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IMF to discuss Pakistan’s budget plans as funding lifeline nears

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The International Monetary Fund (IMF) is preparing to discuss Pakistan’s budget plans for the coming financial year, as part of a long-awaited bailout tranche from the lender for the cash-strapped nation, the IMF’s Pakistan mission chief told Reuters on Thursday.

Negotiations over key budget targets such as the fiscal deficit are one of the last hurdles before the IMF approves a staff-level agreement to release $1.1 billion in funding, which has been delayed for months, that is crucial for Pakistan to resolve an acute balance of payments crisis.

A successful staff level agreement (SLA) for the 9th review, which has been pending since November, will unlock the $1.1 billion tranche.

The funding is a part of a $6.5bn bailout package the IMF approved in 2019, which is due to end in June, prior to the budget.

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“In all IMF programmes, the authorities issue a letter of intent associated with the last review outlining their policy intentions for the period after the programme,” said Nathan Porter, mission chief to Pakistan.

Pakistan has been in economic turmoil for months with an acute balance of payments crisis while talks with the IMF to secure $1.1bn tranche have not been successful.

Inflation surged to a record 36.4 per cent in April from a year earlier, driven mainly by skyrocketing food prices and rising energy costs.

The finance ministry projected that inflation would rem­ain in the range of 36-38pc mainly due to the rupee’s depreciation and rising administered prices, which contributed to the increase in overall prices.

Last month, IMF chief Managing Director Kristalina Georgieva said the Fund hoped to complete its current programme with Pakistan successfully.

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“My hope is that with the goodwill of everyone, with the implementation of what has been already agreed by the Pakistani authorities, we can complete our current programme successfully,” IMF Georgieva said at a news briefing in Washington.

Responding to a question about IMF-Pakistan talks for the revival of the 2109 loan package, Georgieva said: “We have been working very hard with the authorities in Pakistan within the context of our current programme to make sure that Pakistan has the policy framework that makes it possible to avoid what you are talking about.”

The reporter who asked the question had hinted at the possibility of Pakistan’s burgeoning debt becoming unsustainable.

But Georgieva said the purpose of the IMF-Pakistan talks was to avoid getting to a point where the country’s debt may become unsustainable. “We are not there yet and it’s better not to get there,” she said.

The IMF and Pakistani officials, she said, were also discussing how to support Pakistan “in terms of providing financial assurances so we can complete the programme”.

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A sigh of relief as inflation at lowest ebb of 17.3pc in two years

A sigh of relief as inflation at lowest ebb of 17.3pc in two years

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A sigh of relief as inflation at lowest ebb of 17.3pc in two years

Pakistan’s consumer price inflation has come down to 17.3 per cent in April, the lowest during the preceding two years, data from the Pakistan Bureau of Statistics (PBS) says. 

Pakistan has been beset by inflation above 20pc since May 2022, registering as high as 38pc in May 2023, as it has gone through reforms as part of an International Monetary Fund (IMF) bailout programme. 

Month-on-month inflation is down 0.4pc, showing negative growth for the first time since June 2023. 

The Finance Ministry in its monthly economic report said it expected inflation to hover between 18.5pc and 19.5pc in April and ease further in May to 17.5pc-18.5pc. 

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“The inflation trajectory is slowing primarily on account of food inflation which has slowed down considerably,” said Faizan Kamran, chief executive of a Karachi-based investment and research company.

Kamran added that he expected inflation to fall into single digits in the next five to six months. 

The State Bank of Pakistan (SBP) maintained its key interest rate unchanged at 22pc for the seventh straight policy meeting on Monday, hours before the donor agency executive board approved $1.1 billion in funding under a $3 billion standby arrangement signed last year. 

Pakistan receives last tranche from IMF 

The State Bank of Pakistan (SBP) received SDR 828 million (around $1.1 billion) from the International Monetary Fund (IMF) on Tuesday – a day after the Fund approved the last tranche for Pakistan under the $3 billion Stand-By Arrangement (SBA). 

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In a statement, the SBP said the amount would reflect in the foreign exchange reserves for the week ending on May 3. 

Last week, the SBP said its foreign exchange reserves dropped by $74 million to $7.981 billion (in the week ending on April 19) because of external debt repayments.

IMF greenlights $1.1bn tranche 

On Monday, the IMF approved disbursement of $1.1 billion tranche, concluding the second bailout package in eight years. The board met in Washington and completed the second review. It is learnt that all board members, except India, favoured the last installment for Pakistan.

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Czech central bank cuts a key interest rate again with inflation down and the economy on the mend

Czech central bank cuts a key interest rate again with inflation down and the economy on the mend

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Czech central bank cuts a key interest rate again with inflation down and the economy on the mend

The Czech Republic’s central bank on Thursday cut its key interest rate for the fourth straight time as inflation dropped and the economy showed signs of recovery.

The cut by a half-percentage point brought the interest rate down to 5.25%. The move was expected by analysts.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, which marked the first cut since June 22, 2022. It continued with a cut by a half-percentage point on Feb. 8 and went on by another half-percentage cut on March 20.

Inflation declined to 10.7% in 2023 from 15.1% in 2022, according to the Czech Statistics Office, and dropped to 2.0% year-on-year in February, which equals the bank’s target, and remained unchanged at the same level in March.

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The Czech economy was up by 0.4% year-on-year in the first quarter of 2024, and increased by 0.5% compared with the last three months of the previous year, the preliminary figures released by Statistics Office indicated on Tuesday.

That came after the Czech economy contracted by 0.2% in the last three months of 2023 compared with a year earlier.

The Czech bank’s decision comes as central banks around the world, including the U.S. Federal Reserve, are trying to judge whether toxic inflation has been tamed to the point that they can start cutting rates.

The European Central Bank left its key rate benchmarks unchanged at a record high of 4% in April, but signaled it could cut interest rates at its next meeting in June.

But the U.S. Federal Reserve emphasized earlier this week that inflation has remained stubbornly high in recent months and said it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2% target. 

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Neelum Jhelum Power Plant shutdown for physical inspection of head race tunnel

Neelum Jhelum Power Plant shutdown for physical inspection of head race tunnel

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Neelum Jhelum Power Plant shutdown for physical inspection of head race tunnel

The Neelum Jhelum Hydropower Plant was shut shutdown yesterday for a physical inspection of its head race tunnel to locate the problem which led to a decrease in pressure a month ago.

Once the problem is traced, a comprehensive plan will be chalked out in coordination with the project consultants and the international experts for undertaking remedial works to rectify the issue, said a press release.

According to the details, a sudden change in the head race tunnel pressure was observed on April 2, 2024. As per the advice of the Project Consultants for the safety of the head race tunnel, the project management kept operating the plant at a restricted generation of 530 MW since April 6 to monitor fluctuation in the head race tunnel pressure.

Neelum Jhelum Hydropower Plant continued generating about 530 MW of electricity till April 29 without any issue. However, at 2257 hours on April 29, further change in the head race tunnel pressure was observed. Subsequently, the generation was gradually reduced but the pressure could not sustain within the safe limits as per the advice of the Project Consultants.

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Keeping in view the safety of the head race tunnel and the powerhouse, the plant was shut down at 0600 hours on May 1 for a physical inspection of the head race tunnel to identify the problem of reduced pressure. Consequent to the detailed discussion with the consultants for dewatering of the 48 Km-long tunnel, the intake gates at the dam site were lowered for flushing of the de-sanders.

The dewatering started from the powerhouse side on the same day. The dewatering will be executed at intervals for the safety of the tunnel.

It is important to note that Neelum Jhelum Hydropower Project has been constructed in a weak geological and seismic-prone area. It has a 51.5 Km-long tunnel system. Its head race tunnel is 48 Km long, while the tail race tunnel is 3.5 Km-long. About 90% of the project is underground. Earlier, the plant was shut down in 2022 for repair of the tail race tunnel downstream of the powerhouse. After completion of the repair and rehabilitation work, the plant resumed electricity generation in August 2023.

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