Pakistan PM Abbasi rules out devaluing rupee, says will not ask IMF for help despite rising deficit

Pakistan Prime Minister Shahid Khaqan Abbasi (back toward the camera) being interviewed by Arab News’s Baker Atyani (left) and Sib Kaifee.
Updated 06 February 2018
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Pakistan PM Abbasi rules out devaluing rupee, says will not ask IMF for help despite rising deficit

ISLAMABAD: Pakistan will not devalue the rupee or seek help from the International Monetary Fund to address its fiscal challenges, Prime Minister Shahid Khaqan Abbasi told Arab News in an exclusive interview.

A rising trade deficit, a potential currency crisis and a sharp decline in exports have placed Pakistan’s foreign exchange reserves under pressure. Financial analysts believe the reserves are probably falling more quickly than government projections suggest.

“We have discussed devaluation but it’s not on the cards,” Abbasi said. “There has been a slight decline in the rupee but that’s market based. In fact, because we are linked to the dollar and the dollar is weaker today, there has been a certain devaluation … compared to the other currencies.

“Economies have also slowed down in the Gulf, where most of our remittances used to come from.

“There has been a decline in the reserves but hopefully the last two months show an improving trend and the numbers for September will come in… and we expect to resolve that issue within our resources and not have to resort to the IMF. I don’t think the IMF program is something that we intend to pursue.”


Abbasi conceded that exports were down, but he insisted this was a macroeconomic trend. “Globally there has been a decline in exports,” he said. “We are trying to revive them. The economy is expanding, so the current account challenge is there and we are managing it.

“Imports have gone up. We have a lot of machinery imports. There are some discretionary imports that have gone up, which actually signals growth in the economy because the people have more money to spend on luxury goods.”

Abbasi said Pakistan and its economy were in an “expansion phase,” and were placing their hopes for the future on Chinese investment — particularly CPEC, the China Pakistan Economic Corridor, part of China’s ambitious $1 trillion One Belt One Road initiative.

“If you look at any economy, the basic ingredient is more infrastructure to resolve infrastructural issues and this is a quantum leap in that direction,” he said.

“It’s a massive investment, over $60 billion today. It’s mostly in infrastructure that we badly needed. Our roads, ports, industrial zones … it will open up western channels access to the world. It will help us to move our commerce faster. It will help us develop more industries and help with exports.

“It’s really a game changer and it will have multiplier effect. It will attract more investment, it will attract more projects. So, it’s really something that we feel will pay very high dividends for Pakistan.”

Abbasi rejected suggestions that large investments would give China undue influence in Pakistan.

“It’s a two-way relationship,” he said. “They have equity investments here but mostly it is debt or loans of some kind and it is basically focused on certain areas. We do not view it as a threat of any kind.

“Pakistan’s economy has the capacity to repay those loans. They have been targeted very carefully and the economic dividends will pay for more than the loans are worth. So, it’s an economic relationship in that sense.”

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Oil rises after US Navy destroys Iranian drone

Updated 19 July 2019
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Oil rises after US Navy destroys Iranian drone

  • The International Energy Agency is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day
  • Speculators have exited options positions that could have provided exposure to higher prices in the next several years

TOKYO: Oil prices rose more than 1 percent on Friday after the US Navy destroyed an Iranian drone in the Strait of Hormuz, a major chokepoint for global crude flows, again raising tensions in the Middle East.
Brent crude futures were up 82 cents, or 1.3 percent, at $62.75 by 0100 GMT. They closed down 2.7 percent on Thursday, falling for a fourth day.
West Texas Intermediate crude futures firmed 61 cents, or 1.1 percent, at 55.91. They fell 2.6 percent in the previous session.
The United States said on Thursday that a US Navy ship had “destroyed” an Iranian drone in the Strait of Hormuz after the aircraft threatened the vessel, but Iran said it had no information about losing a drone.
The move comes after Britain pledged to defend its shipping interests in the region, while US Central Command chief General Kenneth McKenzie said the United States would work “aggressively” to enable free passage after recent attacks on oil tankers in the Gulf.
Still, the longer-term outlook for oil has grown increasingly bearish.
The International Energy Agency (IEA) is reducing its 2019 oil demand forecast due to a slowing global economy amid a US-China trade spat, its executive director said on Thursday.
The IEA is revising its 2019 global oil demand growth forecast to 1.1 million barrels per day (bpd) and may cut it again if the global economy and especially China shows further weakness, Fatih Birol said.
“China is experiencing its slowest economic growth in the last three decades, so are some of the advanced economies ... if the global economy performs even poorer than we assume, then we may even look at our numbers once again in the next months to come,” Birol told Reuters in an interview.
Last year, the IEA predicted that 2019 oil demand would grow by 1.5 million bpd but had already cut the growth forecast to 1.2 million bpd in June this year.
Speculators have exited options positions that could have provided exposure to higher prices in the next several years, market participants said on Thursday.
US offshore oil and gas production has continued to return to service since Hurricane Barry passed through the Gulf of Mexico last week, triggering platform evacuations and output cuts.
Royal Dutch Shell, a top Gulf producer, said Wednesday it had resumed about 80 percent of its average daily production in the region.