, which the region exports. Food exports from South Asia, such as rice from India and Pakistan, to the rest of the world could be disrupted as well.

Potential delay in the start of interest rate cuts: An escalated conflict will have negative implications for Pakistan’s CA balance and inflation. In a scenario where global prices of crude oil, chemicals and food commodities rise by 10% in the coming months, Pakistan’s trade and CA deficit could expand up to US$300 million per month.

It is also likely that, in an escalated conflict, Pakistan’s exports and remittances may shrink, due to a disruption in shipping routes and economic concerns in the GCC, respectively.

Together these could spell a reversal in the exchange rate parity which has been stable around 280 since the start of year 2024. Note that, as per the SBP, Pakistan has a funding gap of around US$3 billion until June 2024, excluding the US$1 billion Eurobond repaid on April 12, 2024.

Tuesday 16 April 2024

Middle East can't afford more conflicts

Saudi Foreign Minister Prince Faisal bin Farhan reaffirmed on Tuesday that the Middle East cannot afford further conflict, amid heightened tensions between Iran and Israel.

Addressing a joint press conference with his Pakistani counterpart Ishaq Dar in Islamabad on Tuesday during his official visit to Pakistan, leading a high-level delegation, Prince Faisal urged all parties to prioritize de-escalation.

Prince Faisal and Dar called for immediate ceasefire in the Gaza Strip. While regretting the failure of the international community to ensure ceasefire in Gaza, both leaders demanded its immediate enforcement, opening of a humanitarian corridor and averting of famine that was leading to a catastrophe.

Prince Faisal said that a ceasefire in the Gaza Strip, which has been besieged for months due to the Israeli war, has become a necessity.

He said international efforts aimed at achieving a ceasefire in Gaza have been wholly insufficient. He emphasized the need for intensified efforts to alleviate the suffering of Palestinians in Gaza and stressed the urgency of implementing an immediate ceasefire.

Prince Faisal called for an immediate end to the killings and sufferings of the people of Gaza. Palestinians were already living in an unstable region leading to a catastrophe in Gaza and ‘there is no need for further confrontation’, he said adding that ‘de-escalation should be everybody’s priority.

Prince Faisal said that so far more than 33,000 people had been killed in Gaza. “They are now facing a famine like situation and starving to death as the international humanitarian aid is not getting in. It is a complete failure of the international community,” he observed.

Terming the situation unacceptable, the Saudi minister said there was no justification to it. In reality, he said, the two United Nations resolutions regarding immediate ceasefire in Gaza had not seen implementation. Efforts were seen after six Western aid workers were killed but not when 33,000 Palestinians died which showed the double standards, he regretted.

On his part, Dar said Pakistan and Saudi Arabia shared the same feelings on Gaza, while calling upon the international community to help end the genocide.

“The world conscience must wake up and enforce an immediate and unconditional ceasefire to ensure unimpeded humanitarian aid. More Palestinians should not be killed due to starvation,” he said, and demanded for a global probe into the crimes committed against humanity in Gaza.

Prince Faisal and Dar reiterated the need to build up and convert the bilateral strong partnership into a strategic partnership and further promote economic cooperation for the mutual benefit of the two countries.

Prince Faisal termed his meetings with the Pakistani leadership very productive. He emphasized the importance of strategic partnership between the two countries and expressed commitment for strengthening of investment.

“The Saudi delegation was impressed with the proactive and business focused approach of the Pakistani side. There were significant investment opportunities in Pakistan, and termed their visit ‘very positive on their perspective’, which would lay the groundwork for future ventures.”

The Saudi minister also emphasized the need to tap the untapped potential in Pakistan. “We should continue to work closely for the economic progress and regional security with historic bilateral cooperation,” he added.

Monday 15 April 2024

Saudi foreign minister leads high-level delegation to Pakistan

Saudi Arabia’s Foreign Minister Prince Faisal Bin Farhan arrived in Pakistan on Monday for a two-day official visit, aimed at bolstering economic ties and advancing mutual interests.

Leading a distinguished delegation, the foreign minister is joined by several key figures, including the Minister of Environment, Water and Agriculture, Eng. Abdulrahman Al-Fadhli; Minister of Industry and Mineral Resources, Bandar Al Khorayef; Advisor at the Royal Court Mohammed Al-Tuwaijri; and Assistant Minister of Investment, Eng. Ibrahim Al-Mubarak, among other senior officials from the Ministry of Energy, the Public Investment Fund, and the Saudi Fund for Development.

The delegation's visit follows a recent meeting between Crown Prince and Prime Minister Mohammed Bin Salman and Pakistani Prime Minister Shehbaz Sharif in Makkah, underscoring a commitment to expedite a previously discussed US$5 billion investment package.

Discussions during this visit will focus on enhancing bilateral cooperation across diverse sectors, including significant investments in Pakistan’s Reko Diq mining project, which involves one of the largest undeveloped reserves of copper and gold in the world.

The Saudi delegation is set to engage in comprehensive talks with Pakistani leaders, including the president, the prime minister, the foreign minister, and other key stakeholders.

These discussions are expected to cover a wide range of topics such as agriculture, trade, energy, minerals, IT, and transport.

Thursday 11 April 2024

Iranian president’s upcoming visit to Pakistan

Iranian President Ebrahim Raisi is scheduled to officially visit Pakistan on April 22, 2024. 

This diplomatic engagement comes amidst heightened regional interest, particularly as Pakistan prepares to embark on the construction of a gas pipeline linking Gwadar port to the Iranian border in the near future, according to WION News.

In an interview with the Tehran Times on March 15, the Pakistani ambassador to Iran, Muhammad Mudassir Tipu, emphasized the importance of strengthening the longstanding bond between Iran and Pakistan. 

Tipu also underscored the need for both nations to actively nurture and enhance their deep-seated connections which are rooted in history. 

“There is a very high level of political engagement going on between the two countries. The Iranian leadership sent very strong congratulatory messages to Pakistan when our new government was recently elected. So did Islamabad when parliamentary elections were held in Iran.  I think that shows that the relationship is in the right direction and that it’s being solidified, strengthened, and widened,” Tipu stated, adding that terrorism is one thing that the two states will focus on.

He added, "But there are also far more areas where we need more cooperation. There is a historical perspective that connects more than 300 million people in the two countries. We are connected through geography, history, and culture and I think both leaderships understand that and are determined to move forward and further diversify and expand relations. While we need robust cooperation to tackle terrorism, we should meanwhile not get fixated on it. We need to widen our horizons and make use of the countless opportunities we have to deepen our ties. This is what I am looking at as the ambassador."

 

Monday 8 April 2024

Pakistan’s antagonized relations with its neighbors

Pakistan's relationships with its neighboring countries have been strained for several decades, with current tensions particularly evident with Iran, Afghanistan, and India. These strained relations stem from a complex history and various geopolitical factors.

Historically, Pakistan enjoyed close ties with Iran, notably during the RCD era. However, following the revolution in Iran, relations soured, partly due to pressure from the United States. US-imposed sanctions on Iran and efforts to isolate it, including influencing Saudi Arabia to sever ties, further exacerbated tensions. Allegations suggest that countries like Saudi Arabia and Kuwait supported Iraq during its decade-long war with Iran.

The Iran-Pakistan-India (IPI) gas pipeline project, once of significant importance, faced setbacks due to US influence. India, under US pressure, withdrew from the project, citing the threat of economic sanctions. In an attempt to mitigate these challenges, Pakistan turned to Saudi Arabia for crude oil supplies on deferred payment terms.

Despite hopes for improved relations following diplomatic efforts brokered by China between Saudi Arabia and Iran, ongoing cross-border terrorism activities between Pakistan and Iran have hindered progress on projects like the Iran-Pakistan gas pipeline.

The relationship between Pakistan and Afghanistan has been marked by fluctuating dynamics, oscillating between cooperation and hostility. India's involvement, including support for anti-Pakistan elements in Afghanistan and participation in infrastructure projects like the Chabahar Port, has further complicated matters, seeking to undermine Pakistan's regional influence.

US foreign policy interests heavily influence the dynamics between India and Pakistan, with the former receiving substantial military support to counterbalance China, often at Pakistan's expense. Some analysts believe that entrenched hard-line positions in both countries will continue to hinder any prospects for improved relations.

Critics argue that Pakistan's foreign policy, historically aligned with US interests, prevents the country from overcoming its most pressing challenges independently. This dependence on external support, particularly from the United States, perpetuates Pakistan's vulnerability in international affairs.

Saturday 6 April 2024

Al Quds Day observed worldwide

Millions of people across the world held huge rallies to mark ‘Al Quds Day’ to express solidarity with Palestinian people and condemn Israeli crimes. This year Israeli genocide in the Gaza Strip has attached specific significance. 

The event observed on the last Friday of Ramadan is commemorated by Palestinian supporters every year.  

In Pakistan, political parties including Jamaat-e-Islami and Majlis Wahdat-e-Muslimeen staged rallies across the country in support of the Palestinians and against the Israeli killing in Gaza. 

The protests were held in different cities including Karachi, Quetta, Muzaffarabad, Kashmore, Bhalwal, Parachinar, Chichawatni, Rajanpur and Jacobabad.

On the occasion, Prime Minister Shehbaz Sharif called on the international community to exert pressure on Israel to halt its oppression of the Palestinian people in Gaza.

He underscored Pakistan's unwavering support for Palestine, advocating for the establishment of an independent Palestinian state.

The premier pointed to decades-long Israeli occupation of Palestine and denounced the international community’s silence in the face of human rights violations by the regime. 

On the outskirts of Srinagar in Indian controlled Kashmir, Muslims slammed the Israeli massacres in Gaza. They called for ending the Israeli violence and genocide in the Palestinian territory. 

A massive rally also took place in Mumbai, India. The protesters expressed support for the Palestinians and their cause. They also slammed the Israeli genocide in Gaza which has left 33,000 people dead since October 07, 2023.

Indonesia was also the scene of protests against Israel on Al Quds Day. The protesters denounced the regime’s war of genocide on Gaza. They blamed the US for standing by the regime.

The demonstrators displayed a poster depicting President Joe Biden as a clown during a rally outside the US embassy in Jakarta.

Malaysians also rallied to express solidarity with Palestinian people and the cause of Palestine.  

In Thailand, people took part in a rally in support of Palestinians in front of the Israeli embassy in Bangkok. 

Bahrainis demand closure of Israeli embassy. Theycame on the streets to voice support for Palestinians, particularly the residents of the Gaza Strip. They condemned the Israeli brutality against the Gazans. 

The protesters called for the closure of the Israeli embassy in Manama and the expulsion of the regime’s diplomats from the Arab country. 

Bahrain and the Israeli regime established diplomatic relations in 2020 as part of the United States-brokered Abraham Accords.

Millions of Yemenis also marked Al Quds Day. Protesters in the capital Sana'a condemned Israel’s brutal war on Gaza. 

In a statement, the protesters said the Palestinian nation has been subjected to the US-Israeli genocide for six months. 

The statement called on all Arab and Islamic countries to fulfill their responsibilities in the face of the savagery of the US and the Israeli regime.

Other countries in the Arab world including Iraq and Jordan saw huge protests on Al Quds Day. 

Protesters in Tanzania's coastal city of Dar es Salaam also rallied as they were holding the Palestinian flag. The protesters chanted anti-Israeli slogans and condemned the regime’s vicious crimes against Palestinian people in the Gaza Strip.

Al Quds Day rallies in Nigeria turned deadly as police clashed with protesters. Reports suggest security forces killed several people in the city of Kaduna who were protesting against the Israeli crimes. 

Police used tear gas and water cannon to disperse the pro-Palestine demonstrators.

Europe also saw rallies marking International Quds Day. In Britain, demonstrators gathered outside the Home Office in Marsham Street before heading into Horseferry Road, along Millbank, past the front of the Houses of Parliament and finishing in Whitehall where speeches were delivered. Prior to the rallies, more than 500 officers were deployed in central London.

In Poland, protesters held banners as they gathered to spend night near the US Consulate in Krakow to protest against Israeli attacks in Gaza.

 

Tuesday 26 March 2024

US refuses to support Pak-Iran gas pipeline

The news that United States could impose sanctions on the country if it goes ahead with Iran-Pakistan gas pipeline has been received with utter disappointment. It is likely to increase hatred against the super power, which is alleged of toppling Iman Khan Government in Pakistan.

According to DAWN, the US said on Tuesday it does not support a Pakistan-Iran gas pipeline project from going forward and cautioned about the risk of sanctions in doing business with Tehran.

A day earlier, Petroleum Minister Musadik Malik had said that Islamabad would seek exemption from US sanctions over the gas pipeline project.

The Pakistan-Iran gas pipeline is a long-term project between Tehran and Islamabad, and has faced delays and funding challenges for several years.

“We always advise everyone that doing business with Iran runs the risk of touching upon and coming in contact with our sanctions, and would advise everyone to consider that very carefully,” a US State Department spokesperson told reporters in a press briefing.

“We do not support this pipeline going forward,” the spokesperson added, saying that Donald Lu, the State Department’s top official for South and Central Asia, had said as much to a congressional panel last week.

 

 

Pakistan: Smuggled Iranian oil affecting local supply chain

According to a DAWN report, the increasing scale of smuggling of petroleum products has brought the country’s oil supply chain — from import to refineries and from marketing companies to pipeline transport network — to its knees.

With a massive drop in registered sales, the country’s oil industry has sought emergent action from the prime minister and other state agencies to stop the smuggling of petroleum products that they claim is not only threatening their survival but is estimated to be causing over PKR120 billion in direct annual revenue loss to the government at the rate of about US$36 million per month.

Three major petroleum market stakeholders — Oil Companies Advisory Council (OCAC), 22-member Oil Marketing Companies of Pakistan (OMAP) and Pak-Arab Pipeline Company (Papco) that transports various products through pipelines — have separately approached the federal government with unprecedented foul play in petroleum trading and sales.

In an urgent communication to the government on Monday, chairman of the 39-member OCAC representing all the local refineries and larger marketing companies Adil Khattak said it was a pressing issue that posed a severe threat to the oil industry, and consequently jeopardized the stability of government revenue streams.

The staggering influx of 4,000 tons of smuggled fuel daily into Pakistan, as confirmed by the Oil and Gas Regulatory Authority (Ogra), was bleeding the nation of approximately US$35.6 million per month. This national crisis demands swift and aggressive action.

The sales trend of petrol and high-speed diesel (HSD) during 2022-23 starkly resembled the figures recorded during the tumultuous pandemic period in 2019-20, the OCAC chief said.

The GDP growth of 6.11% in FY22 to a contraction of 0.3% in FY23 may partly explain this downturn. However, the year-to-date sales of petrol and HSD have further plummeted by approximately 6.5% in July-February 2023-24 when compared to FY23, casting doubts on the veracity of projected GDP growth rate of 1.7% for FY24.

Similarly, the month-to-date sales figures of petrol and HSD in March exhibit an alarming 12% and 21% decline, respectively.

“Such high negative variances signify product glut, lower refinery throughput, choking of White Oil Pipeline (WOP) and restrained sales volumes.

Based on this, Khattack said the illicit trade had disrupted the entire supply chain of petroleum products, adversely affecting the refinery health, WOP operations, and the profitability of OMCs.

The unchecked proliferation of substandard smuggled petroleum products not only drains the government revenue but also fuels a shadow economy, making it increasingly challenging to monitor and regulate illicit activities, says the OCAC chairman, who also leads Rawalpindi-based Attock Refinery besides other Attock Group companies.

OMAP Chairman Tariq Wazir Ali also said the smuggling of Iranian petroleum products into Pakistan was inflicting severe damage on the country’s economy and unjustly impacted OMCs operating within the legal framework, dutifully paying taxes and duties.

He demanded swift and decisive actions to eradicate this smuggling, reinforcing the rule of law and safeguarding the interests of legitimate businesses that play a vital role in Pakistan’s economic development.

Papco Chief Amr Ahmed said against a guaranteed 45% throughput, the utilization has struggled at 34%. The government should ensure to achieve 900,000 tons of petrol input into WOP between now and end-June 2024 to yield an annualized 45% mark.

 

Monday 25 March 2024

Pakistan Day reception in Washington

Discussions at the Pakistan Day reception at the embassy underscored the importance of political unity in Pakistan, while the PTI’s protests dominated conversations among the guests.

Ambassador Masood Khan also acknowledged the necessity of political stability in Pakistan when he addressed his guests, “We continue to work for political cohesion in our country and economic development.”

The other speaker, USAID Assistant Administrator of the Bureau for Asia Michael Schiffer, emphasized Pakistan’s long-term development aspirations. “Enhancing Pakistan’s economic growth is a bedrock of our work,” he declared.

Ambassador Khan assured the audience both sides were working to recalibrate ties structured around trade, investment, green energy, healthcare, education, and science and technology.

Schiffer identified sustainable economic growth, greater access to energy, gender equality, strengthening peace and inclusion, education, and health as shared objectives.

Ambassador Khan said, “Together, we would continue to work for regional and global security and counter transnational threats, especially terrorism.”

Over 450 guests, including ambassadors of friendly countries, other diplomats and military attaches, high-ranking officials from the US State Department, the World Bank, IMF, US lawmakers, think tank scholars, media representatives, and members of the Pak-American community, attended the event.

 

Pakistan: IMF reaches staff level agreement

An International Monetary Fund (IMF) team, led by Nathan Porter, visited Islamabad from March 14-19, 2024, to hold discussions on the second review of Pakistan’s economic program supported by an IMF Stand-By Arrangement (SBA). At the conclusion of the discussions, Porter issued the following statement:

“The IMF team has reached a staff-level agreement with the Pakistani authorities on the second and final review of Pakistan’s stabilization program supported by the IMF’s US$3 billion (SDR2,250 million) SBA approved in January 2024. This agreement is subject to approval by the IMF’s Executive Board, upon which the remaining access under the SBA, US$1.1 billion (SDR 828 million), will become available.

“Pakistan’s economic and financial position has improved in the months since the first review, with growth and confidence continuing to recover on the back of prudent policy management and the resumption of inflows from multilateral and bilateral partners. However, growth is expected to be modest this year and inflation remains well above target, and ongoing policy and reform efforts are required to address Pakistan’s deep-seated economic vulnerabilities amidst the ongoing challenges posed by elevated external and domestic financing needs and an unsettled external environment.

“The new government is committed to continue the policy efforts that started under the current SBA to entrench economic and financial stability for the remainder of this year. In particular, the authorities are determined to deliver the FY24 general government primary balance target of PRs 401 billion (0.4% of GDP), with further efforts towards broadening the tax base, and continue with the timely implementation of power and gas tariff adjustments to keep average tariffs consistent with cost recovery while protecting the vulnerable through the existing progressive tariff structures, thus avoiding any net circular debt (CD) accumulation in FY24. The State Bank of Pakistan remains committed to maintaining a prudent monetary policy to lower inflation and ensure exchange rate flexibility and transparency in the operations of the FX market.

The authorities also expressed interest in a successor medium-term Fund-supported program with the aim of permanently resolving Pakistan’s fiscal and external sustainability weaknesses, strengthening its economic recovery, and laying the foundations for strong, sustainable, and inclusive growth. While these discussions are expected to start in the coming months, key objectives are expected to include: 1) strengthening public finances, including through gradual fiscal consolidation and broadening the tax base (especially in undertaxed sectors) and improving tax administration to improve debt sustainability and create space for higher priority development and social assistance spending to protect the vulnerable;

2) restoring the energy sector’s viability by accelerating cost reducing reforms including through improving electricity transmission and distribution, moving captive power demand to the electricity grid, strengthening distribution company governance and management, and undertaking effective anti-theft efforts;

3) returning inflation to target, with a deeper and more transparent flexible forex market supporting external rebalancing and the rebuilding of foreign reserves; and

4) promoting private-led activity through the above mentioned actions as well as the removal of distortionary protection, advancement of SOE reforms to improve the sector’s performance, and the scaling-up of investment in human capital, to make growth more resilient and inclusive and enable Pakistan to reach its economic potential.

 

Sunday 24 March 2024

Pakistan exports to European Union states fall

Pakistan’s exports to European countries have fallen in the current fiscal year despite a GSP+ status that allows duty-free entrance into European markets for the majority of its products.

In absolute terms, Pakistan’s exports to European countries dipped 6.89%YoY in the first eight months of the current fiscal year to US$5.411 billion from US$5.812 billion in the corresponding period last year.

The decline was mainly attributed to reduced demand for Pakistani goods in western, southern and northern Europe.

In FY23, exports to the EU had dropped 4.4% to US$8.188 billion from US$8.566 billion a year ago.

In October 2023, the European Parliament unanimously voted to extend the GSP+ status for another four years until 2027 for developing countries, including Pakistan, to enjoy duty-free or minimum duty on exports to the European market.

Western Europe, which includes Germany, the Netherlands, France, Italy and Belgium, accounts for the largest portion of Pakistan’s exports to the EU.

There has been a significant decrease of 13.2% in exports to this region. The export value was reported at US$2.609 billion in the first eight months of FY24, down from US$3.006 billion during the same period last year.

While exports to western, southern and northern Europe have seen a decline, there is a silver lining in the form of an uptick in exports to Eastern Europe. The exports saw an increase of 8.2% to US$407.6 million in 8MFY24 against US$376.68 m over the corresponding months of last year.

Exports to southern Europe saw a paltry decline of 1.1% to US$1.971 billion in 8MFY24 from US$1.993 billion over the corresponding period of last year. Exports to Spain grew 4.66% to US$966.95 million in 8MFY24 from US$923.85 million a year ago.

Exports to Italy declined 3.36% to US$733.79 million from US$759.36 million.

Exports to northern Europe have not done well, recording a 3.04% dip. The export to this region was reported at US$423.732 million, down from US$437.03 million in the corresponding period last year.

Before Brexit, Pakistan’s major export destination was the United Kingdom. In the post-Brexit period, Pakistan’s exports to the UK slightly went up to US$1.351 billion in 8MFY24 from US$1.329 billion.

In FY23, Pakistan’s exports had dipped by 10.63% to US$1.966 billion to the UK from US$2.20 billion a year ago.

The British government has assured Islamabad of no change in the post-Brexit scenario which is evident from the inclusion of Pakistan in its preferential market access scheme.

Saturday 23 March 2024

US opposition of Iran-Pakistan gas pipeline

While US Assistant Secretary of State Donald Lu’s recent testimony before a Congressional panel contained no bombshells about the cipher saga, the American diplomat’s replies to questions from lawmakers about the Iran-Pakistan gas pipeline should certainly be cause for concern.

American reservations over the gas project clearly infringe on Pakistan’s sovereign right to take independent foreign policy decisions.

Lu told lawmakers that it was an American goal to ensure the pipeline is not completed. Using highly undiplomatic language, he observed that if they [Pakistan] get in bed with Iran, it will be very serious for our relationship.

The Foreign Office reaction to these comments was measured, as the spokesperson told the media that there was no room for discussion on a third-party [US] waiver, while the pipeline plays an important role in Pakistan’s energy security.

It is hoped that the state remains steadfast in upholding its commitments to the project, and rejects unwarranted foreign pressure.

Until the caretaker government gave the go-ahead for revitalizing the pipeline last month, the scheme had been in the doldrums for over a decade, mainly out of concern over attracting America’s wrath.

Pakistan should be the best judge of its energy requirements, and unsolicited advice such as that offered by Lu should be rejected with thanks. The American official also questioned how Pakistan would procure the financing to complete the scheme. Again, that should be Pakistan’s headache, not anyone else’s.

The fact is that the Iran pipeline appears to be a viable energy project, as the other major regional scheme — the Turkmenistan-Afghanistan-Pakistan-India pipeline — is in deep freeze particularly after the Taliban takeover of Afghanistan. Moreover, if Pakistan reneges on the deal with Iran, it risks entering a messy litigation process, and paying a hefty US$18 billion in penalty.

Lu’s comments should also serve as a warning to our policymakers of the demands some of our friends may make of us in future as geopolitical turbulence increases.

For instance, today, Washington has issues with CPEC and the Iran pipeline; tomorrow it could let its displeasure be known regarding our relations with Moscow or other American foes.

Pakistan should be ready to face such criticism, and take decisions that are in the national interest.

Pakistan values its ties with the US and other Western states. But this does not mean relations with other states/ blocs should be held hostage to the whims of its Western partners.

However, it is also true that Pakistan can only take truly independent decisions when it does not have to depend on others to keep its economy afloat.

India and China can ignore US strictures about not trading with Russia because of their economic heft. Pakistan must heal itself if it wants to achieve true sovereignty.

Courtesy: Dawn

Saudis commit US$101 million for Pakistan

The Saudi Fund for Development (SFD), Chief Executive Officer, Sultan Abdulrahman Al-Marshad and Secretary of the Ministry of Economic Affairs of Pakistan Dr. Kazim Niaz signed two strategic development loan agreements totaling US$101 million to bolster Pakistan's clean energy sector.

These agreements, valued at US$66 million for the Shounter Hydropower Project and US$35 million for the Jagran-IV Hydropower Project, aim to significantly enhance Pakistan's renewable energy infrastructure by adding a combined total of 70MW hydropower capacity to the national grid.

The funding will facilitate the construction of essential infrastructure, including dams, water diversion systems, powerhouses, and transmission lines, marking a significant step forward in Pakistan's transition towards sustainable energy sources.

These projects not only aim to address the environmental and financial challenges associated with conventional energy sources but also underscore the critical role of clean energy in promoting sustainable development, economic growth, and social welfare across Pakistan.

This move reinforces the SFD's long-standing commitment to supporting Pakistan's development goals, having financed 41 development projects and programs since 1976 with soft loans and grants exceeding US$1.4 billion, aimed at fostering growth in various critical sectors throughout the country.

Friday 22 March 2024

Pakistan Stock Exchange benchmark index closes almost flat

The week ending on March 22, 2024 started on a positive note, witnessed uncertainty over interest rate cuts erasing some gains from the initial days. Overall the benchmark index closed at 65,152 points, with a gain of 335 points or 0.5%WoW.

On Monday, State Bank of Pakistan (SBP) decided to maintain the interest rate at 22%, the decision did not impact the stock market as it was already expected and priced-in.

The talks with the IMF mission on the SBA’s second review concluded on Tuesday with staff-level agreement, resulting in infused positivity into the equity market and international investors as well with appreciation in dollar bonds and Pakistan Stock Exchange benchmark index.

As discussions progressed, prerequisites for the next medium-term programs have surfaced, primarily focusing on broadening the tax base. News has circulated about a new plan to collect taxes from retailers through electricity bills, which has been shared with the IMF.

Additionally, IMF has recommended eliminating GST exemptions on petroleum products and other taxes, whereby, despite a easing weekly inflation, an increase in gas price (as sought by Sui twins) and implementation of 18%GST on POL products pose risks to the inflation outlook.

On the economic front, current account for February 2024 turned positive, with a surplus of US$128 million, bringing 8MFY24 CAD below the US$1.0 billion mark.

With a controlled current account balance, SBP’s reserve position also improved by US$105 million WoW to reach US$8.0 billion as of March 15, 2024.

With the IMF's smooth review, market participation improved by 13%WoW, with the daily traded volume averaging at 323 million shares as compared to 287 million shares a week ago.

Other major news flows during the week included: 1) During first eight months of the current financial year the GoP borrowed US$6.678 billion from multiple sources, 2) FDI dropped over 17% to US$820.6 million during these eight months, 3) IT exports raised by 32% to US$257 million during February, and 4) the Supreme Court ordered NBP National Bank of Pakistan to pay PKR60 billion in pensions to retired employees.

The top performing sectors of the week were Transport, Inv. banks/ securities cos. and Tobacco, while Synthetic & Rayon, Cement, and Refinery were amongst the worst performers.

Major selling was recorded by companies with a net sell of US$9.0 million. Insurance absorbed most of the selling with a net buy of US$24.1 million.

Top performing scrips of the week were: Company-wise, top performers during the week were: NBP, DAWH, PTC, CEPB, and MEBL, while laggards included: NRL, PIOC, CNERGY, HCAR, FCCL.

With the aforementioned tax reforms, price increases, particularly with the imposition of GST on POL products, could pose a risk to the CPI outlook and potential delay in interest rate cuts, resulting in restrained market performance. However, successful implementation of tax reforms would have a positive impact on long-term economic stability.

Additionally, with SBP REER increasing to 102.2 in February 2024, there is a risk of PKR depreciation, especially in case of increased smuggling or imports.

Investors are advised to remain cautious and maintain positions in strong valuation main board stocks, particularly those offering attractive dividend yields.

 

 

Friday 15 March 2024

Iran-Pakistan to sign Free Trade Agreement

Iranian Ambassador Dr Reza Amiri Moghadam has indicated that a Free Trade Agreement (FTA) is likely to be finalized in the upcoming visit of Iranian President Ebrahim Raisi to Pakistan.

Addressing the business community during his visit to the Islamabad Chamber of Commerce and Industry (ICCI), the Iranian envoy said the FTA would increase mutual trade and several bilateral economic and trade agreements would also be signed during the visit.

He also said that the two countries need to have strong air, maritime and sea links, which will strengthen the economic relations and Pakistan, will also be connected to regional and global trade.

The ambassador emphasized the closeness of maritime links, especially Karachi and Gwadar and Chabahar and Bandar Abbas ports and said that Gwadar and Chabahar should be declared as sister ports.

The current bilateral trade volume paltry US$2.5 billion. Pakistan and Iran can fulfill 70% of each other’s needs by engaging in mutual trade, just as Iran imports halal meat, Pakistan can do a lot of work in Iran in this sector.

“After the FTA and bilateral agreements for the promotion of mutual trade, there is a strong possibility that the mutual trade between Pakistan and Iran would reach US$5 billion in the next few years,” he added.

The envoy added that the Pakistan-Iran gas pipeline was a significant project, which would benefit both the domestic and industrial sectors of Pakistan.

“Iran is serious about resolving Pakistan’s energy problems and that is why Tehran completed the gas pipeline project for US$1 billion in 2009 so that Pakistan could meet its energy needs,” he said, adding that it was essential that the project is completed at the earliest.

He added that Iran was already trading in gas and the energy sector with Turkiye, Turkmenistan and Azerbaijan, therefore Pakistan can also follow the procedure adopted by these countries.

He acknowledged that the banking channel between Pakistan and Iran was a serious issue, but Iran has banking links with Turkiye, Bahrain and Iraq.

 

Wednesday 13 March 2024

Pakistan: Saga of Financial Challenges

Once hailed as a financial wizard, Ishaq Dar's return to Pakistan was accompanied by grandiosity, with a Red Carpet reception. However, the same individuals who celebrated Dar's financial prowess are now touting Muhammad Aurangzeb as a savior capable of instantly resolving Pakistan's myriad issues. While Aurangzeb may possess exceptional banking skills, his comprehension of Pakistan's complex economic landscape raises doubts.

Adding to the skepticism is his hefty monthly salary of US$100,000, amounting to a staggering US$1.2 million annually. Despite decades under the IMF microscope, Pakistan struggles to generate sufficient dollars to finance its imports, with around US$150 billion from overseas Pakistanis disappearing into a financial abyss over the last five years.

The finance minister's primary task now is to persuade the lender of last resort to release more dollars, settling outstanding loans and facilitating imports, particularly for the elite. The proposed solutions involve increasing electricity and gas tariffs, raising interest rates, and imposing additional duties and taxes, collectively squeezing every Pakistani financially.

Financial wizards argue that these measures will bridge the budget deficit, but they overlook the resultant surge in government borrowing and the negative impact on local manufacturers' competitiveness. This situation brings to mind the saying, "An expert is a person who makes things complicated." Pakistanis are inundated with advice on improving taxes, but there's a glaring absence of plans to tax those enjoying exemptions since independence, and austerity measures are conspicuously lacking.

As Pakistan rushes into talks with the IMF, concerns persist about addressing GDP growth, boosting exports, and curbing extravagance. The impending debt servicing crisis looms large, and while the IMF may greenlight a larger and extended standby program, the real question lies in whether policymakers have viable strategies to maintain debt servicing at a sustainable level.

Tuesday 12 March 2024

Iran-China-Russia naval drill in Indian Ocean

The navies of Iran, China, and Russia have initiated joint drills in the northern tip of the Indian Ocean, marking their fifth collaborative military exercise in recent years. Naval delegations from Azerbaijan, Kazakhstan, Oman, Pakistan, and South Africa are present as the observers of the exercises.

Chinese and Russian naval forces have entered Iranian territorial waters to participate in the primary stage of the naval war game, named Maritime Security Belt 2024, near the Gulf of Oman. This international exercise, involving Iran, China, and Russia, underscores a commitment to peace and security in the region.

During a joint press conference with Russian and Chinese commanders, Second Flotilla Admiral Mustafa Taj al-Dini emphasized the strategic significance of this being the fifth joint exercise among the involved countries. He highlighted the objectives of this joint naval drill, including bolstering maritime trade security, combating piracy and terrorism, and fostering cooperation among the participating nations.

According to Taj al-Dini, this security-focused exercise, covering an expansive area of 17,000 square kilometers, aims to address multifaceted challenges. Despite the approaching festivities for the Persian New Year, the spokesperson underscored that security efforts remain steadfast.

Notably, naval units from Iran, China, and Russia, comprising destroyers and missile cruisers, actively contribute to this collaborative initiative.

Iranian naval forces, along with their Chinese and Russian counterparts, have conducted several military drills in recent years to enhance the security and stability of international maritime trade. They have also collaborated in countering piracy and maritime terrorism, exchanging information in naval rescue and relief operations, as well as sharing operational and tactical experiences.

Russia's defense ministry stated that the exercises, running through Friday and involving warships and aviation, would focus on the protection of maritime economic activity.

The Russian defence ministry said its Pacific fleet, led by the Varyag guided missile cruiser and the Marshal Shaposhnikov frigate, had arrived at Iran’s Chabahar port on Monday to take part in the joint drill.

China’s defense ministry mentioned that the drills aimed at jointly maintaining regional maritime security. China sent its 45th escort task force, consisting of the guided-missile destroyer Urumqi, guided-missile frigate Linyi, and the comprehensive supply ship Dongpinghu, to the exercise.

Last month, Rear Admiral Shahram Irani, commander of the Iranian Navy, announced Tehran's plan to hold joint drills with Beijing and Moscow before the end of March, aimed at ensuring regional security.

Providing insights into the strategic maritime efforts, the rear admiral revealed that the mission to safeguard Iran's shipping lines in international waters commenced in 2009 under the direct command of the Leader of the Islamic Revolution, Ayatollah Seyyed Ali Khamenei.

Emphasizing the unwavering commitment of the Army's strategic naval force, he highlighted their continuous role in ensuring the security of the nation's economic hub in both the Gulf of Aden and the northern Indian Ocean.

The admiral further highlighted the expansion of the security mission beyond securing shipping lines in the Red Sea over the past four years. Currently, the comprehensive management of protection for Iran's shipping lines extends from the Gulf of Aden to the Suez Canal.

The Iranian Navy conducts routine exercises throughout the year. In recent years, Iranian military experts and technicians have made significant progress in developing and manufacturing a diverse range of military equipment, achieving self-sufficiency for the armed forces in the military industry.

In March 2023, Iranian, Chinese, and Russian naval forces staged the 2023 Marine Security Belt war game in the northern parts of the Indian Ocean, marking the fourth joint exercise in recent years. Alongside Chinese and Russian fleets, more than 10 Iranian Navy vessels and three helicopters reportedly took part.

 Courtesy Tehran Times

Monday 11 March 2024

Pakistan: Kitchen Cabinet of PM Shehbaz Sharif

President Asif Ali Zardari on Monday administered the oath to the 19-member federal cabinet of newly elected Prime Minister Shehbaz Sharif.

The PML-N’s main ally, the PPP, has refused to become part of the federal cabinet.

The cabinet includes 12 MNAs and three senators as federal ministers, as well as a minister of state. Three technocrats — Muhammad Aurangzeb, Mohsin Naqvi and Ahad Cheema are also included in the cabinet.

A press release from the information ministry elaborated on the various portfolios assigned to the federal ministers.

Federal ministers

·         Khawaja Muhammad Asif, MNA — defence, defence production, aviation

·         Mohammad Ishaq Dar, Senator — foreign affairs

·         Ahsan Iqbal Chaudry, MNA — planning, development and special initiatives

·         Rana Tanveer Hussain, MNA — industries and production

·         Azam Nazeer Tarar, Senator — law and justice, human rights

·         Chaudhry Salik Hussain, MNA — overseas Pakistanis and human resource development

·         Abdul Aleem Khan, MNA — privatisation, Board of Investment

·         Jam Kamal Khan, MNA — commerce

·         Amir Muqam, MNA — states and frontier regions, national heritage and culture

·         Sardar Awais Ahmad Khan Leghari, MNA — railways

·         Attaullah Tarar, MNA — information and broadcasting

·         Dr Khalid Maqbool Siddiqui, MNA — science and technology, federal education and professional training

·         Qaiser Ahmed Sheikh, MNA — maritime affairs

·         Mian Riaz Hussain Pirzada, MNA — housing and works

·         Musadik Masood Malik, Senator — petroleum, power

·         Muhammad Aurangzeb — finance, revenue

·         Ahad Khan Cheema — economic affairs, establishment

·         Mohsin Naqvi — interior, narcotics control

Minister of state

·         Shaza Fatima Khawaja

Familiar faces returning include Khawaja Asif, Dar, Ahsan Iqbal, Azam Nazeer Tarar and Musadik Malik.

 Ishaq Dar, Ahsan Iqbal, Azam Tarar, Aleem Khan, Attaullah Tarar and Musadik Malik take oath as federal ministers on March 11. — DawnNewsTV

 

Saturday 9 March 2024

Asif Ali Zardari: The Prince of Guile

Asif Ali Zardari, co-chairman of the Pakistan People’s Party (PPP), has secured his second term as President of Pakistan, defeating Mahmood Khan Achakzai, the candidate backed by the Pakistan Tehreek-e-Insaf (PTI) and Sunni Ittehad Council.

In the presidential election, Zardari garnered an overwhelming majority, securing 411 votes, while Achakzai managed to bag 181 votes, only one vote was rejected. To know more about the charismatic as well as mysterious character of Zardari read the details published in Dawn newspaper on February 23, 2024.

Even his rivals acknowledge that Zardari is a deal-maker par excellence. He has been written off and made a comeback so many times that his doubters have simply stopped trying.

You have heard the trope: Asif Ali Zardari is Machiavelli’s Il Principe personified. While that most certainly isn’t an endearment, it is perhaps not much of an insult either. Whether one accepts it or not, Zardari seems to have cracked the code to surviving and succeeding in the swampy wastelands of Pakistani politics. There are very few who can claim to have his guile, and none who can claim his political acumen.

Call it the politics of ‘mufahimat’ (understanding and reconciliation) or the politics of ‘mufadaat’ (interests and advanta­ges), the Zardari brand of deal-making has ensured that his star continues to shine.

“Chaos isn’t a pit,” go the memorable lines from Game of Thrones, one of the most popular TV show of our times. “Chaos is a ladder. Many who try to climb it fail and never get to try again. The fall breaks them.”

“And some are given a chance to climb. They refuse, they cling to the realm or the gods or love. Illusions. Only the ladder is real. The climb is all there is.”

In the chaos of Pakistan’s politics, none has climbed the ladder higher or more successfully than Zardari. He has been thrown off again and again, yet refused to let his falls break him.

He has seized every opportunity to play the game, and won it with an unlikely hand too many times.

The young Zardari was a notorious playboy who often ended up in brawls at Karachi’s casinos. He was known for his then-famous father, Hakim Ali Zardari, who had been elected as an MNA on a PPP ticket to Zulfikar Ali Bhutto’s first assembly.

The two were said to be close at one time, but fell out at some stage, following which the elder Zardari had exited the PPP. At one time, both father and son supported the anti-Bhutto alliance.

The Zardaris were otherwise regarded as a liberal Sindhi family who ran a successful entertainment business centred around their two cinemas. The son, at one point, had also tried his hand in the construction business, but was not successful.

The family’s name shot to national prominence when, through a common family connection, the Zardari scion’s marriage was arranged with Zulfikar Ali Bhutto’s daughter and protégé, the late Benazir Bhutto. Benazir was well-loved and internationally known: it was natural for the spotlight to shine on her soon-to-be-husband. On the night of their wedding, the two celebrated with thousands of well-wishers, most of them common folk, at Lyari’s Kakri Ground.

The event seemed as political as it was personal, and it catapulted Zardari onto the national stage.

The very next year, in 1988, Ms Bhutto was elected Pakistan’s first woman prime minister.  Zardari landed in Prime Minister House, and quickly went to work turning around his personal fortunes. It wasn’t long before Ms Bhutto’s first government was mired in scandals of all sha­des and sizes. It was during this time that Zardari earned the title of ‘Mr 10 percent’.

The axe would fall as soon as Ms Bhutto’s government was dismissed. Among the numerous cases filed against Zardari was one involving abduction for extortion. Zardari was accused of abducting a businessman, strapping a bomb to him, and sending him to the bank to withdraw a large sum of money from his account. The case ran in an anti-terrorism court between 1990 and 1993. Nothing ever came of it.

It was during Ms Bhutto’s next government that Zardari finally started being regarded as one of the most powerful men in the country. He got his own office within PM House, and was even made a federal minister. After that government was also dismissed, he was arrested immediately. A slew of new cases were filed against him, and Zardari once again found himself in jail. Once again, he was never convicted.

Zardari’s by then lengthy record and the length of time he had spent behind bars, without ever being convicted, added to his legend. He quickly came to be regarded as a shrewd wheeler-dealer who could get out of the stickiest situations without any fatal consequences.

It was Ms Bhutto’s tragic assassination that proved to be another turning point in Zardari’s fortunes. Though he had deferred to his spouse’s politics during her lifetime, the mantle of the PPP now fell to him.

His shrewd, calculating nature came to his aid, and benefit. Having decided that General Musharraf needed to go, Zardari played a cunning hand, using the army chief at the time to get Musharraf evicted from the presidency. No one at the time realized that Zardari actually wanted the job for himself.

The presidency solidified his grip on power. Although he buried Article 58(2)(b) of the Constitution as president, the PPP government continued to be run from the President House, with key decisions always in Zardari’s hands.

Although that term led to speculation that the PPP would be wiped out from nearly everywhere except Sindh, Zardari had prepared in advance with the 18th Amendment. It allowed him to keep a foot in the corridors of power while plotting his comeback for another time.

In recent years, with rival parties much larger than his own engaged in a long-running death match, Zardari did not take his eyes off the ladder.

After the 2024 elections, he has emerged as a kingmaker yet again. He has also managed to secure the maximum concessions for his own party (and himself), while giving very little to the PML-N in return.

Even his fiercest rivals begrudgingly acknowledge that Zardari is a deal-maker par excellence. He has been written off and made a comeback so many times that his doubters have simply stopped trying.

They say that “the only thing certain in life is death and taxes”; in Pakistan, it might as well be “death, taxes, and Zardari’s political relevance”.

The man has been derided as a Machiavellian leader, a shrewd and cunning politician interested only in self-enrichment. Yet, he is also the first democratically elected president to serve out a five-year tenure, and likely to become the only person to have held that office twice.

 

 

Wednesday 6 March 2024

Pak US relationship a saga of ‘Marriage of Convenience’

Soon after the results started pouring in following the February 08 general elections in Pakistan, several members of the US Congress, as well as the US State Department, expressed concern over alleged interference in the polls, with the former even calling on President Joe Biden not to recognize the incoming government until a transparent investigation into the allegations. I invite the readers to read a blog posted as back as on May 03, 2022.

In today’s blog I am daring to negate an impression created by an article written by Ms Maleeha Lodi (Pakistan’s former ambassador to the United States, United Kingdom and United Nations) and published in Pakistan’s leading English newspaper. I am taking an extreme position by saying, “Pakistan’s foreign policy has always remained subservient to the US mantra”.

Please allow me to begin with the U2 incident, when the US pilot-less planes used to takeoff from a Pakistani airbase near Peshawar for spying USSR. At one point the situation got so nasty that USSR threatened to attack Pakistan.

Badaber: A secret US intelligence facility in Pakistan

In July 1958, US President Dwight D. Eisenhower requested permission from the Pakistani Prime Minister Feroze Khan Noon for the United States to establish a secret intelligence facility in Pakistan and for the U-2 spy plane to fly from Pakistan. The U-2 flew at altitudes that could not be reached by Soviet fighter jets of the era; it was believed to be beyond the reach of Soviet missiles as well. A facility established in Badaber (Peshawar Air Station), 10 miles (16 km) from Peshawar, was a cover for a major communications intercept operation run by the United States National Security Agency (NSA). Badaber was an excellent location because of its proximity to Soviet central Asia. This enabled the monitoring of missile test sites, key infrastructure and communications. The U-2 "spy-in-the-sky" was allowed to use the Pakistan Air Force section of Peshawar Airport to gain vital photo intelligence in an era before satellite observation.

I would also invite the readers to recall last-minute cancellation of the visit of Prime Minister Liaquat Ali Khan to USSR and going to the United States around the same dates.

This also reminds me the US ditching Pakistan at the time of creation of Bangladesh. State-owned Pakistani media kept on telling the US feet could arrive any minute, which never arrived. This creates an impression that the US supported creation of Bangladesh.

Now coming to Afghan proxy war, Pakistan played two opposite roles: first it supported Taliban in averting USSR attack in a quest to reach warm water and then supporting US/Nato troops in crushing the same Taliban.

Please also allow me to share conspiracy theory, “Pakistan and United States have enjoyed cordial relationships due military rule”. The readers are invited to read details of Ayub, Zia and Musharraf eras.

I am also inclined to share another public opinion, The US-Pakistan relationship is a saga of ‘Marriage of Convenience’.

It is often said, ‘Pakistan is a frontline allay of United States in war against terrorism’. Some analysts interpret it ‘Pakistan is partner in proxy wars but when it comes to Investment and trade India is the US darling’.

I tend to subscribe to this theory based on my follow up of the construction of Chabahar Port in Iran. Despite economic sanctions on Iran, India invested millions of dollars in the construction of this port and allied road and rail links to connect with Afghanistan and Central Asian states. Please also note that Pakistan was not allowed to import oil from Iran during this period.

The United States was more than smart in facilitating India in the construction of Chabahar Port and allied infrastructure. The prime US motive was to create an alternative access to land-locked Afghanistan, extended to Central Asian states.

But the real objective was to undermine Pakistan’s importance in Afghan transit trade. There is no denying to the fact that Pakistan still offers cost effective and shortest route to Afghanistan.

Before I conclude let me say, “Pakistan under the influence of the United States has not recognized Taliban Government in Afghanistan”. While Afghans are facing shortage of food and medicines, the two countries are not allowed to trade in local currencies; the United States has not released foreign exchange reserves of Afghanistan.