Pakistan cautious ahead of key IMF talks

The State Bank of Pakistan (SBP) maintained the policy rate at 22%, on April 29, 2023. Market expectations were divided between no-change and a cut.

CPI had decelerated to 20% in March from a recent peak of 38% (May 2023), and the CA balance in March was a surplus of US$619 million, with 9MFY24 current account deficit of only US$0.5 billion – both, along with ongoing fiscal contraction, supported a rate cut.

However, the SBP overweighed the risks to inflation emanating from – a volatile geopolitical backdrop due to tensions in the Middle East and its impact on global oil prices, other global commodity prices likely to have bottomed out, and perhaps more importantly, the terms of the next IMF program.

Despite the tight monetary conditions, the SBP’s outlook for GDP growth for FY24 of 2-3% remains intact, supported by a robust agricultural sector. Most major crops (rice and maize) are projected to exceed the targets for the year. LSM growth in 8MFY24 was negative 0.5% as against negative4% last year, but it is expected to perform better in the remaining months.

Core inflation continued to decline in March – to 15.7% from 18.1% in February 2024. Encouragingly, the contribution of wage growth to overall CPI has also diminished considerably in recent months. These reinforce the outlook for continued disinflation in the coming months. However, risks to inflation emanate from volatile geopolitics, global commodity prices and the extent to which the next fiscal budget will be inflationary.

External financial inflows in Pakistan have been weak in recent months, as global central banks have adopted a cautious policy stance. The SBP wants to build-up further FX buffers (in the face of above uncertainties) before adopting an accommodative stance.

Outstanding debt repayments until June 2024 are US$1.8 billion (principal only), while Pakistan is likely to receive the final tranche of IMF SBA program, of US$1.1 billion.

Monetary aggregates (M2 growth) is expected to decelerate in the coming months to under inflation (from 17.1% in March), and the SBP expects the government to maintain the primary surplus of around 1.8% of GDP until year-end.

Analysts believe even if inflation and the external account continue to improve in the coming months, the June announcement would be mainly influenced by IMF conditions for a new program – any further adjustments in energy tariffs and the budgetary measures that the Fund will demand.

 

 

Demands for imposing sanctions on Israel

The Arab –Islamic Ministerial Committee called on the international community to impose effective sanctions on Israel, including halting arms export in response to its violation of international law, international humanitarian law, and its ongoing war crimes in Gaza and the occupied West Bank.

The meeting of the Ministerial Committee, assigned by the Joint Arab-Islamic Extraordinary Summit, was presided over by Saudi Minister of Foreign Affairs Prince Faisal bin Farhan in Riyadh on Sunday. The ministers also stressed the need to activate international legal tools to hold Israel accountable for these crimes and the need to stop settler terrorism and take clear and strict positions against it.

The meeting discussed the mechanisms to intensify joint Arab and Islamic action to reach an immediate cessation to end the war on the Gaza Strip and ensure the protection of civilians by international humanitarian law, in addition to continuing all efforts aimed at international recognition of an independent Palestinian state, to achieve the aspirations of the Palestinian people and sustainable and unhindered delivery of humanitarian aid to all parts of the Gaza Strip.

The meeting also discussed taking the necessary steps to implement the two-state solution and recognizing the State of Palestine on the borders of June 4, 1967, with East Jerusalem as its capital.

The ministers emphasized that the Gaza Strip is an integral part of the occupied Palestinian territory and renewed their categorical rejection of any attempts to displace the Palestinian people outside their land and any military operation in the Palestinian city of Rafah.

The ministers also expressed their concern about the measures taken against peaceful demonstrators in the Western countries demanding an end to the war in Gaza and the severe crimes and violations being perpetrated by Israel against the Palestinians.

The committee members who participated in the meeting included Deputy Prime Minister and Minister of Foreign Affairs and Expatriates of Jordan Ayman Al-Safadi, Minister of Foreign Affairs of Egypt Sameh Shoukry, Minister of Foreign Affairs of Türkiye Hakan Fidan, Secretary General of the Organization of Islamic Cooperation Hissein Brahim Taha, Secretary General of the Executive Committee of the Palestine Liberation Organization and Palestinian Minister of Civil Affairs Hussein Al Sheikh, and Minister of State at the Ministry of Foreign Affairs of Qatar Dr. Mohammed Al Khulaifi.

Meanwhile, the developments in Gaza dominated in the discussions held by Prince Faisal bin Farhan with his counterparts in Arab, Asian and European countries, on Sunday, on the sidelines of the special meeting of the World Economic Forum in Riyadh.

During his meeting with Algerian Foreign Minister Ahmed Attaf, Prince Faisal bin Farhan discussed bilateral relations between the two countries, and ways to strengthen and develop them in a way that achieves common interests. Prince Faisal discussed with his Norwegian counterpart Espen Barth Eide the latest developments in the Gaza Strip and the efforts made to address them.

During the meeting with Malaysian counterpart Mohamed Hassan, the two sides reviewed ways to enhance bilateral relations and joint cooperation in various fields.

The Saudi foreign minister also discussed with Minister of Foreign Affairs of Sri Lanka Ali Sabry bilateral relations and ways to strengthen and develop them, in addition to discussing the consolidation of bilateral coordination in many fields, and exchanging views on regional and international issues

 

Why discredit pro-Gaza campus protests?

Progressives in Congress this week have joined professors and Holocaust survivors in supporting peaceful student protests against the US-backed Israeli assault of the Gaza Strip as the demonstrators have been demonized by the White House, Democratic and Republican political leaders, police, administrators, and the corporate media.

"Peaceful protest is a central tenet of our democracy and students standing for justice have often been a catalyst for much-needed change," Rep. Ayanna Pressley said Friday. "From the 1960s Civil Rights Movement, the Vietnam War protests, the struggle for gender equality, and the movement for Black lives, to the global movement for peace in Israel and Palestine, many of the rights we tout today were earned thanks to the sweat equity of students demonstrating on college campuses across the nation."

Already, hundreds of students and faculty have been arrested for protesting at dozens of US college and university campuses.

Pressley, who supports a cease-fire in Gaza, stressed that "every student, regardless of background or faith, has a right to feel safe and show up in the world without fear or discrimination—and we must ensure that those exercising their right to free speech are met with dignity and respect, not criminalization."

"We cannot lose sight of the horrific injustices that Palestinians in Gaza are facing."

"That is why I am deeply concerned about misinformation that aims to undermine this movement, outside agitators that detract from peaceful solidarity actions and the aggressive response by law enforcement to students peacefully protesting across the country," Pressley said. "The National Guard or riot police should not be called in response to students' peaceful freedom of expression."

"I am grateful to students nationwide and across the Massachusetts 7th—at Emerson, Northeastern, MIT, Tufts, Boston University, Harvard, and more—who are raising their voices and putting their bodies on the line to press for action to save lives in Gaza," she added. "That is what this movement is about. We cannot lose sight of the horrific injustices that Palestinians in Gaza are facing and I am proud to stand in solidarity with peaceful protestors."

Since October, Israeli forces have killed at least 34,356 Palestinians, wounded another 77,368, and displaced around 90% of the besieged enclave's 2.3 million people. Thousands more remain missing in the rubble of devastated civilian infrastructure. The International Court of Justice has deemed Israeli Prime Minister Benjamin Netanyahu's war—fueled by US weapons and diplomatic support—plausibly genocidal.

Rep. Ilhan Omar's daughter Isra Hirsi was suspended from Columbia University's Barnard College earlier this month for "standing in solidarity with Palestinians facing genocide." Omar—a war refugee and longtime critic of the Israeli government—has not only grilled the Ivy League school's president at a congressional hearing but also attended the ongoing demonstration.

"I had the honor of seeing the Columbia University anti-war encampment firsthand," Omar said Thursday. "Contrary to right-wing attacks, these students are joyfully protesting for peace and an end to the genocide taking place in Gaza. I'm in awe of their bravery and courage."

I had the honor of seeing the Columbia University anti-war encampment firsthand.

Contrary to right-wing attacks, these students are joyfully protesting for peace and an end to the genocide taking place in Gaza.

Omar is a frequent target of right-wing attacks, which she has faced in the past for being outspoken on foreign policy issues and this month for supporting student anti-war protesters.

House Majority Whip Tom Emmer claimed that "Omar's pro-Hamas rhetoric solidifies the Democrat Party as the pro-terrorist party."

Responding to Emmer, Rep. Jamaal Bowman said that "this rampant Islamophobia is unacceptable. My sister Ilhan Omar is standing up with the students peacefully demanding a cease-fire to end the bombing, starving, and killing of Palestinian people. No amount of hatred is going to stop this movement for peace."

Bowman—who faces a primary challenger backed by the American Israel Public Affairs Committee—has also slammed House Speaker Mike Johnson's trip to Columbia and law enforcement's crackdown against students.

"As an educator who personally experienced the overpolicing of our schools, this is personal to me," Bowman said. "We must resist right-wing demagoguery and stop suppressing peaceful protest if we are to keep students safe."

Both Bowman and Rep. Alexandria Ocasio-Cortez visited the Columbia encampment on Friday. The congresswoman has also publicly challenged comments from New York Police Department of Patrol John Chell and taken aim at "vulnerable NY Republicans in tight seats" who have gone to campus to condemn the nationwide demonstrations.

"They have played a key role drumming up pressure to crack down on students and asymmetrically police Palestinian human rights speech," Ocasio-Cortez said of her Republican colleagues. "Those campus hearings? GOP-led. They need to lose."

Police violence against students and professors has been on display across the country. A day after state troopers descended on a demonstration at the University of Texas at Austin, Rep. Greg Casar addressed protesters, noting the decades of protests at the campus.

"We need a cease-fire now in Gaza. And it is up to us to live that out here today," Casar said, with the crowd echoing his speech line by line. "My message to the university is clear: Students and faculty are not the enemy. Students and faculty are the university. We are the university. This is our democracy. And we are going to save it, here and for the world."

"I am so proud of each and every one of you. Because you have raised your voices, Austin is the largest city in this country where your entire Democratic delegation voted 'no' on sending more weapons to Netanyahu," he noted, eliciting cheers. "There are millions more lives at stake and your continued organizing is the only way we can stop being complicit in this killing and instead get to saving our shared humanity. Solidarity forever."

After defeating a primary challenger backed by a billionaire Republican megadonor and Netanyahu ally earlier this week, Rep. Summer Lee on Thursday addressed the University of Pittsburgh's encampment.

"While Netanyahu compares students on campuses like Pitt—including Jewish students—protesting peacefully against genocide to Nazis and attempts to define the limits of our free speech and assembly, it's worth noting that there are no universities left in Gaza from Israeli and US bombs," Lee said in a social media post about her speech.

"We must always confront and root out antisemitism anywhere it appears, and not let the white nationalist GOP be the arbiters or weaponizers of it," she continued. "Students engaging in the time-honored tradition of activism and civil disobedience is a crucial right we must all protect."

Rep Summer Lee drops by the University of Pittsburgh’s Palestine encampment to support and give propers to the students leading the fight for Pitt to divest from the occupation as part of the broader student movement that erupted across the US.

As Common Dreams reported Thursday, Jewish Sen. Bernie Sanders—who lost family members to the Holocaust—also pushed back against Netanyahu's mischaracterization of US campus protests, asserting, "It is not antisemitic to hold you accountable for your actions."

Others who have spoken out this week include Rep. Hank Johnson, who denounced Republican Gov. Brian Kemp's decision to deploy the Georgia State Patrol at Emory University, saying the officers have "no place on the college campus. And neither do outside agitators who seek to usurp the peaceful protests against the Netanyahu government's killing of tens of thousands of innocent Gazans by giving life to a false narrative that the protest movement is violent and antisemitic."

Drawing on her own experiences with the Black Lives Matter movement, Rep. Cori Bush said "as a Ferguson activist, I know what it's like to have agitators infiltrate our movement, manipulate the press, and fuel the suppression of dissent by public officials and law enforcement. We must reject these tactics to silence anti-war activists demanding divestment from genocide."

Rep. Delia Ramirez declared that "the rights to peaceful assembly and to express dissent are constitutional freedoms. Criminalizing young people who are using their voices to call for peace is not only harmful; it endangers the well-being of the students and the health of our multiracial, multicultural democracy. Resisting war and standing up for peace are not a crime."

 

Iran denounces new sanctions

The Iranian Foreign Ministry Spokesperson, Nasser Kanaani has refuted the charges made against Tehran in a recent resolution passed by the European Parliament, and denounced the new sanctions that the United States, Britain and Canada have placed on a number of Iranian citizens and firms.

The spokesperson also attacked several European nations for adhering to the harsh policies of the US administration by criticizing the European Parliament's decision against Iran.

He emphasized that Iran’s military capabilities are built in accordance with its needs to preserve territorial integrity and sovereignty, defend national security and interests, and provide a legitimate and deterrent defense against external threats and acts of aggression.

According to Kanaani, “The Islamic Republic of Iran is a major partner of the international community in providing peace and security to the region and the world, as well as in the fight against international terrorism.”

Imposing the sanctions, he said, the sanctions against Iran’s defense sector will actually present a chance to advance the nation’s military and defense capabilities and self-sufficiency, rather than weakening its resolve to strengthen its defense of its sovereignty, territorial integrity, and national interests.

“Many nations and governments, specifically in the West Asia region, hold out no hope of the role of the US and its European allies in the establishment of stability and security in the region anymore,” the spokesman continued. 

His remarks followed the announcement of further sanctions against Iran on Thursday by the US, Britain, and Canada in response to its retaliatory strike against Israeli military targets on April 13.

The three states said that they will punish people and companies “closely involved” in Iran’s drone manufacture in order to target the country’s drone and missile sectors.

By a vote of 357 to 20, the European Parliament on Thursday passed a resolution denouncing Iran’s use of drones and missiles against the Israeli regime and urging the imposition of more penalties on Iranian organizations.

The Treasury Department and the State Department said on Tuesday that the United States government has imposed charges and penalties on four Iranian nationals in connection with an alleged multi-year cyber operation that targeted over a dozen American firms.

The Treasury Department issued sanctions on two firms, Dadeh Afzar Arman and Mehrsam Andisheh Saz Nik, which it claimed employed the individual defendants and served as front organizations for Iran’s Revolution Guards cyber command.

The business targets, according to federal prosecutors in Manhattan, were mostly defense contractors with access to confidential data; other targets included an accountancy firm and a hotel company located in New York. 

“These actors targeted more than a dozen US companies and government entities through cyber operations, including spear phishing and malware attacks,” the US Treasury Department said in a statement.

The defendants, according to the prosecution, used spearfishing—a tactic that entails deceiving email recipients into clicking on harmful links—and impersonating women to win over people’s trust in order to infect computers with malware.

The Israeli airstrike, which took place in Damascus’s Mezzeh district, resulted in the deaths of seven military advisors from the Islamic Revolution Guards Corps (IRGC). Iranian officials have vowed a decisive response to what they described as a violation of international obligations and conventions.

Zahra Ershadi, Iran’s deputy permanent representative to the UN, told the 15-member Security Council that Iran reserves the right "to take a decisive response" to the attack, saying Israel violated the founding UN Charter, international law, and the inviolability of diplomatic and consular premises.

Israel’s crime clearly breached the basic principles of diplomatic and consular immunity, as well as the 1961 Convention on Diplomatic Relations, the 1963 Vienna Convention on Consular Relations, and the 1973 Convention on the Prevention and Punishment of Crimes, the diplomat stated.

 

Iraq: Khor Mor gas facilities attacked

Iraqi Kurdish ministries of electricity and natural resources said on Saturday that they were working with their partners to restore operations at the Khor Mor gas field in Iraq's Kurdistan region after output was suspended due to a deadly drone attack.

So far no group has claimed responsibility for the attack.

At least four Yemeni workers were killed and two other workers injured in the attack late on Friday, the Kurdish regional government said on X. It said gas supplies to power plants were also halted, resulting in a reduction of approximately 2,500 MW of power generation.

Iraqi President Abdul Latif Rashid and Kurdish Prime Minister Masrour Barzani both condemned the attack.

"Our security services must investigate the incident without delay and hold the perpetrators accountable. Preventative measures must also be taken immediately," Rashid said in a post on Saturday.

"Attacks on energy hubs that power millions of homes in the Kurdistan Region and Iraqi provinces are indefensible. These attacks also sabotage efforts by Erbil and Baghdad to develop the energy sector. They happen with disturbing frequency and amount to war crimes," Barzani said on Friday.

The US State Department said in a statement, "Attacks like this are an affront to Iraq's sovereignty".

Pearl Petroleum, a five-company consortium that includes two major independent United Arab Emirates oil and gas companies - Dana Gas, opens new tab and Crescent Petroleum, has the rights to exploit Khor Mor and Chemchemal, two of Iraq's biggest gas fields.

The UAE's foreign ministry described the attack as a "blatant violation of international law".

"The Ministry expressed the UAE's solidarity with all measures undertaken by Iraq to protect its sovereignty, security, and stability, stressing the UAE's support for its endeavors in combating terrorism, while underscoring the UAE's commitment to reinforcing security and stability in Iraq," it said in a statement.

Iraq has witnessed drone and rocket attacks since Israel's war in Gaza began in October, mostly targeting bases housing troops belonging to a US-led military coalition. They have been claimed by the Islamic Resistance in Iraq, an umbrella group of hard line pro-Iran militias.

The attack on Friday also underscores security concerns for the oil-rich nation.

The Khor Mor gas field lies near territories under Iraqi control and Kirkuk province, one of the disputed territories between the Iraqi capital Baghdad and Erbil, the provincial capital of Iraq's semi-autonomous Kurdistan region.

Pakistan Stock Exchange index up 2.58%WoW

Pakistan Stock Exchange maintained its bullish momentum during the week ended on April 26, 2024. Despite some profit-takings, challenged its previous highs and closed the week at its highest ever level of 72,742 points, marking a weekly gain of 1,833 points or 2.58%.

Overall, the positive momentum was largely driven by anticipation of investments from Saudi Arabia, the successful visit of Iran’s President, and inclusion of Pakistan in the IMF’s executive board agenda.

On the macroeconomic front, trends remained encouraging. Firstly, current account balance for March 2024 clocked in at a surplus of US$619 million, taking 9MFY24 total CAD to US$508 million, down by 87%YoY.

Foreign direct investment in March witnessed an increase of 89%MoM, reaching US$258 million.

Inflation is expected to ease; with April 2024 CPI estimated at 16.9%YoY compared to increase of 36.4%YoY during the same period last year. This easing inflationary pressure signaled monetary easing to investors, which resulted decline in secondary market yields, with the yield on 12-month paper decreasing to 20.21%. The weekly inflation index, SPI has been on a downward trajectory for the past two weeks, indicating a favorable outlook for inflation for next month as well.

Consequently, the possibility of monetary easing beginning in the upcoming monetary policy meeting scheduled for Monday cannot be ruled out.

On the flip side, concerns regarding smuggling have begun to emerge, particularly in the petroleum sector, which is beginning to impact the refinery sector.

With the market enjoying positivity, participation also improved WoW with average daily traded volume increasing to 650 million shares as compared to 492 million shares in the earlier week, up 32%WoW.

Foreign exchange reserves held by State Bank of Pakistan declined by US$74 million to US$7.98 billion as at April 19, 2024. PKR depreciated by 0.03%WoW to close at 278.4/US$.

Other major news flows during the week included: 1) Pakistan's IT exports were up 37% to record US$306 million in March, 2) RDA inflows rose to US$7.66 billion, and 3) GDP expected to grow 2.6% during FY24.

Top performing sector were: Fertilizers, Synthetic & Rayon, and ETFs, while Tobacco, Miscellaneous, and Refinery were amongst the worst performers.

Flow wise, major net selling was recorded by Insurance companies with a net sell of US$13.1 million. Mutual Funds absorbed most of the selling with a net buy of US$6.0 million.

Top performing scrips of the week were: FATIMA, DGKC, AVN, EFERT, and FFBL, while laggards included: FHAM, PAKT, PSEL, BIPL, and NRL.

Looking ahead, the upcoming monetary policy meeting scheduled for April 29, would remain in the limelight, with start of monetary easing poised to further support the ongoing bullish trend of the market, that would be led by debt-heavy sectors.

Additionally, the disbursement of the third tranche of the IMF’s SBA and initiation of talks with IMF for next EFF will be closely monitored.

Given the market at its highest, analysts advise investors to focus on fundamentally strong companies.

   

 

Netanyahu faces imminent arrest

Reportedly, the Israeli National Security Council held secret discussions on the possibility of issuing international arrest warrants for Prime Minister Benjamin Netanyahu, Defense Minister Yoav Gallant and Army Chief of Staff Herzi Halevi.

Israel’s Channel 13 reported that the discussions took place in anticipation of the possibility of international arrest warrants being issued in the coming days against senior officials in Israel.

“According to the information and indications available to senior officials in Israel, there is a possibility that the International Criminal Court in The Hague will issue arrest warrants for Netanyahu, Gallant and Halevi,” the channel added.

It said that as part of the discussions, several immediate measures were approved for Israel to take in response to this potential move, including launching a political campaign at the international level against it.

The channel revealed that Netanyahu would hold talks later Wednesday with his counterparts from the Netherlands, the Czech Republic and Austria as part of efforts to hinder the potential step.

Meanwhile, Israeli Minister of Strategic Affairs Ron Dermer and Israel’s ambassador to the US, Michael Herzog, would contact the US Congress and President Joe Biden’s administration.

The channel cited unnamed senior Israeli officials as saying that if this step were taken, it brings to mind the measures taken against Russia and its president, Vladimir Putin, in light of the war it has been waging against Ukraine since February 2022.

The officials added that the International Criminal Court is expected to focus on policy makers rather than low-ranking soldiers in the arrest warrants.

In this context, Israel’s political-security Cabinet was scheduled to hold a meeting Thursday which was expected to address the issue of potential arrest warrants, according to the private broadcaster.

Last Friday, Israel’s private Channel 12 reported that the International Criminal Court is considering issuing international arrest warrants in the near future against Netanyahu and other senior officials for committing war crimes against Palestinians in the Gaza Strip.

At the time, the channel said that Netanyahu urgently met with Strategic Affairs Minister Dermer, Justice Minister Yariv Levin and Foreign Affairs Minister Israel Katz to discuss the matter and appeal to Western allies for assistance.

More than 34,200 Palestinians have been killed and 77,200 others injured amid a tight siege imposed by Israel, which left the entire population, especially residents of northern Gaza, on the verge of starvation.

More than six months into the Israeli war, vast swathes of Gaza lay in ruins, pushing 85% of the enclave’s population into internal displacement amid a crippling blockade of food, clean water and medicine, according to the UN.