Monday, 27 January 2025

Pakistan: Central bank cuts policy rate by 100bps

Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Monday January 27, 2025 in its meeting reduced the benchmark policy rate by 100bps to 12.00%.

The MPC stressed adopting a cautious approach noting that core inflation remains elevated, with high frequency indicators showing gradual improvement. The impact of 1,000bps reduction in the policy rate since June 2024 will continue to unfold, driving growth.

The committee also added that 1QFY25 GDP growth remained below expectations.

Tax collection during 1HFY25 also remained below the target.

Global oil prices remained volatile and that the global economic policy environment has become more uncertain.

Going forward, economic activity is expected to gain more traction with GDP growth for FY25 in the range of 2.5 to 3.5%.

Headline inflation for FY25 is now expected to average between 5.5 to 7.5%, subject to risks from volatile commodity prices, adjustment to energy prices, volatile food prices and impact of revenue measures.

On the fiscal front achieving the target for primary surplus would be challenging, while overall deficit is likely to come close to the target.

Outlook for the current account has improved considerably due to robust remittances. The current account balance for FY25 is anticipated to swing between a surplus and a deficit of 0.5% of GDP.

 

Sunday, 26 January 2025

Can Trump force Egypt and Jordan to accept Gazans?

US President has suggested to move Gazans to Egypt and Gaza. It depends on how serious Trump is about the idea and how far he is prepared to go. Let us explore the likely outcomes.

One of Trump’s favorite economic tools impositions of new tariffs or outright sanctions that could be devastating for Jordan and Egypt. The two countries receive billions of dollars in American aid each year, and Egypt is already mired in an economic crisis.

Allowing an influx of refugees could also be destabilizing. Egypt says it is currently hosting some 9 million migrants, including refugees from Sudan’s civil war. Jordan, with a population of less than 12 million, is hosting over 700,000 refugees, mainly from Syria.

US pressure would also risk alienating key allies in the region with whom Trump has had good relations — not only el-Sissi and Jordan’s King Abdullah II, but the leaders of Saudi Arabia, Qatar and Turkey, all of whom support the Palestinian cause.

That would potentially complicate efforts to broker a historic agreement between Saudi Arabia and Israel to normalize relations, something Trump tried to do during his previous term and expects to complete in his current one.

Trump’s suggestion that Egypt and Jordan take in Palestinians from the war-ravaged Gaza Strip is likely to be met with a hard “no” from the two US allies and the Palestinians themselves who fear Israel would never allow them to return.

 “I’d rather get involved with some of the Arab nations, and build housing in a different location, where they can maybe live in peace for a change,” Trump said.

The idea is likely to be welcomed by Israel, where Prime Minister Benjamin Netanyahu’s far-right governing partners have long advocated what they describe as the voluntary migration of large numbers of Palestinians and the reestablishment of Jewish settlements in Gaza.

Human rights groups have already accused Israel of ethnic cleansing, which United Nations experts have defined as a policy designed by one ethnic or religious group to remove the civilian population of another group from certain areas “by violent and terror-inspiring means.”

History of Displacement

Before and during the 1948 war surrounding Israel’s creation, some 700,000 Palestinians — a majority of the prewar population — fled or were driven from their homes in what is now Israel, an event they commemorate as the Nakba — Arabic for catastrophe.

Israel refused to allow them to return because it would have resulted in a Palestinian majority within its borders. The refugees and their descendants now number around 6 million, with large communities in Gaza, where they make up the majority of the population, as well as the Israeli-occupied West Bank, Jordan, Lebanon and Syria.

In the 1967 Mideast war, when Israel seized the West Bank and Gaza Strip, 300,000 more Palestinians fled, mostly into Jordan.

The decades-old refugee crisis has been a major driver of the Israeli-Palestinian conflict and was one of the thorniest issues in peace talks that last broke down in 2009. The Palestinians claim a right of return, while Israel says they should be absorbed by surrounding Arab countries.

Many Palestinians view the latest war in Gaza, in which entire neighborhoods have been shelled to oblivion and 90% of the population of 2.3 million have been forced from their homes, as a new Nakba. They fear that if large numbers of Palestinians leave Gaza, then they too may never return.

Steadfastly remaining on one’s land is central to Palestinian culture, and was on vivid display in Gaza on Sunday, when thousands of people tried to return to the most heavily destroyed part of the territory.

Egypt and Jordan fiercely rejected the idea of accepting Gaza refugees early in the war, when it was floated by some Israeli officials.

Both countries have made peace with Israel but support the creation of a Palestinian state in the occupied West Bank, Gaza and east Jerusalem, territories Israel captured in the 1967 Mideast war. They fear that the permanent displacement of Gaza’s population could make that impossible.

Egyptian President Abdel Fattah el-Sissi has also warned of the security implications of transferring large numbers of Palestinians to Egypt’s Sinai Peninsula, bordering Gaza.

Hamas and other militant groups are deeply rooted in Palestinian society and are likely to move with the refugees, which would mean that future wars would be fought on Egyptian soil, something that could unravel the historic Camp David peace treaty, a cornerstone of regional stability.

“The peace which we have achieved would vanish from our hands,” el-Sissi said in October 2023, after Hamas’ attack on southern Israel triggered the war. “All for the sake of the idea of eliminating the Palestinian cause.”

That’s what happened in Lebanon in the 1970s, when Yasser Arafat’s Palestine Liberation Organization, the leading militant group of its time, transformed the country’s south into a launchpad for attacks on Israel.

The refugee crisis and the PLO’s actions helped push Lebanon into a 15-year civil war in 1975. Israel invaded twice and occupied southern Lebanon from 1982 until 2000.

Jordan, which clashed with the PLO and expelled it under similar circumstances in 1970, already hosts more than 2 million Palestinian refugees, the majority of whom have been granted citizenship.

Israeli ultranationalists have long suggested that Jordan be considered a Palestinian state so that Israel can keep the West Bank, which they view as the biblical heartland of the Jewish people. Jordan’s monarchy has vehemently rejected that scenario.

Trump proposes relocating Gazans to Egypt and Jordan

We have been saying over the years that the United States has been godfathering the ruling regime of Israel. We also wrote that whoever wins the US presidential election he/ she will condone war crime of Israeli ruling junta. The latest statement of US president Donald Trump that Egypt and Jordan must accept displaced Gazans is nothing but to handover the control of Gaza to Israel.

Trump on Saturday proposed relocating Palestinians from Gaza to neighboring countries, such as Egypt and Jordan, a suggestion that contrasts with the policy of the former Biden administration.

Speaking to reporters aboard Air Force One en route to Miami, Trump said he raised the issue during a telephone conversation with King Abdullah II of Jordan, reports Reuters.

He added that he planned to discuss the matter with Egyptian President Abdel-Fattah al-Sisi on Sunday.

"I told him [King Abdullah] that I'd like you to take on more because Gaza is a mess, a real mess," Trump said.

"I'd like Jordan to take people, and I'd like Egypt to take people. I’ll talk to Gen. Al-Sisi tomorrow. You're talking about a million and a half people. We just clean out that whole thing."

Trump described Gaza as "a demolition site," claiming, "Almost everything is destroyed, and people are dying there. I’d rather get involved with some Arab nations and build housing at a different location where they can live in peace for a change. It could be temporary or it could be long-term."

This relocation idea has drawn criticism, as the Biden administration had opposed similar proposals, emphasizing the importance of allowing Gazans to return to their homes in the context of a peace agreement and a two-state solution.

A ceasefire, in place since January 19, has brought temporary relief to civilians in the besieged enclave, but Trump expressed doubts about its sustainability.

"It's not our war; it's their war. I think they are very weakened on the other side," Trump told reporters in the Oval Office earlier in the week.

Commenting on the state of Gaza, Trump said, "I looked at a picture of Gaza. It’s like a massive demolition site. 

That place... it needs to be rebuilt differently. Gaza is a phenomenal location by the sea, with the best weather and great potential. Some beautiful things could be done with it, but it’s in ruins now."

Saturday, 25 January 2025

AMAN-25 multinational maritime exercise

The Commander of the Pakistan Navy has expressed his enthusiasm about the participation of the Islamic Republic of Iran in the forthcoming multinational maritime exercise, AMAN-25, set to take place in Karachi from February 07 to February 11.

Speaking in an exclusive interview with Iranian news agency IRNA in Islamabad, Admiral Naveed Ashraf emphasized the long-standing and constructive relationship between Pakistan and Iran’s naval forces. He also indicated his eagerness to further expand and enhance this partnership.

During the official visit of General Mohammad Bagheri, Chief of Staff of the Iranian Armed Forces, to Islamabad, Pakistan extended a formal invitation to Iran for the AMAN-25 exercise. 

Tehran welcomed the invitation, reinforcing the shared interest in strengthening military cooperation. 

Admiral Ashraf noted that Pakistan values the contributions made by the Iranian Navy in fostering stronger regional maritime cooperation. “We have much to learn from each other’s maritime experiences. As we look ahead to AMAN-25, the Pakistan Navy is eager to engage in deeper collaboration with Iran, especially through more focused bilateral and multilateral exercises,” Admiral Ashraf stated.

“As neighboring nations, we share a strong bond, and our mutual stance on maritime threats and challenges remains unwavering,” he added.

Admiral Ashraf highlighted his visit to Iran in 2021 and the reciprocal visit by Iran's naval commander to Pakistan in the summer of 2023. “The current level of cooperation between our naval forces is commendable, and I am optimistic that it will continue to grow,” he said.

Admiral Ashraf also discussed the evolving maritime security landscape in the region. He noted that the geopolitical environment remains unstable and complex, especially in the context of the region's growing geoeconomic competition.

“Our maritime security is closely linked to the rapidly changing dynamics of the Indian Ocean, and we must recalibrate our mutual interests accordingly,” he explained.

The Admiral also touched on the ongoing threats posed by actions in the Red Sea, particularly from Israel, which have escalated tensions and disrupted safe passage through vital maritime routes such as the Gulf of Aden.

“I believe neighboring countries can strengthen their collaboration within a focused regional maritime security framework to ensure that stability at sea is maintained through collective efforts,” Admiral Ashraf emphasized.

Further discussing regional security and naval capabilities, Admiral Ashraf highlighted Pakistan Navy's strides in domestic production, self-sufficiency, and technological advancements in shipbuilding, combat warships, missile systems, and commercial vessels.

He expressed a strong desire to partner with regional allies like Iran in areas of mutual interest, including advancing maritime technologies and capabilities. 

The multinational AMAN-25 maritime exercise is expected to draw over 50 nations, making it one of the most significant maritime exercises in the region.

The theme for this year is "Together for Peace," with a focus on strengthening regional and extraregional cooperation to maintain maritime order, enhance collective capabilities, and foster mutual understanding.

On Friday, Iran’s Islamic Revolution Guards Corps (IRGC) naval forces have begun their solo large-scale military exercises in the southern provinces of Bushehr and Khuzestan, focusing on their coastal waters. 

In alignment with the guidance of Ayatollah Seyyed Ali Khamenei, the Leader of the Islamic Revolution, Iran's Armed Forces—comprising both the Army and the IRGC—have consistently been upgrading their military equipment and improving their operational readiness.

 

 

Friday, 24 January 2025

Pete Hegseth to become US defense secretary

According to Reuters, Pete Hegseth narrowly secured enough votes on Friday to become the next US defense secretary, a major victory for President Donald Trump after fierce opposition from Democrats and even some Republicans to his controversial nominee.

Hegseth was confirmed after a 50-50 vote in the Senate, when Vice President JD Vance came to the chamber to break the tie in his role as president of the Senate, after three Republicans joined every Democrat and independent in voting no.

Hegseth, a former Fox News personality and decorated veteran, is promising to bring major changes to the Pentagon. But his leadership will be under intense scrutiny after a bruising confirmation review that raised serious questions about his qualifications, temperament and views about women in combat.

"We have not had a secretary of defense like Hegseth before," said Jeremi Suri, a University of Texas, Austin, history professor and presidential scholar.

Hegseth is the most divisive candidate to clinch the US military's top job, a position that has historically gone to candidates with deep experience running large organizations and who enjoy broad bipartisan support.

It was only the second time in history a cabinet nominee needed a tie-break to be confirmed. The first was also a Trump nominee, Betsy DeVos, who became secretary of education in 2017.

The three Republican senators who voted against Hegseth were Senators Lisa Murkowski, Susan Collins and Mitch McConnell, was the party's leader in the chamber until this month.

McConnell said Hegseth had failed to demonstrate that he had the ability to effectively manage an organization as large and complex as the military. "Mere desire to be a ‘change agent’ is not enough to fill these shoes," McConnell said in a statement.

Hegseth will lead 1.3 million active-duty service members and the nearly one million civilians who work for the US military, which has a nearly US$ one trillion annual budget.

Hegseth told lawmakers that, up until this point, the largest group he had managed was 100 people and the largest budget was US$16 million.

His nomination was rocked by a series of accusations, including one this week by his former sister-in-law, who said he abused his second wife to the extent that she hid in a closet and had a code word to use with friends if she had to be rescued. Hegseth strongly denied the accusations and his wife had previously denied any physical abuse.

 

PSX witnesses subdued activities

Pakistan Stock Exchange (PSX) experienced a marginally subdued week, with authorities proposing amendments to tax bill including increased restrictions on non-tax filers, barring them from the purchase of securities, investment in mutual funds, properties and even suspending their bank accounts. National Assembly panel is currently reviewing the proposals.

Benchmark KSE-100 index declined by 392 points, down 0.3%WoW to close at 114,880 points on Friday, January 24, 2025. However, trading volumes grew as compared to last week, reaching 699 million shares, up 25%WoW.

Several important data points came in during the week, including a Current Account Surplus of US$582 million for December 2024, taking cumulative 1HFY25 balance to US$1.21 billion.

State Bank of Pakistan (SBP) raised PKR297 billion through T-Bills auction during the week, with 12-month yields dropping to 11.39%, down 41bps.

IMF revised Pakistan’s GDP growth forecast for 2025 to 3% and for 2026 to 4%, slightly downwards from previous projection.

On the external front, foreign exchange reserves held by SBP declined by US$276 million to US$11.5 billion. PKR weakened marginally against the greenback to close at PKR278.75 to a US$.

Other major news flow during the week included: 1) GoP agrees terms for US$1 billion loan with 2 Middle Eastern banks, 2) Saudi firm agrees to invest up to US$1 billion in Reko Diq project, 3) Foreigners withdraw US$38.5 million from T-Bills by January 10, 4) Pakistan to float US$200 million panda bonds in June, 5) World Bank to lend US$20 billion to Pakistan, 6) Petrol price increases, and 7) Urea sales increases by 58%YoY during CY24 to 6.6 million tons.

Fertilizer, Inv. Banks, and Textile weaving were amongst the top performing sectors, while E&P, Jute, & transport sectors were among the laggards.

Major net selling was recorded by Banks at US$14.1 million. Foreigners and companies absorbed most of the selling with a net buy of US$11 million.

Top performing scrips of the week were: FCCL, KTML, CNERGY, LOTCHEM, and MLCF, while laggards included: MARI, NRL, SAZEW, PGLC, and PIBTL.

According to Pakistan’s leading brokerage house, AKD Securities, PSX is expected to remain on positive trajectory, driven by an anticipated shift of funds from fixed income to equities amid falling fixed income yields.

The upcoming Monetary Policy Committee (MPC) meeting, scheduled on June 27, will remain a key focus.

Over the medium term, the KSE-100 index is anticipated to sustain its upward momentum throughout CY25, primarily driven by the strong profitability of fertilizer companies, higher sustainable ROEs of banks and improving cash flows of E&Ps and OMCs, benefitting from falling interest rates.

 

 

Iraq: Fire at Rumaila oilfield extinguished

A fire at Iraq's Rumaila oilfield was brought under control on Friday, the country's oil ministry said in a statement, adding that there were no serious injuries.

The fire started at a storage tank inside the oilfield's fifth gas station, "for unidentified technical reasons", the ministry said.

The station will operate again after checking all safety procedures and assessing the damages, the ministry added.

Three energy sources told Reuters that operations at the field had not been affected.

Two local oil workers suffered minor burn injuries, the sources said.

Production at Rumaila stands at about 1.45 million barrel per day (bpd), said two officials at the field.