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IMF’s help is not a long-term solution for Pakistan’s fragile economy: Experts

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Pakistan has finally secured the approval of $3 billion from the International Monetary Fund (IMF), unlocking the long-awaited lending that could help stabilize the delicate economy of the country, thought in a temporary period. The approval could help ease the nation’s dire need for cash and somehow give a new start for the country to help rescue its economy.

The Executive Board of the (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of $3 billion, or “111 percent of quota” to support the authorities’ economic stabilization program, IMF said in a statement.

Indeed, the approval comes at a challenging economic juncture for Pakistan. A difficult external environment, devastating floods, and policy missteps have led to large fiscal and external deficits, rising inflation, and eroded reserve buffers in the fiscal year.

IMF expects the new approval to lead to Pakistan’s economic reform aims to support immediate efforts to stabilize the economy and guard against shocks while creating the space for social and development spending to help the people of Pakistan.

“Steadfast policy implementation will be critical for Pakistan and the success of the program, which requires greater fiscal discipline, a market-determined exchange rate to absorb external pressures, and further progress on reforms related to the energy sector, climate resilience, and the business climate,” the statement added.

Nearly 230 million nations facing acute balance of payment crisis

But experts say that this approval is not a long-time solution for the country where its 230 million nations are facing an acute balance of payments crisis.

The bailout had been frozen since December and the IMF refused to release $1.1 billion of the loan and blamed Pakistani authorities for not complying with the 2019 agreement signed between the IMF and the then Prime Minister Imran Khan.

The hold on the funds was a big headache for the incumbent government and had created fears that the country would default, giving no hope for the country’s economy.

After months of discussion and struggle, finally the ballot has been approved, a Pakistani expert said, but is skeptical the money could solve the longer solution of an economy-starved nation.

In long-term the agreement would fuel further economic crises

“For the time being it may be a relief but in the long-term it would fuel further economic crises in Pakistan,” Shamim Shahid, a Pakistan political expert told Harici.

Inflation in Pakistan touches all time high.

He furthered that “Pakistan’s Non Development and Defense” expenditures are badly affecting its budgetary allocations, developmental and economic sectors.

“Pakistan, if it really wants to end its economic and financial crises, must slash its non development and defense expenditures. With slashing defense expenditures almost all economic crises could be combated and IMF debts may be reimbursed,” Shahid added.

Analysts say that Pakistan needs at least $20 billion in the next two years to pay its foreign loans. The money is included with interest. Meanwhile, the currency value of Pakistan against dollars has dropped significantly.

The currency and inflation is almost out of control, and now all eyes are on the new agreement to at least stabilize the currency and inflation.

Remaining $1.8 billion will be released in two installments

An Islamabad-based writer and expert, Naveed Aman Khan told Harici that at the stage when Pakistan was at the verge of economic collapse the IMF had released $1.2 billion and it is a good sign.

“Remaining $1.8 billion will be released in two installments. By this year Pakistan will have to bear $ 136 billion burden on its shoulders. Last year external loans were $123.57 billion which may reach $152.136 billion by 2027-28,” Khan added.

Khan furthered that foreign reserves are still far beneath country’s level. “China, Saudi Arabia and UAE have extended their cooperation to avoid economic collapse,” he added, calling it a great achievement for the government.

The positive thing is that Pakistan has gone through a number of reforms to meet the demand of the IMF since its mission arrived in the country in February. These changes include revising its 2023-24 budgets. The IMF also demanded the central bank of Pakistan to remain proactive to reduce inflation.

At the same time, reforms in the energy sector which has accumulated $12.58 billion in debt have been a key agenda of the talks between IMF and the Pakistani authorities.

Pakistan’s PM reaction to the agreement

Prime Minister Shehbaz Sharif has welcomed the IMF agreement and said it will help the country improve its economy.

“The approval of the Stand-by Agreement of $3 billion by the IMF’s Executive Board is a major step forward in the government’s efforts to stabilize the economy and achieve macroeconomic stability,” Shehbaz added.

Pakistan primer furthered: “It (agreement) bolsters Pakistan’s economic position to overcome immediate- to medium-term economic challenges, giving the next government the fiscal space to chart the way forward. This milestone, which was achieved against the heaviest of odds and against a seemingly impossible deadline, could not have been possible without excellent team effort,” he added.

Analysts say that the approval of the IMF bailout will also encourage other countries and international financial institutions to help start funding Islamabad to overcome economic challenges.

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Afraid of the gun; Taliban supreme leader fears of a coup

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Hibatullah Akhundzada, the supreme leader of the Taliban, has ordered the security institutions that without his permission, “no one can distribute or use the military equipment registered by the ministries of defense and interior, the directorate of intelligence and other independent institutions.”

Experts and analysts have considered this move by Hibatullah as last resort to weaken the position of defense minister, Yaqoob Mujahid, interior minister, Sirajuddin Haqqani and the head of Taliban intelligence, Abdul Haq Wasiq in order to prevent a possible internal coup that was initiated by these three top officials.

In the first article of the order, it is mentioned that no person can distribute military equipment registered in the reserves of the ministries of defense, interior and intelligence, or issue an order to distribute it without the order of Hibatullah.

This decree titled “Regarding the distribution, protection and supervision of registered military equipment”, specifies that whenever an Emirate entity (Taliban-related entity) needs weapons, ammunition, night vision cameras, telecommunications and other military equipment” must receive the approval order from the leader of the Taliban.

Also, in the second article of this decree, it is stated that whenever one of the military departments of the Taliban needs military equipment, it must send its request to Hibatullah’s office in Kandahar.

In the third article of the decree, it is emphasized that if the military equipment was distributed or used without the permission of the Taliban leader before the issuance of this decree, they must be returned to the reserves.

Ministries of defense, interior and head of intelligence department are banned from disturbing military weapons.

According to this article, Hibatullah entrusted the ministries of defense and interior, as well as the general directorate of Taliban intelligence, with the responsibility to report the list of available military equipment to the directorate of registration, and protection of military equipment.

This order of the Taliban leader has been considered as another step in the direction of concentrating more power in the hands of Mullah Hibatullah in Kandahar. Many have seen it as a sign of Hibatullah’s increasing distrust of senior Taliban officials in Kabul. Previously, some senior Taliban officials, including Sirajuddin Haqqani, have openly disobeyed Hibatullah’s order to prohibit photography and filming and have not followed the order of their supreme leader.

(R) Defense Minister Mullah Yaqoob Mujahid and (L) Interior Minister Sirajuddin Haqqani.

Previously, several reports have been published about the sale of military equipment left over from the US troops and Afghan security forces during the republic government. Even the US-elected president Donald Trump, repeatedly mentioned this issue during his election campaigns. Not long ago, the government of Pakistan also announced that the Pakistan security forces have discovered and confiscated a car carrying US weapons smuggled from Afghanistan.

Pakistani media reported that this equipment included M4 assault rifles, night vision cameras and thousands of rounds of ammunition, which were transported in a truck carrying vegetables. Pakistani security officials have estimated the total value of weapons smuggled from Afghanistan in this truck to be 126,354 US dollars.

The cost of US’s remaining equipment in Afghanistan estimated over 7 billion US dollars

The Pentagon has already announced that after the withdrawal of US forces from Afghanistan, about 7 billion dollars of military equipment fell into the hands of the Taliban. This equipment reached the hands of the Taliban after the fall of Afghanistan on 15 August, 2021.

It has been reported that when the US forces left Afghanistan, there were 78 US-made aircrafts in the country, whose value reached 1 billion dollars. According to CNN, with the end of the US military presence, a total of more than 9,000 air-to-ground munitions worth more than six and a half million dollars have remained in Afghanistan.

The report also states that out of a total of 96,000 military vehicles, more than 40,000 units, including 12,000 Humvees (armored tanks), fell into the hands of the Taliban. Moreover, out of a total of more than 400,000 weapons that the US gave to the forces of the former Afghan government, about 300,000 remain in the country.

Almost all “communications equipment, including mobile base stations, portable and hand-held commercial and military radio systems, and associated transmitters and encryption devices, all remain in Afghanistan,” according to the report.

The report added that “almost all” of the equipment for night vision cameras, surveillance, biometric and positioning equipment,” a total of nearly 42 thousand pieces of specialized equipment, remained in Afghanistan.

Meanwhile, Five Mi 17 helicopters of the then Afghan army, which were transferred to Ukraine for repair before the collapse of the government, have also returned to Afghanistan and now are used by the Taliban.

It should be noted that the internal rivalries in the Taliban, especially among the different factions of this group, is one of the important reasons for Mullah Hibatullah’s distrust of some Taliban officials. Some officials, including interior minister Sirajuddin Haqqani and defense minister Mohammad Yaqub Mujahid, gained a lot of power, especially during the Taliban’s war against foreign forces, and Mullah Hibatullah may be worried that these officials are trying to expand their power, which is a clear threat to his position as the Taliban leader.

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China’s BYD prepares to launch latest SUV, the Sealion 07, in Europe despite EU tariffs

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BYD, the world’s largest electric vehicle (EV) maker, is set to launch its latest SUV, the Sealion 07, in Europe, undeterred by recent tariff increases on Chinese-made electric vehicles. This strategic move highlights BYD’s commitment to expanding overseas sales despite economic barriers.

Deliveries of the Sealion 07 are scheduled to begin in 2025, marking BYD’s seventh all-electric model in the European market, the company announced on Wednesday. Additionally, BYD plans to enter the South Korean market next year, adding to its existing presence in 95 countries worldwide.

This European expansion comes on the heels of the European Union’s decision last month to impose new tariffs—ranging from 17% to 35.3%—on Chinese electric vehicles following an anti-subsidy investigation. BYD’s EVs are subject to a 17% tariff, in addition to the standard 10% tariff applied to all pure electric cars imported from China. These tariffs, which took effect last month, will remain in place for five years. Meanwhile, U.S. tariffs on Chinese-made EVs increased from 25% to 100% as of September, citing similar concerns.

Despite the added costs, BYD’s vehicles continue to hold strong appeal in export markets. “BYD’s vehicles remain attractive even after the additional tariffs, so it’s not really a big problem for the company,” said Chen Jinzhu, CEO of Shanghai Mingliang Auto Service, a leading industry consultancy. “The Sealion 07 exemplifies how BYD’s cost advantage enables it to counteract such trade barriers in key export markets.”

Shenzhen-based BYD has yet to disclose the European pricing for the Sealion 07. On the mainland, the SUV—featuring a range of 450 kilometers—starts at 189,800 yuan (approximately US$26,272), with deliveries beginning in May.

According to a report last year from UBS analysts, BYD has a sustainable cost advantage of 25% over traditional European brands.

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Singles’ day promotions target overseas Chinese as China’s domestic demand slows

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After last year’s Singles’ Day shopping festival in China was dubbed the “quietest in history,” China’s e-commerce platforms focused on a new strategy this year.

For this year’s Singles’ Day event, major e-commerce companies such as Alibaba, JD.com, and Pinduoduo invested heavily in expanding overseas markets, targeting the estimated 100 million Chinese living abroad with offers like discounts and free or low-cost shipping.

The central question, however, is not whether these efforts will succeed in the short term, but rather if this shift can help platforms grow their user bases as online sales growth in China reaches a bottleneck.

“Domestic consumption is quite weak right now, and every company is certainly considering new ways to drive growth for Singles’ Day,” said an executive at a leading online retailer, who requested anonymity. “The overseas market is widely seen as a promising source for additional growth,” he added in an interview with Nikkei Asia.

Singles’ Day, a one-day sales event launched by Alibaba in 2009 as a celebration for singles, has since evolved into a month-long campaign with special offers and deep discounts, culminating on or around November 11.

This year, China aimed to revitalize its retail sector with the event. Total consumer goods sales rose by 3.3% year-on-year in the first three quarters of 2024, though high-end consumer spending remained stagnant. Cosmetics sales fell by 1%, while gold and silver jewelry sales declined by 3.1% year-on-year.

Last month, Alibaba’s Taobao launched a significant marketing campaign in Hong Kong and Taiwan, flooding subway stations with advertisements for “free shipping on orders over 99 yuan,” among other offers. According to the company, the campaign cost 2 billion New Taiwan dollars ($61.7 million) in Taiwan and 1 billion yuan ($138 million) in Hong Kong.

Following Alibaba’s move, JD.com announced it had invested 1.5 billion yuan to offer discounted product prices and cheaper shipping to Hong Kong shoppers. Bargain platform Pinduoduo took it a step further, offering free shipping via courier SF Express for Hong Kong shoppers, regardless of the item’s price. All products on these platforms are shipped from mainland China.

A spokesperson from Alibaba’s International Digital Commerce Group noted that since the overseas initiative launched in October, Taobao Hong Kong has achieved double-digit growth in both orders and gross merchandise value (GMV)—a metric that excludes canceled orders—on both a monthly and year-on-year basis.

The platforms are also targeting Chinese shoppers in Malaysia, Thailand, and Singapore.

This year, unlike in previous years, shoppers could combine online discounts with a subsidy program introduced by the Chinese government to boost domestic consumption, primarily for home appliances and household products. Analysts suggest these incentives will likely boost sales for JD.com, which is known for selling high-quality large appliances and offering after-sales services.

While JD.com has yet to release sales or GMV figures for home appliances during the shopping festival, it is expected to share its June-September results, along with Alibaba, later this week.

Last year, data provider Syntun estimated that total GMV on major e-commerce platforms grew by only 2.1% to 1.14 trillion yuan, falling short of the 2.9% growth forecast for 2022. Similarly, consultancy Bain predicted that Singles’ Day sales would reach 1.15 trillion yuan in 2023.

On Tuesday morning, Alibaba announced “strong GMV growth” and a “record number” of active shoppers for this year’s Singles’ Day event.

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