IMF approves US$15.6 billion loan for Ukraine

The International Monetary Fund said on Friday its executive board approved a four-year US$15.6 billion loan program for Ukraine.

The decision clears the way for an immediate disbursement of about US$2.7 billion to Kyiv, and requires Ukraine to carry out ambitious reforms, especially in the energy sector, the Fund said in a statement.

The Extended Fund Facility (EFF) loan is the first major conventional financing program approved by the IMF for a country involved in a large-scale war.

Ukraine's previous, US$5 billion long-term IMF program was canceled in March 2022 when the fund provided US$1.4 billion in emergency financing with few conditions. It provided another US$1.3 billion under a "food shock window" program last October.

Ukraine must meet certain conditions over the next two years, including steps to boost tax revenue, maintain exchange rate stability, preserve central bank independence and strengthen anti-corruption efforts.

Deeper reforms will be required in the second phase of the program to enhance stability and early post-war reconstruction, returning to pre-war fiscal and monetary policy frameworks, boosting competitiveness and addressing energy sector vulnerabilities, the IMF said.

A senior US Treasury official said the program was really solid and included commitments from Ukrainian authorities to achieve 19 structural benchmarks over the next year alone.

IMF First Deputy Managing Director Gita Gopinath said the program faced exceptionally high risks, and its success depended on the size, composition and timing of external financing to help close fiscal and external financing gaps and restore Ukraine's debt sustainability.

The decision formalizes an IMF staff-level agreement reached with Ukraine on March 21 that takes into consideration Ukraine's path to accession to the European Union after the war.

Ukrainian President Volodymyr Zelenskiy welcomed the new funding.

"It is an important help in our fight against Russian aggression," he said on Twitter. "Together we support the Ukrainian economy. And we are moving forward to victory!"

US Treasury Secretary Janet Yellen, who pushed hard for the past year to secure the IMF funding package and paid a surprise visit to Ukraine in February, said the package would help secure the country's economic and financial stability and set the foundation for long-term reconstruction.

"I call on all other official and private creditors to join this initiative to assist Ukraine as it defends itself from Russia’s unprovoked war," she said in a statement. "The United States will continue to stand by Ukraine and its people for as long as it takes."

The IMF said international financial institutions, private-sector firms, and most of Ukraine's official bilateral creditors and donors backed a two-step debt treatment process for Ukraine that includes adequate financing assurances on debt relief and concessional financing during and after the program.

The broad support reassured the IMF, the senior Treasury official said, adding, “That was really helpful for them to see that we really mean to be there for the long haul."

LONGER WAR SCENARIO

IMF official Gavin Gray told reporters the fund's baseline scenario assumed the war would wind down in mid-2024, resulting in the projected financing gap of $115 billion, which would be covered by the multilateral and bilateral donors and creditors.

The fund's "downside scenario" saw the war continuing through the end of 2025, opening a much larger $140 billion financing gap that would require donors to dig deeper, he said.

Gray said the program had been designed to function, even if economic circumstances were "considerably worse" than the baseline. He said the countries providing financing assurances had agreed to work with the IMF to ensure Ukraine was able to service its debt to the IMF if larger sums if needed.

Ukraine will face quarterly reviews beginning as early as June, he said.

 

 

  

Ramadan brings Saudi, Irani envoys closer

Preparations are underway to hold the meeting between Saudi Foreign Minister Prince Faisal bin Farhan and his Iranian counterpart Hussein Amir Abdollahian this Ramadan, following the announcement of the resumption of diplomatic relations between the two countries on March 10.

The signing of the agreement and the phone calls brought in a friendly atmosphere among members of the diplomatic corps of the two countries all over the world. The month of Ramadan witnessed the meeting of the ambassadors of the two countries in Iraq and Norway for Iftar banquets, which confirms the progress in activating the Beijing agreement and the return of relations to normal.

Saudi Ambassador to Iraq Abdulaziz Al-Shammari attended an Iftar banquet hosted by the Iranian Ambassador in Baghdad Muhammad Al-Sadiq on Tuesday. A number of ambassadors accredited to the Iraqi capital also attended the Iftar.

On her part, Saudi Ambassador to Norway Amal Yahya Al-Moallimi hosted the annual Ramadan Iftar banquet in the presence of the Iranian Ambassador Ali Reza Yousefi, along with the heads of Arab and Islamic diplomatic missions accredited to Norway.

The Iranian ambassador said in a statement on his Twitter account that it was a pleasure to participate in the Iftar party of Saudi Ambassador Al-Moallimi at her residence. The recent agreement opened a new chapter in the friendly relations between Iran and Saudi Arabia.

The first meeting between the foreign ministers of the two countries is expected to take place in the Iraqi capital Baghdad, which hosted meetings and dialogues between the two sides last year, or the Omani capital Muscat, which also hosted rounds of Saudi-Iranian talks.

There is also a possibility of hosting the historic meeting in the Chinese capital Beijing in view of its key role in turning the page on the differences between Tehran and Riyadh, and its brokering of the agreement to restore diplomatic relations that were severed in 2016.

Saudi Arabia, Iran and China reached an agreement in Beijing, which stipulates the resumption of diplomatic relations between Riyadh and Tehran and the reopening of their embassies and consulates within two months, according to a joint statement, issued after the signing of the Beijing deal.

 

US refiner seeks approval to import Venezuelan oil

Valero Energy Corp, the second-largest US oil refiner, is seeking Washington's permission to import Venezuelan crude, hoping for a repeat of the approval granted to Chevron Corp in November 2022 after a four-year ban.

President Joe Biden's administration has eased some US sanctions on the OPEC-member nation in an effort to encourage a political dialogue with the country's opposition. That has led to further pressure from US, European and Asian energy firms, but Washington has resisted any additional major steps for now.

Venezuelan oil resumed flowing to the US in January 2023 under a Treasury Department license granted to Chevron that allowed it to expand output there and export the oil. Refiners including Valero and Phillips 66 have bought cargoes from Chevron, according to US Customs and shipping data.

The Chevron decision came as part of negotiations for humanitarian aid and a presidential election. But efforts to fund the aid by releasing Venezuela's frozen money abroad have stalled and no new talks have been scheduled since that time.

Valero is asking the Treasury for a Chevron-style exemption from sanctions and allow it to directly purchase crude from Venezuela's state-run oil company PDVSA, said one of the sources, who is based in Washington.

No decision appears imminent, the source said, signaling that the US, for now, does not want to be seen further easing Venezuela sanctions until President Nicolas Maduro makes political concessions to Venezuela's opposition.

Before oil sanctions were imposed on PDVSA in 2019, Valero was among the US top three receivers of the South American country's crude through long-term supply contracts that have not expired.

A Valero spokesperson said the company has not contacted the US Treasury Department for permission to import Venezuelan oil.

"I am told that we have not applied for a license," said spokesperson Lillian Riojas.

PDVSA did not reply to requests for comment. The Treasury Department declined comment.

The U.S. has banned all cash payments to Maduro's administration under its easing of sanctions. Chevron's license - and approvals granted to European firms Eni and Repsol - allow only for oil or debt swaps.

"The United States provided targeted, time-limited sanctions relief to support efforts to restore democracy and alleviate the suffering of the Venezuelan people," said a spokesperson for the White House National Security Council, referring to the six-month license granted to Chevron in November.

"We have no new licenses to announce or preview," the spokesperson added.

Chevron's resumption of Venezuelan crude imports has not led to an increase in the country's overall exports this year, according to PDVSA schedules and Refinitiv Eikon data.

The No. 2 US oil company exported some 86,000 barrels per day of Venezuelan oil in February.

PDVSA's new boss Pedro Tellechea in January suspended most oil supply contracts while reviewing payments for past shipments.

The suspension has recently brought Venezuela's exports almost to a halt, with only four customers - Chevron, Iran, Cuba and Hangzhou Energy - authorized to lift cargoes.

The investigation into payments and disclosure of US$21.2 billion in commercial accounts receivable since 2020 this month prompted the resignation of powerful Oil Minister Tareck El Aissami and the arrest of top PDVSA officials.

 

OPEC Plus likely to stick to its output quota

OPEC Plus is likely to stick to its existing deal to cut oil output at a meeting on Monday, five delegates from the producer group told Reuters, after oil prices recovered following a drop to 15-month lows.

Oil has recovered towards US$80 a barrel for Brent crude after falling to near US$70 on March 20, as fears ease about a global banking crisis and as a halt in exports from Iraq's Kurdistan region curbs supplies.

OPEC Plus, which comprises the Organization of the Petroleum Exporting Countries and allies led by Russia, is due to hold a virtual meeting of its ministerial monitoring panel, which includes Russia and Saudi Arabia, on Monday.

"It is hard to expect any new development," one of the delegates said of Monday's talks. Another said the Kurdistan curbs and recent price drops were not sufficiently important to affect the overall OPEC Plus policy path for 2023.

Three other OPEC Plus delegates also said any policy changes were unlikely on Monday. After those talks, the next full OPEC Plus meeting is not until June.

Falling oil prices are a problem for most OPEC Plus members because their economies rely heavily on oil revenue.

Even so, OPEC Plus delegates did not raise any suggestion of further action to support the market after the recent price drop and predicted prices would stabilize - which they have since shown signs of doing.

Last November, OPEC Plus reduced its output target by 2 million barrels per day - the largest cut since the early days of the COVID-19 pandemic in 2020. The same reduction applies for the whole of 2023.

Saudi Arabia's energy minister has said OPEC Plus will stick to the reduced target until the end of the year.

 

Pakistan: Dilemma of Policy Planners

I am obliged to share with my readers one of my blogs posted as back as on July 09, 2013, its title was “Pakistan: Dilemma of Policy Planners”. It appears that the situation has not improved in nearly a decade and the country continues to suffer from the same contentious issue and apathy of the ruling junta.

With every passing day the conviction seems to be getting stronger that PML-N government headed by Mian Nawaz Sharif hardly has any sense of priority. Many of its announced plans lack coherence and at the best can be termed wishful thinking and worst of all complacency is based on perceptions rather than ground realities.

The country is suffering from severe balance of payment crisis, which demands following multi pronged strategy, negotiations with International Monetary Fund (IMF) being the top priority. It seems the government has hardly done any homework prior to commencing negotiations with the lender of last resort.

Those at the helm of affairs suffer from the illusion that the United States needs Pakistan rather than realizing the harsh reality that India is being promoted as regional super power and also being assigned an important role in Afghanistan after the pullout of US-led Nato forces.

The entire focus of Senator Ishaq Dar seems to be on mobilizing additional taxes and withdrawing subsidies.  PML-N government has been talking about resolution of circular debt issue by borrowing more but completely ignoring the urgent need to overcome the two most contentious issues: rampant pilferage and poor recovery. Injection of billion of rupees may reduce the debt for the time being but it will reappear soon.

Some of the analysts are of the view that Mian Sahib is surrounded by people having vested interest, seeking funds on concessional terms for establishing power generation facilities. These analysts also believe that another ‘power scam’ is in the making.

To substantiate their argument they say that the country has installed capacity of over 28,000MW but actual utilization hovers at less than half. Therefore, the top priority should be running of power powers at optimum capacity utilization rather than adding new capacities.

Some of the cynics say that Since Dar is an accountant by profession his entire focus is on profit and loss statement and balance sheet rather than achieving synergy, economy of scale and off course there is no focus on restoring confidence of investors.

At present Pakistan is suffering from ‘confidence deficit’ which is even worse than budget deficit and trade deficit put together. Local investors are shy because of looming energy crisis and deteriorating law and order situation.

Mobilizing additional tax without putting the economy on track is ‘hoping against hopes’. Since bulk of Pakistan’s revenue collection comes from indirect taxes, people must have ample purchasing power. Bleak outlook for the economy, eroding purchasing power and shrinking job opportunities forces people not to spend. On top of all failure of the government to contain price hike adds to the woes of masses.

There is an old saying ‘action talks louder than words’ but in case of PML-N there is hardly any action but big talk, mostly blame game. Both Pervez Musharraf and Asif Ali Zardari are being held responsible for the poor state of economy.

People listened to this during the election campaign but now want action to remove some of the malice. PML-N had sought 100 days to put the economy on track but its real challenge will be getting the budget endorsed by the IMF to enter into an agreement with the Fund.

Ironically most of the members of National Assembly can’t comprehend impact of budget proposals and impact of these on masses. They consider clapping their sole duty during the speeches of Prime Minister and Finance Minister and saying ‘I second’ their sole responsibility. In return members are given huge development funds which are mostly spent on development of their home town rather than those areas which need the funds most.

Though, it was expected that collectively ANP, MQM, PPP and PTI will emerge as strong combined opposition, not much has been delivered as yet. Many analysts fear that the present opposition will also be the ‘friendly opposition’ only. Since some of the leading parties have formed government at province, these are effectively part of ruling junta and not the opposition.

 

Saudi king invites Iranian President to visit Riyadh

Saudi King Salman bin Abdulaziz has sent an invitation letter to Iranian President Ebrahim Raisi asking him to pay a visit to Riyadh.

“We will also send a similar invitation to the King of Saudi Arabia,” Amir Abdollahian told Al Jazeera.

Tehran and Riyadh reached an agreement in early March to resume diplomatic relations after years of hostility. The talks were brokered by China.

According to the National, Chinese President Xi Jinping said on Tuesday that his country is ready to support a follow-up process between Saudi Arabia and Iran to restore diplomatic relations.

Xi’s comments came in a phone call with Saudi Crown Prince Mohammed bin Salman, state media CCTV reported.

The crown prince told Xi of the importance of the strategic relations between the two countries and that he appreciated Chinese efforts to develop relations between Saudi Arabia and Iran, said the kingdom’s official state media SPA.

“During the call, they reviewed aspects of partnership between the kingdom and China, and joint coordination efforts to enhance cooperation between the two countries in various fields,” SPA said.

The Chinese leader said his country and Saudi Arabia will make more contributions to promote peace, stability and development in the Middle East, state media said.

Tehran and Riyadh reached an agreement in early March to resume diplomatic relations after years of hostility.

 

Pakistan: Ruling junta finds it difficult to contain Imran Khan

The ruling junta in Pakistan seems to be having great trouble asserting itself while remaining within the limits of the law. With the interior minister making it clear that he is willing to go to any lengths — democratic or undemocratic; principled or unprincipled — to counter the PTI, he has just confirmed the worst fears of political analysts and observers who have been warning about Pakistan’s gradual slide towards totalitarianism.

There are no laws and no rules binding the government any longer, to paraphrase Rana Sanaullah. In other words, the PDM government will abuse state power if it needs to in order to neutralize the once again resurgent PTI. “It is us or them,” as the interior minister quite candidly explained in a recent interview during which he made these remarks. This hardly bodes well for national stability.

However, one may interpret Rana Sanaullah’s statement; the PML-N is clearly struggling to counter the PTI politically. It may not acknowledge this, but the large rally in Lahore’s Greater Iqbal Park late Saturday was a clear enough message that using state-sanctioned violence to cut the party down to size does not appear to be working.

The rally was, by most independent accounts, quite well-attended despite the Punjab administration’s efforts. The arrest and disappearance, respectively, of two prominent young faces in the PTI — lawyer Hassaan Niazi and head of the PTI’s social media team, Azhar Mashwani — reports of the detention of lower-level party organizers and their family members; police raids at supporters and sympathizers’ homes; and the willy-nilly blocking of Lahore’s roads with containers and other impediments on the day of the rally all failed to have a chilling effect on the PTI’s supporters. No wonder the interior minister feels frustrated.

Brute force only looks like an answer where politics fails. We saw this when PML-N activists were rounded up in July 2018 to sabotage the PML-N’s electoral chances, and we see it happening to a different set of actors today. In both cases, the forces behind the campaigns of abduction and harassment appear to be the same.

In both cases, the shameful acquiescence of civilian leaders — clearly hoping to derive political benefits from the violent repression of their opponents — allowed rogue actors to expand their influence in the political domain. Rana Sanaullah — himself a victim of the state’s excesses — should have known better.

The enforced disappearance of Mashwani and other workers, regulatory bans on the media’s coverage of the PTI, frivolous arrests of political workers and unleashing the police on the citizenry will not win the PML-N any free and fair elections.

Instead, they will worsen the anarchy that the interior minister himself concedes is prevailing in the country. Perhaps Rana Sanaullah should consider setting better precedents rather than repeating the mistakes of the past.

Courtesy: Dawn