Pakistan seeks cash bailout as its financial woes deepen after political turmoil and devastating floods

Published

2 years ago

February 1, 2023

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Pakistan is in talks to release of $1.1bn (£890m) of cash from the International Monetary Fund (IMF) to help ease its financial crisis.

Pakistan’s economic woes are a culmination of years of political turmoil, a financial crisis and last year’s catastrophic floods, with its reserves only able to cover three weeks – rather than the required three months.

Inflation is also thought to stand at around 24% to 26%, according to the country’s finance ministry, and the currency has been devalued against the dollar.

The IMF delegation will be encouraging the Pakistani government to implement bold cost-cutting measures to help it bridge its financial gap, with mission chief Nathan Porter saying: “You don’t have any other option.”

In 2019, Pakistan secured a $6bn (£4.9bn) bailout from the IMF. It got another $1bn (£811m) last year to help overcome the devastating floods, but in November the IMF suspended payments, saying the government failed to make progress on its fiscal consolidation.

In response, Ishaq Dar, the country’s finance minister, told the IMF it had made some efforts to bring its crisis under control, including increasing taxes on petrol and natural gas, and increased prices for electricity.

If released, the cash from the IMF would go towards paying its external debt to the tune of $8bn, which has to be paid by the end of June.

Backlogs at ports, factories closed and electricity blackouts

The government has stopped issuing lines of credit, causing a backlog of container ships at the port of Karachi, while industry has been battered by the currency devaluation and imports block.

Domestic investment has dried up, with textile factories partially closing due to demand, and construction projects have been delayed due to lack of investment.

There has also been severe energy shortages, which has hindered remaining economic activity, while companies that generate and supply energy struggle with the high costs of fuel and turn off the electricity grid to save money.

Last week the country of 243 million people was plunged into darkness after a major breakdown of the national grid, which lasted several hours – the impact was felt on schools, hospitals, businesses and industry further hindering economic activity.

The country’s economy has been faltering for many years, with the floods in 2022 pushing it over the edge.

Pakistan’s floods impacted a third of the country and wiped out millions of hectares of crops. Almost 2,000 people were killed, and around 33 million people were displaced, with damage thought to cost around $40bn (£32.4bn).

Successive governments have been accused of making little effort to widening the tax net and increasing sources of revenue, while loans from allies such as China, Saudi Arabia and the United Arab Emirates kept its economy afloat.

Some blame former PM Imran Khan

Former prime minister Imran Khan, and his government, have been accused of contributing to the immediate crisis. A year into his premiership, the fiscal deficit shot to a record high of $25.3bn (£20.5bn) and by the time he was ousted early last year, inflation was over 12%.

Mr Khan delayed approaching the IMF, despite economists recommending it, saying he wants to shun the practice of approaching foreign entities with a “begging bowl”.

However, his government was unable to bear the costs of a slew of welfare schemes it rolled out – though it helped his popularity.

His government’s reluctance to increase fuel costs, even in early 2022 when international crude rates had breached the $100 mark due to the war in Ukraine war, meant the state exchequer lost precious dollars.

Is Pakistan going the same way as Sri Lanka?

There is comparison of what is taking place in Pakistan with the collapse of the Sri Lankan economy last year.

But this is unlikely, as almost half of Sri Lanka’s external debt was owed to private creditors while for Pakistan, this is only about 8% of what it owes.

Pakistan’s large bilateral loan payments are to friendly countries like Saudi Arabia, the UAE, and China, which will be rolled over.

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With the present government starting to implement changes that would satisfy the IMF and a release of the $1.1bn tranche, this will pave the way for the release of the loan and other bilateral assistances.

But more importantly, Pakistan is a nuclear nation and a geostrategic country, and its allies, and the world, would prevent its economy from collapsing.

World

‘People were crying, they were trapped’: Spain reels from deadly flash floods

Published

17 hours ago

November 1, 2024

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'People were crying, they were trapped': Spain reels from deadly flash floods

Emergency responders are searching for bodies inside stranded cars and buildings following deadly flash floods in Spain that have killed at least 158 people.

Scenes of destruction have been left in the wake of the powerful floodwaters which hit the east of the country late on Tuesday and early Wednesday, marking Spain‘s worst natural disaster this century.

Cars have been piled high on top of each other, homes and businesses have been swept away, trees have been uprooted, and roads and bridges have been left unrecognisable.

Spain flooding latest: Looting breaks out as flood deaths rise

At least 92 people have died in the worst-hit region of Valencia, while deaths were also reported in Castilla La Mancha and southern Andalusia.

An unknown number of people remain missing.

“Unfortunately, there are dead people inside some vehicles,” Spain’s transport minister Oscar Puente said.

In the Valencian district of La Torre, nine dead bodies were discovered inside a garage – with a local police officer among the victims.

Luis Sanchez, a welder, said he saved several people from floodwaters rushing through the V-31 motorway south of Valencia city.

“I saw bodies floating past. I called out but nothing,” Mr Sanchez said.

“The firefighters took the elderly first, when they could get in. I am from nearby so I tried to help and rescue people. People were crying all over, they were trapped.”

Satellite images from NASA show how severe flooding has impacted Valencia and its surrounding towns.

The images, captured on 30 October, show large areas to the south of the city covered in floodwater.

The Turia river, which runs through the city, can be seen at a much higher level.

The Pobles del Sud, a large lake nearby, overflowed. Much of the area surrounding the lake was covered in floodwater.

The worst of the destruction was concentrated in Paiporta, a municipality next to Valencia city, where 62 people have been reported dead.

Mayor Maribel Albalat told national broadcaster RTVE: “We found a lot of elderly people in the town centre. There were also a lot of people who came to get their cars out of their garages… it was a real trap.”

What has caused the devastation?

The flooding events in Spain have been hard to witness. But the rainfall there could never have been anything but devastating.

Chiva, located just to the west of Valencia, received 491mm of rain in an eight-hour window.

Some 100-200mm fell in surrounding areas with the accumulation of running water producing apocalyptic scenes.

In addition there have been over 20,000 lightning strikes.

Whilst the rainfall totals are astounding in themselves, this part of the world is simply not accustomed to huge quantities of water falling from the sky.

In an average year, Spain would expect somewhere between 50 and 100 mm of rain throughout the entire month of October but Valencia and Andalusia would expect far less – just 60–70mm.

So how did this happen? It’s attributable to a DANA, a “depresion aislada en niveles altos” or a “cut-off low”.

This is a low pressure system which becomes slow moving or stationary, blocked by high pressure elsewhere, which can only keep shedding its rain over the same area for long periods of time.

These systems are not that unusual. They occur when cool air from the north is drawn across the Mediterranean in late summer and autumn when the waters are war. The temperature differential enhances storms and rainfall totals.

But whilst not uncommon, this one was certainly extreme.

And it hasn’t gone yet. This same system has continued to bring further heavy rain and thunderstorms today, but it has now moved a little further north and east, heading toward the French border and currently remaining to the west of Barcelona.

The rain and thunderstorms are likely to continue for a few days yet with the Tarragona and Castellon regions still under an amber warning while a yellow warning remains in force for both eastern and western Spain.

Spanish Prime Minister Pedro Sanchez said on Thursday morning that Valencia had been declared a disaster zone and that the priority was to find victims and missing people.

He also urged those affected to stay at home as more torrential rain was forecast.

“The most important thing is that I know Spanish people are aware that this phenomenon has not finished,” he said.

Sky News’ Europe correspondent Adam Parsons, reporting from Valencia, said the devastation suffered in the region is “enormous”.

“What we’re witnessing now are the locals here who are waking up and seeing what’s happened to their town and what has happened is something almost apocalyptic,” he said.

A nearby shop was left “absolutely wrecked” and looked like a “bomb has gone off in there”, he added.

Three days of mourning has been declared in Spain, beginning on Thursday.

Spain’s Mediterranean coast is used to autumn storms that can cause flooding, but this was the most powerful flash flood event in recent memory, and scientists have linked its strength to climate change.

World

‘No one came to rescue us’: In this destroyed Spanish town, people are angry

Published

17 hours ago

November 1, 2024

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'No one came to rescue us': In this destroyed Spanish town, people are angry

In the Spanish town of Algemesi, people are angry.

The suburb of Raval was one of the worst hit by flash flooding but residents feel abandoned.

At least 158 people have been killed in the disaster in eastern Spain – with the worst of the flooding concentrated around the Valencia region.

Spain floods latest: Looting breaks out as flood deaths surpass 150

“When the alert came the water was already two metres high,” Carolina shouts from her balcony. “There were no police, firefighters or the mayor. No one came to rescue us.”

The distress is echoed street after street.

Carmen puts her head in her hands and weeps.

“They have lost everything,” she says, pointing at her neighbours’ houses.

Every home is in ruins and their owners are heartbroken.

Dolores shows us inside her house. She says the flood was up to the ceiling but because no help came, they have had to hammer holes in the walls to clear the water.

“I feel awful. I’m terrified and very afraid. My husband is sick – we need more help,” she says.

The level of destruction is immense.

On the street, we meet Noel with his children. The youngest toddler barefoot in the mud.

Yesterday, Noel and his wife had nothing to eat. He feels helpless.

“Right now, there are people who are trapped. The mud is up to their waists, so they can’t open their doors,” he says.

“I live on a high floor so I didn’t have problems with the flooding in my home, but I don’t have water, light, or food.”

There’s a growing feeling of desperation in this suburb.

At one point, someone shouts “food!” and people rush to grab what they can from a nearby shop.

It’s not clear if they have been let in by the owner or are looting.

The devastation is so great and at a time when people are at their most in need, they feel frustrated and alone.

In a nearby shelter we meet people from Algemesi who have been made homeless by the flood.

Carol says she has never felt so hopeless.

“There was a tree trunk that came into the front of my house. There are no walls, no ceiling. I don’t have anything. There’s nothing left,” she explains, beginning to cry.

For many, the initial trauma of this natural disaster has been compounded in the aftermath by a feeling of loss and loneliness.

World

Ukraine war: Thousands of North Korean troops near Ukraine border will enter battle ‘within days’, says Blinken

Published

17 hours ago

November 1, 2024

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Ukraine war: Thousands of North Korean troops near Ukraine border will enter battle 'within days', says Blinken

Thousands of North Korean soldiers are now positioned near Ukraine’s border and likely to enter combat in the coming days, the US says.

Russian troops have been training them in artillery, drones and “basic infantry operations, including trench clearing”, said US secretary of state Antony Blinken.

He said it strongly indicated they would be used on the front line and would therefore become legitimate targets for Ukraine.

Some 10,000 North Korean troops are in Russia, including up to 8,000 in the Kursk border region, Mr Blinken said.

The troops are wearing Russian uniforms and carrying Russian gear, according to US defence secretary Lloyd Austin.

“We’ve not yet seen these troops deploy into combat against Ukrainian forces, but we would expect that to happen in the
coming days,” Mr Blinken said on Thursday.

America’s top diplomat said the recruitment of troops from North Korea to Russia’s “meat grinder” was a “clear sign of weakness”.

Mr Blinken made the assessment after he and Mr Austin met their South Korean counterparts in Washington DC.

Foreign minister Cho Tae-yul called for the immediate withdrawal of North Korean soldiers from Russia and condemned it “in the strongest possible terms”.

They also all agreed China should do more to rein in North Korea, Mr Blinken said, adding that he’d had a “robust conversation” with Beijing this week.

Mr Austin also announced that – with the US election just days away – America would soon be announcing new security assistance for Ukraine.

The deployment of troops to Russia is down to the close relationship between President Putin and North Korea’s Kim Jong Un.

The leaders last met in June when Mr Putin travelled to North Korea for the first time in 24 years.

A mutual defence pact was agreed during their summit, meaning the countries will help each other if they are attacked.

The US says North Korea has also given munitions to Russia as it continues its grinding effort to take more territory in Ukraine’s east.

The White House published images earlier this month which it said showed 1,000 containers of equipment being sent to Russia by rail.

There are concerns about what military aid Russia will now provide in exchange.

North Korea test-fired an an intercontinental ballistic missile for the first time in almost a year on Thursday and there is speculation Russia may have provided technological help.

In a statement, the US, Japan and South Korea condemned the launch as a “flagrant violation” of UN resolutions.

“We strongly urge (North Korea) to immediately cease its series of provocative and destabilising actions that threaten peace and security on the Korean Peninsula and beyond,” they said.