Pakistan all set to seek $2 bn from friendly country

[Samlee]

• Tuesday, 20 Mar 2018

Slowdown in Chinese funding requires urgent attention
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Slowdown in Chinese funding requires urgent attention
By Ihtashamul Haque
Published: March 19, 2018
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PHOTO:REUTERS

ISLAMABAD: A slowdown in Chinese funding could delay bigger China-Pakistan Economic Corridor (CPEC) development projects and the matter requires urgent attention of the government.

On the other hand, the International Monetary Fund (IMF) executive board’s first post-programme monitoring report has cast serious doubt about Pakistan’s repayment capacity, considering the fast depleting foreign exchange reserves.

Both issues require critical assessment of the situation in order to take immediate decisions with a view to reducing growing economic vulnerabilities.

More importantly, the declining foreign exchange reserves, insiders say, will go down from $12.3 billion to $10 billion by June this year, not sufficient to cover the necessary two months of imports.

The government does not seem to be interested in starting dialogue with the IMF to seek an urgent bailout package to avoid default. Likewise, the caretaker government, it is said, would have no appropriate mandate to seek urgent financing from the IMF.

China, UNDP sign $4m agreement to help FATA, Balochistan

Therefore, there is confusion at the top level on how to deal with the current economic meltdown that has intensified due to continued widening of the current account deficit.

China has surprisingly slowed down its assistance over which experts have voiced their concern. CPEC-related projects, in the first six months of the current fiscal year, have received $506 million in Chinese funding compared to $848 million in the same period of 2016-17.

“There is a 40% drop in Chinese funding and this is something very alarming,” said a former finance minister. He suggested that the funding should have reached its peak to aptly complete highway and Gwadar-related development projects.

The slowdown in China’s CPEC-related funding is believed to have caused an 18% reduction in the import of power generation machinery. Why the Chinese are putting less money into the CPEC projects?

Interior Minister Ahsan Iqbal, who still looks after CPEC projects, is usually blamed for not taking up the issue with the Chinese. He seems to be more preoccupied with the political fire-fighting to appease the PML-N leadership due to which his own ministry is said to be suffering.

It is not ironic that while these projects could face delays and hardships due to the decrease in Chinese funding, Prime Minister Shahid Khaqan Abbasi is offering six approved routes to members of the Shanghai Cooperation Organisation (SCO) to help enhance its vitality to become a conduit for linking the Eurasian landmass – China, Russia and Central Asia with the Arabian Sea.

Favourable outlook at risk

The IMF monitoring report believes that continued erosion of Pakistan’s macroeconomic resilience could put the near-term favourable outlook at risk. Surging imports have led to the widening current account deficit and a significant decline in international reserves, despite higher external financing, it said.

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“Against the backdrop of rising external and fiscal financing needs and the declining reserves, risks to Pakistan’s medium-term capacity to repay the fund have increased since completion of the Extended Fund Facility (EFF) in September 2016,” said the IMF board of directors.

This has happened for the first time that the IMF has expressed its concern over Pakistan’s ability to pay off its $6.4-billion loan whose payment will start from June this year. Pakistan will have to return $450 million and $800 million by early next year and later $1 billion.

All this is happening when Pakistan is already facing $8-billion financing gap which is feared to reach $10 billion by June this year.

Pakistan is largely seen as facing new troubles and since the government is not taking any decision to contact or not to contact the IMF for any emergency assistance, the World Bank, the Asian Development Bank (ADB) and the Islamic Development Bank (IDB) are not expected to offer their usual annual assistance.

All the three international financial institutions (IFIs) provide close to $4 billion in annual assistance to Pakistan which also includes short-term Islamic financing for oil imports by the IDB through US-influenced commercial banks in Bahrain. These three banks offer low-cost concessionary loans to Pakistan, but this time around their funding has become difficult due to the IMF, whose go-ahead is necessary.

They have already cut their assistance for the current fiscal year and who knows how they would deal with Islamabad in the absence of any bailout package from the IMF?

However, the government has found an easy way to seek expensive commercial loans from Chinese banks as others are a little hesitant, considering the current weak economic condition of Pakistan.

Exchange rate

IMF officials are happy with Pakistan’s long-awaited move to allow some better exchange rate adjustment, but they are still seeking greater exchange rate flexibility on a more permanent basis to preserve external buffers and improve competitiveness.

In fact, the IMF wants 23% devaluation of the rupee to improve its competitiveness and support Pakistani exporters. Adviser on Finance Miftah Ismail said the other day that the government would be reimbursing a maximum portion of over Rs200 billion worth of sales tax refund claims to the exporters and that an incentive package is under way to help the exporters increase their declining exports. Will this happen?

Pakistan borrows another $500m from Chinese bank

Overall, the country’s economy continues to slide downwards and who knows the economic mismanagement, especially by the previous PPP and now PML-N governments, is the major cause of the current mess. Questions are being asked what the government is leaving behind after completing its five-year term.

Public debt surged to over Rs22 trillion in 2016-17 from Rs13.3 trillion in 2012-13, adding Rs7.5 trillion only in four years. It has added Rs657 billion in just three months of the current fiscal year.

The government is said to be adding another Rs2.5 trillion of public debt before the elections due this year. Total debt will stand at a whopping Rs25 trillion which means close to 69% of GDP.

Foreign debt and liabilities increased from $61 billion in 2012-13 to $89 billion by the end of December last year. They are feared to be reaching $96 billion by end-June 2018. The government is accused of adding $35 billion to the external debt. It would have added another $55 billion had there been no unprecedented decline in international oil prices.

The current account deficit rose to $12.4 billion or 4.1% of GDP in 2016-17 and it is anticipated to be deteriorating to $18 billion or 5.3% of GDP by the time the current fiscal year ends on June 30 this year.

Foreign exchange reserves continue to decline and the plan of floating new bonds has been delayed for some time because of being very expensive.

The changing economic scenario is getting bleaker and bleaker with the government only concerned about its own political survival and benefiting its cronies. The latest is the announcement of Ali Siddiqui – the son of Jahangir Siddiqui – to become Pakistan’s Ambassador to the United States.

He has no experience and has been appointed because of alleged business relations with the rulers and a media group that is involved in the bashing of credible state institutions.

The writer is the recipient of four national APNS awards and four international awards for journalism



https://tribune.com.pk/story/1663705/2-slowdown-chinese-funding-requires-urgent-attention/

That Slowdown In Project Funding Is B'Coz Most Projects Are Complete.But The Other News You So Conveniently Left Out Is

http://www.gulf-times.com/story/585484/Pakistan-s-FDI-jumps-15-6-on-massive-Chinese-inflo

 

[wiseone2]

is it china or saudis ??

 

[protest]

Wow You Were Questioning My Credentials And Now You Are Showing Yours,Dude Do You Even Know What Is Meant By C/A Deficit It Takes All Financial Inflow Into Account So It Means Except For FDI All Other Inflows You Mentioned Have Been Accounted For And There Is Still A Deficit.

And FYI ACCA Stands For Association for Association of Chartered Certified Accountants.Its Is UK Based Body.

Please read through the article i have posted along with it. What does a chartered accountant know about macro economics. Ishaq dar is one too, we all know how he managed the books rather than economy.

 

[Samlee]

Please read through the article i have posted along with it. What does a chartered accountant know about macro economics. Ishaq dar is one too, we all know how he managed the books rather than economy.

Yes I Read Your Link And It Proves Every word Of What I Just Said.The Current Account Deficit Has Grown But The Forex Is Built On Prtfolio Inflows Which Can Leave At Any Time(i.e Hot Money).

And FYI Before Doing ACCA I Did B.Com and M.Com In Which I Actually Did Study Economics

 

[Thanatos]

Did you notice that your country has negative Forex Reserves

That implies that your country cannot issue Bonds to pay for your daily imports.

Have you further noticed that no Pakistani is aware of this predicament

That is why Pakistanis are happier as Ignorance is Bliss

I know all these things. I also know only last year 8000 indian farmers committed suicide as they had no money to eat. India is not a holy cow. Its shameful that Pakistan has net negative forex reserves, doesnt make india better!! Ever.

I'm very much afraid of Aedes mosquitoes. A bite from them may prove lethal to a human being as there is a high possibility of a dengue fever and even death. But does that mean they are superior to Human Being ????? LOL

Really with 2000 posts , thats your level of intellect, oh these indian kids keep humour alive on this otherwise serious forum .

 

[HAIDER]

is it china or saudis ??

India.

 

[Kinetic]

ISLAMABAD: With the general elections looming and the federal budget on the anvil, the government is all set to knock at the doors of friendly countries to rattle up two to three billion US dollars to meet international obligations, The News learnt.

Sources said that initially two friendly countries have been contacted and the response was optimistic. This will almost be the same arrangement as was managed during the early days of Musharraf government, The News learnt.

As per the arrangement being negotiated with a friendly country, a trusted friend of Pakistan has assured of depositing about $2 billion in its account as safe deposit as was done in 2000. It means that this amount will reflect in Pakistan’s account to keep its image positive but Pakistan will not be able to use this amount, sources confided.

Negotiations with the brotherly Muslim country having a generous attitude towards Pakistan in the past are also under way and there is expectation that a relief of about $1.5 billion will be provided to Pakistan. A source without giving details of this arrangement stated this was also done in past, when after nuclear tests, the US had slapped sanctions on Pakistan and there was a serious threat of default. At that time, a desperate Nawaz Sharif government had frozen the foreign currency accounts. This practice was also exercised during the Nawaz Sharif government in 1999. At that time, the brotherly country had requested not to make this arrangement public but Pakistan’s then secretary finance had immediately informed the US about this arrangement, sources confided.

Sources in the government told this correspondent that the government is worried about the situation and negotiation at senior level officers were initiated a couple of weeks ago. Prime Minister’s Adviser on Finance Miftah Ismail, along with Prime Minister Shahid Khaqan, visited the Muslim country. Later on, officials of Finance Ministry also visited this country where negotiations went ahead smoothly. Before these tours, the COAS Qamar Bajwa had also visited this country. And luckily these negotiations are going positively, have rather successfully concluded. Now final arrangements will be finalised by political leadership in the next couple of weeks, sources shared with The News. When questioned about political level, who will finalise the arrangement, sources added this is up to governments to decide at which level the agreement will be done. But initially all dialogues are going positive and after assurance of success of these negotiations, Pakistan has decided not to float bonds in the international market, sources confided.

When The News contacted Prime Minister’s Adviser on Finance Miftah Ismail, he refused to comment.

Negotiations with the brotherly Muslim country having a generous attitude towards Pakistan in the past are also under way and there is expectation that a relief of about $1.5 billion will be provided to Pakistan. A source without giving details of this arrangement stated this was also done in past, when after nuclear tests,


Prime Minister’s Adviser on Finance Miftah Ismail, along with Prime Minister Shahid Khaqan, visited the Muslim country.

Before these tours, the COAS Qamar Bajwa had also visited this country. And luckily these negotiations are going positively.





WTH!! Hilarious adjectives. @Janbaz Rao @faithfulguy @Dalit

 

[shah_123]

Bhikari ......

 

[EndangeredSpecies]

Would You Please Care To Explain The Composition Of Your Forex Reserves????Even You Know You "Forex" Is Not Yours.Most Of It Is Short Term Hot Money.

Your Current Account Is In Heavy Deficit.

No not quite. This is why:

http://www.zeebiz.com/india/news-ce...kh-crore-for-the-first-time-in-a-decade-28085

India's total CoD volume is now less than 1 lakh crore. About 15 Billion dollars. This means most of the forex money is in form of longer term instruments or assets. You are confusing India with China of 2-3 years back. Interestingly, what kind of accountant cann't even capitalize properly?