The United Arab Emirates has announced its intention to deposit US$3 billion (equivalent to AED11 billion) in the State Bank of Pakistan "to support the financial and monetary policy of the country", reported WAM, the official news agency of the Emirates.
The Abu Dhabi Fund for Development said, in a statement today, that it will deposit the said amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the bank.
The country's support for Pakistan's fiscal policy is based on the historical ties between the two people, said WAM, and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.
Following the announcement, Prime Minister Imran Khan took to Twitter to thank the UAE government for "supporting Pakistan so generously in our testing times".
"This reflects our commitment and friendship that has remained steadfast over the years," said the prime minister.
The Abu Dhabi Fund for Development has financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED931 million in grants, added WAM. The funds covered projects in sectors such as energy, health, education and roads.
The PTI-led government, which completed its 100 days in power on November 26, counted "resetting relations with key partners including Saudi Arabia and the UAE" among its accomplishments in its performance report.
Since assuming office in August, the premier has visited the UAE twice.
The first visit took place in September when Khan visited Saudi Arabia and then the UAE. He was received by Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed bin Sultan Al Nahyan and the two countries had agreed to strengthen economic, trade and investment relations.
The next month, a UAE delegation — comprising CEOs/senior officials of major companies including Mubadala Petroleum, ADIA (Sovereign Wealth Funds), Etisalat, DP World, Dubai Investment Authority, Emaar Properties, Aldahra Agriculture and Abu Dhabi Fund for Development — arrived in Pakistan.
According to Foreign Minister Shah Mahmood Qureshi, the one-day visit of the delegation — headed by Dr Sultan Aljaber, minister of state and CEO of Abu Dhabi National Oil Company — was a follow-up to the prime minister’s maiden visit to Abu Dhabi.
In November, the premier embarked on his second trip to the UAE amid reports that the gulf state was ready to extend financial assistance to Pakistan. Khan was received by the Abu Dhabi crown prince in the UAE capital and was accorded a reception at the presidential palace, which was followed by delegation-level talks.
He was accompanied by a high-level delegation comprising Foreign Minister Qureshi, Finance Minister Asad Umar, Petroleum Minister Ghulam Sarwar Khan, Power Minister Omar Ayub Khan, PM’s Adviser on Commerce Abdul Razak Dawood, PM’s Adviser on Accountability Shahzad Akbar and Chief of the Army Staff Gen Qamar Javed Bajwa, among others.
During his day-long trip, the prime minister had also met Sheikh Muhammad bin Rashid Al Maktoum, the vice president and prime minister of the UAE and ruler of Dubai.
Finance Minister Asad Umar on Tuesday rejected the notion that the country is facing an economic crisis, saying the "financing gap for the current fiscal year has been met", Radio Pakistan reported.
He said "those spreading rumours about the economy are not doing any favour to the country".
The minister's comments come a day after stocks suffered the worst single-day decline in 16 months as the KSE-100 index tumbled 1,335.43 points (3.30 per cent) and closed at 39,160.60.
While speaking at the 11th South Asia Economic Summit in Islamabad, Umar said that "all the fundamental economic indicators are improving as a result of effective policies of the present government".
He also pointed out that exports are increasing while imports and current account deficit are witnessing downward trend, Radio Pakistan reported.
Talking about the record rise of the US dollar against the Pakistani rupee in the interbank market, the finance minister pointed out the rupee has been witnessing depreciation since last year. He, however, said that the situation is now improving.
Umar, according to Radio Pakistan, also made it clear that no compromise will be made on the independence of State Bank of Pakistan (SBP).
A day earlier, during a meeting with TV anchors at PM House, Prime Minister Imran Khan had revealed that he was unaware of the SBP move [on Friday] to decrease the value of the currency against the US dollar and came to know about rupee depreciation through the media.
The prime minister said the SBP was compelled to depreciate the rupee in order to preserve the country’s foreign currency accounts, as the government inherited a $19bn trade deficit from the last PML-N government.
The premier said although the SBP was an autonomous body, he had asked the authorities that no such decision be taken without taking the government into confidence first.
Later at night, Minister of State for Finance Hammad Azhar told a private TV channel that the prime minister did not intend to roll back his commitment to an independent central bank, but only meant that he wanted greater “information sharing” between the bank and the government.
THE decision to approach the International Monetary Fund provided comfort to economic stakeholders as the prospective bail-out package will help Pakistan dodge the immediate danger of a sovereign default. It is not expected, however, to automatically solve all problems weighing on future economic prospects.
A major challenge would be to contain the fallout of the economic slowdown on households and investors. The petrol, gas and electricity rate hike and their multiplier effect will significantly jack up cost of living and doing business. The slowdown has shrunk trading volumes in the market. Many brokerage houses, trading firms and mutual funds have already started cutting corners and firing staff on the fringes.
During a recent interaction with top businessmen in Karachi, Razak Dawood, advisor to the prime minister for commerce, articulated what he termed the major economic challenge. “Stopping deindustrialisation, which is an onerous task but not impossible. The industrial base needs to be reinvigorated. The government has focused itself on a doable export-led growth strategy and is working to remove duties for all imported raw material.”
“Sure. The million dollar question is: where is the new investment is going to come from?” commented a big gun privately.
Austerity measures, tightening of the monetary policy, falling rupee dollar parity, upward revisions of utility rates and the growing wedge of confidence between the private sector and the government mean more challenging private investment prospects going forward.
No one in business circles expects the cash starved and debt ridden government, with a harsh lender breathing heavy on its neck to invest liberally in the current phase. At the same time it would be absurd to assume that the private sector can be mobilised unless it finds the activity sufficiently safe and financially rewarding.
The fact is that the risk-averse private sector did not respond when the past governments attempted to expand the base of the economy by offering a low credit cost environment unless returns were guaranteed.
The current economic downturn, reflected in depressing trends in capital, currency, commodity, retail and property markets, are symptomatic of a deeper malice. The indecisiveness of the ruling party, since it assumed power two months back, played a part in exposing the fact but even ardent supporters of the last PML-N government will not refute that the high growth it achieved was not well grounded.
Some businessmen, economists and officials were approached to pick their mind on the crucial step, in their opinion, that can steer the economy out of this tight corner. The responses were swift but reflected a lack of consensus in the relevant circles.
Mr Salim Raza, former governor, State Bank of Pakistan, responded in writing. “Setting the right agricultural choices is important. We have to subsidise wheat and sugar exports because of a production surplus. To this end the government set rates above world prices.” He advocated that land surplus be diverted to edible oil crops (rapeseed, canola, mustard, etc), which have been taken over by sugarcane and wheat, to curtail edible oil imports.
Mr Shaukat Tarin, former finance minister, admitted that there is no single ‘ready’ solution. “It is most important that we all start paying taxes judiciously,” he says.
Mr Muhammad Ali Tabba, chairman, the Pakistan Business Council and CEO Lucky Cement said that “the country needs expansion of tax base and an increase in exports.”
A senior official admitted that under the IMF’s guardianship growth will suffer in the short run. “In the medium- to long-term the only way out is to excite the private sector to invest in Pakistan. These non-debt creating financial flows will ease out the stringent balance of payments situation. This is possible through orderly, business-friendly structural reforms besides changing the bureaucratic mindset,” he said.
“I would recommend tariff and trade policy reforms to get exports moving. That’s what India did after their bailout in 1992. Nothing else will work. Other options include substantially reducing the defence expenditure and privatising state owned enterprises,” opined Dr Manzoor Ahmad, former Pakistan ambassador to the World Trade Organisation.
Shabir Ahmed, chairman Pakistan Bed Linen Manufacturers and Exporters Association wanted the government to focus on the economy. “Stop the witch hunt. The FIA involvement is scaring overseas joint venture partners”, he said. Terming public name calling of suspected tax evaders irresponsible he thought that the PTI is punishing the business class for its own failings (being ill prepared to deal with challenges on hand).
“Zero duties and taxes on import of machinery plus loans for plant upgradation machinery on a rate permissible under the export finance scheme can help,” responded Majyd Aziz, president Employers Federation of Pakistan.
Eizaz Sheikh, president Cement Manufacturers Association of Pakistan advised reducing imports and stay away from meddling in the housing construction business to avoid financial scandals.
Published in Dawn, The Business and Finance Weekly, October 15th, 2018
ISLAMABAD: The Pakistan Tehreek-i-Insaf (PTI) and the Communist Party of China have signed a memorandum of understanding (MoU) to strengthen party-to-party relations.
During an event held at the Foreign Office, Foreign Minister Shah Mehmood Qureshi and Chinese minister Song Tao signed the MoU.
PTI secretary general Arshad Dad, Senator Dr Shahzad Waseem and other party leaders were present on the occasion.
“Witnessed MoU signing ceremony between Communist Party of China and Pakistan Tehreek-i-Insaf to further strengthen party to party relations,” Senator Shahzad Waseem tweeted after the event.
Mr Qureshi tweeted: “China is an all weather friend and strategic partner. We start a new chapter in our relations with the signing of an MoU between PTI and the Communist Party of China. A regular exchange of ideas will help both countries and political parties to combat the challenges we face today.”
The two parties also agreed to exchange high-level delegations to further understand each other, bring the two nations closer to each other and to address the issues.
Earlier on Saturday, the Chinese delegation visited the PTI secretariat where it was received by Arshad Dad.
China has been playing an important role in addressing the issues of Pakistan. Tens of billions of dollars have been invested in Pakistan under the CPEC which is a framework of regional connectivity. The CPEC will not only benefit China and Pakistan but will also have a positive impact on Iran, Afghanistan, India, Central Asian Republics and the region.
Published in Dawn, October 15th, 2018