Day: December 14, 2021

The federal cabinet will today decide whether to allow some citizens to exchange old notes until December 31, 2026.

Although the old currency notes were declared void almost 5 years ago, the State Bank of Pakistan (SBP) and the Ministry of Finance have both suggested that the deadline be extended.

As per reports, the government has proposed extending the deadline for exchanging outdated notes by another five years. The extension has been approved by the Ministry of Finance, based on a proposal from the SBP board.

Collecting demonetized notes from people unaware of any exchange facility and having them exchanged for new notes at central bank counters has become an informal business. People who have amassed a huge number of these notes in the past will benefit from the proposed five-year extension.

Regardless, the SBP believes that in developed-world central banks, where old legal money can be swapped at any time, one door must remain open for persons who were unable to redeem their holdings on time.

Arguably, according to the SBP Act, the central bank is the sole issuer of banknotes in Pakistan, and the federal government deems legal tender and exchangeable any series of banknotes of any denomination as per the suggestion of the SBP board.

It is noteworthy to point out that having currency notes demonetized six years ago, the central bank has changed its mind about canceling them.

The vintage Rs. 500 banknotes were the last of the central bank’s historic series to have been dropped from circulation as the new currency notes were being pushed for immediate use. Historically, the country’s third-largest currency note was initially positioned for de-circulation on September 30, 2011, and this deadline was later extended to October 1, 2012.

Source: Pro Pakistani

The government received $15.32 billion in fresh foreign loans from multilateral institutions and commercial banks during the previous fiscal year, up over 47 percent from $10.45 billion the year before.

According to the ‘Annual Report on Foreign Economic Assistance 2020-21’ that has been released by the Ministry of Economic Affairs, the incumbent government took loans worth $15.32 billion from numerous financial institutions while the total foreign loan repayments stood at $35.1 billion in the last three years.

The report detailed that Pakistan lost $8.41 billion in the fiscal year 2018-19, followed by $10.45 billion in 2019-20 (up 24 percent), and $15.32 billion in 2020-21. (up 47 percent). As a result, its external public debt was $85.6 billion by 30 June 2021, up from $77.9 billion on 30 June 2020, a net rise of around $7.7 billion (10 percent). The external public debt was $73.4 billion at the end of June 2019.

International commercial banks provided $4.66 billion (30 percent of the total). Project financing was contracted for $4.19 billion (or 27 percent of the total) while commodity financing was arranged for $952 million (or 6 percent of the total).

During the fiscal year 2020-21, energy and electricity were the top priority sectors for new loan agreements, accounting for 35 percent of the total committed project funding of $4.19 billion.

Rural development and social welfare came in second with a 23 percent share of the overall project funding, followed by governance (18 percent), finance and revenue (seven percent), education (five percent), agriculture (five percent), and transportation and communication (four percent).

Furthermore, the government borrowed $2.5 billion in Eurobonds from international capital markets and $1 billion as a deposit from the Chinese government’s foreign exchange and international trade agency, the State Administration of Foreign Exchange (SAFE). Multilateral development partners have set aside $2 billion (or 13 percent of the total pledges) for program finance to extend and expand the financial system, improve fiscal management, and strengthen the regulatory framework in order to boost Pakistan’s growth and competitiveness.

The World Bank emerged as the top multilateral development partner in terms of new commitments ($4.675 billion), followed by the Islamic Development Bank with $952 million, the Asian Development Bank with $902 million, and the Asian Infrastructure Investment Bank with $326 million.

Moreover, the report detailed that $6.97 billion in financing agreements were negotiated with multilateral development partners, $4.66 billion with foreign commercial banks, and $187 million with bilateral development partners out of a total of $15.32 billion in the new agreements that were inked in the previous fiscal year.

The report adds that a greater commitment was made during the previous fiscal year “to mitigate the pressure on the current account deficit, strengthen foreign exchange reserves, enhance external debt servicing capacity and provide requisite financing to water sector development”.

Source: Pro Pakistani

The State Bank of Pakistan (SBP) has withdrawn facilities for exporters of Afghanistan and Central Asian Republics (CARs) in response to the growing dollar demand, a situation that has compelled foreigners to conduct business solely through more onerous traditional methods and banking channels.

As a result of this decision, Pakistan’s trade with Afghanistan, and perhaps a few of Central Asian countries, is expected to be severely impacted as inflationary pressures take their toll.

Previously, US dollars could be purchased from Pakistan through Afghan exporters and then presented at Customs counters for import and export clearances. However, after adopting new regulations in light of the ongoing inflationary burden, the Central Bank has revoked all facilities with effect from December 13, 2021.

The SBP gave instructions to the Presidents/Chief Executives of banks and all authorized foreign exchange dealers in relation to exports to Afghanistan and Central Asian Republics (CARs) via land routes, according to a circular released by the SBP on December 7, 2021.

A top Customs officer told a national daily that there are three key developments relating to the latest SBP circular. The first is that the trade of perishable commodities will be Rupee-denominated. Second, travelers now must present convertible currencies and Goods of Declarations (GDs) for import and export, but the currency must include legal declarations. Third, the practice of traders purchasing dollars on behalf of Afghan exporters from the open market has been discontinued in order to relieve pressure on the exchange rate.

Given the looming and unpleasant fiscal repercussions posed by the Bank’s decision, bilateral trade could come down to precarious levels, severely reducing trade volume and conversely piling more pressure on the Pakistani Rupee.

Notably, Pakistan’s exchange rate is currently under substantial pressure due to the growing current account deficit, a lack of dollar inflows, and increased dollar demands. The Pakistani Rupee has been steadily losing ground against the greenback and looks on course to fall below Rs. 180 in the open market.

Source: Pro Pakistani

The Privatization Commission plans to complete the privatization of at least one dozen state-own entities (SOEs) in the next few years.

Pakistan Steel Mills (PSM) is also among the list of SOEs that the government wants to privatize. The government had projected to generate over Rs. 250 billion in the current fiscal year from privatization proceeds.

According to a report by Business Recorder, the privatization of the Jinnah Convention Center, the House Building Finance Corporation Limited and the First Women Bank Limited is in advanced stages.

The incumbent government had put almost 21 SOEs on the active privatization list but could only manage to privatize a few of them during the last three years. However, the Services International Hotel was auctioned for Rs. 1.951 billion during the current fiscal year.

Now, the Privatization Commission has drawn up a list of 12 more SOEs that it intends to auction by the end of the next fiscal year. The government generated in excess of Rs. 920 million in the last year by selling off 10 properties.

The privatization of the Jinnah Convention Center in Islamabad is expected during the last quarter of the current fiscal year.

The privatization of Pakistan Re-Insurance Co Ltd (PakRe) and Heavy Electrical Complex (HEC) will also be completed by the third quarter of the current fiscal year, whereas the privatization of First Women Bank Limited (FWBL) and House Building Finance Corporation (HBFC) is set to be completed by December next year.

The commission further plans on privatizing Sindh Engineering Limited (SEL) by the end of the next fiscal year. The commission also plans to privatize two liquefied natural gas (LNG) based power plants by the end of the current fiscal year.

Source: Pro Pakistani