Skip to content
Search

Latest Stories

Pakistan’s deepening political crisis douses hopes for IMF relief

The turmoil since Imran Khan was ousted just more than a year ago has scarred the country’s economy and markets

Pakistan’s deepening political crisis douses hopes for IMF relief

The political crisis engulfing Pakistan is eroding hopes that the south Asian country can get its much needed programme with the International Monetary Fund (IMF) back on track soon and escape a full-blown debt crunch, analysts said.

Deadly clashes between supporters of Imran Khan and police spread across the country after Pakistan's anti-corruption agency arrested the former prime minister on Tuesday (9).

The rupture in Pakistan's febrile politics comes as the 230-million-population nation prepares to hold tightly fought elections in the autumn while facing its worst economic crisis in decades, with dwindling reserves and a stalled $6.5 billion IMF programme that is expiring in June and scarce other financing sources in sight.

"With protesters on the streets, the IMF will be even more wary about restarting the loan deal," said Gareth Leather, senior economist for Emerging Asia at Capital Economics.

The turmoil since Khan was ousted just more than a year ago has scarred the country's economy and markets.

Pakistan's rupee has lost nearly 50 per cent over the past 12 months. The main stock index has suffered a double-digit decline over the same period.

On Wednesday (10), the rupee tumbled some two per cent to a fresh record low of 290 to the dollar. The country's international bonds, already in deeply distressed territory of as little as 32 cents, dropped more than a cent in the dollar on the day.

While noisy politics generating volatility was nothing new for Pakistan and its investors, they "really complicated the discussion with the IMF", said Cathy Hepworth, head of emerging market debt at PGIM Fixed Income, which holds Pakistan bonds.

"It just delays and complicates decisions."

Time is ticking down. Nearly 100 days have passed since the last IMF staff level mission to Pakistan and the two sides have yet to strike a preliminary deal - a key step to secure the next funding tranche. That is the longest such gap since at least 2008.

Meanwhile foreign exchange reserves at $4.457 billion cover barely a month's worth of imports.

JPMorgan analyst Milo Gunasinghe said little relief was in sight while the IMF programme remained stalled.

"The latest developments likely dampen any prospect of a political breakthrough across both sides," Milo said.

The bank recently lowered its 2023 growth forecast for the country from 1.3 per cent to 0.1 per cent and warned of "stagflation shock" due to delays in the IMF talks, while the central bank hiked its key interest rate to a record 21 per cent to fight double-digit inflation.

At a local government bond auction on Wednesday, Pakistan was able to raise only Rs 63 bn ($222 million) against a target of Rs 100 bn ($350m) with the cut-off yield rising to nearly 20 per cent for three-year maturities.

The nuclear-armed nation faces the risk of a default unless it receives massive support. The gross public debt-to-GDP ratio stands at 73.5 per cent, according to government data as of December.

Hasnain Malik, head of equity research at London-based Tellimer, said unless martial law was imposed, there was no reason for the IMF to suspend discussions.

(Reuters)

More For You

Prudential to list Indian asset management venture

Prudential chief executive Anil Wadhwani

Prudential to list Indian asset management venture

INSURER Prudential plc announced that it is considering a partial listing of its stake in ICICI Prudential Asset Management, one of India's leading investment firms. The news sent Prudential's shares soaring by 5.8 per cent to close at 722p on the London Stock Exchange.

The FTSE 100 company currently holds a 49 per cent stake in the Indian joint venture, which market analysts estimate to be worth around £4 billion. ICICI Bank, which owns the remaining 51 per cent, has confirmed its intention to maintain its majority shareholding, emphasising its "long-term commitment" to the partnership that began in 1998, reported the Times.

Keep ReadingShow less
NatWest-Reuters

The bank has set a new performance target, aiming for a return on tangible equity of 15-16 per cent in 2025 and above 15 per cent by 2027. (Photo: Reuters)

What’s driving NatWest’s better-than-expected profit growth?

NATWEST reported higher-than-expected annual profit on Friday, supported by its growth strategy, improved productivity, and capital management efforts.

The bank, which once had assets worth 2.2 trillion pounds—more than twice the size of the British economy—has undergone years of restructuring to focus mainly on domestic consumer and mortgage lending.

Keep ReadingShow less
London business district
A general view shows the London's financial district from an office window in Canary Wharf. (Photo: Getty Images)

Economy grows 0.1 per cent in fourth quarter, defying expectations

THE UK economy expanded by 0.1 per cent in the final quarter of 2024, contrary to forecasts of a contraction, according to official data released on Thursday.

The growth, supported by a stronger-than-expected 0.4 per cent rise in December, offers some relief to chancellor Rachel Reeves as she navigates broader economic challenges.

Keep ReadingShow less
BP-Reuters

Fourth-quarter profit dropped 61 per cent compared to the previous year, marking BP’s weakest results since Q4 2020, when the pandemic reduced global oil demand. (Photo: Reuters)

BP reports lowest quarterly profit in four years, plans strategy reset

BP reported a quarterly profit of £943 million on Tuesday, falling short of expectations and marking its lowest in four years.

The company said it plans a "fundamental reset" of its strategy, days after reports that Elliott Management had taken a stake in the oil major.

Keep ReadingShow less
Shein-Reuters

Shein had aimed to go public in London in the first half of this year, subject to regulatory approvals in the UK and China. (Photo: Reuters)

Shein cuts valuation to £40 billion for London listing

SHEIN is preparing to lower its valuation to around £40 billion for a potential initial public offering (IPO) in London, according to three Reuters sources familiar with the matter.

This is nearly 25 per cent lower than the company's 2023 fundraising valuation as it faces increasing challenges.

Keep ReadingShow less