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.
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Updated 25 July 2020

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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Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

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Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.