Iran non-oil exports to Pakistan at US$1.3 billion

Iran has exported non-oil commodities valued at US$1.3 billion to Pakistan during the first eight months of the current Iranian calendar year, the head of the Islamic Republic of Iran Customs Administration (IRICA) announced.

Mohammad Rezvani-Far said that Pakistan registered the highest growth in import of goods from Iran, among the other neighboring countries, in the mentioned eight-month period. 

He said that Pakistan had imported non-oil products worth US$855 million from the Islamic Republic in the first eight months of the past year.

The Islamic Republic of Iran is aiming to expand its economic and trade relations with Pakistan through establishing joint free zones and trade centers with the country, IRIB reported.

According to Ahmad Jamali, the deputy secretary of Iran’s Free Zones High council, Tehran has reached an agreement with Islamabad to establish a joint free zone on the border between the two countries.

Courtesy: The Tehran Times

 

Pakistan: Understanding General Asim Munir Doctrine

Functioning as a security state, Pakistan has long formulated its foreign policy choices based on security needs and the aspiration to establish itself as a hard military power. This approach has allowed the military to play a leading role in shaping both, domestic and foreign policy decisions, often overshadowing civilian institutions. However, with changing global dynamics, the current civil-military establishment is actively signaling a shift in Pakistan’s strategic culture and foreign policy interests.

It has been just over a year since General Asim Munir took command of Pakistan's military; succeeding General (retired) Qamar Javed Bajwa in late November 2022. Apart from stepping into the most powerful role in Pakistan, Munir also inherited the legacy of Bajwa’s military doctrine, which not only shaped Pakistan's foreign policy but also presented considerable challenges for him to address.

Throughout his tenure, Bajwa orchestrated a paradigm shift in Pakistan's traditional geostrategic focus, transitioning from geopolitics to geoeconomics. This shift involved broadening the scope of Pakistan’s national security, moving beyond a primary emphasis on military defense, and recognizing economic security as a crucial factor for achieving improved traditional security outcomes.

To safeguard economic security, Bajwa aimed to enhance Pakistan's geostrategic importance by prioritizing regional connectivity and global development partnerships. He sought to position Pakistan as a key hub for trade, transit, and production in West, Central, and South Asia, intending to transition from aid-based dependencies to trade and investment partnerships.

Bajwa fell short of fully realizing his vision during his six years in office, with Pakistan continuing to rely heavily on International Monetary Fund (IMF) loans to support its declining economy. Munir now faces the challenging task of turning Bajwa’s unrealized vision into a reality. This requires cultivating positive interdependence and multi-alignment with a diverse range of partners, while also ensuring domestic stability.

An examination of Munir’s first year in office is crucial to assess his progress thus far and gain insight into the military’s current foreign policy vision.

Munir doctrine

A crucial aspect of Munir’s doctrine involves guiding Pakistan away from the strategic dilemma of choosing between the United States and China, and avoiding the significant costs it has incurred for Islamabad’s foreign policy.

Munir has made clear a preference for pursuing a hedging strategy, aiming to avoid getting entangled in global binary politics. His strategic approach is centered on maximizing Pakistan's economic gains to avoid subservience to major powers and increase its room for maneuver. He articulated this vision for defending Pakistan's sovereignty by building a robust economy, emphasizing that, “all Pakistanis must throw out the beggar’s bowl.”

At least three interrelated points characterize Munir's foreign policy vision, each representing significant challenges he must confront. These observations are drawn from his statements and actions up to this point.

First, he has expressed a commitment to project and advance a softer image of Pakistan.

Second, he has demonstrated a keen interest in elevating Pakistan as a regional middle power.

Third, he has placed a significant focus on prioritizing geo-economics over geopolitics.

Revamping Pakistan’s image

A state's image and reputation are pivotal in achieving foreign policy goals. Pakistan's global reputation is currently plagued by a host of domestic issues, all of which paint a picture of the country as a struggling democracy grappling with internal turmoil. Recent regime changes, the constitutional crisis over the next general elections, growing insecurity and the rise in terrorist attacks, escalating debt, human rights violations, political instability, socioeconomic disparities, growing inflation, and energy crises have all taken a toll on Pakistan's standing in the international community.

The country is increasingly perceived as an elitist state that struggles to address the genuine concerns of its citizens, moving closer to a praetorian state. This negative image is partly due to the hybrid governance model adopted prior to Munir's appointment, disrupting the balance of power between civilian and military authorities.

Under this system, the military has gained legal authority to govern key state institutions, but this has eroded its public image, a problem that has been exacerbated by allegations from popular leader Imran Khan of undermining democracy.

At present, there are lingering suspicions that the next general elections, currently scheduled for February 08, 2024, may not take place until Khan is absent from the political landscape. Despite being imprisoned and facing a ban from politics, Khan maintains significant popularity compared to his political rivals. As long as his Pakistan Tehreek-e-Insaf party remains a legitimate political entity, it poses a potential risk of securing a majority in parliament, a scenario the military establishment is unwilling to tolerate.

For their part, Western nations, including the United States and European Union, have issued warnings about potential consequences if the elections are delayed further or conducted unfairly. Adding to Pakistan's challenges, a group of US members of Congress recently urged the Biden administration to withhold military aid due to concerns over human rights abuses.

Dismissing such negative perceptions, Munir has pledged his commitment to upholding democracy in Pakistan. This underscores a major aspect of the Munir doctrine, which aims to restore the military's soft image both at home and abroad while retaining its influence in the country's governance.

Affirming Munir’s position, Interim Prime Minister Anwar-ul-Haq Kakar has asserted that the military's involvement in state governance is solely due to its organizational capabilities and has dismissed concerns that it might seek to manipulate the upcoming elections.

Pakistan a regional security actor

Historically, Pakistan has leveraged its advanced military capabilities as a crucial asset in its foreign relations, a reason why its defense cooperation takes precedence over economic ties with other countries. This security-centric foreign policy strategy has played a pivotal role in sustaining the functionality and institutional capacity of the military, even during the most testing periods. However, despite entering significant security and defense agreements, Pakistan has been unable to achieve much-needed stability and security.

A primary factor contributing to this challenge is the hostile internal and regional security environment in which Pakistan is situated. Munir's foreign policy vision reflects this strategic thinking, as evidenced by his statements and efforts in defense diplomacy.

He has expressed his desire to defend Pakistan against internal and cross-border terrorism while simultaneously transforming the country into a stabilizing regional security actor.

In terms of foreign policy initiatives, Munir has carved out a distinctive path, particularly in relation to India and Afghanistan. Taking a stern stance toward India, Munir has issued warnings of a swift proportional response in the event of an attack. He has also accused India of waging a proxy war against Pakistan through terrorist organizations.

Deviating from the traditional friendly ties between Pakistan's military and the Afghan Taliban, Munir has chosen to pursue a more adversarial policy toward the Kabul regime.

Accusing the Afghan government of sheltering anti-Pakistan terrorists, he has threatened a robust military response if Pakistan’s security demands are not met.

The ongoing deportation of 1.7 million Afghans residing in Pakistan is evidence of Munir’s stringent policy against the Afghan Taliban. In defense of the massive deportations, Munir has contended that the expulsion of Afghans, whom he alleges to be involved in most terrorist activities in Pakistan, would enhance the country’s internal security.

Strategic neutrality

Munir has articulated his aspiration to safeguard Pakistan's strategic autonomy and territorial integrity, with the objective of maintaining a neutral middle power status in the global context.

This vision may have taken shape as a response to the deliberate strategic maneuvers of middle powers, which have astutely capitalized on the rivalry between the West and Russia, as well as the competition between the United States and China, to bolster their bargaining positions, all while avoiding being ensnared in their confrontations.

Achieving genuine neutrality may be a tall order though and would require, first and foremost, full independence from foreign aid.

Unfortunately, at present Pakistan is highly reliant on external aid to meet its needs. Bound by geographic, geopolitical, and geo-economic constraints, Pakistan often finds itself with limited options, at times playing a subservient role to major global powers.

In the face of fervent appeals from substantial segments of Pakistani society, calling on the military to lend support to Hamas against Israel and to diplomatically boycott Western backers of Israel, including the United States, Munir has opted to abstain from such actions.

In contrast, he seems focused on navigating Pakistan's response to the demands of both the United States and China without stirring tensions with either side.

He has sought to enhance Pakistan-US defense ties, rekindling US interest in the country after a previous inclination to disengage. A notable case in point is the renewal of the Communications and Information Security Memorandum of Agreement (CISMOA), a crucial element of US-Pakistan defense cooperation, through which the US has extended its offer to assist Pakistan in counterterrorism efforts.

To further solidify ties, Munir visited Washington in mid-December for discussions with senior US military and Biden administration officials, seeking to strengthen US-Pakistan military cooperation and foster investment in Pakistan by urging the US government to explore opportunities through the newly established Special Investment Facility Council.

As for China, despite reports of Beijing’s reluctance to add more projects to the China-Pakistan Economic Corridor (CPEC) due to performance issues on Pakistan's part, Munir's renewed commitment to ensuring the security of Chinese interests has injected new life into previously stagnant CPEC projects.

Pakistan's economic revival

One of Munir’s major foreign policy objectives is to address Pakistan's economic challenges through cooperation with friendly nations. His vision for Pakistan’s economic growth and prosperity emerged when he took on a diplomatic role in securing funding from the United Arab Emirates and Saudi Arabia to fulfill IMF preconditions for a crucial bailout package. While this prevented Pakistan from facing a debt default, it also brought significant embarrassment due to the harsh conditions attached to the IMF bailout in an already crisis-ridden country.

Indicating a shift away from geopolitics and toward geo-economics, Munir has committed to leading Pakistan toward self-reliance by leveraging its resource advantages.

His vision includes a policy aimed at ending dependency and promoting self-sufficiency. To expedite these initiatives, a new “single-window” investment facilitation body, the SIFC, was established under his leadership in June of this year. Its primary objective is to attract foreign investments across various sectors, such as mining, agriculture, information technology, and energy, from affluent Gulf countries, China, and the United States.

Munir has urged foreign investors to explore Pakistan's untapped natural resources, estimated to be worth US$6 trillion, including deposits of copper, gold, sulfur, lead, and zinc, among others. He has also encouraged local investors to participate in these endeavors.

In discussions with Pakistan's business community, Munir outlined his plans for economic recovery. Emphasizing his commitment to geo-economics, he underscored his efforts to convince Gulf monarchs to consider investing up to US$100 billion in Pakistan.

Munir's broader approach to economic diplomacy underscores his vision, favoring development partnerships over development assistance. This shift also signifies a change in Pakistan's traditional military approach of providing military bases to now offering economic bases.

Key takeaways

Munir’s geostrategic vision for Pakistan, though it may sound idealistic, has already scored several successes. To revive the domestic economy, he has launched a comprehensive crackdown on corruption, smuggling, energy theft, illegal practices, and unauthorized immigration.

Munir has earned praise for his commitment to revitalizing Pakistan's economy, presenting himself as the guarantor of stability in the country and the primary point of contact for the international community. This underscores his aim of transforming Pakistan into an important market that can bring together various global economic interests.

On the security front, Munir has escalated military operations against terrorist outfits like Tehreek-e-Taliban Pakistan, declining to engage in talks for peace.

Furthermore, he has strengthened the military’s defense engagements by forging military cooperation agreements with countries across the Central, West, East, and South Asian regions.

Pakistan recently hosted the “Eternal Brotherhood-II” multinational counterterrorism exercise, reflecting Munir's two-pronged strategy.

Firstly, he aims to capitalize on Pakistan's pivotal role in combating terrorism originating from Afghanistan, addressing concerns among both neighboring nations and global powers such as the US, China, and Russia. Secondly, he seeks to counterbalance India's influence by strengthening regional military alliances.

At the same time, Munir's foreign policy aspirations entail significant risk and could have serious consequences for Pakistan.

To begin with, it remains uncertain whether his expanded role in governance will effectively enhance the military's softer image and bolster Pakistan's global reputation, especially given that many of its major challenges are still attributed to the actions of the military establishment.

Additionally, establishing Pakistan as a stabilizing regional security actor seems to be a daunting task, particularly in the context of heightened tensions with its immediate neighbor, Afghanistan.

Achieving a neutral middle power status presents its own set of difficulties, and this objective may prove elusive until Pakistan gains a certain level of economic independence.

To date, Pakistan's efforts to attract significant new investments from the Gulf states have run into difficulties, given the latter’s predominant focus on the ongoing Gaza crisis.

There is limited evidence to suggest that Gulf nations will come to Pakistan's aid in the near future. As a result, the SIFC has struggled to finalize long-awaited billion-dollar foreign transactions. With limited foreign support available, Pakistan continues to heavily depend on financial assistance from organizations like the IMF and investments from China.

It seems that the most critical foreign policy challenge confronting Munir is the integration of soft power with hard power.

This requires finding a delicate balance between security and economic considerations, necessitating a departure from traditional military strategies to embrace alternative methods of advancing national interests. Given the unique strategic culture of the military, which may lack an understanding of the nuances of civilian affairs and the intricacies of soft power, expectations for progress from Munir may be limited.

With two more years ahead, the success of Munir's foreign policy hinges on addressing several crucial questions. How does he plan to balance fostering economic growth with Pakistan's current economic dependence? Could Munir's geo-economic strategy unintentionally lead Pakistan into another debt trap?

To prevent Pakistan from becoming overly reliant on the exploitation of natural resources and transforming into a rentier state, what proactive measures does he intend to take?

Additionally, as Pakistan navigates strained relations with neighboring India and Afghanistan, how will Gen. Munir achieve Pakistan’s long-term security goals? Moreover, how does he plan to navigate its position amid the rivalry between the United States and China without taking sides? Importantly, what specific steps will he take to bridge the gap between civilian leadership and the military establishment, ensuring a cohesive and effective foreign policy strategy?

 Courtesy: Middle East Institute

 

Saudi Aramco acquires stake in Pakistani company

Reportedly, Saudi Aramco has acquired a 40% stake in Gas & Oil Pakistan (GO Petroleum). This is the second major development in Pakistan’s oil marketing space this year - both led by Saudi Arabia - with Wafi Energy earlier entering into a share purchase agreement to buy Shell Pakistan (SHEL PA).

Incorporated in 2015, GO Petroleum retails fuels and lubricants, backed by about 1,100 outlets and a storage capacity of 200,000 tons. It is the 2nd largest oil marketing company in Pakistan in terms of retail outlets. However, its market share has fluctuated between 6 to 8 percent in the last three years, making it smaller than SHEL and APL. The industry leader remains PSO (enjoying market share of 50%).  

Although, pricing details have not been divulged as yet, according to Pakistan’s leading brokerage house, Intermarket Securities the assessed intrinsic value of US$200 million for SHEL to tentatively price the GO deal.

Given GO’s smaller market share, including in the lubricants business and the lack of a brand value comparable to SHEL, the brokerage house takes the deal price between US$100 million to US$150 million.

A 40% stake at this valuation range translates to US$40 million to US$60 million.

The brokerage house estimates that Vitol Dubai has a 10% share in GO Petroleum but it is unclear at this point if this is part of the 40% stake being acquired by Aramco.

It is likely but not certain that Aramco will take over management rights.

The GO Petroleum deal will be Aramco’s first investment in Pakistan, and comes on the heels of its earlier moves to acquire Valvoline’s global operations and Chile’s Esmax Distribution SpA.

The GO Petroleum investment will likely be very small in comparison to these other overseas downstream ventures. This leads analysts to think it may well represent a testing of the waters, with Aramco reportedly also interested in setting up a mega refinery project in Pakistan.

If GO Petroleum expands rapidly it could eat into the existing market shares of competitors. At present, given its major presence on motorways and the North region, GO primarily competes with HASCOL and APL, while urban centers are dominated by PSO and SHEL.

A possible expansion into the South region will impact the latter two companies more.

 

Iran aims boosting trade with Pakistan

The Islamic Republic of Iran is aiming to expand its economic and trade relations with Pakistan through establishing joint free zones and trade centers with the country, IRIB reported.

According to Ahmad Jamali, the deputy secretary of Iran’s Free Zones High council, Tehran has reached an agreement with Islamabad to establish a joint free zone on the border between the two countries.

“We have identified 200 investment opportunities in potential joint free zones with Pakistan which can be used to boost export to the country,” Jamali said in a meeting held on Monday by the Trade Promotion Organization (TPO) for exploring Iran-Pakistan business opportunities.

Noting that Chabahar free zone in Sistan-Baluchestan Province is a good platform to develop exports from Iran to Pakistan, the official added, “Identifying investment opportunities in free zones can lead to the prosperity of businesses and trade of the two countries’ economic operators.”

Jamali further noted that Iran has considered significant incentives for the exporters to Pakistan and the government fully supports business operators active in the mentioned country.

Mentioning an upcoming exhibition of Iran-Pakistan trade opportunities, which is scheduled to be held in mid-January 2024, Jamali said holding such exhibitions would also be another great way to expand economic relations between the two countries.

Also speaking in the same meeting, Director of TPO’s South Asia Department Hadi Talebian-Moghadam announced a plan for establishing trade centers in Pakistan in the coming months, saying: “We are planning to increase the volume of trade between Iran and Pakistan, because the two countries need each other's goods and products.”

Stating that currently the highest level of trade between Iran and Pakistan is nearly US$2.5 billion, he added. “In the two countries’ strategic cooperation roadmap, we seek to increase the level of exports and exchanges between the two countries to five billion dollars bartering and free trade.”

The value of Iran’s non-oil export to Pakistan increased by 62% during the first seven months of the current Iranian calendar year, as compared to the same period in the past year, the spokesman of the International Relations and Trade Development Committee of Iran's House of Industry, Mining and Trade announced.

Ruhollah Latifi said that Iran exported non-oil commodities worth US$1.14 billion to its neighbor Pakistan in the seven-month period of this year.

He also announced that Iran imported commodities valued at US$352.64 million from Pakistan during the first seven months of this year, with 39% drop YoY.

The official has previously announced that Iran’s non-oil export to Pakistan increased by 18% in the previous Iranian calendar year.

Pakistan was Iran’s fifth largest export market in the previous calendar year, importing non-oil products worth US$1.488 billion from Iran, Latifi said in May.

He added that Iran imported non-oil goods worth $842 million from Pakistan last year, up 170% from the previous year.

The intertwining of economic, security, and transit relations between Iran and Pakistan has made the relations of the two countries beyond the neighborhood and turned them into strategic partners with common interests at the regional level.

Having more than 900 kilometers of joint border can lead to closer cooperation between the two countries in areas such as transit corridors and bilateral trade.

Iran and Pakistan signed a Memorandum of Understanding (MoU) in mid-January to facilitate bilateral trade between the two countries.

The MoU was signed by the former Head of Iran’s Trade Promotion Organization (TPO) Alireza Peyman-Pak and Head of the Trade Development Authority of Pakistan (TDAP) Muhammad Zubair Motiwala.

Based on the MoU, which was signed on the sidelines of Iran’s Exclusive Exhibition in Karachi, the parties pledged to exchange business information, support each other’s private sectors, and provide the conditions and context for the presence of their trade delegations in the other country.

Speaking at the signing ceremony, Peyman-Pak said that signing this MoU was indicative of the two sides’ determination for removing the obstacles in the way of bilateral trade and prepare the ground for the businesspersons of both sides to bolster cooperation.

He considered the holding of exclusive exhibitions, exchanging trade delegations and investment in joint production units as positive steps for knowing the capacities and needs of the two countries and expressed hope that such events would continue.

 

Pakistan: IMF Reaches Staff Level Agreement

International Monetary Fund (IMF) staff and the Pakistani authorities reached a staff-level agreement on the first review under Pakistan’s Stand-By Arrangement (SBA), subject to approval by the IMF’s Executive Board. Upon approval, Pakistan will have access to SDR 528 million (around US$700 million).

The agreement supports the authorities’ commitment to advance the planned fiscal consolidation, accelerate cost-reducing reforms in the energy sector, complete the return to a market-determined exchange rate, and pursue state-owned enterprise and governance reforms to attract investment and support job creation, while continuing to strengthen social assistance.

An IMF team, led by Nathan Porter, visited Islamabad from November 2-15, 2023, to hold discussions on the first review of Pakistan’s economic program supported by an IMF Stand-By Arrangement (SBA). At the conclusion of the discussions, Porter issued the following statement:

“The IMF team has reached a staff-level agreement (SLA) with the Pakistani authorities on the first review of their stabilization program supported by the IMF’s US$3 billion (SDR2,250 million) SBA. The agreement is subject to approval of the IMF’s Executive Board. Upon approval around US$700 million (SDR 528 million) will become available bringing total disbursements under the program to almost US$1.9 billion.

“Anchored by the stabilization policies under the SBA, a nascent recovery is underway, buoyed by international partners’ support and signs of improved confidence. The steadfast execution of the FY24 budget, continued adjustment of energy prices, and renewed flows into the foreign exchange (FX) market have lessened fiscal and external pressures. Inflation is expected to decline over the coming months amid receding supply constraints and modest demand. However, Pakistan remains susceptible to significant external risks, including the intensification of geopolitical tensions, resurgent commodity prices, and the further tightening in global financial conditions. Efforts to build resilience need to continue.

“In this regard, strengthening macroeconomic sustainability and laying the conditions for balanced growth are key priorities under the SBA. The authorities’ policy priorities include:

Continued fiscal consolidation to reduce public debt, while protecting development needs. The authorities are determined to achieve a primary surplus of at least 0.4 percent of GDP in FY24, underpinned by federal and provincial government spending restraint and improved revenue performance supported, if necessary, by contingent measures. The authorities are building capacity to expand the tax base and raise revenue mobilization and are committed to improving the quality of public investment and spending.

Strengthening the social safety net to better protect the vulnerable. The authorities will continue the timely disbursements for social protection under BISP’s budget allocation—which are about a third higher than in FY23. This will allow for the expansion of the Unconditional Cash Transfers (UCT) Kafaalat program to 9.3 million families this fiscal year, with an annual inflation adjustment of the stipend. Looking forward, the authorities are seeking to improve the UCT Kafaalat generosity level and to increase enrollment into the Conditional Cash Transfers programs supporting children’s education and health.

Further reforms to reduce costs in the energy sector and restore its viability. With the combined circular debt (CD) across power and gas sectors exceeding 4% of GDP, immediate action was critical. While protecting vulnerable consumers, the authorities implemented power tariff adjustments that were pending since July 2023 and increased gas prices after a long time, effective November 01, 2023. While these increases were substantial, they were necessary to avoid further arrears that threatened the viability of these sectors and the provision of critical energy supplies. The authorities are also moving to tackle cost-side pressures, including bringing private sector participation to DISCOs, institutionalizing recovery and anti-theft actions, improving PPA terms, and reducing the incentives for captive power.

Returning to a market-determined exchange rate and rebuilding FX reserves. While inflows following increased regulatory and law enforcement helped normalize import and FX payments and rebuild reserves, the authorities recognize that the rupee must remain market-determined to sustainably alleviate external pressures and rebuild reserves. To support this, they plan to strengthen the transparency and efficiency of the FX market and to refrain from administrative actions to influence the rupee.

Proactive monetary policy to lower inflation toward its target. With appropriately tight monetary policy, inflation should steadily decline and the authorities stand ready to respond resolutely if near-term price pressures reemerge, including due to second-round effects on core inflation or renewed exchange rate depreciation.

Building financial sector resilience. Continued vigilance is warranted to safeguard the soundness of the banking system. Priorities include addressing undercapitalized financial institutions, ensuring foreign exchange exposures within regulatory limits, and aligning bank resolution and crisis management frameworks with best practice.

Continuing state-owned enterprise and governance reforms to improve the business environment, investment, and job creation. Following passage of the State-Owned Enterprises (SoE) law, the authorities are moving forward with their SoE policy and implementation of their triage plan, including the privatization of select SoEs. High governance and transparency standards will apply to the management of assets under the ownership of the newly created Sovereign Wealth Fund (SWF) and the operations of the SIFC. To further strengthen governance, the authorities will ensure public access to asset declarations from Cabinet members and a task force, with participation from independent experts, will complete a comprehensive review of the anticorruption framework.

Deepening cooperation with international partners. The authorities have accelerated the engagement with multilateral and official bilateral partners. Timely disbursement of committed external support remains critical to support the authorities’ policy and reform efforts.

“The IMF team thanks the Pakistani authorities, private sector, and development partners for fruitful discussions and cooperation throughout this mission.”

 

Pakistan Stock Exchange benchmark index posts 3.02%WoW increase

Pakistan Stock Exchange (PSX) sustained its positive momentum and surged to record highs. The benchmark index closed at record high of 57,397 points on Thursday before posting a slight correction to close at 57,063 points on Friday, posting an impressive 3.02%WoW increase.

During the week investors remained focus on the IMF review, concluding with a successful staff-level agreement, paving way for a US$700 million inflow post-IMF Board approval.

A major but negative development was the government’s decision to impose a 40% tax on banks' windfall income, meeting IMF demands and to agree on further revision in the gas prices in January 2924.

There was a noteworthy increase in remittances, surging to US$2.21 billion. In addition, international oil prices experienced a considerable ease, attributed to increased US strategic reserves and reduced demand from China.

Market participation witnessed a substantial improvement, taking average daily trading volume to 687 million shares, registering a 26%WoW increase from earlier week's average of 544 million shares.

Notably, Thursday saw participation cross one million share mark for the first time in last 28 months.

On the currency front, the rupee appreciated marginally by 0.19%WoW against the greenback, closing at PKR286.5/US$ on Friday.

Other notable news of the week included: 1) MSCI keeping Pakistan’s Frontier Market Index unchanged, 2) Debt/ liabilities soaring to PKR78 trillion, 3) Bank deposits rising 18%YoY on high rates and currency crackdown, 4) Car sales plunging by 24%MoM in October, 5) UAE firms expressing intent to invest US$25 billion in real estate sector.

Close-end Mutual Funds, Synthetic & Rayon, and Woollen were amongst the top performing sectors. Vanaspati & Allied Industries, Commercial Banks, and Textile Weaving were amongst the laggards.

Major net selling was recorded by Banks with a net sell of US$9.14 million. Foreigners remained bullish with a net buy of US$8.22 million.

Top performing scrips during the week were: HGFA , PAEL, RMPL, IBFL, and PKGP, while top laggards included: BIPL, BAFL, CNERGY, PABC, and MEBL.

Despite the benchmark index reaching record highs, the market remains at attractive valuations.

Analysts maintain their positive outlook on the market owing to favorable economic developments like improving inflation and expected monetary easing in the current fiscal year.

While the market is flourishing, Analysts strongly advise market participants to avoid potential pitfalls and instead concentrate on companies with robust fundamentals.

Furthermore, companies with healthy dividend yields can be a prudent strategy for navigating inflation safely.

 

 

Pakistan-China Joint Naval Exercises

The opening ceremony of the Pakistan Navy and PLA (Navy) bilateral exercise Sea Guardian-2023 was held at the Pakistan Navy Dockyard, Karachi.

Commander Qingdao Naval Base, Rear Admiral Liang Yang graced the occasion as Guest of Honour. Commander Pakistan Fleet, Vice Admiral Muhammad Faisal Abbasi was also present at the occasion.

In his opening remarks, Vice Admiral Muhammad Faisal Abbasi welcomed the officers and personnel of PLA (N) Flotilla, underscoring the close and strategic ties between the two countries in general and Navies in particular.

The admiral emphasized the importance of immaculate and sound planning during the exercise and hoped that this exercise would further enhance strategic cooperation and interoperability between the two navies.

In his speech, Commander Qingdao Naval Base Rear Admiral Liang Yang thanked the Pakistan Navy for hosting Exercise Sea Guardian and hoped to have a mutually beneficial and professionally rewarding experience from the joint exercise.

Earlier, the Chinese Flotilla comprising of naval ships, Submarine and Submarine Rescue Ship along with PLA (Navy) Marines Corps Detachment, arrived in Karachi to participate in the exercise.

During the exercise, frontline destroyers/ frigates along with Air and other assets and Marines/ Special Forces from Pakistan Navy and PLA (Navy) will carry out advanced-level joint drills and naval maneuvers in the North Arabian Sea besides professional and social activities during the harbor phase.

The objective of Exercise Sea Guardian-2023 is to share professional experiences on contemporary traditional and non-traditional threats in the Indian Ocean Region as well as to enhance bilateral cooperation and interoperability between the two Navies.

The exercise is a reflection of strong bilateral military cooperation between the Pakistan Navy and the Chinese Navy and will foster greater bilateral cooperation between the two navies.

 

 

Pakistan: GSP Plus status extended for another four years

According to Pakistan’s leading newspaper Dawn, the European Parliament on Thursday unani­mously voted to extend the current generalized system of preferences (GSP) for another four years until 2027 for developing countries, including Pak­istan, to enjoy duty-free or minimum duty on exports to the European market.

The parliament voted with 561 in favor, five against and two in abstention to extend the current rules on the GSP schemes, including GSP Plus, after talks with the EU Council on the new rules were paused in June, an official statement issued by the EU Parliament said.

In September this year, the INTA Committee, a trade body of the EU Parliament, approved the extension of GSP schemes for 60 developing countries.

Caretaker Commerce Minister Gohar Ejaz told Dawn that the decision will ensure that Pakistani exporters can keep selling their goods to the EU market with certainty. He said the EU is a major market for Pakistani exporters, adding that all schemes under GSP were extended for four years.

“I take this opportunity to reiterate Pakistan’s commitments under the scheme for the betterment of all,” the minister said, adding that Pakistan will comply with all obligations and effective implementation of 27 EU conventions.

EU Ambassador to Pakistan Riina Kionka in a post on X said this rollover is proposed so as to avoid a cliff edge at the end of 2023. “It is unrelated to Pakistan’s performance or that of any other beneficiary country. EU member states will decide soon and monitoring will continue,” she further said.

In another post, Ms Riina said that together with the EU team, “I whole heartedly support the commitment of Minister Ejaz and government of Pakistan to fully meet GSP+ obligations, referring to the implementation of 27 conventions on labour, human rights, political rights and press freedom.”

It is worth mentioning that the current GSP regulation was set to expire at the end of this year, and negotiations between the EU parliament and the council of member states took place in January 2023 to establish new rules.

In June, talks were paused as the gap between the position of the parliament and member states could not be bridged, and as a result, the current rules were prolonged.

The draft report by rapporteur Heidi Hautala only amends the date of application of the regulation currently in place, extending it until December 31, 2027. The extension gives more time for the European Parliament and member states to agree on the new rules.

“By dealing swiftly and efficiently with this prolongation and rollover, the parliament underlines that it will not let beneficiaries down,” the rapporteur said during the plenary on Wednesday.

“However, this rollover is an unfortunate consequence of not being able to reach an agreement between the council and parliament on the ongoing review of the GSP regulation,” she said, adding that there are two outstanding issues: the link the council wants between tariff preferences and the obligation of readmission, and safeguarding rice producers without creating excessive trade barriers.

On the first issue, Hautala said, “The European Parliament’s position is against the inclusion of this type of migration policy measures because this is a trade and development policy instrument, which benefits two billion people in the developing world.”

She added, “The trilogues will continue, and it is vital to conclude them as soon as possible. Now it is very important that the parliament and the Spanish presidency go the extra mile and make this review a reality. This would require, however, a change in the approach by the council on the question of readmissions. We need to preserve the GSP as a development tool.”

The EU Council is expected to give its final approval for the extension of the current rules soon.

 

Lingering Energy Crisis in Pakistan

Today, while reviewing the site, I came across one of my blogs posted as aback as on March 24, 2018. I am sure the situation has not improved in five years; in fact it has gone from bad to worse. All of my friends are invited to read this and also send their comments.

If one looks at the history of power sector in Pakistan, a few points are clear. These include: 1) a myth that the country has been persistently suffering due to the shortage of energy products, 2) the successive power policies have been have been introduced to serve the interest of local and overseas investors, 3) blatant theft of electricity and gas has been going on with the connivance of employees of utility companies, and 4) regulatory authorities have failed in protecting the interest of consumers and remained subservient to the incumbent governments.

Energy shortage

Pakistan is blessed with an enormous potential of hydel power generation. According to the experts Mighty River Indus alone has the potential to generate more than 40,000MW electricity per annum. Another 10,000MW electricity per annum can be generated from smaller hydel plants (run of the river type facilities which does not require construction of dams/reservoirs. In addition to that 50,000MW electricity can be produced annually from Thar coal. However, at present total hydel generation is around 8,000MW, which goes down when water level drops in dams. Thermal power plants (mostly owned and operated by the private) have the lion’s share in the total generation. The share of coal and nuclear power plants in the total electricity generated has remained minuscule. Though, a lot is being talked about changing the energy mix and curtailing use of gas for power generation, a little success has been achieved.

Serving vested Interest

Major hydel power generation facilities, i.e. Warsak, Mangla, Tarbella and Ghazi Brotha are located in the northern parts of the country and cater to the needs to KPK and upper Punjab. Karachi is hub of trading and industrial activities, but totally dependent on thermal power generation. The city has 10% of the total population of the country but gets nothing from low cost electricity generated from hydel power plants. To be precise, K-Electric supplies electricity to some parts of Sindh and Baluchistan. If transmission of hydel electricity to Karachi is difficult or uneconomical, quota allocation of gas to K-electric should be doubled. Karachi is surviving on self generated electricity; the city has a latent demand of 5,000MW, whereas K-Electric is capable of meeting only half of this demand. One can still recall that in the early nineties E-Electric used to export electricity to Punjab. HUBCO was constructed to primarily meet Karachi’s demand, but it was ‘hijacked’ by WAPDA for meeting Punjab’s demand.

Blatant Theft

Blatant theft of electricity and gas has been going on for ages with the connivance of the employees of the utilities. On top of all some of the parts of Pakistan are provided free of cost electricity. One may recall that at one time the average T&D losses of electric utilities were as high as 40%. Lately, gas UFG, which mostly comprise of theft hover a little less than 10%. On top of this, utility companies carry the load of billions of rupees of receivables; the probability of recovery is very low. According to some analysts, if K-Elecric pays off its outstanding dues, SSGC will be able to pay off almost all the payable amount to E&P companies. Containing theft or recovering outstanding dues does not require any rocket science, but a firm commitment. However, utilities fail completely helpless because of the pressure of political and linguistic groups. It is also necessary to put on record that utilities don’t provide connections, taking refuge behind non-availability of electricity/gas, but are prompt in providing ‘temporary connections, which are often without meters. Analysts term this ‘offical kunda’.

Regulatory Authorities

The Government of Pakistan (GoP) initiated the process of liberalization, deregulation and privatization. Under this policy, the private sector was encouraged to establish industries, which remained the exclusive domain of the state for decades and it was also offered the stake in state owned enterprises along with management control. Prior to that the World Bank has refused to lend more money to WAPDA and the shift in policy gave birth to HUBCO and other IPPs. 

IMF Recipe

Many analysts have the consensus that the International Monetary Fund (IMF) is the lender of last resort, but its recipes are not aimed at enabling any country to ‘stand on its own feet.’ Often the country is trapped in a vicious cycle of borrowing. However, the advantage is that if the country succeeds in developing its own home grown plan and meeting the condition imposed by the IMF, it may overcome the balance of payment crisis. 

Pakistan has a long history of remaining under the IMF support program. In one of the latest country report, the Fund has once again highlighted the need to introduce structural reforms for the power sector. These weaknesses identified are: 1) the persistence of circular debt, 2) DISCOs still operating under the state control, 3) high T&D losses, 4) failure to follow corporate governance and 5) lack of the mechanism for passing on input cost adjustments to end consumers.

Emphasizing US$55 billion in planned investments as a part of CPEC, the Fund anticipates improved economic activity made up of 19 Chinese sponsored power sector investments (US$17.7 billion) and non-CPEC energy projects (US$25.4 billion). Mode of financing for energy projects has been bifurcated into: 1) direct borrowing and investment from Chinese financial institutions, and 2) financing of projects by private domestic sponsors as well as government backed borrowing from multilateral lenders.

A detailed analysis of the power sector shows: 1) the country has enormous resources to produce low cost electricity, 2) if pilferage is contained cash flow of DISCOs will improve and 3) circular debt issue will be resolved. Appropriately managed conventional sources of power generation can help in meeting the electricity demand and there may not be an urgent need to invest in alternative sources of power generation.

 

Why can’t Pakistan buy oil and gas from Iran?

The United States first imposed sanctions on Iran in 1979 on the pretext of radical students storming its embassy and taking staff hostage. Since then sanctions have remained in force, in fact new sanctions have been imposed over the years.

While the United States continues to play the mantra that Iran is busy in the production of nuclear warheads, it hasn’t come up with any credible proof. Many doubt it is a hoax call like presence of Osama bin Laden in Afghanistan and Iraq busy in the production of weapons of mass destruction (WMD).

The growing perception is that the United States considers Iran a hurdle in the creation of its hegemony in the region, the major source of crude oil.

There is also growing impression among Pakistanis that the successive governments in Pakistan due to the US pressure stopped buying crude oil from Iran and didn’t go ahead on the construction of Iran-Pakistan gas pipeline.

The US administration is fully cognizant of the fact that Pakistan’s GDP growth is being pegged due to looming energy crisis. However, Pakistan is not allowed to buy crude oil and gas from Iran.

It is on record that India has been buying crude oil from Iran and also from Russia, despite imposition of sanction.

It is high time Pakistan should ask the United States to allow it to import crude oil and gas from Iran.

To be honest, the United States has no legal or moral authority to restrict any country from buying Iranian energy products.

Lately, the United States has not only swapped prisoners with Iran, but also allowed transferred US$6 billion to Iran. This was in fact Korean money payable to Iran, against crude oil already purchased.

Is it not the height of hypocrisy that United States has used money which it never owned for the exchange of prisoners, but didn’t release the funds when Iran needed it the most during COVID-19 pandemic?

The time has come Pakistanis should assert themselves and convince the US that buying energy products from Iran bodes well for Pakistan. If India can pay Russia in different currencies, Pakistan should also be allowed to buy energy products from Iran against supply of food.

On may recall that during sanctions on Iraq, the country was allowed to export certain quantity of crude oil and use the proceeds for buying food under “Oil for Food Program”.

Pakistan: Prime Minister’s UN trip ends without big meetings

According to Dawn, a leading English newspaper from Pakistan, after the culmination of his five-day visit to the UN headquarters in New York, interim Prime Minister Anwaarul Haq Kakar headed to London on Saturday, amid speculations that he might have a ‘secret rendezvous’ with PML-N Supremo Nawaz Sharif in the British capital.

At a news conference on Friday evening in New York, Kakar indicated that he was returning home to work with the Election Commission and let the new government take charge of long-term relations, such as negotiating new terms with the IMF.

He did not respond when asked about a possible meeting with Nawaz Sharif. In response to a question about Sharif’s return to Pakistan in October, he said the former premier would be treated under the laws of Pakistan.

Kakar also did not respond to a question if he would visit Saudi Arabia on his way back to Islamabad.

Official sources said Kakar stopped over in Paris on his way to New York and visited the Eiffel Tower with his family. He also spent some quiet time with his family and friends in New York and was seen dining at a Turkish restaurant on Thursday night.

He did have a busy official schedule though, meeting global leaders. The list included Turkish President Recep Erdogan as well, but the meeting did not take place for some reason. He also did not have a separate meeting with the official US delegation.

According to the interim premier, he met business bodies in the US that showed interest in the economic revival plans of Pakistan through privatization and the Special Investment Facilitation Council.

The visit by an interim ruler was supposed to be a low-key affair but assumed greater importance when Canada publicly accused India of killing a Sikh leader on its soil.

Kakar responded promptly to the developing situation, terming it “a first-of-its-kind event after World War I”.

“An Asian country staging a murder on Canadian soil! Its impacts are felt across the Western countries who now realise how India is persecuting its minorities,” he said.

When a journalist objected to his using “genocide’ to describe the persecution of minorities in India, he said, “Genocide is a suitable word, not to call it a genocide will be a crime.”

“…no other word can describe what the Kashmiris are facing. While they are being killed and raped, I cannot sit here and wonder if the word genocide may hurt someone’s feelings.”

He called for the formation of an international alliance to keep in check India’s “rough behaviour” including the attacks it sponsored inside Pakistan.

Kakar said, he had a detailed meeting with IMF officials at the UN headquarters. “The IMF was very appreciative of the interim government’s steps over illegal trade of dollars,” he said, adding, “IMF did not demand anything, rather the caretaker government was giving them confidence and [it] would abide by the agreements.”

Shedding light on Pakistan-US relations, Kakar said Pakistan had an exclusive identity and it should be seen through “regional or extra-regional prisms.”

 

Saudi Crown Prince announces economic corridor linking India, Middle East and Europe

According to Saudi Gazette, Saudi Crown Prince and Prime Minister Mohammed Bin Salman announced the signing of a memorandum of understanding (MoU) for an economic corridor project connecting India with the Middle East and Europe.

The project aims to enhance economic connectivity, develop and upgrade infrastructure, and boost trade between the involved parties.

Speaking at the occasion of the launch of the corridor on the sidelines of the G20 Leaders' Summit in Delhi on Saturday, the Crown Prince said, “I am pleased today that we are gathered in this friendly country to sign an MoU for an economic corridor project connecting India with the Middle East and Europe.”

“This project is the culmination of our joint efforts over the past few months.

“It is built on principles that serve the common interests of our countries by enhancing economic connectivity and positively impacting our partners in other countries and the global economy as a whole.”

He added, “This project will contribute to the development and upgrading of infrastructure, including railways, port connections, and increased flow of goods and services, thus enhancing trade between the parties involved.

“It will also extend pipelines for the export and import of electricity and hydrogen to enhance global energy supply security, in addition to high-efficiency, reliable cross-border data transmission cables.”

The Crown Prince highlighted that the MoU also supports clean energy development efforts and will create new, high-quality employment opportunities along the corridors for all parties.

"To achieve what we have agreed upon in this memorandum, it requires the continuation of our collective efforts and the immediate commencement of developing the necessary mechanisms for its implementation within the agreed-upon timeframe," he said.

He also expressed profound gratitude to all those who worked together to take these foundational steps towards establishing this significant economic corridor.

Indian Prime Minister Narendra Modi announced the launch of the India-Middle East-Europe connectivity corridor, which is the first of its kind initiative on cooperation on connectivity and infrastructure involving India, UAE, Saudi Arabia, EU, France, Italy, Germany, and the United States.

The governments of Saudi Arabia and United States announced that they had signed a memorandum of understanding (MoU) between the two countries. The bilateral MoU provides a framework for developing a protocol for establishing intercontinental green transit corridors through the Kingdom to connect the continent of Asia with the continent of Europe.

This project aims to facilitate the transit of renewable electricity and clean hydrogen via transmission cables and pipelines as well as constructing rail linkages.

It is also intended to enhance energy security, support efforts for the development of clean energy, promote digital economy through digital connectivity and transmission of data via fiber cables, and promote trade and transport of goods by rail and through ports.

Saudi Arabia welcomed the role of the United States to facilitate and support the negotiation, establishment, and implementation of the green corridors transit protocol with the relevant countries.

Pakistan Gasport seeks spot LNG cargo

Pakistan Gasport is looking to buy a spot liquefied natural gas (LNG) cargo for November delivery, its chairman Iqbal Ahmed told Reuters on Thursday. This would be the country's first spot LNG deal since June 2022.

The south Asian country, facing a severe economic and foreign exchange crisis, has struggled to purchase the super-chilled fueled following a surge in prices after Russia's invasion of Ukraine last year.

LNG is crucial for Pakistan, where natural gas accounts for over a third of power generation and local gas reserves are insufficient to address growing electricity demand in a country of over 230 million, leading to frequent power cuts.

Pakistan Gasport is evaluating interest for a cargo from sellers in Oman, the United States and the United Arab Emirates, Ahmed said.

"We've got different countries which have offered us different options. We are extremely encouraged by what we've heard today," Ahmed told Reuters.

Pakistan Gasport owns the country's largest LNG import and regasification terminal at Port Qasim, but LNG imports have historically been facilitated by Pakistan LNG, a state-run firm that last bought a spot cargo in June 2022 from PetroChina.

A cargo would be the first shipped in by a private sector company in Pakistan, said Ahmed, who expects LNG prices to fall in coming years, making spot purchases more attractive.

Ahmed said 12% to the Brent slope was the "price to beat" for a cargo to Pakistan. That works out to nearly US$11 per mmbtu, a discount of a sixth to current average Asian LNG prices of US$13.

"If the government or anybody else can bring LNG at a price of 12% of Brent or lower, there is a market. The minute you cross that barrier, there is resentment," he said.

Ahmed said he expects Pakistan's LNG demand to grow to 30 million metric tons in 5 years, from about 10-12 million tons now.

Importers of all commodities to Pakistan have faced increased financing costs and higher processing times due to the ongoing economic and foreign exchange crisis. LNG traders have said sellers to Pakistan could demand a premium because of the country's low credit rating.

Pakistan Gasport plans to avert such challenges by not seeking a letter of credit from banks, financing the deal with internal funds, Ahmed said.

"I plan to use a currency other than the dollar to facilitate the payment and also use a semi-barter system to settle," he said.

 

Urea shortage in Pakistan a hoax call

Certain quarters have started saying that Pakistan is likely to face shortage of urea that could affect wheat production and food security in the country. Their voice gets credibility because natural gas supply to fertilizer plants will be suspended from middle of October.

They say the gap between urea production and consumption has widened, raising fears of nitrogenous fertilizer shortage up to 500,000 tons during Rabi season, especially between the critical period of October 2023 and March 2024, when wheat and other crops are sown.

The market has also begun to see price distortions, the industry is providing urea as usual but the middlemen are selling it at higher rate.

Farmers are being fleeced by middlemen, who are charging a premium up to PKR1,000 per bag above the retail price.

According to the National Fertilizer Development Center (NFDC) projections, total urea availability as of October 01, 2023, is expected to be only 69,000 tons, compared to 294,000 tons during the same period last year. During the last Rabi season, around 300,000 tons of urea was imported, but no plan has been set by the government to meet the critical requirement of farm nutrients for this season.

Some groups are asking the government to immediately import at least 500,000 tons urea and ensure its arrival in November 2023 to avoid a shortage and also ensure uninterrupted supply at full capacity keep the plants operating simultaneously.

Every year around this time Pakistan is forced to import urea. However, this year the government should continue gas supply to the fertilizer plants as the gas prices are attractive level in the international market.

For those, who may not be aware, Pakistan has an installed capacity to produce 7 million tons urea, but the manufacturers produce 6 million tons.  

There is also the responsibility of the ruling junta to also take concrete steps to stop the smuggling of fertilizer through the Western borders.

Pakistan Victim of Geopolitics

I am pleased to share one of my articles published in Eurasia Review on December 27, 2012. Despite lapse of more than a decade, many of the assertions seem most current as Pakistan continue to suffer from unabated interference of the super powers. 

Since independence Pakistan has remained the focus of global and regional powers. The country is termed a natural corridor for trade ‑ including energy products ‑ gateway to Central Asia and landlocked Afghanistan.

There is a perception that often regimes are installed and toppled in Pakistan by the super powers to achieve their vested interest. This is evident from cold war era to occupation of Afghanistan and from love and hate relationship with India to creation of Taliban (phantom now having many offspring).

At present Pakistan is facing extremely volatile situation, which has become a threat for its own existence. Fighting a proxy war for United States in Afghanistan for nearly four decade has completely destroyed the economic and social fabric of the country. Pakistan is suffering from the influx of foreign militant groups getting funds and arms from different global operators.

Analysts say over the years Pakistan has been towing foreign and military policy of the United States, which has often offended USSR, China, India and Iran. Therefore, one needs to analyze Pakistan’s relationship with Afghanistan, India and Iran, enjoying common borders with the country. It may not be wrong to say that at present Pakistan doesn’t enjoy cordial relation with none of these countries.

Pakistan helped Afghans in averting USSR attack. After the pullout of USSR forces Afghanistan plunged into civil war. It was often alleged that Pushtoons were supported by Pakistan and Northern Alliance was highly annoyed. After 9/11 Pakistan was made to fight Taliban under the US dictate. As the time for withdrawal of Nato forces is getting closer Pakistan once again faces a precarious position.

When British Raj left the subcontinent in 1947 it left a thorn, Kashmir. Since independence India and Pakistan have been living in constant state of war, spending billions of dollars annually on the purchase of conventional as well as non-conventional arms and have also attained the status of atomic powers. However, both the countries suffer from extreme poverty. There seems no probability of reconciliation between the two countries because of presence of hawks on both the sides. Even the trade relations could not be normalized due to Kashmir dispute as Hindus are not ready for another division of Hindustan on the basis of religion.

Pakistan and Iran have enjoyed the best time till toppling of Shah’s rule as both the countries were under the US influence. Iran has been persistently enduring economic sanctions for more than three decades after the Islamic revolution. Pakistan is suffering from severe energy crisis but not allowed to construct Iran-Pakistan gas pipeline or even buy Iranian crude oil under food for oil program. Iran has often complaint that certain outfits, most notorious being Jundullah, having its base in Balochistan province of Pakistan, are involved in cross border terrorism.

Pakistan also faces a difficult situation when Saudi Arabia, under the US pressure asks it to do or not to do certain things. One such example is Saudi Arabia promising to meet Pakistan’s oil requirement if it opts not to buy Iranian oil. There are also allegations and counter allegations that Saudi Arabia and Iran are supporting Sunni and Shia factions in Pakistan. This point is being highlighted by referring to sectarian killings. However, Pakistanis have no doubt that killing is being done by those who are neither Sunni nor Shia. This point got credence when it was discovered that Taliban involved in attack on Peshawar airbase had tattoos on their bodies.

Till today, Pakistan offers the shortest and cost effective route to landlocked Afghanistan, leading to Central Asian countries. Gwadar deep seaport has been constructed in Balochistan province with the financial and technical assistance of China. India often raises its concerns on Chinese presence along Pakistan’s coastal belt. However, India is not only constructing Chabahar port in Iran but also road and rail links up to Central Asia via Afghanistan.

Pakistanis completely fail to understand the duality of US policy. India was asked to withdraw itself from Iran-Pakistan-India gas pipeline project and also rewarded nuclear technology in return. On top of that it has not been stopped from building port and supporting infrastructure in Iran. Some experts say all this is being done to construct an alternate route once the objective of creation of greater Balochistan is achieved. This new country will be created taking one slice each from Iran, Afghanistan and Pakistan.

The level of US pressure on Pakistan can also be gauged from the fact that President, Asif Ali Zardari, on the eleventh hour, cancelled his visit to Tehran and went straight to UK. The new date of his visit to Iran has not been announced as yet. This reminds Pakistani’s of a similar cancelled visit of Prime Minister Liaquat Ali Khan to USSR and he instead went to United States.

It is also on record that Chinese experts working in Pakistan have often come under attack to make them leave Pakistan. Chinese experts working on Gwadar and Thar coal projects have been repeatedly attacked. At one stage it was feared that Chinese will completely withdraw their support for Thar coal mining and power plant.

China has also complaints that some extremist Muslim groups are trying to create disturbance in one of its province bordering with Pakistan. It seems these attempts are made to disrupt trade being done through this land route.

 

 

Developing countries facing debt problem

According to Reuters, the persistent and damaging debt problems gripping a number of developing nations will be a core topic during the G20 summit in Delhi next month. Following is the recap of economies in the countries currently facing problems:

ZAMBIA

Zambia was the first African country to default during the COVID-19 pandemic and after a long-awaited burst of progress in recent months finally looks to be closing in on a repair plan.

In June, it clinched a US$6.3 billion debt rework deal with the Paris Club creditor nations and its other big bilateral lender China. The details are still being worked on, but the government also hopes to reach a deal in the coming months with the international funds that hold its unpaid sovereign bonds.

The progress has also been cheered as a success for the struggling G20 Common Framework initiative, which was set up during the pandemic to try to streamline debt restructurings but has been hard to make work in practice.

SRI LANKA

Sri Lanka announced a debt overhaul plan at the end of June and has continued to make progress since, albeit not everywhere.

Nearly all holders of its domestic, dollar-denominated Sri Lanka Development Bonds (SLDBs) agreed to exchange their bonds into five new Sri Lankan rupee-dominated notes that will mature between 2025 and 2033.

Another part of the domestic debt plan has faced delays, though, with a key deadline on a Treasury bond exchange delayed three times and now set for Septemer 11, 2023.

Central bank chief Nandalal Weerasinghe has said the country's big foreign creditors such as India and China are awaiting the conclusion of the domestic debt operation before continuing discussions.

He said negotiations will be held in parallel with the first review of its US$2.9 billion International Monetary Fund (IMF) bailout program due from 14-27 September. Failure to complete the domestic debt overhaul by then could result in delays both in terms of IMF disbursements and talks with creditors.

GHANA

Ghana defaulted on most of its external debt at the end of last year. It is the fourth country to seek a rework under the Common Framework and is aiming to reduce its international debt payments by US$10.5 billion over the next three years.

Its progress has been relatively swift compared to the likes of Zambia. The government recently agreed to tackle roughly US$4 billion of its domestic debt via a pension fund debt swap operation and a dollar-denominated bonds exchange.

It has sent a restructuring plan to its official sector - wealthier government - creditors and its finance minister has said he also expects to reach a deal with the country's bondholders by the end of the year.

The funds know it will require them to write off money but hope it could also include a recovery instrument that would mean Ghana pays back more of that money over time if its economy recovers quickly.

PAKISTAN

Pakistan needs upwards of $22 billion to service external debt and pay other bills for fiscal year 2024.

A caretaker administration is in charge until an election that must take place by November. Inflation and interest rates are at historic highs, and it is struggling to rebuild from devastating 2022 floods.

In June 2023, Pakistan reached an 11th-hour deal with the IMF for a US$3 billion bailout, and Saudi Arabia and the UAE followed with US$2 billion and US$1 billion cash infusions.

Reserves, which had fallen to US$3.5 billion, had rebounded to US$7.8 billion by late August. Observers say it could have enough to make it to the elections but there are major questions about how long it will be able to avoid default without huge support.

TUNISIA

The North African nation, reeling from multiple hits since a 2011 revolution, is facing a full-blown economic crisis.

Most debt is internal but foreign loan repayments are due later this year and credit ratings agencies have said Tunisia could default.

President Kais Saied has slammed the terms required to unlock US$1.9 billion from the IMF as diktats that he will not meet.

Saudi Arabia pledged a US$400 million soft loan, and a US$100 million grant, but the tourism-dependent economy continues to grapple with shortages in imported food and medicine. The European Union has offered about US$1.1 billion (one billion euros)in support but that appears to be mostly pegged to the IMF deal or reforms.

EGYPT

Egypt remains another of the big countries seen as at risk of falling into trouble. North Africa's largest economy has around US$100 billion of hard currency - mainly dollar-denominated - debt to pay over the next five years, including a meaty US$3.3 billion bond next year and the government spends over 40% of its revenues just on debt interest payments.

Cairo has a US$3 billion IMF program and has devalued the pound by roughly 50% since February 2022. But a privatization plan is still on the go-slow and last month it veered away from its IMF plan by saying it would keep subsidized electricity prices unchanged until January.

Some of its government bonds are changing hands at half their face value and analysts think a key factor in whether it can get back on track is the amount of support wealthy Gulf nations such as Saudi Arabia provide going forward.

EL SALVADOR

El Salvador has shifted from doom and default to bond market darling, propelled by two surprise debt buybacks and the appointment of a former IMF official as adviser to the finance ministry.

In summer 2022, its 2025 eurobond fell to just under 27 cents on the dollar, weighed down by high debt service costs and worries over its financing plans and fiscal policies.

The same bond traded at 91.50 cents on August 31, and its debt-to-GDP ratio stood at 77% in December 2022, the lowest since 2019, and is forecast to drop another percentage point this year, according to Refinitiv data.

It’s now relatively light debt repayment schedule through 2027, and the sky-high popularity of President Nayib Bukele, has assuaged fears the country could default.

KENYA

The East African nation's public debt stands at nearly 70% of GDP, according to the World Bank, putting it at high risk of debt distress.

President William Ruto's government has moderated spending and proposed a raft of tax hikes, assuaging some concerns of an imminent default.

The African Development Bank is in talks with Kenya over US$80.6 million to help it plug its financing gaps this year, and it is also discussing budgetary support from the World Bank.

But concerns remain; Ruto's political opposition has opposed many of his tax hikes, and protests have forced him to pause some reforms, such as fuel subsidy cuts.

UKRAINE

Ukraine froze debt payments in 2022 in the wake of Russia's invasion. It has said it is likely to decide early next year whether to try to extend that agreement or begin looking at potentially more complex alternatives.

Top institutions estimate the post-war rebuild cost will be at least one trillion euros, and the IMF estimates Ukraine needs $3-$4 billion a month to keep the country running.

If the war with Russia is not won or at least eased to a much lower intensity by next year, its debt restructuring dilemma will also have to factor in the November 2024 US Presidential election and the degree of support it would receive should Donald Trump or another Republican candidate win office.

LEBANON

Lebanon has been in default since 2020 with few signs its problems will be resolved any time some.

The IMF has issued stark warnings, but one bit of progress in the last couple of months has been a proposal by the central bank to lift the long-time peg on the country's local currency,

 

Iranian export to ECO members on the rise

Iran exported over US$3.6 billion worth of commodities to the members of the Economic Cooperation Organization (ECO) in the first four months of the current Iranian calendar year. This reflected a 4.52%YoY increase, said an official with the Islamic Republic of Iran Customs Administration (IRICA).

According to Omid Golzari, the head of the IRICA Office of International Affairs and Public Relations, Iran exported 8.161 tons of goods to the ECO members during the said period, Tasnim News Agency reported.

The volume of exports also increased by 31.24% as compared to the same period last year.

As previously announced by the IRICA head, Iran’s trade with the members of the Economic Cooperation Organization reached US$20.5 billion in the previous Iranian calendar year.

According to Mohammad Rezvani-Far, Iran exported US$13 billion worth of commodities to the said nations last year, while the imports were recorded at US$7.5 billion.

Referring to the trade potentials of ECO member countries in various fields, such as rail and land transport, common borders, as well as territorial and population size, Rezvani-Far said the volume of commercial exchanges with ECO members should be more than this figure.

“IRICA is fully prepared to take the necessary measures for increasing the volume of trade and transit exchanges with ECO members in order to achieve the organization’s goals set according to the ECO agreement,” he said.

The official underlined the development of transit ties with ECO members as a way of boosting trade exchanges with the mentioned countries.

“Iran has many customs agreements and memorandums with ECO member countries, and in order for these agreements to be operational in line with the provisions of the ECO agreement, it is suggested that the ECO secretariat announces the necessary measures needed to be taken with the cooperation of the members,” he noted.

Iran and ECO members traded more than 23.723 million tons of goods worth US$11.71 billion during the previous Iranian calendar year, of which the share of exports was 18.419 million tons of goods worth US$6.890 billion and the share of imports from these countries was 5.312 million tons worth US$4.819 billion.

Petroleum products, dairy products, foodstuff, fresh and dried fruits, juices and citrus fruits, carpets, saffron, fish, caviar, ornamental aquatic products, various stones, construction equipment, clothing, industrial equipment, bags and shoes, medicine, and health supplies, as well as plastic products, were Iran’s main exported items to ECO members last year, while basic goods, industrial machinery, raw materials for production, and medical supplies and medicine, were the top imported goods from ECO member states.

The Economic Cooperation Organization or ECO is an Asian political and economic intergovernmental organization that was founded in 1985 in Tehran by the leaders of Iran, Pakistan, and Turkey.