Pakistan opposition takes prime minister to task over IMF deal

Pakistan Finance Minister Asad Umar (R) meets with IMF Managing Director Christine Lagarde at the Bali Convention Centre during the 2018 IMF/World Bank annual meetings in Nusa Dua on the Indonesian resort island of Bali on Oct. 11, 2018. (AFP file photo)
Updated 16 October 2018
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Pakistan opposition takes prime minister to task over IMF deal

  • The daily dithering has paralyzed the economy and precipitously devalued the rupee, says Sen. Sherry Rehman
  • Govt has instilled a sense of 'comfort and confidence' in the markets, says official spokesman

KARACHI, Pakistan: Questioning the government’s lack of perspicacity to avoid “painful economic decisions,” Pakistan’s opposition said on Monday that it was shocked at Prime Minister Imran Khan’s inability to avert a crisis, if any.  

“We have serious questions about this kind of strategy, where just the daily dithering has not just paralyzed the economy and precipitously devalued the rupee, but hugely compounded the crisis in the country’s public finances,” Sen. Sherry Rehman, former leader of the opposition in the Senate, told Arab News.

The reaction follows Finance Minister Asad Umar’s comments on Saturday wherein he said that “the government will have to take tough decisions that would be painful for people,” signaling a possible hike in utility prices, following Pakistan’s decision to approach the International Monetary Fund (IMF) for a bailout program. 

Opposing the decision, Rehman said: “We are shocked at the lack of a plan for a crisis we all saw looming. Now the slash and burn of utility prices is going to cause severe economic hardship. It’s one thing to have promised a completely different Pakistan, but another to not present alternative plans at least to manage the inflationary impact…on the most socially vulnerable sectors of Pakistan.”

Defending the move, Dr. Farrukh Saleem, government’s spokesman on economy and energy issues, said that the government has instilled a sense of “comfort and confidence” in the markets, not only within Pakistan but outside the country too, which was not possible without approaching the IMF for financial help. “IMF gives one prescription to those who avail its program, which includes an emphasis on increasing exports and curtailing imports and an end of subsidies,” he said.  Adding that the country’s “circular debts have gone up to 1.3 trillion rupees” — inherited from previous governments in the past 10 years — Dr. Saleem said that it was up to Imran Khan’s administration to do away with the liabilities as otherwise “the burden would eventually be shifted to consumers.”

“The government did not raise the gas rates for the last four years despite repeated requests from the concerned departments. Someone will have to swallow bitter pills of last 10 years,” he said. 

The stock market was jubilant following Pakistan’s decision to approach the IMF. However, investors’ newly acquired confidence was quickly replaced with concern as details emerged about the terms and conditions attached with the bailout program, resulting in a 750-point plunge in the benchmark KSE 100 index on Monday.

“Panic selling continued in the quarter earnings season amid a major fall in global equities and investor concerns for likely surge in interest rates and rupee depreciation with the potential IMF loans bailout package,” said Ahsan Mehanti, chief executive of Arif Habib Group. 

Pakistan has devalued its currency for the fifth time by 27 percent since December 2017, with analysts and stakeholders expecting another markdown as the IMF deal gathers steam.

“Its first impact would be in the currency market and the currency would be further devalued. With the devaluation of the Pakistani rupee against the US dollar, the prices of almost everything would start increasing especially those of imported goods,” Zafar Paracha, general secretary of Exchange Companies Association of Pakistan, told Arab News.  Another community that is expected to bear the brunt of the decision is the country’s industrialists and traders who said they could foresee an impact on the price of inputs and raw materials.

Junaid Esmail Makda, president of the Karachi Chamber of Commerce and Industry, said: “The finance minister should take the country’s business community into confidence before taking the ‘painful decision’ because if the government comes up with harsh decision without taking us into the loop it would have a disastrous impact.” 

He further warned that such a decision would be unfavorable not just “for foreign investors but for local investors too” who might move their assets to other countries.  

However, Dr. Saleem continued to remain optimistic.

Reiterating the fact that the steps taken by the government to mitigate the impact of the IMF’s conditions would yield results, he said: “The government is working to increase exports to stabilize foreign exchange and starting a housing project that would spur economic activities in the backdrop of a growing demand of allied industries.”


Brazil seeks to privatize key stretches of Amazon highways

Updated 24 January 2019
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Brazil seeks to privatize key stretches of Amazon highways

  • President Jair Bolsonaro’s government is seeking to overhaul Brazil’s poor transportation infrastructure
  • The Trans-Amazonian highway was inaugurated in the 1970s but only a fraction of its nearly 3,000 kilometers were paved
BRASILIA: Brazil will add the Trans-Amazonian Highway to the list of projects for privatization, its infrastructure minister said on Tuesday, seeking new investment to pave part of a dictatorship-era roadway already blamed for extensive deforestation.
The road concession will be added to a priority list for privatization at a meeting next month, Infrastructure Minister Tarcisio Freitas told Reuters in an interview.
The government will package a short section of highway with a concession to run a major section of BR-163, a key northern route for shipping Brazilian grains, a ministry spokesman said later on Tuesday. The 40-km (25-mile) section of the Trans-Amazonian up for privatization will connect BR-163 with the river port of Miritituba in northern state of Para, the spokesman said.
President Jair Bolsonaro’s government is seeking to overhaul Brazil’s poor transportation infrastructure, which raises costs and causes delays for the commodity-exporting powerhouse, by seeking private investors to operate dozens of road, rail and airport projects.
On Monday, government Secretary Adalberto Vasconcelos, who has been tasked with creating public-private infrastructure partnerships, said the country would privatize more airports and secure new investment for railways.
For roadways, five concessions are slated for auction this year with a long pipeline of projects to follow, according to Freitas. BR-262/381 in the state of Minas Gerais, sometimes called the “Road of Death” because its poor condition has contributed to lethal accidents, will also be put on the privatization list next month, he said.
The Trans-Amazonian highway, officially known as BR-230, was inaugurated in the 1970s under Brazil’s military dictatorship, but only a fraction of its nearly 3,000 kilometers (1,864-miles) were paved and much of the existing roadway has fallen into disrepair. It stretches from the coastal state of Paraiba deep into Amazonas state. Original plans for it to reach the border with Peru were never completed.
Nevertheless, research by Brazil’s space agency and academics has linked the road to a rise in deforestation, and road improvements allowing easier access deep into the Amazon have consistently led to increased deforestation nearby.
He said that major construction firms that were implicated in corruption schemes remain unable to participate in public auctions for infrastructure projects, but could act as subcontractors for winners of concession auctions.
Engineering conglomerates Odebrecht SA and Andrade Gutierrez SA, both implicated in corruption schemes to fix contracts, signed leniency deals with the government admitting guilt and agreeing to cooperate, which allows them to contest government contracts. Companies linked to corruption but without such leniency deals may be subject to legal challenges.
“They are companies that have know-how, companies with engineering (ability), companies that can provide good services,” Freitas said.