Category: Economy

On Tuesday, in a record 7.95 percent interest rate, Pakistan has raised a whopping $1 billion loan through its Sukuk bond, the highest rate it’s ever paid on an Islamic bond in its history. The media also reported that in return for the much-needed loan, Pakistan also agreed to pledge a portion of the Lahore-Islamabad Motorway.

The country issued the 7-year tenor asset-backed Sukuk bond to raise $1 billion with 7.95%. This rate is half a percent higher compared to the 10-year Eurobond which Imran’s government floated in April last year.

The key difference between the traditional Eurobond and the Islamic Sukuk is that the Islamic bond is backed by an asset that attracts less interest rate.

According to a leading newspaper, Pakistan’s Ministry of Finance stated that ahead of some major foreign loan’s repayment, the nation had to raise the loan to keep the official foreign reserves on point.

As of January 14, the gross official foreign exchange reserved was brought down to $17 billion due to spending $2 billion of the $3 billion borrowed from Saudi Arabia one-and-a-half months ago. This led Prime Minister Imran Khan to go to the international capital market.

India’s imports from China soar to almost $100 billion for the first time in the calendar year 2021 due to imports of electrical and electronic goods, machinery, and particularly smartphones. A massive surge was also seen in imports of special chemicals including APIs, fertilizers like ammonia sulfate, urea, and other varieties, industrial goods, telecom equipment, machine tools, and auto components.

According to China’s General Administration of Customs of the People’s Republic of China (GACC), India’s imports from China have reached $97.52 billion in 2021, whereas the total two-way bilateral trade touched $125.66 billion.

Based on India’s Ministry of Commerce and Industry’s Foreign Trade Performance Analysis (FTPA), the import of petroleum (crude) and petroleum products, pearls, precious and semi-precious stones, as well as coal, coke, and briquettes increased significantly in the first eight months of the calendar year 2021. During this period, the items accounted for nearly $60 billion of the total imports from China. Data for December for a commodity is yet to be released by India.

Trade economist and professor, Centre for Economic Studies and Planning, School of Social Science, JNU, Biswajit Dhar said, “India’s overall relationship with China seems to mirror the US-China relationship, in which economic and political relations have their own distinct dynamics”.

On Monday, the oil prices rose on worries regarding supply disruption amid rising tensions in Eastern Europe and the Middle East. This can make an already tight market even tighter. Meanwhile, Opec and its allies are struggling to raise their output.

On Friday, the US West Texas Intermediate (WTI) crude futures gained 57 cents (0.7%) to US$85.71 a barrel which fell to 0.5%. By 0742 GMT, Brent crude futures were up 58 cents, or 0.7 percent, to US$88.47 a barrel, reversing Friday’s losses of 0.6 percent.

Since October 2014, both the benchmarks rose for a fifth week in a row last week. It gained around 2% to hit its highest. However, the prices are already up more than 10% in the current year on the concerns over tightening supplies.

Chief analyst at Fujitomi Securities, Kazuhiko Saito said, “Investors remained bullish due to geopolitical risk between Russia and Ukraine as well as in the Middle East, while Opec+ continued to fail to reach its output target”. He further added that the expectation for higher heating oil demand in the US amid cold weather had also added the pressure.

Post-mid-term elections in September, Prime Minister Justine Trudeau returned to power. Shortly after four months, his popularity is taking a battering due to high levels of inflation.

According to the government’s data agency Statistic Canada, the consumer price for the month of December was at 4.8%, which reached the highest point in three decades. This level of data is considered as an “inflation anxiety”. Hashtag #JustinFlation is making rounds on social media by Trudeau’s opponents.

In September, he formed another minority government for the first time after precipitating snap polls. The ruling party has 28.2% which is marginally behind the Conservative’s 28.5% mark according to Nanos Research.

As per the new poll from the non-profit, non-partisan polling agency (ARI) Angus Reid Institute, 57% of Canadians say that is currently difficult to feed their households where these numbers in 2019 stood at 36%. The further survey suggests that 29% of respondents believe that their financial standing might worsen in the next 12 months which will be six points higher than those who believed that it will improve.

The president is likely to address the matter in the coming days. PM’s office said that bringing down costs will be priority agenda.

On Friday (Jan 21), US President Joe Biden praised Intel’s plan to spend US$20 billion on a new US semiconductor facility. This facility was hailed by the president as the “historic” investment as a global chip shortage fans the inflation flames weighing on his leadership.

The president was seen urging the manufacturers to bring their production back to the country. The nation was once a leader in making the chips key from vacuums to television to cars, everything that became scarce due to the pandemic.

Biden said, “This is a truly historic investment in America and American workers and is one of the largest investments in the semiconductor manufacturing in American history”. The global supply chain crisis demonstrates both the importance of semiconductors and the risks of over-dependence on imports.

Due to the pandemic, the closure of semiconductor plants, particularly in Asia, has disrupted the global chip shortage and has affected a range of industries from automobiles to video games. In addition, surging demand caused bottlenecks and slowed production, which drove prices higher.

The chip production is said to start from 2025 once the construction of two plants starts by the end of the year in the Midwestern state of Ohio.

Official figures showed on Saturday, Sri Lanka’s consumer prices show a new high of 14 percent in December. The current high surpassed the previous high of 11.1 percent from a month earlier as food and fuel charges are worsening in the country.

According to the Census and Statistics Department, the National Consumer Price Index (NCPI) for December, year-on-year inflation reached its highest level since the index was established in 2015. Food inflation has seen a new record high of 21.5 percent which is up from 16.9 percent in November and 7.5 percent a year ago. Vegetables and fruits crop yields have sharply been reduced due to the use of substandard organic fertilizer and pesticides.

Ministers in the parliament warned earlier this week of a growing food crisis after the government banned imports of agrochemicals last year, which led to farmers abandoning more than 30% of farmland. The government had lifted its agrochemical import ban in October after the intense farmer protest. However, the banks are yet short with dollars to finance imports.

Due to the pandemic, the island’s tourism-dependent economy has been negatively impacted, with the government imposing broad import restrictions to avert a currency crisis, resulting in a shortage of essential items.

New Zealand’s first foreign aid Hercules aircraft carrying emergency supplies arrived in Tonga. The military plane landed after the workers cleared ash from the Tonga airport.

Hundreds of volunteers and the rescue team desperately worked for days to clear the thick layer of ash at the Nuku’alofa airport runway that prevented planes from landing. They used wheelbarrows and shovels, to which New Zealand’s commander of joint force Rear Admiral Jim Gilmour called it a “mammoth effort”.

New Zealand’s Defence Force confirmed the arrival of Hercules C-130 at 16:00 local time (03:00 GMT). The aircraft was loaded with temporary shelter kits, water containers, electricity generators, communication equipment along with hygiene and family kits.

Earlier the aid efforts were hampered by ash from the volcano but now Austalia also confirmed the first of its relief planes had arrived. Australian Defence Minister Peter Dutton tweeted hours afterward, the arrival of the first plane by Australia Defense Force landed with “humanitarian assistance and disaster relief supplies”.

After being cut off from the rest of the world for five days, Tonga is now re-establishing global contact. Three deaths have been reported so far and communications have been crippled for these five days.

On Wednesday, the Turkish Central Bank announced a currency swap deal between Turkey and the United Arab Emirates. Both the nations have agreed to a currency swap of 4.74 billion to build and boost Turkey’s foreign exchange reserve.

With the possibility of extending the deal further, currently, the nations swapped 65 billion Turkish lira and 18 billion UAE dirham for three years. According to the agreement, the central bank sold foreign currency to prop up the lira during a currency crisis in order to increase reserves in Turkey.

The Central Bank of the Republic of Turkey’s statement quoted that Khaled Mohamed Balam, chief of the UAE central bank said after the signing ceremony, the deal signifies each nation’s desire to enhance bilateral cooperation in financial matters, especially in the trade and investment sectors.

Sahap Kavcioglu, his Turkish counterpart said, “This agreement demonstrates the two central banks’ commitment to deepen bilateral trade in local currencies in order to advance economic and financial relations between our countries”.

Last month, Abu Dhabi’s powerful crown prince visited Ankara as the first official trip to Turkey since 2012. It was the highest-level visit by an Emirati official in recent years.

On Tuesday, India announced a $500 million credit line to help Sri Lanka purchase fuel (petroleum products). The island nation is currently struggling with massive fuel and energy crisis.

According to the Indian High Commission, External Affairs Minister S Jaishankar agreed to offer critical support along with a $500 million credit line through a letter written to Sri Lankan Foreign Minister G L Peiris.

The nation started to lose its currency value, making imports costly. It is also grappling with a shortage of almost all essential commodities including fuel. The power cuts are imposed at peak hours and the state power utilities are unable to run turbines.

On Tuesday, Power Minister Gamini Lokuge was scheduled to hold a talk with the Indian Oil Corporation (IOC) as part of a desperate measure to tide over the crisis. However, the talks are said to have fallen through.

Lokuge said, “The IOC said they are unable to supply fuel to Ceylon Electricity Board (CEB) because they do not have extra supply”. In the meantime, the state energy board has stopped oil supplies due to unpaid bills.

The State Bank of Pakistan (SBP) has junked the Imran Khan-led Pakistan Tehreek-e-Insaf (PTI) request to open the Afghanistan Relief Fund and requested to review its decision. According to the local media, the Central Bank is afraid that the Financial Action Task Force (FATF) can impose sanctions against Islamabad.

On Saturday, the bank advised them to review the action in light of Pakistan’s commitments under international covenants and the FATF action plan. Since 2018, Pakistan is on the Paris-based FATF’s grey list for anti-money laundering and for deficiencies in its counter-terror financing. In Feb, the FATF plenary is going to review the country’s case.

Government officials had requested that the SBP governor instruct scheduled banks to open the bank account on behalf of the federal government. However, the account has not yet been operational.

To provide humanitarian assistance to Afghanistan, the Finance Ministry instructed the SBP to “open with immediate effect” the previous year on December 8 for the Afghanistan Relief Fund. the issue is being examined to ensure Pakistan’s compliance with its international commitments.

The reports show that the central bank’s observers have raised questions over the authority of the federal government.