Lenders trim Pakistan’s growth forecast to 0.4pc

[daytrader]

Debt mismanagement, rupee devaluation, high interest rates push debt to record high

ISLAMABAD:
Statistics released by the central bank, on Wednesday, show that Pakistan’s total debt and liabilities peaked, by an unsustainable 24%, to Rs62.5 trillion at the end of September 2022 – pushing the country into unchartered territory.

According to the State Bank of Pakistan (SBP), the total liabilities of the country, mainly government debt, surged by Rs12 trillion, or 23.7%, compared to a year ago.

The figures reported in the central bank’s latest debt bulletin suggest that no political party, neither the Pakistan Tehreek-e-Insaaf (PTI) nor the Pakistan Muslim League-N (PML-N), have a solution out of our growing debt problems. With the mounting number of loans, coupled with a lack of resources to repay, the country’s destiny has been placed in the hands of international financial institutions and the global powers.

Now, however, the realisation that Pakistan cannot seem to survive without continued financial support is becoming more apparent to the world powers, creating problems in the political and security spheres.

The central bank did not give the percentage of Pakistan’s total debt and liabilities in terms of size of the economy. The increase in public debt alone, a direct responsibility of the government, was Rs9.7 trillion in the past year. Gross public debt was recorded at Rs51.1 trillion by the end of September 2022, according to the SBP.

None of the three mainstream political parties have managed to bring any meaningful reforms to stop debt accumulation. Instead, in its 43-month rule, the PTI added the largest amount of debt to country ever.

While blaming his predecessors for throwing the country under a pile of debt, former prime minister Imran Khan had promised to curtail debt on priority. When he left office in April 2022, however, his government had mounted Rs19.5 trillion to the federal government’s total debt stock.

During his visits to China, Saudi Arabia and the United Arab Emirates, Pakistan’s Finance Minister Ishaq Dar pleaded for additional loans so as to meet this year’s gross financing requirements. The government is also in dialogue with foreign commercial banks, the World Bank and the International Monetary Fund (IMF) to secure loans.

There was a clear mismatch between the increase in public debt and the budget deficit, showing the adverse impact of the currency devaluation on the external debt stock.

In terms of US dollars, Pakistan’s total external debt and liabilities remained almost unchanged at $127 billion in the past one year due to the soaring ties between Pakistan, the international financial institutions (IFI) and Washington. However, in terms of the rupee, there was a massive surge in external debt due to the currency’s devaluation.

Pakistan’s total external debt jumped to Rs26.5 trillion as of September-end – an addition of Rs6.8 trillion or 35% compared to last year. Excluding the IMF loans, the federal government’s external debt increased to Rs18 trillion within one year. There was a net increase of Rs1.3 trillion in external debt, largely caused by the depreciation of the rupee and the country’s efforts to build foreign currency reserves via borrowing.

Pakistan’s debt from the IMF increased by 44% within one year to Rs1.7 trillion by the end of September, stated the SBP. This is despite the fact that the IMF has disbursed about $2 billion less than its scheduled releases during this period.

The federal government’s total domestic debt increased to Rs31.4 trillion, an addition of Rs5 trillion, or 19%, in one year.

The lower-than-targeted tax collection, steep currency devaluation, high interest rates, rising expenditures along with losses incurred by state-owned companies and debt mismanagement were the main reasons for the surge in public debt.

The average exchange rate on the last day of September 2022 was Rs228 to a dollar due to a depreciation of 57.4% in just one year, according to the central bank. This had a huge impact on the government’s external debt.

The direct consequence of the mounting pile of debt is a huge increase in the cost of debt servicing. In just one quarter of the current fiscal year, debt servicing stood at Rs1 trillion. The government’s revised estimates show that the cost of debt servicing may cross Rs4.7 trillion – about Rs750 billion more than the budgeted figure.

Express Tribune

 

[Cricket-lion]

This is thanks to the experiment that put the installation of a government that does not represent the people. Khan govt had the economy growing at 6%, exports record high and now Pakistan is left with nothing.

 

[Local.Dada]

This is thanks to the experiment that put the installation of a government that does not represent the people. Khan govt had the economy growing at 6%, exports record high and now Pakistan is left with nothing.

As a Pakistani You are obviously more qualified to talk about the competency of Pakistan governments but can you explain how change in govt impacts exports in 6 months unless there was a total change in the current trade regulations?

Also looks like Pakistan’s top 3 exporters are China, UAE and USA all 3 countries seemingly had some issue or the other with IK. Let me know if that is wrong.

 

[MenInG]

This is a downward spiral - no other way to describe it.

 

[MenInG]

Pakistan and the International Monetary Fund (IMF) had another round of engagement on Thursday but could not finalise a schedule for formal talks on the overdue ninth review of a $7 billion loan programme amid a lack of clarity on flood-related financial requirements for this fiscal year and declining revenue stream in the wake of import controls.

“Dates for the ninth review could not be finalised,” a senior official told Dawn after Finance Minister Ishaq Dar had an online meeting with IMF’s mission chief to Pakistan, Nathan Porter, on Thursday.

Mr Dar reiterated the government’s commitment to “successfully completing the IMF programme”, the finance ministry said in a statement, apparently to pacify jittery markets.

The talks, originally due in the last week of October, were rescheduled to Nov 3 and then kept on facing delays following gaps in estimates by the two sides.

https://www.dawn.com/news/1721528/talks-with-imf-on-ninth-review-delayed-further

 

[MenInG]

<blockquote class="twitter-tweet" data-partner="tweetdeck"><p lang="en" dir="ltr">As I had predicted 6 months back that the regime change conspiracy would throw our economy into tailspin destroying our capability to service our debts. The two crooked families who ruled Pakistan for almost 3 decades never had the integrity or competence to build our economy. <a href="https://t.co/fASSw2wo6q">pic.twitter.com/fASSw2wo6q</a></p>— Imran Khan (@ImranKhanPTI) <a href="https://twitter.com/ImranKhanPTI/status/1593494028556836864?ref_src=twsrc%5Etfw">November 18, 2022</a></blockquote>
<script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

 

[daytrader]

PAKISTAN RECEIVED $5665.8MN IN AID, LOANS FROM APRIL-SEPT 22, NA TOLD

ISLAMABAD: Minister for Economic Affairs Sardar Ayaz Sadiq on Friday said Pakistan has received $5665.83 million in aid and loans from April 11 to September 30, 2022, ARY News reported.

This data he disclosed during the ongoing session of the National Assembly (NA) held under the chair of speaker Raja Pervaiz Ashraf.

Ayaz Sadiq said Pakistan received $5665.83 million in aid and loans from the world during the tenure of the incumbent government so far.

He said $5609.9 were received on account of loans and $55.92 million as aid.

Earlier, the National Assembly was informed in categorical terms that the country faces no risk of default.

Minister of State for Finance Aisha Ghaus Pasha told the house during question hour that the country was faced with a difficult situation when the present coalition government came into power as the IMF program was suspended.

She said we have revived the IMF program while improvement is being seen in exports and remittances are also pouring in the country.

The state minister further said the investors are showing interest in investment in the country as a result of our reforms.

ARY

 

[ElRaja]

As a Pakistani You are obviously more qualified to talk about the competency of Pakistan governments but can you explain how change in govt impacts exports in 6 months unless there was a total change in the current trade regulations?

Also looks like Pakistan’s top 3 exporters are China, UAE and USA all 3 countries seemingly had some issue or the other with IK. Let me know if that is wrong.

politicians will try to spin this but this has been mismanagement decades in the making.

 

[PakLFC]

Nothing to worry about. Clairvoyants have foretold that great times are ahead for Pakistan.

 

[MenInG]

<blockquote class="twitter-tweet"><p lang="en" dir="ltr">We used to be told that we should focus on the economy and forget about accountability. These graphics show just some of the devastation of the economy since this corruption loving imported govt was installed. <a href="https://t.co/62BsbvZL8u">pic.twitter.com/62BsbvZL8u</a></p>— Asad Umar (@Asad_Umar) <a href="https://twitter.com/Asad_Umar/status/1594327251755089920?ref_src=twsrc%5Etfw">November 20, 2022</a></blockquote> <script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>

 

[daytrader]

PTI govt could’ve convinced US on Russian oil deal: Imran Khan
Imran Khan said that if the PTI government had been in power, it would have persuaded the US to allow Pakistan to buy oil from Russia

KARACHI: Pakistan Tehreek-i-Insaf Chairman Imran Khan said on Tuesday that if the PTI government had been in power, it would have persuaded the US to allow Pakistan to buy oil from Russia.

“We could have convinced the US on buying Russian oil as Pakistan is facing a severe energy crisis,” Imran stated, saying the current rulers are afraid of doing it, whereas India bought the Russian oil for the sake of its people.

He was speaking at a seminar on economic performance and challenges ahead, organised by the PTI through a video link here at a local hotel.

Imran reiterated his demand for early free and fair elections in the country and said that it was the only way to lead the country towards economic stability. “Pakistan is currently entrapped in an economic quagmire, and only political stability through the holding of free and fair elections can steer the country out of the crises,” he said.

The PTI chief criticised the present government for ruining the economy and melting down the economic gains of PTI government.

“When we learned about the conspiracy against our government, we informed the neutrals about the economic disaster that regime change would bring to the country.”

Imran claimed victory in the upcoming elections, claiming that the PTI would win due to inflation and the country’s economic situation. “However, we are afraid of the worst economic conditions that this government will leave for the next government to handle. We are afraid that the new government would be in great trouble because of the way the economy has been destroyed,” he said. He again called for a clear majority for the new government, as a government with a thin majority can’t take bold decisions that would be required to fix the economy and other key problems.

Imran Khan said that a weak government can’t establish the rule of law in the country, which was required to tackle the challenges, especially the economic ones. He said that some powerful groups and mafias can be challenged by the rule of law to be asserted by a strong government.

He said that economic stability would come through political stability, as it would restore the confidence of local and foreign investors in the country. He emphasised the importance of exports as a tool for wealth creation, which the PTI government has prioritised by increasing exports to high levels.

He also deemed the role of overseas Pakistanis important for the economy of the country and said that the PTI government had incentivised them. He stated that if 1.5 to 2 million overseas Pakistanis were willing to invest in the country, it would not need to rely on donors to meet its financial needs.

He said the PTI government gave the amnesty schemes to whiten the black money but these schemes should have allowed only the black money that should have been invested in the industry to be whitened.

The News PK

 

[daytrader]

PAKISTAN’S CIRCULAR DEBT CROSSES 4.177 TRILLION

The circular debt of Pakistan’s energy sector has crossed an alarming level of Rs4,177 billion, ARY News reported on Tuesday, citing sources familiar with the development.

With the country’s economic situation getting appalling, the documents have revealed that Pakistan’s energy sector is running completely on credit.

The circular debt in the energy sector is also swelling as the government is unable to pay dues to independent power producers (IPPs).

The energy sector’s circular debt is increasing Rs129 billion yearly, the sources said.

Furthermore, the circular debt of the electricity sector has reached Rs2,277 billion, while Pakistan State Oil’s (PSO) debt has crossed Rs600 billion. The country’s national oil company has sought Rs80 billion from the finance ministry to save its letter of credit from defaulting.

Similarly, the circular debt of the gas sector has reached Rs1,400 billion. The sources feard that the energy supply chain might get affected due to a massive rise in circular debt.

ARY

 

[daytrader]

Shehbaz decries ‘callous IMF’ amid flood devastation
PM performs groundbreaking of Hyderabad-Sukkur motorway; announces renewed construction of Karachi-Hyderabad motorway

Prime Minister Shehbaz Sharif on Tuesday decried a “callous IMF”, saying that the global lender had put shackles on the country because of which the government’s efforts for rehabilitation of flood victims and providing relief to the masses had become a huge challenge.

Shehbaz performed the groundbreaking of M6 Hyderabad-Sukkur motorway during two ceremonies in Sukkur and Hyderabad districts. The prime minister, on the occasion, also announced renewed construction of M9 Karachi-Hyderabad motorway.

The prime minister said that the government was facing many difficulties and challenges. “On the one hand, the government is burdened by the economic destruction caused by the previous government and the resulting inflation, while there are the strict conditions of the IMF (International Monetary Fund),” he added.

“We need funds for flood recovery but the IMF has shackled us,” Shehbaz said.

“It is a big challenge but there is no question of giving up. With the help of Allah, the government coalition will work together and mitigate the sufferings of the people. We will not rest until the [flood-affected] people are settled in their homes.”

The prime minister lampooned former prime minister Imran Khan for instigating people for his personal gains but expressed the hope that the masses would not fall prey to his negative campaign. He [Imran] knows the plight of the people but he doesn’t care,” Shehbaz added.

“It is stated that why traders and farmers are not coming out on the streets in protest. He is such a hardhearted person that he did not visit the flood-affected people and knowing the plight of the people, he is inciting the public,” the prime minister said.

“He should come to his senses,” Shehbaz said about his arch-political rival.
“Instead, he should have protested against the manipulation by sugar and wheat cartels during his tenure,” he added, expressing the hope that the masses would reject his campaign.

The prime minister disclosed that the bureaucracy was acting as a stumbling block in the way of making the Gwadar port functional. He said that the freight charges from Gwadar to upcountry areas were being cited as the reason for preference to the Karachi port.

“[But] I told them that the cartels, which don’t want development of the Gwadar port, are behind this thinking. I will not let this happen,” he said, adding that he would like to see the future wheat imports through both Karachi and Gwadar ports.

On the motorways project, Shehbaz said that the M6 project that had already faced delay of around eight years would be completed in 30 months at a cost of Rs360 billion. He appreciated all the concerned institutions, including the National Highway Authority (NHA).

"Today is a moment of joy because the project which remained a victim of a very long delay ... its foundation stone is being laid today," the prime minister said. “By the grace of Allah, this is being done by our coalition government.”

To the demand of Sindh Chief Minister Syed Murad Ali Shah, who complained about the poor quality road of M9, the prime minister announced the renewed construction of the motorway between Karachi and Hyderabad.

"The vision of our leader Nawaz Sharif [about connecting all major cities through motorways] remains incomplete without Karachi-Hyderabad motorway," he underlined, vowing to fulfil the promise Nawaz Sharif made for the construction of Sukkur-Rohri bridge.

Shehbaz stressed the importance of completing road access from Balochistan to the rest of the country. “Balochistan is the most important province of the country and the development of Pakistan is incomplete without its development.”

The M6 project is being executed under the public-private partnership (PPP) mode with the federal government's funding limited to just Rs9.5 billion. The 306-kilometre-stretch will connect Jamshoro, Hyderabad, Matiari, Nawabshah, Noshehro Feroze, Khairpur and Sukkur districts. The project will also create 25,000 jobs.

Shehbaz expressed the hope that the quality of M6 would be at par with other motorways in the country. He appreciated the chief minister for promoting the PPP projects in Sindh, asking Planning Minister Ahsan Iqbal to work on the PPP projects in the other provinces of the country.

Earlier, Chief Minister Murad Ali Shah pointed out that the people of Karachi, Hyderabad and other cities, who travel on the Karachi-Hyderabad motorway, were not happy with the road quality. "A lot of accidents occur on the motorway, including a recent accident which claimed the lives of 18 flood-affected people."

CM Murad also raised the issue of delay in the release of federal funds for completion of Indus Highway's 128-kilometre-stretch from Jamshoro to Sehwan, where he said several hundred people had died in accidents over the last five years.

Murad urged that all the 25,000 jobs, which were expected to be created via the M6 motorway, should be given to the local people. "It isn't possible to complete the motorway before the next general elections. But the government could make progress on the project visible to the people."

Federal Information Technology Minister Aminul Haq, who belongs to the Muttahida Qaumi Movement-Pakistan, demanded Rs3 billion package for Hyderabad.

Later, the prime minister announced Rs1 billion for Hyderabad’s development, asking the chief minister to contribute matching funds.

Haq also requested the prime minister and the chief minister to visit Hyderabad in a few weeks for the foundation stone-laying ceremony of a public sector university. He also called for making the Hyderabad airport functional.

Express Tribune

 

[daytrader]

SBP injects Rs2tr into banks
Central bank also provides Rs40.5b to Shariah-compliant banks for 70 days

Pakistan’s central bank has injected slightly over Rs2 trillion into commercial banks for a longer period of up to 70 days to help the financial institutions meet growing financing demand coming from the government.

The government remains the largest borrower from commercial banks, as its reliance on borrowing is constantly on the rise amid a surge in interest payments against debt, increase in budgetary deficit in the post-flood era and acute slowdown in fresh foreign inflows from bilateral and multilateral creditors.

The State Bank of Pakistan (SBP) reported on Friday that it had injected Rs1.93 trillion into commercial banks for 70 days at an interest rate of 16.10% through open market operations (OMO). Besides, it has provided Rs100.65 billion at the rate of 16.24% for seven days.

The central bank has also supplied Rs40.5 billion to Shariah-compliant banks at a return of 16.09% for 70 days. It rejected Islamic banks’ bid for seven-day borrowing. Ismail Iqbal Securities Head of Research Fahad Rauf said that “OMO is a tool available with the central bank to manage liquidity within the banking system. SBP has injected the massive sum into banks to meet growing demand coming from the government”.

Arif Habib Limited (AHL) economist Sana Tawfik explained that one of the primary objectives of the central bank to inject money into the system was to maintain the rate of financing at which the commercial banks lent money to the government.

The increased supplies pushed commercial banks to maintain their lending rate this week in a high inflationary environment, she said.

The rate of inflation has remained significantly high at over 24% in November 2022. However, commercial banks have lent money to the government at around 17% this week, which is almost the same rate at which they provided financing about a month ago.

To recall, commercial banks increased their lending rate about one percentage point last month after the central bank increased its key policy rate by one percentage point to over a two-decade high at 16%.

“Commercial banks provided financing to the government at a historic high of 17% last month. They, however, maintained the rate this week, considering that a section of the market (banks) believes that the central bank policy rate could go further up to control rising inflation,” she remarked.

Rauf noted that the tenure of OMO injections had increased to 60-70 days from less than seven days about a couple of years ago. Besides, “the size of injection has also risen to Rs2-3 trillion these days, as compared to less than Rs1 trillion earlier”. The reasons for the increase in fund size and injection tenure are that the government’s dependence on commercial bank borrowing has been on the rise amid low collection of taxes.

Secondly, foreign fund inflows have shrunk, amid a delay in IMF’s ninth review of the economy.

Thirdly, the government’s demand for financing has increased, since the country faced devastation from floods, which have wiped out around $30 billion from the economy. Meanwhile, banks’ deposits increased by 16% to Rs22.7 trillion in November 2022 as compared to Rs19.7 trillion in the same month of last year.

Rauf stated that the deposit growth rate had remained stagnant at around 15-16% for the past few years.

“Businesses and people, however, have opted to park a big portion of money in banks instead of spending it, due to high inflation and lucrative rate of return on deposits,” he explained.

Banks’ credit to the private sector (advances) grew 15% to Rs11.1 trillion in the month compared to Rs9.6 trillion in the same month of last year.

However, the advance-to-deposit ratio (ADR) dropped by 25 basis points to 49% in November, as compared to the same month of last year despite a significant growth in deposits over the past one year.

Banks’ lending to the government (investment) jumped by 36% to Rs18.5 trillion in November, as compared to Rs13.6 trillion in November 2021.

Accordingly, the investment-to-deposit ratio (IDR) hiked 12.38 percentage points to 81% in the month, compared to the same month of last year.

Express Tribune

 

[daytrader]

SBP’s ‘outdated’ data raises questions
Central bank cites pre-flooding projections in annual report

The central bank has reported pre-flooding ‘outdated’ projections in its latest outlook section of the annual report on the State of Pakistan's Economy for the Fiscal Year 2021-22, saying the country’s growth would remain "below the previously announced range of 3%-4% for FY23”.

However, the State Bank of Pakistan (SBP) had revised down its economic growth to 2% for the year last month.

Earlier, the bank had projected an economic growth in the range of 3%-4% before the recent widespread floods struck the country.

A number of financial experts, however, expect the economic growth may fall well below 2% this year, considering the prolonged administrative controls on imports, high inflation readings, low foreign exchange reserves, and unsustainable external debt.

Similarly, the bank has reported an outdated projection for the current account deficit (CAD) for the year in the annual report. "The SBP projects [the] CAD to fall below last year’s level of 4.6% of GDP in FY23,” it read.

To recall, the SBP had projected the CAD at 3% (around $10 billion) in its latest monetary policy statement issued last month.

Thirdly, it reported the obsolete projection for the inflation reading in the current fiscal year as well. It has given the pre-flooding inflation expectation in the range of 18%-20% for the year in the annual report.

Last month, the central bank had revised up its inflation projection to 21%-23%.
The SBP said in the annual report that the recent widespread floods had multiplied the incumbent government's measures to cool down the then overheated economy, leading the way for economic growth decelerating below 3-4% in the current fiscal year 2023.

This figure is in stark comparison with the 6% recorded in the previous fiscal year 2022.

“Pakistan’s economic growth is expected to moderate considerably during FY23," the bank said.

As suggested by the tapering sales of high frequency demand indicators, the demand compression measures introduced by the government and SBP have started to cool down the overheated economy in the initial months of FY23. "The economy was already in a stabilisation phase, when widescale flooding hit a large part of the country [at] the start of FY23,” the report added.

The flooding in FY23 is likely to impinge on the country’s real economic activity through various channels.

Specifically, the losses in the agricultural sector emerging from the damages to crops and livestock are likely to transmit to the rest of the economy through various backward and forward linkages.

Similarly, the widescale destruction of the infrastructure in the affected provinces might also undermine the country’s growth prospects during the year, according to the annual report.

Supply shocks in the form of the rollback of energy subsidies and resumption of fuel taxation in addition to losses to the agricultural produce caused by floods are likely to influence the inflation trajectory during the year.

The elimination of subsidies and increase in fuel taxation triggered a sharp increase in inflation since June 2022, and the trend is likely to persist in FY23. Similarly, the supply shortages of perishable food commodities stemming from floods is expected to add further stimulus to prices.

On the other hand, the stabilisation policies introduced since last year and flood-induced losses to incomes might suppress the magnitude of demand-pull inflation during the year, the central bank said.

The widening of the tax base -- through elimination of exemptions, increase in their rates and reinstatement of fuel duty -- is expected to boost receipts during FY23.

The non-tax revenues will also recover with the re-imposition of the petroleum development levy (PDL) on the expenditure side and the rationalisation of subsidies is likely to keep current spending under check.

The coordinated fiscal and monetary policy stance is likely to reduce external account pressures in FY23.

The SBP projected the CAD to fall below last year’s level of 4.6% GDP in FY23.
This improvement would be driven by a sizable contraction in import growth.

As evident from the year-on-year declines in imports since July 2022, a range of demand compression measures introduced since last year have succeeded in trimming their growth momentum.

However, the losses to agricultural produce, induced by the recent floods, are likely to step up import of farm commodities, particularly cotton.

The slowdown in global demand might also weaken the exports growth during FY23 and policy tightening in advanced economies would dampen the prospects of capital flows to emerging and developing economies.

The workers’ remittances after witnessing a spike in FY21 appear to have plateaued in FY22 and are likely to remain at around the similar level in FY23.
The windfall gain from oil prices in the Gulf Cooperation Council (GCC) countries offers an upside risk to this projection.

Moreover, with the resumption of the International Monetary Fund (IMF) programme, the outlook of financial account has also improved.

Alongside the IMF programme disbursements, the country is expected to receive external financing from multilateral and bilateral creditors that will considerably strengthen foreign reserves position during FY23.

Express Tribune

 

[daytrader]

Total debt jumps by Rs4tr in a month

The central government debt jumped by Rs4 trillion, or around 7.7 per cent, in January to reach close to Rs55tr, the State Bank of Pakistan (SBP) data showed on Tuesday.

The figure was Rs42.39tr in January 2022, which means it has increased by 30pc over the past year.

Meanwhile, domestic debt rose to Rs34.3tr by end-January, 3.4pc higher than it was a month ago and around 25pc higher than the year-ago figure.

External debt stood at Rs20.69tr, recording a jump of 15.7pc in a month and 38pc in a year.

The cash-starved government, which has been struggling to generate revenues, is heavily dependent on borrowing. The SBP’s data shows that during the first seven months (July to January) of the current fiscal year, the central government domestic debt rose by Rs3.218tr, an increase of 10.4pc.

The government’s borrowings through long-term, high-cost Pakistan Investment Bonds (PIBs) reached Rs20.9tr by the end of January from Rs15.59tr a year ago, recording an increase of 34pc.

...
https://www.dawn.com/news/1741011/total-debt-jumps-by-rs4tr-in-a-month

 

[MenInG]

The cash-strapped government has planned to pile up debt by a net Rs1.5 trillion in three months (March-May 2023) mainly to make the ever-growing interest payment on debt, finance loss-making State-Owned Entities (SOEs) and pay monthly salaries and pensions among other expenditures.

In gross, the government is targeting to borrow almost Rs7 trillion from commercial banks in the next three months. A big chunk of around Rs5.5 trillion will be used to return old maturing debt. Speaking to The Express Tribune, Arif Habib Limited Head of Research, Tahir Abbas said, “The government’s reliance on domestic debt is on the rise – especially to meet its growing budgeted-expenditure (fiscal deficit) after foreign financing dried up in wait of the International Monetary Fund (IMF)’s programme being revived.

“Debt servicing (interest payment on debt) has become one of the single largest heads of government expenditures,” added Abbas. Global rating agency, Moody’s Investors Service said in late February that “Pakistan has very weak debt affordability (foreign debt in particular). Moody’s estimates that interest payments will increase to around 50% of government revenue in fiscal 2023.”

“The government has budgeted interest payments at Rs3.9 trillion (4.7% of the GDP) for the current fiscal year 2023. It is anticipated to grow to around Rs5.5 trillion (6.5% of the GDP) in the year,” observed Abbas, adding that the aggressive hike of 300bpts in the central bank’s key policy rate in March inflated the size of the interest payment.

Express Tribune

 

[daytrader]

Lenders trim Pakistan’s growth forecast to 0.4pc

• World Bank sees four million falling below $3.6/day lower middle-income poverty line
• ADB calls for prompt revival of IMF programme

ISLAMABAD: The World Bank on Tuesday projected about four million people falling below the lower middle-income poverty line amid economic growth plummeting to just 0.4 per cent against a budgeted target of 5pc.

Meanwhile, the Asian Development Bank (ADB) has forecast Pakistan’s economic growth plunging to 0.6pc from 6pc last year owing to the prevailing political crisis, flood-oriented economic losses, foreign exchange challenges and tighter macroeconomic policies at home and a challenging external environment.

“In the absence of public transfers that cover income losses or mitigate the impact of higher prices, poverty measured at the lower middle-income poverty line ($3.65 per day 2017 PPP per capita) is projected to increase to 37.2pc in FY23, pushing an additional 3.9 million people into poverty as compared to FY22,” said the Washington-based lending agency in its flagship Pakistan Development Update (PDU) 2023, adding that “the depth and severity of poverty has also increased, reflecting the overlapping impacts of multiple shocks and households’ lack of savings to mitigate short-term impacts”.

The World Bank’s GDP growth rate estimate at 0.4pc is down from its previous growth estimate of 2pc in January. The World Bank’s Country Director for Pakistan Najy Benhassine said it was not easy to write a report about Pakistan in such a critical time when so many things were happening amid super focus on IMF programme, exchange rate volatility and floods and so on but all this highlighted usual structural issues were behind the fresh numbers.

...
https://www.dawn.com/news/1746007/lenders-trim-pakistans-growth-forecast-to-04pc