Day: December 10, 2021

Pakistan is expected to receive more than $2 billion from various sources within the next one and a half months.

The sources include funds from the International Monetary Fund (IMF), the new Sukuk, and Eurobonds issues.

Reliable sources from within the State Bank of Pakistan (SBP) have told ProPakistani that the central bank will soon confirm the receipt of over $2 billion in confirmed credit, including $1 billion from the IMF next tranche and the remaining payment in par through respective issues of Sukuk and Eurobonds.

While the sources couldn’t confirm the draft timeline for the placement of funds with the bank, the prospectus inflows are expected to propel forex reserves to reach $20.5 billion in the near term.

Amid a widening current account deficit, declining foreign currency reserves, and a depreciating rupee, additional fundraising to meet budgetary requirements is essential for Pakistan. Earlier, the State Bank of Pakistan witnessed huge inflows of $3 billion from Saudi Arabia, pushing reserves to 25.1 billion by the week ending 3 December 2021. External debt and other official payments were also made, and the SBP reserves reflected a net addition of $2.648 billion to stand at $18.658 billion. The foreign exchange reserves held by the commercial banks stood at $6.4 billion.

It is pertinent to note that the Islamic denominated Ijara Sukuk was launched following a staff-level agreement with the IMF in November. The bond was launched with the aim that Pakistan would be able to get a ‘favorable’ deal in the shape of getting a competitive mark-up on offered amounts from potential investors.

Government officials at the time did mention that the remaining $1-1.5 billion bonds will be launched in the second half (Jan-June) period of FY2022.

Moreover, the country’s trade deficit expanded by 162.4 percent during November, owing to an almost threefold increase in imports compared to exports. The current account deficit stood at $5.08 billion from July to October 2021 as against the current account surplus of $1.33 billion reported in the same period the last year.

Source: Pro Pakistani

The government on Thursday raised Rs. 68 billion through the auction of five-year fixed rate government of Pakistan Ijara Sukuk against the target of Rs. 25 billion.

The cut-off rental rate of 11 percent, however, was much higher than the cut-off rate in the auction held on September 30, which stood at 9.7 percent.

The government has also raised Rs. 47 billion through the auction of five-year variable rate Ijara Sukuk. The issuance of the Sukuk will help the government in diversifying its outstanding debt.

The government plans to raise Rs. 6.90 trillion to finance the budget deficit caused by low revenues through the auctions of Market Treasury Bills (MTB), Pakistan Investment Bonds (PIB) and Sukuk from December 2021 to February 2022.

During the first quarter of the current fiscal year, the budget deficit jumped to Rs. 745 billion compared to Rs. 529 billion during the same period of the previous year. The budget deficit in the first quarter of the current fiscal year stands at 1.4 percent of the gross domestic product compared to 1.2 percent during the same period of the previous year.

Source: Pro Pakistani

The Asian Development Bank (ADB) today approved a $300 million policy-based loan to support financial, technical, and governance reforms to strengthen Pakistan’s energy sector and improve its financial sustainability.

The financing is part of the second subprogram of ADB’s Energy Sector Reforms and Financial Sustainability Program, which aims to improve the governance of Pakistan’s energy sector and reduce and manage the accumulated cash shortfall across the power supply chain known as circular debt. The first subprogram for the amount of $300 million was approved in December 2019.

“As Pakistan’s key development partner in the energy sector, ADB has been supporting the government to expand access to reliable, affordable electricity and help enact reforms that make the sector more efficient and sustainable,” said ADB Director General for Central and West Asia Yevgeniy Zhukov.

“This program will help facilitate public and private sector investment across the energy sector value chain through key policies and integrated planning, and will help expand renewable energy generation,” he added.

Disruption from the coronavirus disease (COVID-19) pandemic stressed the finances and supply chains of Pakistan’s energy sector, slowing the pace of sector reforms initiated by the government in 2019. Losses incurred by state-owned enterprises that impacted the energy sector’s circular debt, together with pandemic relief measures put unprecedented pressure on the energy sector’s liquidity and finances.

Reforms under ADB’s program will help make Pakistan’s energy sector more financially sustainable by addressing inefficient tariffs and subsidies, high generation costs, system losses, and a lack of integrated planning. The program also aims to enhance energy infrastructure and professionalize the management of energy entities to improve their performance.

“ADB continues to work with development partners to advance crucial energy sector reforms and implement a road map for a competitive electricity market,” said ADB Central and West Asia Director for Energy Joonho Hwang.

“Ultimately, these reforms will help improve the quality and reliability of power supply to the benefit of all—commercial, domestic, urban, and rural consumers,” he added.

Source: Pro Pakistani

The Asian Development Bank (ADB) today approved $385 million in financing to help improve the livability and community health of five cities in Pakistan’s Khyber Pakhtunkhwa province.

The Khyber Pakhtunkhwa Cities Improvement Project will help to construct two clean water supply treatment facilities, three sewerage treatment facilities, and rehabilitate dysfunctional tube wells, among several other important subprojects in the cities of Abbottabad, Kohat, Mardan, Mingora, and Peshawar.

More than 3.5 million people will benefit from improved access to clean and safe water, reliable and integrated waste management and sanitation services, green urban spaces, and gender-friendly urban facilities. About 150,000 households will gain new connections to water supply systems and have smart water meters installed in their homes.

With its rapidly growing urban population, Khyber Pakhtunkhwa province is becoming more exposed to health risks due to deteriorating municipal services and the impacts of climate change. Climate-resilient urban infrastructure combined with access to reliable services benefit the people, the environment and support sustainable development. This project will help address these challenges of urban centers in Khyber Pakhtunkhwa province.

“Large urban projects are often delayed due to their inherent complexity and competing interests in limited urban space,” said ADB Director General for Central and West Asia, Yevgeniy Zhukov.

“This project has used ADB’s project readiness financing facility to ensure detailed engineering design, safeguards assessments, and other critical preparatory work was completed in advance—a first for central and west Asia region. That will ensure the transformative benefits of this project will flow to the people of Khyber Pakhtunkhwa province more quickly.”

ADB will provide a $380 million loan and a $5 million grant, while the Asian Infrastructure Investment Bank will provide co-financing of $200 million, subject to the approval of their board of directors. Together with $65 million in financing from the Government of Pakistan, this represents ADB’s largest urban project ($650 million equivalent) in Pakistan.

ADB’s loan includes more than $106 million for climate adaptation and mitigation, the bank’s largest climate financing contribution in any urban project in 2021, reaffirming its commitment to helping its developing member countries fight climate change.

With a strong focus on gender, the project will boost women’s access to economic opportunities and increase their participation in urban governance by upgrading a center dedicated to women’s skills development. The project will rehabilitate streets, parks, and nature trails, adding female-friendly urban facilities such as women’s sports complexes, family areas, and well-lit rest areas and toilets. The project will also support a scholarship program for qualified female students.

Pakistan is a founding member of ADB. Since 1966, ADB has committed more than $36 billion to promote inclusive economic growth and improve the country’s infrastructure, urban and social services, and resilience to climate change.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and Pacific while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

Source: Pro Pakistani

The Adviser to the Prime Minister on Commerce and Investment, Abdul Razak Dawood, announced on Friday that Pakistan’s exports had registered the fastest growth rate in South Asia in November 2021.

He tweeted that Pakistan’s exports had grown by 33.5 percent in November, which is higher than Bangladesh’s exports that had grown by 31.3 percent, and had surpassed India’s growth of 26.5 percent in the same month.

Congratulating exporters for this achievement, Dawood said, “This has been made possible by the hard work of our exporters and they deserve praise for this accomplishment”.

Pakistan’s exports during the month under review rose to a historic monthly high of $2.903 billion as compared to $2.174 billion during the corresponding period last year, while the target for November 2021 was $2.6 billion.

Furthermore, Pakistan’s exports increased by 27 percent to $12.365 billion during the first five months of the current financial year against $9.747 billion during the same period last year.

Source: Pro Pakistani

The Pakistani Rupee (PKR) continued its historic decline against the US Dollar (USD) for the fourth day in a row and depreciated by 10 paisas against the greenback in the interbank market today. It hit an intra-day low of Rs. 177.95 against the dollar during today’s open market session.

The local currency depreciated by 0.06 percent against the USD today and closed at another all-time low of Rs. 177.71, following its loss of 18 paisas when it closed at Rs. 177.61 in the interbank market on Thursday, 9 December.

The local currency has lost 1.13 percent on a month-to-date basis after recording another historic low today, and it has depreciated by 11.18 percent on a calendar-year-to-date basis. It notably continues its dismal run and has dashed the market’s hopes for an immediate recovery despite numerous fiscal fulfillments over the week.

Rupee Spillover

The Rupee continues its historic plunge as market players are finally coming to grips with the fundamental understanding of how loan facilities usually work in times of inflation and economic uncertainty. While borrowing usually helps governments determine how debt servicing can be improved for future benefits, the usual pullbacks of unsupervised market practices, coupled with the uninvited fiscal handicaps, heap pressure on financial instruments, including the currency.

To that effect, Pakistan’s borrowing from multiple financial sources has doubled during the first five months of the ongoing fiscal year. The government’s borrowing for budgetary support increased by 108 percent to Rs. 104 billion in the first five months of the current fiscal year to control the widening fiscal deficit.

The State Bank of Pakistan (SBP) has also had huge inflows of $3 billion from Saudi Arabia recently, which pushed the reserves to $25.1 billion. From 5 to 26 November, the foreign exchange reserves were depleted by over $1.5 billion. The SBP’s reserves declined by $1.31 billion and commercial banks’ reserves decreased by $211 million.

The outflow of the reserves was reported due to the heavy payment on account of the debt payments to various financial institutions. On the other hand, higher imports bill, the smuggling of dollars, and the purchase of dollars through commercial banks and open markets also impacted this trend.

Commenting on the local unit’s tumble to another historic low, the former Treasury Head of Chase Manhattan Bank, Asad Rizvi, remarked, “Net Reserves with SBP is up after receiving $3bn deposit, but during the week due [to] payments, it was reduced by $352mn to $18.658bn”.

He added, “To ease pressure on PKR, the size of settlement needs to be curtailed, as constant borrowing add[s] burden to the GOVT KITTY & increases DEBT”.

The PKR had a mixed showing of trends against the other major currencies. It posted blanket losses of two paisas against the Pound Sterling (GBP), and two paisas against both the UAE Dirham (AED) and the Saudi Riyal (SAR) in today’s interbank currency market.

Conversely, the rupee appreciated against the Australian Dollar (AUD) and the Canadian Dollar (CAD) and posted respective gains of 32 paisas and 53 paisas in today’s interbank currency market.

Source: Pro Pakistani