Pakistan repays $1 billion in Eurobonds, says central bank

Pakistan repays $1 billion in Eurobonds, says central bank
A logo of the State Bank of Pakistan (SBP) is pictured on a reception desk at the head office in Karachi, Pakistan July 16, 2019. (REUTERS/File)
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Updated 13 April 2024
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Pakistan repays $1 billion in Eurobonds, says central bank

Pakistan repays $1 billion in Eurobonds, says central bank
  • The bond, which was launched in 2014 and repaid on Friday, was maturing this month
  • It comes as Islamabad struggles with balance of payments crisis, currency devaluation

ISLAMABAD: Pakistan’s central bank has repaid $1 billion in Eurobonds, it said on Saturday, a scheduled payment ahead of the South Asian nation seeking a long-term bailout from the International Monetary Fund.
The bond, launched in 2014 and repaid on Friday, was maturing this month.
“The payment was made to the agent bank for onward distribution to the bond holders,” the central bank said in a statement.
Islamabad has been struggling with a balance of payments crisis, record inflation and steep currency devaluation since an IMF standby arrangement averted a sovereign default.
Finance Minister Muhammad Aurangzeb is due to leave on Sunday for Washington to attend the IMF-World Bank spring meeting, where he will start negotiations for Pakistan’s 24th long-term IMF bailout.
Aurangzeb briefed Prime Minister Shehbaz Sharif about the new IMF program on Friday, the government said in a statement.
The IMF standby arrangement of $3 billion Islamabad secured last summer expired on Thursday. Its final tranche of $1.1 billion is expected to be released after the multilateral lender’s board meets later this month.
The two sides have spoken in recent weeks about negotiating the longer-term bailout to continue with necessary policy reforms to rein in deficits, build up reserves and manage soaring debt servicing.
Pakistan is in discussions with the IMF for a potential follow-up program, the IMF chief Kristalina Georgieva said on Thursday.


‘Elite must pay,’ PM says as Pakistan sets big tax target amid IMF talks

‘Elite must pay,’ PM says as Pakistan sets big tax target amid IMF talks
Updated 13 June 2024
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‘Elite must pay,’ PM says as Pakistan sets big tax target amid IMF talks

‘Elite must pay,’ PM says as Pakistan sets big tax target amid IMF talks
  • Pakistan has to find ways to increase revenues to reduce fiscal deficit as part of reforms being discussed with IMF
  • IMF is demanding fiscal consolidation, broadening tax base, improving tax administration and debt sustainability

Prime Minister Shehbaz Sharif said on Thursday the elite classes of Pakistan needed to pay their share of taxes, a day after the government announced its national budget and set a challenging tax revenue target of 13 trillion rupees ($46.66 billion) for the year starting July 1, a near 40 percent jump from the current year. 

Pakistan has to find ways to increase its revenues to reduce its fiscal deficit as part of reforms being discussed with the IMF, with whom Islamabad is in talks for a bailout of up to $8 billion. The IMF wants Islamabad to carry out gradual fiscal consolidation, broaden its existing tax base and improve tax administration and debt sustainability while protecting the vulnerable.

“During the budget preparation, I made it clear that the elite must pay taxes,” Sharif was quoted as saying in a statement by the PM Office after a meeting on tax reforms, digitization of the economy and measures to increase revenue. 

“We will eliminate tax evaders and those who assist them.”

Calling the national tax watchdog, the Federal Board of Revenue (FBR), the “most pivotal wheel” of the national economy, Sharif said the incumbent government would provide all resources for the uplift and digitalization of FBR’s human resources.

The top priority was to lower the tax rate while increasing the number of taxpayers, Sharif added, reiterating his government’s resolve to impose minimal taxes on the poor and middle class.

“We are prioritizing the complete digitization of the tax system and enhancing the capacity of the workforce,” Sharif said. “We are taking steps to bring eligible taxpayers into the tax net as soon as possible.”

The rise in the tax target in the national budget is made up of a 48 percent increase in direct taxes and 35 percent hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by a whopping 64 percent while sales tax would increase to 18 percent on textile and leather products as well as mobile phones. A hike in the tax on capital gains from real estate has also been announced. 

Key objectives for the upcoming fiscal year include bringing the public debt-to-GDP ratio to sustainable levels and prioritizing improvements in Pakistan’s balance of payments position, the government’s budget document shows.

Pakistan has projected a sharp drop in its fiscal deficit for the new financial year to 5.9 percent of GDP, from an upwardly revised estimate of 7.4 percent for the current year. 

On Monday, the central bank warned of possible inflationary effects from the budget, saying limited progress in structural reforms to broaden the tax base meant increased revenue must come from hiking taxes.

The bank, in a bid to boost growth, cut interest rates for the first time in four years on Monday, slashing them by 150 basis points, in the face of a sharp decline in inflation from a high of 38 percent last year to 11.8 percent in May.

GDP would expand 2.4 percent in the current year, missing the budgeted target of 3.5 percent, the government said, despite revenues rising 30 percent on the year, and the fiscal and current account deficits being under control.

The upcoming year’s growth target has been set at 3.6 percent and inflation projected at 12 percent, Aurangzeb said.

With inputs from Reuters


Pakistan seeks US support for ‘favorable’ international financing to fix power sector woes

Pakistan seeks US support for ‘favorable’ international financing to fix power sector woes
Updated 13 June 2024
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Pakistan seeks US support for ‘favorable’ international financing to fix power sector woes

Pakistan seeks US support for ‘favorable’ international financing to fix power sector woes
  • Energy Minister Sardar Leghari meets US delegation led by Assistant Treasury Secretary Brent Neiman
  • “Fan replacement program” being launched for first time in Pakistan to increase energy savings, Leghari says

ISLAMABAD: Pakistan’s Energy Minister Sardar Awaiz Leghari has sought US assistance in securing international financing at “more favorable rates” to fix deficiencies in the South Asian nation’s ailing power sector, a statement from his office said on Thursday.

Restoring the viability of the energy sector is a major demand of the IMF, with which Pakistan is in negotiations for a new bailout loan ranging from $6 billion to $8 billion to avert default in an economy growing at the region’s slowest pace.

The IMF wants Pakistan to prevent further accumulation of circular debt in its power sector arising from subsidies and unpaid bills, and implement reforms to reduce costs by improving electricity transmission and distribution, moving captive power into the grid, improving governance, and combating theft.

Additionally, Pakistan needs to maintain power and gas tariffs at levels that ensure cost recovery, with adjustments made to safeguard the financially vulnerable, through existing progressive tariff structures.

In a report released in January, the IMF said Pakistan had missed its target for power sector arrears, largely due to lower-than-expected recoveries and tariffs.

On Thursday, a delegation from the US treasury department called on the Pakistani power minister and discussed collaborations in the energy sector as well as Islamabad’s reform agenda. 

A statement from Leghari’s office said he told the delegation about “the importance of US support in securing international financing at more favorable rates for Pakistan’s power sector.”

“He expressed the need for US technical assistance to address the gap between seasonal production and demand,” the statement added. 

Leghari informed the US delegation about plans to address the power sector’s deficiencies, adding that the reforms were aimed at improving Pakistan’s energy mix and rectifying other issues. 

The energy minister also informed the US delegation about reforms to increase private sector participation in the distribution and transmission of electricity. T

Discussing debt management, the energy minister also apprised the US team of a “fan replacement program” being launched by Pakistan in a bid to increase energy saving.

“The US Assistant Secretary of Treasury [Brent Neiman] appreciated Pakistan’s power sector reform initiatives and assured all possible cooperation to resolve Pakistan’s power sector problems,” the statement said. 


Pakistan shares close at record high after budget dispels concern over capital gains tax hike

Pakistan shares close at record high after budget dispels concern over capital gains tax hike
Updated 13 June 2024
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Pakistan shares close at record high after budget dispels concern over capital gains tax hike

Pakistan shares close at record high after budget dispels concern over capital gains tax hike
  • Benchmark share index closed up 4.9 percent at 76,338 points after presentation of budget, which looks to raise tax revenue of $47 billion
  • Budget aims to strengthen case for new IMF bailout deal, as Pakistan seeks estimated loan ranging from $6 billion to $8 billion

ISLAMABAD: Pakistan’s benchmark share index made its biggest single-day gain in nearly a year to close at a record high, a day after the government unveiled a budget that cheered investors by avoiding an anticipated increase in capital gains tax, despite an ambitious tax revenue target.

The benchmark share index closed up 4.9 percent at 76,338 points after the presentation of the budget, which looks to raise tax revenue of 13 trillion rupees ($47 billion) for the year starting July 1, up nearly 40 percent from the current year.

“The market was expecting an increase in capital gains tax and so investors had reduced exposure significantly,” said Adnan Sheikh, assistant vice president of Pak Kuwait Investment Co.

A record day was expected following the budget and Monday’s cut of 150 bps in the central bank’s policy rate, as “equities are the best option for the medium term,” said Sheikh.

Pakistan’s international sovereign bonds also rallied with longer-dated maturities seeing the largest gains. The 2036 bond added 1.4 cents — its biggest gain in more than two months — to be bid at just over 77 cents in the dollar, Tradeweb data showed. .

Following a post budget press conference on Thursday, Finance Minister Muhammad Aurangzeb told Reuters that Islamabad plans to raise up to $1 billion through international bonds in the 2025/26 fiscal year, adding that up to $300 million will be raised through Chinese markets.

Apart from the capital gains tax, analysts say the budget and other revenue measures were in line with expectations.

The budget aims to strengthen the case for a new bailout deal from the International Monetary Fund (IMF), as Pakistan seeks an estimated loan ranging from $6 billion to $8 billion, to avert default in an economy growing at the region’s slowest pace.

“We believe this budget will serve as prior action for a new IMF program,” Topline Securities said in a note.

Topline said that if parliament passes the budget in compliance with IMF measures, it expected a forward price to earnings ratio of 6.93 in three years time, for a historic high, from 3.4 now.

Defending the decision to boost tax revenue, Aurangzeb said the present tax-to-GDP ratio of a little under 10 percent was not sustainable.

Key objectives for the upcoming fiscal year include efforts to increase the ratio gradually to 13 percent in the next three years, Aurangzeb told a press conference after presenting the budget in parliament.


Pakistan’s top investigation agency moves court against acquittal of ex-PM Khan in state secrets case

Pakistan’s top investigation agency moves court against acquittal of ex-PM Khan in state secrets case
Updated 13 June 2024
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Pakistan’s top investigation agency moves court against acquittal of ex-PM Khan in state secrets case

Pakistan’s top investigation agency moves court against acquittal of ex-PM Khan in state secrets case
  • A high court in Pakistan earlier this month overturned jailed former PM’s conviction on charges of leaking state secrets
  • Despite acquittal order by Islamabad High Court, Khan will remain in prison for now due to a conviction in another case

ISLAMABAD: Pakistan’s Federal Investigation Agency (FIA) has challenged in the Supreme Court a decision by a high court to overturn jailed former Prime Minister Imran Khan’s conviction on charges of leaking state secrets, the ex-premier’s party said on Thursday.

Khan, 71, had been sentenced to 10 years in prison by a lower court on charges of making public a classified cable sent to Islamabad by Pakistan’s ambassador in Washington in 2022. He has been in jail since August last year.

On June 3, the Islamabad High Court (IHC) overturned the state secrets case conviction, saying an “instant appeal is allowed” and Khan was acquitted of the charges. Shah Mahmood Qureshi, Khan’s foreign minister during his tenure from 2018-2022, was also acquitted of the charges. Both however remain in jail due to other legal cases against them. 

“FIA has challenged IHC decision, acquitting former Prime Minister Imran Khan & Former Foreign Minister Shah Mahmood Qureshi, in the Supreme Court of Pakistan,” Khan’s Pakistan Tehreek-e-Insaf (PTI) said in a text message sent to journalists. 

“Interestingly appeal filed by FIA is based on short order of IHC whereas detailed verdict is yet to be announced.”

Khan has said the classified cable was proof of a conspiracy by the Pakistan military and the US government to topple his government in 2022 after he visited Moscow just before Russia’s invasion of Ukraine. Washington and Pakistan’s military deny that accusation.

The state secrets case was one of four in which Khan was convicted just ahead of Pakistan’s national election in February. In two other cases the sentences have since been suspended.

But despite the June 3 acquittal, Khan, a former cricket star, will remain in prison serving a seven-year sentence over another case relating to his marriage to his third wife, Bushra Khan, also known as Bushra Bibi, which a court said contravened Islamic law. 

A ruling on the couple’s appeal against the sentence was postponed last month and the proceedings transferred to another court after a judge recused himself following an accusation of bias made by Bibi’s former husband, according to Khan’s lawyers.

Khan and his party were banned from contesting the February election, but candidates backed by the jailed leader still won the most seats. They did not have the numbers to form a government, which was instead led by an alliance of his rivals led by Prime Minister Shehbaz Sharif.

With inputs from Reuters


Pakistan says will collaborate with Arab states for implementation of UNSC-backed ceasefire plan in Gaza

Pakistan says will collaborate with Arab states for implementation of UNSC-backed ceasefire plan in Gaza
Updated 13 June 2024
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Pakistan says will collaborate with Arab states for implementation of UNSC-backed ceasefire plan in Gaza

Pakistan says will collaborate with Arab states for implementation of UNSC-backed ceasefire plan in Gaza
  • Pakistan will start its new term as non-permanent member of the UN Security Council on January 1, 2025
  • Ambassador Akram says Pakistan seeks dialogue with India to address outstanding issues, including Kashmir

ISLAMABAD: Pakistan will work with Arab states and other Muslim countries to seek the implementation of two United Nations Security Council (UNSC) resolutions for a ceasefire in Gaza, Islamabad’s top diplomat at the United Nations said on Wednesday, a week after Pakistan was elected as a non-permanent member of the Council.

Pakistan will replace Japan, which currently occupies the Asian seat, on January 1, 2025, to begin a two-year term after being elected to the top UN body for the eighth time with 182 votes in the 193-member General Assembly. 

“We are trying to do together with our Arab and Muslim brothers, to get an implementation of the Security Council’s decisions on a ceasefire, on providing humanitarian access for the besieged people, the Palestinians, and Gaza, and to promote reconstruction and finally of course to promote the vision of a two-state solution which everybody agrees is the only course through which a durable peace can be established in the holy land,” Pakistan’s Permanent Representative to the United Nations, Ambassador Munir Akram, told Arab News in a Zoom interview from New York.

On Monday, the UNSC backed a proposal outlined by US President Joe Biden for a ceasefire between Israel and Hamas in the Gaza strip and urged the Palestinian group to accept the deal aimed at ending the eight-month-long war.

Akram said the United States proposal called for the implementation of a ceasefire plan, which was negotiated by Egypt, Qatar, and the US.

“Now the question is whether this resolution will be implemented and again, the question of implementing resolutions when it comes there, the United Nations has limited capability for enforcement,” he said, adding that the UN had no military means to implement its decisions and sanctions required passage by the UNSC, which was difficult due to the power of veto. 

The world had witnessed many instances where actions had been blocked in the Security Council because of the use of the veto, Akram said. 

“This is where we have to explore what is possible and what is doable to get to the objectives that we all want, which is ceasefire in Gaza, humanitarian help, reconstruction, and a two-state solution.”

As a non-permanent member of the UNSC, the ambassador said Pakistan would promote an international order based on the UN Charter, emphasizing self-determination, sovereignty, territorial integrity, non-interference, and prohibiting the use or threat of force.

“We will seek for the implementation of the UN resolutions on Kashmir and other conflicts and will also be seeking to strengthen UN peacekeeping capabilities to make UN peacekeeping more effective,” Akram said. 

When asked about his country’s expectations from Indian Prime Minister Narendra Modi who has been sworn in for a third term, Akram said Pakistan “looked forward” to the possibility of dialogue to address all outstanding issues, including the principal issue of Kashmir.

The Muslim-majority Himalayan region of Kashmir has been a flashpoint between Pakistan and India since their independence from British rule in 1947. Both countries rule part of the Himalayan territory but claim it in full and have fought two wars over the disputed region.

“Pakistani government is open to a constructive dialogue with India,” Akram said. “We hope this will be a dialogue without preconditions and that we would be able to promote more normal relations and a relationship based on the principle of sovereignty and equality of states.”