IMF flags debt restructuring hurdles

There are some disagreements over restructuring debt for distressed economies, the chief of the International Monetary Fund said on Saturday on the sidelines of a G20 meeting.

India's G20 presidency comes at a time when its South Asian neighbors Sri Lanka, Bangladesh and Pakistan are seeking urgent IMF funds due to an economic slowdown caused by the COVID-19 pandemic and the Russia-Ukraine war.

China, the world's largest bilateral creditor, urged G20 nations on Friday to conduct a fair, objective and in-depth analysis of the causes of global debt issues as clamor grows for lenders to take a large haircut, or accept losses, on loans.

"On debt restructuring, while there are still some disagreements, we now have the global sovereign debt roundtable with consideration of all public and private creditors," IMF Managing Director Kristalina Georgieva told reporters after the roundtable she co-chaired with Indian Finance Minister Nirmala Sitharaman.

"We just finished a session in which it was clear that there is a commitment to bridge differences for the benefit of countries."

Apart from restructuring debt, regulating cryptocurrencies is another priority area for India, which Georgieva agreed with.

"We have to differentiate between central bank digital currencies that are backed by the state and stable coins and crypto assets that are privately issued," Georgieva said.

"There has to be very strong push for regulation... if regulation fails, if you're slow to do it, then we should not take off the table banning those assets, because they may create financial stability risk."

 

 

 

Pakistan Stock Exchange witnesses 10.4%WoW decline in average daily trading volume

During the week ended on February 24, 2023, Pakistan Stock Exchange remained volatile due to news flows regarding the IMF deal and approval of Financial Supplementary Bill for raising additional taxes of PKR170 billion.

Unease amongst the participants increased as T-Bills cut-offs in the latest auction by State Bank of Pakistan (SBP) went up to 19.95%, contributing to the fears of further hike in the interest rate.

Reserves held by the SBP witnessed an increase for second consecutive week, rising to US$$3.26 billion, still standing at a critical level. The noticeable improvement can be expected after IMF agreement and expected inflows from bi-lateral partners.

The KSE-100 index closed the week at 40,708 points, lower by 411 points, depicting 1.0%WoW decline.

Participation in the market declined by 10.4%WoW, with daily volumes averaging 138 million shares as against 154 million shares a week ago.

PKR continued to strengthen against the US$, gaining 2.82% over the course of the period to close in at PKR259.99/US$ on Friday.

Other major news flows during the week included: 1) foreign exchange reserves got much-needed boost on support from amid IMF procrastination, 2) GoP announced steps to correct fiscal imbalances, 3) Current Account for the first seven month of the current financial year dipped on import curbs to US$3.8 billion deficit, 4) Islamabad got positive signals for help from Riyadh, and Beijing, and 5) ECP failed in taking decision on election date.

Sector-wise, Miscellaneous, Cement and Vanaspati & Allied Industries were amongst the top performers. On the other hand, Leasing Companies, Close-End Mutual Fund and Oil & Gas Exploration Companies were amongst the worst performers.

Flow wise, major net selling was recorded by Individuals with a net sell of US$4.56 million. Companies absorbed most of the selling with a net buy of US$5.91 million.

Top performing scrips during the week were: PSEL, KTML, KOHC, and MUGHAL, while top laggards were: PGLC, HGFA, PPL, SHFA, and SHEL.

The market is expected to remain range-bound in the near future, clouded by concerns regarding the interest rate hike. Expected increase in the interest rate may be a huge downside for the aggregate demand and subsequently the equity markets.

Any news regarding a successful Staff Level Agreement with the IMF and inflows from bi-lateral partners would boost investor’s confidence. Investors are advised to stay cautious while building new positions in the market.

Pakistan: Auction of wheat not fit for human consumption

Pakistan Agricultural Storage & Services Corporation Ltd (PASSCO) has published a tender in newspapers for the sale of 44,000 tons of wheat lying in its warehouses. This wheat is not fit for human consumption. The last date for submission of the tender is March 03, 2023.

Experts fear that ‘not fit for human consumption’ wheat will ultimate be bought by the erring flour mills and sold to the consumers. Even if it is bought by chicken feed mills, the birds eating contaminated feed will not be suitable for human consumption.

Technically the government should burn this wheat to save chickens and human beings.

Going such a large quantity stale raises various questions: 1) why appropriate steps were not taken to save this quantity from going stale? 2) Why there was delay in release of the quantity to flour mills when market was experience shortfall? Will any action be taken against those who are responsible for this crime?

It is estimated that going stale of such a big quantity would cause over PKR20 million to the nation. The Government is already spending foreign exchange on the import of wheat, leading to waste of precious foreign exchange. On top of all the incapacity of the government has raised flour price in the local market and added to the miseries of the poor people.

This highlights the inadequate storage capacity available with PASSCO and provincial departments. The successive governments have failed miserably in the construction of grain storage silos.

Reportedly, the aggregate wheat storage capacity of PSSACO and provincial food departments is less than 2.5 million tons as against an average crop size of nearly 30 million tons. It must be remembered that these are flatbed warehouses where wheat is kept in bags.

Another question can be raised, if PASSCO and provincial food departments do not have adequate storage, why the government has given these the mandate to be the sole buyers of wheat? 

UN resolution approves withdrawal of Russian forces from Ukraine

The United Nations General Assembly resolution calling for Russia to withdraw from all territory in Ukraine was approved by member nations on a 141-7 vote. Although, the resolution holds no power but relays a powerful message to Moscow.

General Assembly votes also serve as a key barometer for the success of each side of the war to sway international opinion.

The resolution is purely symbolic, but it allows Ukraine and its allies to build a consensus against Russia.

Thirty-two countries also abstained from the vote, including China, South Africa and India.

The countries opposing the resolution included Belarus, Mali, Nicaragua, Russia, Syria, North Korea and Eritrea.

Russia picked up two additional votes from a previous UN vote on the war in October.

US Ambassador to the United Nations Linda Thomas-Greenfield said the vote will go down in history.

“On the one-year anniversary of this conflict, we will see where the nations of the world stand on the matter of peace in Ukraine," Thomas-Greenfield said in remarks the day before the vote.

Indian Ambassador to the U.N. Ruchira Kamboj said the resolution had inherent limitations and questions that needed to be answered.

South Africa, China and Russia are holding joint drills in the Indian Ocean this weekend.

The United States also accused China of supplying nonlethal aid to Russia, and several officials warned Beijing is considering sending lethal aid.

 

 

 

Pakistan: Power Generation decreases by 3.2%YoY in January 2023

Power generation has been reported at 8,515GWh for January, 2023, remaining flat MoM while decreasing by 3.2%YoY as compared to 8,797GWh generated last year.

This takes cumulative energy generated for the first 7 months of FY23 to 77,085GWh, a decrease of 7.3%YoY.

The demand supply shortfall remains a persistent issue in the country, where peak demand for the month was estimated between 16,000-17,000MW.

Circular debt for the power sector has been reported at PKR2.5 trillion as compared to PKR2.25 trillion in June 2022.

According to the revised Circular Debt Management Plan presented to the IMF, FY23 is targeted to close with a Circular Debt stock of PKR2.4 trillion after a PKR335 billion payout will be given in June to reduce the accumulation for the year.

Hydel generation for the month under review was reported at 800GWh, decreasing substantially on a monthly basis as January is the month of least hydrology in the country historically.

Hydel generation was up 56% on a yearly basis, partly due to dependable capacity on Hydel increasing to 10,592MW.

The significant increase in power generation have been seen from Coal fired power plants, with generation up 61%MoM aided by the new Thar Coal Block-1 and ThalNova plants which were added to the grid, along with increased generation from the plants running on imported coal to cover for the lack of hydel generation in the month.

Furthermore, Furnace oil (FO) based plants have finally seen an uptick in utilization, with 463MW generated in the month as compared to merely 39MW last month.

Despite this, owing to better availability of lower-cost alternatives, FO generation was down 63%YoY and remains at highly diminished levels.

Average cost of generation for the month under review rose by 59% to PK11.2/kWh owing to the decrease in generation from Hydel plants and the consequent increase in reliance on thermal sources.

In terms of the generation mix for January, the largest contributors are Coal (29%), followed by Nuclear (22%), RLNG (15%), Gas (13%) and Hydel (9%).

Coal based generation in generation mix has risen to 29% from the 18% recorded last month.

Generation from thermal based power plants was recorded at 63% of total generation in the month, considerably lower than the 3 year average of monthly generation in the month of January of 74%, mainly due to the emergence of new Nuclear based capacities.

HUBC has seen significant increases in power generation, with 58GWh more power generated in this month, while down by 72%YoY despite the new TEL plant coming online this year.

Utilization for the CPHGC remains meager at 6% for January, while the base plant generated 0.9GWh after three months of no utilization.

On the flipside, the more efficient Narowal plant witnessed significant utilization of 37% in the month with 56.5GWh generated, while the TEL plant remains well-utilized at 69% due to its high placement in the Merit Order.

KAPCO remains non-operational owing to the expiry of its PPA and is still out of the Merit Order, although it has sold 2.7GWh from its RLNG plant in the month.

NPL and NCPL have also seen a surge in utilization for the month as the plants are relatively less expensive compared to their peers in the FO group, with the plants recording 40% and 29% in utilization respectively.

As the hydrology in the country improves post January, the cost of generation should decrease going forward as reliance on thermal sources decreases in tandem.

 

 

UN to mark one year of Ukraine war with vote

Marking one year of war, Ukraine and Russia lobbied countries at the United Nations on Wednesday for backing ahead of a vote by the 193-member General Assembly that the United States declared will "go down in history."

"We will see where the nations of the world stand on the matter of peace in Ukraine," US Ambassador to the United Nations Linda Thomas-Greenfield told the General Assembly.

The General Assembly appeared set to adopt a resolution on Thursday, put forward by Ukraine and supporters, stressing the need to reach, as soon as possible, a comprehensive, just and lasting peace in line with the founding UN Charter.

UN Secretary-General Antonio Guterres denounced Russia's invasion and said the Charter was unambiguous, citing from it, "All members shall refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any state."

Ukraine and its supporters hope to deepen Russia's diplomatic isolation by seeking yes votes from nearly three-quarters of the General Assembly to match - if not better - the support received for several resolutions last year.

They argue the war is a simple case of one unprovoked country illegally invading another, while Russia portrays itself as battling a proxy war with West, which has been arming Ukraine and imposing sanctions on Moscow since the invasion.

"The West has ... brazenly ignored our concerns and continue bringing the military infrastructure of NATO closer and closer to our borders," Russia's UN Ambassador Vassily Nebenzia told the General Assembly.

Nebenzia said, “Moscow had no other option but to launch what it has called a special military operation on February 24 last year to defend Russian speakers in eastern Ukraine and ensure the safety and security of our country, using military means.

The draft UN resolution, which is non-binding, but carries political weight, mirrors a demand the General Assembly made last year for Moscow to withdraw troops and halt the hostilities. Russia has described the text as unbalanced and anti-Russian and urged countries to vote no.

Ukrainian Foreign Minister Dmytro Kuleba told reporters Ukraine was exercising its right to self-defense as enshrined in the UN Charter and that when you are sending weapons to Ukraine, you are helping Ukraine to defend UN Charter.

"Russia violated the UN Charter by becoming an aggressor," he said at the United Nations. "When you are sending weapons to them, you are helping to destroy the UN Charter and everything that the United Nations stands for. It's very simple."

The General Assembly has been the focus for UN action on Ukraine, with the 15-member Security Council paralyzed due to veto power by Russia and the United States along with China, France and Britain.

The Security Council has held dozens of meetings on Ukraine in the past year and will again discuss the war on Friday at a ministerial gathering, due to be attended by US Secretary of State Antony Blinken. Diplomats say Russian Foreign Minister Sergei Lavrov is not scheduled to attend.

 

 

 

 

 

 

 

 

 

 

 

 

 

Iraq to allow trade with China in yuan

The central bank of Iraq said on Wednesday it planned to allow trade from China to be settled directly in yuan for the first time, in an attempt to improve access to foreign currency.

The central bank has been taking urgent steps to compensate for a dollar shortage in local markets, which prompted the cabinet to approve a currency revaluation earlier this month.

"It is the first time imports would be financed from China in yuan, as Iraqi imports from China have been financed in US dollars only," the government's economic adviser, Mudhir Salih, told Reuters on Wednesday.

The move is the latest sign of the yuan's growing role on the international stage as China gradually opens up its financial markets and some countries look to diversify their currency exposures.

The central bank could, as part of its plan, boost the balances of Iraqi banks that have accounts with Chinese banks in yuan, it said in a statement.

Another option would be to boost local banks' balances via the central bank's accounts with JP Morgan and Development Bank of Singapore (DBS), it added.

The first option would depend on the central bank's yuan reserves, while the other would use the bank's US dollar reserves at JP Morgan and DBS. The two banks would convert the dollars to yuan and pay the final beneficiary in China, Salih explained.