Pakistan: Interim setup likely to remain in place a little longer

Over the months I have been saying that current account deficit and budget deficit are the outcome of “Confidence Deficit”. However, the team headed by Shehbaz Sharif, spent most of the time talking about non-issues.

Please allow me to say that Pakistanis were ready to bear the brunt, but unwillingness of the ruling junta to cut contain its extravaganzas, created rebellious attitude. Now, top of the agenda items should be bridging the confidence deficit, curtailing extravaganzas, facilitating the local manufacturers and exporters.

The economic managers must stop saying “these are the conditions of IMF” and come up with a home grown plan. Restoring the competitiveness of the local manufactures can not only help in boosting exports but containing inflation and generating new employment and taxes.

It is encouraging that the Caretaker Prime Minister, Anwaarul Haq Kakar, has assembled a small cabinet comprising of 24-members, which sworn in on Thursday. This can also be termed the implementation of a technocratic framework. One has all the reasons to believe that the setup has been put in place to serve the country beyond 90 days due to the potential delay in holding scheduled elections.

This extended period presents a unique opportunity to the caretaker government to spearhead essential economic reforms. Unburdened by political considerations, they can make tough but necessary decisions to jumpstart the economy. Notably, the caretaker setup comprises of accomplished professionals, particularly in key ministries such as Finance, Foreign Affairs, and Power. This strategic placement underscores their significance in the forthcoming period.

The Prime Minister's unwavering commitment to address pressing economic concerns is evident in his swift actions. His decision to transfer DISCOs (Distribution Companies) to provincial authorities, his efforts to attract investments through the SIFC, and the prompt convening of the inaugural cabinet meeting on Friday, all reflect the priority he places on resolving these issues.

 

 

Resumption of Saudi Iran ties pivotal for regional security

Foreign Minister Prince Faisal bin Farhan has affirmed Saudi Arabia's desire to strengthen bilateral relations with the Islamic Republic of Iran and his country's keenness to discuss ways to activate agreements between the two countries.

Addressing a joint press conference with his Iranian counterpart Hossein Amir-Abdollahian in Riyadh on Thursday, Prince Faisal said the resumption of diplomatic relations between Saudi Arabia and Iran marked a pivotal moment for regional security.

Amir-Abdollahian’s visit to Riyadh follows the reestablishment of diplomatic relations between Riyadh and Tehran, brokered by China in March, after seven years of no formal ties.

"Within the framework of the implementation of the agreement, the missions of both countries have resumed their work, and so have the ambassadors-designate," Prince Faisal said.

Prince Faisal said that the Kingdom is keen to activate security and economic agreements that were inked with Iran. He also conveyed Saudi Arabia’s gratitude to Iran for its support of the Kingdom’s bid to host World Expo 2030.

For his part, Amir-Abdollahian described the discussions in Riyadh fruitful. He said that the Islamic Republic values the role Saudi Arabia plays in the region, adding that the two countries can work together to resolve lingering regional issues.

Amir-Abdollahian said that relations with Saudi Arabia were moving in the right direction and stressed that his country was determined to strengthen relations with the Kingdom.

He added that Iranian President Ebrahim Raisi will visit Saudi Arabia soon.

Prince Faisal had made a landmark visit to Tehran in June, where he met with Amir-Abdollahian and President Ebrahim Raisi.

Under the deal signed in March, Riyadh and Tehran agreed to reopen embassies and consulates in each other’s territories and implement security and economic cooperation agreements that were signed over 20 years ago.

Saudi Arabia severed ties with Iran in 2016 following an attack on its embassy in Tehran and consulate in Mashhad. 

Dr Shamshad Akhtar Prudent Choice as Caretaker Finance Minister

In the current economic landscape, it is evident that the role of the Caretaker Finance Minister is strategically important in the team of the Caretaker Prime Minister. While following the prudent decision making process, the appointment of Dr Shamshad Akhtar as the Caretaker Finance Minister is commendable.

Dr Akhtar's track record showcases her adroitness in handling intricate economic scenarios, demonstrated notably during the 2008 global financial crisis when she served as Governor State Bank of Pakistan (SBP) Governor, and again in 2018 during her tenure as the Caretaker Finance Minister.

As the Under-Secretary General of the Economic and Social Commission of the Asia and Pacific (UNESCAP) and the United Nations Secretary General’s Senior Special Advisor on Economics and Finance, Dr Akhtar oversaw the implementation of the sustainable development agenda including economic, social, and environmental and finance work of the UN Department of the Economic and Social Affairs.

During her term at UN, she was UN Secretary General’s Sherpa for Development and the Finance and Central Bank tracks. Among others, she was closely involved in the development and implementation of the 2030 Sustainable Development Agenda (SDG), the Addis Ababa Financing frameworks and work on the Paris Climate Accord and ensured closer alignment of G20 development agenda with the 2030 SDG agenda.

Dr Akhtar served as the Vice President, Middle East and North Africa at the World Bank, the Director General of Asian Development Bank (ADB) and served as the Special Senior Advisor to the President of ADB.

Dr Akhtar is recipient of Asia’s Best Central Bank Governor from Emerging Markets and the Banker’s Trust awards. In 2008, The Wall Street Journal Asia recognized her as one of Asia’s top ten professional women. Recently in 2020, she has been awarded the HUM Women’s Leadership Global Award.

Dr Akhtar in now serving as the Chairperson of few Boards in Pakistan: Chairperson of the Pakistan of Stock Exchange, Chairperson on the Board of Sui Sothern Gas Transmission and Distribution company, Chairperson of the Karandaaz – an innovative nonprofit company—grant funded by DFID/Bill Melinda to promote financial and digital inclusion, Chairperson, Pakistan Institute of Corporate Governance and as Independent Director, Engro Fertilizer Company and Advisor on Pakistan Environment Trust Fund.

Dr Akhtar is Member of the Advisory Council of the Sustainable Finance Centre at the SOAS at London University, Member of UN Global Women Leaders Group, served on G20 Task Force member of the Think Tank on Infrastructure during the Presidency of Japan, Saudi and Italian Government.

She served as an Advisor of SG Food Security and Financing for Development Group, one of the 12 Global Advisors to the Ministry of Foreign Affairs on China on Belt and Road, Council of Advisor and Policy Sherpa for the Boao Forum for Asia and Advisor to the Shanghai Forum.

She has conducted analytical work as Chair of the Pakistan Reform Insurance Committee, Capital Markets reforms and the Special Economic Zones etc. She serve as speaker on diverse set of international and national panel.

 

What is on top of agenda at BRICS upcoming meeting in South Africa?

BRICS leaders are scheduled to meet in South Africa next week to discuss how to turn a loose club of nations accounting for a quarter of the global economy into a geopolitical force that can challenge the West's dominance in world affairs.

Russian President Vladimir Putin, who faces an international arrest warrant over alleged war crimes in Ukraine, will not join leaders from Brazil, India, China and South Africa amid rifts over whether to expand the bloc to include dozens of ‘Global South’ nations queuing up to join.

South Africa will host Chinese President Xi Jinping, Brazil's Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi for the BRICS summit from August 22 to 24.

Spread over the globe and with economies that operate in vastly different ways, the main thing uniting the BRICS is skepticism about a world order they see as serving the interests of the United States and its rich-country allies who promote international norms they enforce but don't always respect.

Few details have emerged about what they plan to discuss, but expansion is expected to be high on the agenda, as some 40 nations have shown interest in joining, either formally or informally, according to South Africa. They include Saudi Arabia, Argentina and Egypt.

China, seeking to expand its geopolitical influence as its tussles with the United States, wants to enlarge BRICS quickly, while Brazil is resisting expansion, fearing the already unwieldy club could see its stature diluted by it.

In a written response to questions by Reuters, China's foreign ministry said, “It supports progress in expanding membership, and welcomes more like-minded partners to join the 'BRICS family' at an early date."

Russia needs friends to counter its diplomatic isolation over Ukraine, and so is keen to bring in new members, as is its most important African ally, South Africa.

In a nod to the bloc's African hosts, the theme of its 15th summit is "BRICS and Africa", emphasizing how the bloc can build ties with a continent increasingly becoming a theatre for competition between world powers.

South Africa's foreign minister Naledi Pandor in a statement last week said BRICS nations wanted to show global leadership in addressing the needs ... of the majority of the world, namely ... development and inclusion of the Global South in multilateral systems, in a veiled swipe at Western dominance.

BRICS nations are keen to project themselves as alternative development partners to the West. China's foreign ministry said BRICS sought to reform global governance systems (to) increase the representation ... of developing countries and emerging markets.

The bloc's New Development Bank (NDB) wants to de-dollarize finance and offer an alternative to the much-criticized Breton Woods institutions.

But it has approved only US$33 billion of loans in nearly a decade -- about a third of the amount the World Bank committed to disbursing just last year -- and has recently been hobbled by sanctions on member Russia.

South African officials say talk of a BRICS currency, mooted by Brazil earlier this year as an alternative to dollar-dependence, is off the table.

With 40% of global population, the BRICS carbon-intensive nations also make up about the same share of greenhouse gas emissions. Officials in Brazil, China and South Africa said climate change may come up but indicated it wouldn't be a priority.

BRICS countries blame rich nations for causing most global warming and want them to take on more of the burden of decarburizing the world's energy supply. China was accused of blocking climate discussions at the G20, which it denied.

 

First commercial ship leaves Ukraine port since February 2022

According to Seatrade Maritime News, Joseph Schulte is the first commercial ship to leave Odessa port of Ukraine’s Black Sea ports on Wednesday, since the beginning of the war in February 2022.

The 9,400 teu Joseph Schulte, owned by German company Bernard Schulte and had been operated by MSC, which has been docked in the war-torn port of Odessa since the conflict in Ukraine began left for Turkey, ostensibly under ballast.

In July the Russians refused to renew the agreement that allowed bulk vessels to operate the grain corridor, exporting foodstuff to maintain populations in the Middle East and Africa.

In bringing that agreement to an end Russia effectively renewed its blockade of Ukraine’s Black Sea ports for commercial as well as military shipping. The departure of the Hong Kong flagged Joseph Schulte from Odessa will test Russia’s resolve to maintain that blockade.

On 13 August a Russian Navy vessel, fired warning shots across the bow of the Palau-flagged Sukru Okan, with troops boarding and searching the bulk carrier.

Nevertheless, Daniil Melnychenko, an analyst at transport consultancy Informall, based in Odessa, told Seatrade Maritime News, “The expectations are that Türkiye flagged ships that were stuck here in Ukraine since the beginning of the war will also leave the big Odessa regional ports.”

According to Melnychenko many of the bulk carriers that have been docked in southern Ukraine are Turkish flagged vessels, so the departure of the container ship has heightened expectations that others will follow.

VesselsValue reports suggest that the Joseph Schulte vessel, which MSC has confirmed is no longer in its fleet, will first call at the Luk Sintez Oil Terminal to load bunkers. It will then sail to the Turkish port of Ambarli on the north shore of the Marmara Sea, on the European side of Istanbul, to offload the few containers on board and for inspection.

Melnychenko added that the vessel will likely be crewed by a mixture of Turkish and older Ukrainian men, over 60-years-old.

Pakistan consolidates its position in the club of furnace oil exporting countries

Till recently Pakistan was suffering from glut of furnace oil (FO), mainly because the incumbent government had decided to stop its use in power generation. However, the efforts by Pak Arab Refinery (PARCO) have made Pakistan a FO exporting country. PARCO is scheduled to export another shipment of 50,000 tons FO by the end of this month.

This would be the refinery’s second export cargo during the current financial year (FY24), as it exported 50,000 tons FO in the last month too.

Amidst the high stocks across the country, PARCO holds the largest stockpile of FO at above 55% of the total stock of fuel oil available with the local refineries.

PARCO has opted to export FO in order to gain maximum in terms of foreign currency to address its issue related to payment of dividend to its foreign partner.

During the last fiscal year (FY23), PARCO along with Pakistan Refinery (PRL) exported a record over 264,000 tons fuel oil because of refusal of power plants to lift it for power generation as it fell in the bottom of the priority list of sources for generation of electricity.

As a result of the refusal, the country accumulated a huge stock of fuel last year, of which some quantity was exported by the two refineries.

During FY24, only PARCO has exported the fuel oil so far in order to earn foreign exchange as other refineries have been selling it in the local market.

According to energy sector experts, PARCO currently possesses 57% of the total FO stock of the refineries followed by PRL, having 14% of total stocks.

Attock Refinery (ARL) possesses 12% of the total stock followed by National Refinery (NRL) and Cnergyico with 11% and 6% stock respectively.

Sector people said that lifting of the fuel oil by the power plants has seen some improvement in recent weeks as the heat of summer has pushed the demand of electricity higher, particularly in Punjab. Although hydropower generation has also gone up significantly, power demand is also being met with the furnace oil burning in the power plants, which improved the lifting of fuel oil from the local refineries.

The government of Pakistan has been trying to phase out fuel oil from the power generation mix to move to greener and more sustainable indigenous options. As per the Generation Capacity Expansion Plan (IGCEP) 2022-31, the total share of green energy is targeted to reach 59%, while FO is set to be phased out by 2031.

Can United States keep Niger under its claws?

The United States appears to be caught in the horns of a dilemma, trying to balance a desire to maintain relations with Niger whose government cannot legally receive US aid, and the consequences that would accrue if US-Niger relations were severed. The clock is ticking on the fate of US-Niger relations, and there seems to be little any US official can do to change the outcome.

Lately, Acting Deputy Secretary of State for the United States Victoria Nuland made her third visit to Niger in the past two years. She was in the African country to respond to the July 26 military coup, which saw the ouster of the constitutionally-elected President Mohamed Bazoum by a group of military officers, operating under the umbrella of the newly-formed National Council for the Safeguard of the Homeland, led by the commander of the presidential guard, General Abdourahmane Tchiani, who subsequently declared himself to be the new head of state. 

Niger and Nigeria are two separate countries in the African continent. Since they are neighboring countries with similar names, most people get confused about the difference between Niger and Nigeria. Niger is located in Western Africa. It is a landlocked country surrounded by Libya, Chad, Nigeria, Benin, Burkina Faso, Mali, and Algeria. Niger is the biggest country in the West Africa with a land area of almost 1,270,000 square kilometers. However, about 80% of its land area lies in the Sahara desert. It has remained a French colony. The religion of the majority of the population in Niger is Islam. Niger ranks bottom in the United Nation’s Human Development Index. This country faces many challenges such as desert terrain, inefficient agriculture, overpopulation, poor educational level, poverty of people, poor health care, and environmental degradation. The main agricultural exports of Niger are peanuts and cotton. It is a big exporter of Uranium.

Nuland had sought a meeting with the ousted president, Bazoum, as well as the leader of the new military government, General Tchiani. She was denied both, and instead held a very strained dialogue with Tchiani’s military chief, General Moussa Salaou Barmou, who headed a delegation of lesser officers.

The reasoning behind the American game of semantics is that, by law, if the US recognizes the coup as a coup, then it must cease all military-to-military interactions between a force of some 1,100 US military personnel currently stationed in Niger, and its military counterparts, as well as all other forms of US-funded aid.

The law known as Section 7008 (of Public Law 117-328, Division K), specifically states that no funds appropriated by Congress in support of State, Foreign Operations and Related Programs (SFOPS) “shall be obligated or expended to finance directly any assistance to the government of any country whose duly elected head of government is deposed by military coup d’état or decree.” 

During her 2-hour discussions with the Tchiani government delegation, Nuland made it clear that while US relations were currently suspended, they were not permanently halted. In a post-meeting video press conference, Nuland emphasized the consequences of the failure to return President Bazoum to power with General Barmou, a Nigerien special forces officer who had been trained at US military schools and had extensive interaction with US military trainers in Niger.

Barmou’s personal experience with the US military is in many ways the personification of a relationship that today serves as the foundation of America’s military presence and mission in West Africa.

The US, France, and other European partners have been engaged in a years-long campaign, together with their West African partners, to combat Islamic extremism in the Sahel region of Africa. Niger, which hosts two major US bases, one outside the capital of Niamey known as Base 101, and a second, Air Base 201, in Agadez – a city located on the southern edge of the Sahara. Both bases support US intelligence, surveillance, and reconnaissance (ISR) operations conducted by MQ-9 Reaper drones and fixed-wing aircraft flown by a Joint Special Operations Aviation Detachment, as well as other US military operations, including military airlift and special forces training detachments (France also maintains a significant military presence in Niger, numbering over 1,000, and there are several hundred other military personnel from a variety of European Union (EU) nations.

With the collapse of the US, French, EU, and United Nations military presence in neighboring Mali, and in the aftermath of a military coup in Chad, Niger has emerged as the last remaining bastion of the US-led anti-terrorism effort in the Sahel. If the US were to cut relations with Niger because of the coup, there would be no Western-oriented anti-terrorism efforts remaining to counter the threat of Al Qaeda and Islamic State terrorism in the region.

From Washington’s perspective, the greatest threat that would emerge from any break in the military-to-military assistance between the US and Niger is not the potential spread of Islamic fundamentalist-inspired terrorism, but rather Russian influence, especially in the form of military security support allegedly provided by Wagner Group, a private military company whose African operations appear to operate in sync with Russian foreign policy objectives.

Prior to last month’s Russian-African Summit, Prigozhin had met with Wagner forces who had relocated to Belarus in the aftermath of the abortive June 23-24 insurrection – which resulted in halting Wagner operations in Donbass – during which he emphasized the importance Africa would play in future Wagner activities. Wagner's presence has been reported in several African countries, including the Central African Republic, Libya, and Mali. Members of the senior leadership of the coup have reportedly met with Wagner officials in Mali, to discuss security cooperation between Wagner and Niger. During her meeting with the coup government, Victoria Nuland singled out the potential deployment of Wagner into Niger as a worrisome development and indicated that she pressed upon her Nigerien counterparts her assessment regarding the detrimental role played by Wagner regarding African security. The reported meeting between Wagner and Niger representatives indicates that Nuland’s message did not resonate with hosts.

There is an option that neither Nuland nor her boss, Secretary of State Antony Blinken, have yet given voice to. In early 2003, the US Congress amended Section 7008 to provide for the Secretary of State to seek a waiver on the grounds of the national security interests of the United States.

There are two major obstacles for the US when it comes to any such waiver. First is the amount of political capital that the US has expended in trying to return President Bazoum to power – to reverse now would be the kind of nod to Realpolitik that the Biden administration is loath to do. Second is the fact that Niger, having evaluated its options going forward, may no longer be interested in maintaining the close relations it previously enjoyed with the US.

Niger, like Mali, Burkina Faso, and Guinea before it, has thrown off the mantle of its post-colonial relationship with France, a relationship that was closely linked with US national security policy in West Africa and the Sahel.