IMF Program Resumption stays key concern of week as country feels the heat of no direction…

Pakistan IMF program

From the desk of editor in chief,
Meher Kashif Younis

Another turbulent week carried on dampening business sentiment following economic and political gusts in wake of delay in IMF talks resumption, were initially scheduled to be held around May 10th, consistently worsening trade deficit, nose-diving Pak rupee and building political uncertainty kept the broader sentiments under pressure.
Rupee kept on sliding to 192.5 against the US Dollar, staining a week on decline of 3.2 percent. Fears over rising petroleum, electricity prices as prerequisites of resumption of IMF 7th review and resultantly CPI readings have made the upcoming MPC meeting scheduled to be held on May 23rd even more interesting specifically given the vacant State Bank Governor’s position.
However, remittances, on the positive side, for the month of April 2022 shot up to the historic highest ever level recorded while ADB hinted at offering Pakistan financial support to the tune of USD 2.5 billion for the next fiscal year.
PBS data suggests that Large Scale Manufacturing Industries (LSMI) output has witnessed an increase of 8.2 percent during March. On yearly basis too, LSMI showed improvement with an increasing 26.6percent during March. LSMI Index stood at 153.7 during month compared to 121.4 SPLY. On yearly basis Provincial BOS, MoI and OCAC increased by 21.0 percent, 34.4 percent and 8.1 percent on yearly.
PML-N supremo, Nawaz Sharif called the top brass of the party to London this week to discuss key ongoing matters and to devise political strategy going forward but no clear direction has been communicated apart from the fact that government is not ready to call in early elections and are looking to complete the remaining term.
However, the key economic challenge that the incumbent government stands to face at this point in time is the revival of the IMF program. The IMF has continuously stressing reversal of petroleum, electricity subsidies and amnesties amongst roll back of other grants for the resumption of the 7th review however, with the political pressure building and macros slipping by the day, the government finds itself at a tricky spot.
Besides, all 3 friendly countries (China, UAE & KSA) have linked offering financial support to the revival of the IMF program that further has amplified its importance. Likewise, consistently worsening trade deficit which surged to $39.3 billion in 10th month of fiscal 2022, forex reserves declining to almost 2-year lows and weakening Pak Rupee, which slid by 3.2percent during outgoing week could not able to take any help.
Major data releases during the week included:

  1. Remittances posted a record high of USD 3.1Bn in Apr’22 (↑12% YoY),
  2. Trade deficit widened 65percent on year on during 10th month of fiscal 2022to USD 39.3Bn,
  3. Auto sales declined to 22,370 units in Apr’22 (↓18% MoM),
  4. Profit rates on National savings certificates increased by 140/96/144/250bps for Special Savings/Regular Income/Bahbood savings/Savings accounts respectively,
  5. Total RDA inflows touched USD 4.2Bn in Apr’22,
  6. Oil sales surged 32percent yearly in Apr’22 to 2.2Mn tons,
  7. Cement sales slid 29 percent yearly in Apr to 3.5 million tons.

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