‘No urgency’ for Pakistan to enter IMF program: Finance minister

Pakistani Finance Minister Asad Umar speaks exclusively to Arab News in an interview in Islamabad on Thursday, Dec. 13, 2018. (AN photo)
Updated 14 December 2018

‘No urgency’ for Pakistan to enter IMF program: Finance minister

  • Reviewing CPEC contracts “not at all” off the table
  • $1 billion received of $6 billion Saudi bailout package

ISLAMABAD: Pakistan is in no rush to strike a deal with the International Monetary Fund to deal with its balance-of-payments crisis, Finance Minister Asad Umar has told Arab News. He added that funding from “friendly countries” would help shore up the economy over the remainder of the current financial year.

Pakistani officials have been in talks with the IMF since October, and have formally requested Islamabad’s 13th bailout since the late 1980s to help settle the economy while the new government of Prime Minister Imran Khan, who came to power in July, struggles to implement reforms. 

“I have no urgency right now to get into an IMF program,” Umar told Arab News in a wide-ranging interview on Thursday. “We are in discussions (with the IMF). When we reach the (outlines) of a program which we believe is in the best interests of Pakistan’s economy, we’ll go ahead and sign that.” 

Umar said that pressure to rush a deal with the IMF through had eased, thanks to a combination of bilateral financial support from historical allies and a host of economic measures taken by the government in its first hundred days in power, which he claimed would result in a current account deficit of $6-7 billion less than the previous financial year.

“So I’ve saved $6-7 billion of my financing need and then I’ve arranged funding from bilateral sources to bridge the gap,” Umar said, referring to a $6 billion package agreed on with Saudi Arabia this October and expected aid from China and the UAE. 

Umar refused to provide a figure for packages promised by the latter two countries, but said that, in both cases, it was just a case of “dotting the i’s and crossing the t’s” on the agreements.

Injections from allies will provide a much-needed boost to Pakistan’s foreign exchange reserves, which dipped to their lowest in over 4 years — at $7.3 billion — in the week that ended on Dec. 7. 

Any IMF program will likely require Pakistan to commit to strict structural reforms to the economy, and to curbing the government spending that has seen growth soar to nearly 6 percent — at the fastest rate in 13 years — but has also exhausted budgets.

In October, the IMF predicted Pakistan’s growth will slow to four percent in 2019 and about 3 percent in the medium term. This month, the Pakistani rupee dropped to an all-time low of 0.0144 against the dollar. 

Umar denied that the government had allowed the rupee’s value to drop in order to fulfill a precondition of an IMF bailout. He said the main sticking point in negotiations with the organization was the pace of reforms.

“We believe that if you try and make reforms too quickly, if you try and make an adjustment too quickly, you’ll crash the economy,” the minister said. “And that is not in our interests, not even from a debt-sustainability point of view.”

The IMF has also said it wants “absolute transparency” regarding Pakistan’s debts — a demand that will require clarification of certain opaque deals, as well as its debts to China for some $60 billion in financing for energy and infrastructure projects that are part of Beijing’s Belt and Road Initiative. 

Asked whether reviewing agreements related to the China-Pakistan Economic Corridor (CPEC) program was off the table, the finance minister said: “Not at all.”

“If it’s (a question of) transparency, then transparency is available,” he said, stressing that contracts with China had been signed in accordance with “well-established rules.”

Umar also noted that Pakistan had satisfied all concerns raised by the IMF and US officials with regard to CPEC. 

“The IMF had a lot of questions. The Americans had a lot of questions around CPEC,” he said. “We made a presentation, we shared the data with them — first meeting. They never came back after that.”

Umar said new projects slated to be added to the CPEC portfolio included a railway line from the port city of Karachi to the northwestern town of Peshawar, and the establishment of special industrial zones.

“There are a few other projects in the area of the industrial cooperation framework that is being finalized, and which will lay the basis on which future industrial cooperation will take place, private sector-to-private sector,” Umar said. “So, from government-to-government, which is what the first phase of CPEC was, it will be moving to business-to-business.”

Giving details of the Saudi package of $3 billion in foreign currency support for a year and a further loan of up to $3 billion in deferred payments for oil imports, the finance minister said $1 billion of the $6 billion package had been disbursed so far. 

“It’s not a rescue package, it’s a financing package,” he said. “Saudi Arabia will earn a rate of return on that investment.” 

Umar explained that the pending agreements with China and the UAE were also not aid packages: “These are all financial transactions. There are loans, there are trade finance facilities. Pakistan is not taking aid from anyone.”

Referring to a recent World Bank report that said trade between India and Pakistan was far below its potential of $37 billion, the minister said Pakistan was ready to engage in a constructive trade dialogue with its neighbor but “it can’t be a one-sided relationship.”

Trade has long been tied to political conflict between the hostile neighbors who have fought three wars since independence from Britain in 1947. Peaceniks on both sides say progress in trade ties could help bolster a fragile peace process.

But Umar ruled out any discussions on trade with India before general elections there in 2019 and said Pakistan would not take “any kind of unilateral step” when it came to granting India Most Favoured Nation (MFN) trade status, a proposal that past governments have toyed with. 

On the government’s promise of attracting investment from Pakistanis living abroad, the finance minister said rules for a diaspora bond were approved by the Cabinet a week ago and the bond would be issued late December or January. 

“There are equity-related or investment opportunity-related diaspora investments which are being finalized. The board of investment has worked on them; there was a presentation to the prime minister today (Thursday) about some of those,” Umar said. “First the diaspora bonds will be launched and then these initiatives will follow quickly after.”

The minister said despite “doom-and-gloom” scenarios painted by critics, he owed his optimism about Pakistan’s future to the fact that he was a “data-driven person.”

“I’m sure you would have heard (people say), ‘Business is not investing (in Pakistan) anymore,’” Umar said. “But if you look at private sector credit offtake — a useful metric to measure business investment — it was five times more in the first quarter of this year than in the first quarter of last year.

“So where is this business which is not (investing)?” he continued. “I’ve got a whole host of businesses which are coming in, international businesses coming in, all saying we want to invest hundreds of billions in Pakistan.”


UK court blocks Heathrow expansion over climate concerns

Updated 27 February 2020

UK court blocks Heathrow expansion over climate concerns

  • The ruling throws in doubt the future of the £14 billion-plan to build a third runway at Heathrow
  • Environmental campaigners challenged the project because of concerns that a third runway would encourage increased air travel and carbon emissions

LONDON: Heathrow Airport’s plans to increase capacity of Europe’s biggest travel hub by over 50% were stalled Thursday when a British court said the government failed to consider its commitment to combat climate change when it approved the project.
The ruling throws in doubt the future of the £14 billion ($18 billion) plan to build a third runway at Heathrow, the west London hub that already handles more than 1,300 flights a day.
While Heathrow officials said they planned to appeal, Prime Minister Boris Johnson’s government indicated it wouldn’t challenge the ruling by the Court of Appeal.
“We won!” said London Mayor Sadiq Khan, a long-time opponent of the project who joined other local officials and environmental groups in challenging the national government’s approval of Heathrow’s expansion plans.
At stake is a project that business groups and Heathrow officials argue is crucial for the British economy as the UK looks to increase links with countries from China to the United States after leaving the European Union. Heathrow has already reached the capacity of its current facilities, and a third runway is needed to serve the growing demands of travelers and international trade, they say.
Environmental campaigners, however, challenged the project because of concerns that a third runway would encourage increased air travel and the carbon emissions blamed for global warming. The British government has committed to reducing greenhouse gas emissions as a signatory to the 2016 Paris Agreement, which seeks to limit temperature increases to 1.5 degrees Celsius over pre-industrial levels.
The court upheld the appeal, saying the government had failed to consider its commitments under the Paris Agreement when it approved a national policy on airport capacity in southeastern England that paved the way for a third runway at Heathrow. That policy statement backed the Heathrow project over a competing plan from Gatwick Airport, 30 miles (50 kilometers) south of central London, and a proposal to build a new airport in the Thames estuary east of London.
In a narrowly written opinion, the three-judge panel stressed that it wasn’t ruling on the merits of the Heathrow project. Instead, the court said the national policy statement would be suspended until the government has reviewed the findings in accordance with Britain’s obligations under the Paris Agreement.
“We have not found that a national policy statement supporting this project is necessarily incompatible with the United Kingdom’s commitment to reducing carbon emissions and mitigating climate change under the Paris Agreement, or with any other policy the Government may adopt or international obligation it may undertake,” the court said.
“The consequence of our decision is that the Government will now have the opportunity to reconsider the (national policy statement) in accordance with the clear statutory requirements that Parliament has imposed.”
The Department for Transport said the government wouldn’t challenge the ruling.
“We take seriously our commitments on the environment, clean air and reducing carbon emissions,” the department said in a statement. ”We will carefully consider this complex judgment and set out our next steps in due course.”
Heathrow said the issue raised by court’s ruling is “eminently fixable,” and it will work with the government to resolve the problem. The airport also said it planned to appeal the ruling to the Supreme Court.
“Expanding Heathrow, Britain’s biggest port and only hub, is essential to achieving the Prime Minister’s vision of global Britain,” the airport said in a statement. “We will get it done the right way, without jeopardizing the planet’s future.”
Thursday’s ruling is just the latest twist in a 13-year battle over increasing airport capacity in and around London.
Choosing a project pits the economic benefits of expansion against the pollution, noise and congestion that it will produce. The issue is so toxic that politicians created an independent commission to weigh the options.
Amid furious public relations battles, the Airports Commission in 2015 backed a third runway at Heathrow. Parliament finally approved the airport policy statement in June 2018.
But things have changed since then. Most notably, perhaps, is Boris Johnson’s election as prime minister last year. Johnson, a long-time opponent of Heathrow expansion, once promised to lie down in front of the bulldozers to prevent construction of the third runway.
Tony Travers, an expert on London issues at the London School of Economics, pointed out that the debate over Heathrow has been going on intermittently since the 1960s and choosing another option to expand airport capacity would take years.
Meanwhile, the government has staked its future on increasing trade with nations outside the EU, and in this context it makes little sense to ignore the Heathrow project.
“Brexit means trade with countries further away than you can get on a train,” Travers said.
The Department for Transportation argued that the Heathrow project would permit an additional 260,000 flights a year and give a 74 billion-pound ($99 billion) boost to the British economy over 60 years.
Tim Alderslade, chief executive of Airlines UK, an industry body representing UK-registered airlines, described Thursday’s decision as “extremely disappointing.”
“The economic prize is enormous if expansion is done right, with airlines ready to respond to the unlocking of new capacity by creating new routes and helping to connect the UK to new markets and destinations,” he said.
The court dismissed appeals that dealt with issues such as noise and air pollution raised by Heathrow’s neighbors.
But local campaingers, some of whom have been fighting expansion for decades, popped champagne corks and cheered when they heard the ruling. Many saw it as decisive.
“It surely must be the final nail in the coffin for Heathrow’s attempts to steamroll over local and national opposition to their disastrous third runway plans,” said Gareth Roberts, the leader of Richmond Council, the local government body for a community in the flight path of the proposed runway. “The expansion of Heathrow would be a catastrophe for our climate and environment and for the thousands of Londoners who would be forced to live with the huge disruption it will cause.”