Business
IMF promises Pakistan ‘immediate’ release of $1.1bn loan after key meet
Cash-strapped Pakistan is poised to receive a $1.1bn loan tranche from the International Monetary Fund (IMF) after a key meeting of the international lender’s executive board on Monday, even as economists have warned that the country needs deep reforms to reduce its dependence on overseas financial assistance.
Late on Monday night, Pakistan’s Ministry of Finance and the IMF confirmed that the lender had approved the ‘immediate disbursement’ of a $1.1bn tranche that completes a total loan of $3bn agreed to under a deal inked last year.
But the approval came with firm words from the IMF. “To move Pakistan from stabilization to a strong and sustainable recovery the authorities need to continue their policy and reform efforts, including strict adherence to fiscal targets while protecting the vulnerable; a market-determined exchange rate to absorb external shocks; and broadening of structural reforms to support stronger and more inclusive growth,” the organisation said in a statement.
The bailout followed a meeting between Pakistani Prime Minister Shehbaz Sharif and IMF Managing Director Kristalina Georgieva, on the sidelines of the World Economic Forum meeting in Riyadh on Sunday.
Sharif’s government had sought a new IMF deal after the current $3bn standby arrangements (SBA) with the global lender expired on April 11.
Hours after the IMF approved the funding, Sharif on Tuesday said disbursement will bring increased economic stability to Pakistan. The bailout from the IMF proved important to save the country from default, the country’s state broadcaster quoted the prime minister as saying.
Pakistan has been reeling from a severe economic crisis for more than two years, with its inflation at one point shooting up to nearly 38 percent and its foreign currency reserves depleted to $3bn in February 2023, enough to cover less than five weeks of imports.
In June last year, Sharif was able to avoid a sovereign default when he secured the IMF bailout, pushing the current forex reserves to almost $8bn, according to the latest central bank data.
Khaqan Najeeb, a former adviser to the Finance Ministry, told Al Jazeera the performance of Pakistan’s $350bn economy in the past nine months has shown that the country’s meagre foreign reserves have increased and that inflation which was at 20 percent in March, has reduced, though slowly.
“Broadly, we can define Pakistan’s economic situation as macro-stabilisation, which is a consequent effect of adjustment policies, but it also means that growth is expected to remain slow and hover around 2 percent,” he said.
Leading Pakistani economist Kaiser Bengali, however, had reservations about the economic outlook as he questioned the sustainability of the current policies, wanting to see more structural reforms.
Bengali called the current economic indicators a “mirage”, adding that the perceived stability was due to the prospect of more loans coming in.
“If the so-called stability was due to a rise in exports or better inflow of dollars, that would have been meaningful but that is not happening. What we are seeing right now is a temporary situation, where the market is responding to day-to-day information,” he told Al Jazeera.
“The economy cannot run on merely an inflow of loans. How will we repay all our [existing] loans?”
Pakistan’s external debt obligations currently stand at more than $130bn, with Lahore-based economist Hina Shaikh fearing the current policy of using more debt to address fiscal deficit will create more inflation.
“Without a commitment to initiate reforms that rationalise expenditures and expand the tax net to increase tax revenues, the macroeconomic situation will not change much. Unless more goods are produced and there is real growth – that is exports see a boost, manufacturing takes place, there are productive employment opportunities – inflation will remain on the rise,” she told Al Jazeera.
Bengali said recent Pakistani governments had a single-point agenda of figuring out “where to get new loans to pay the past loans”.
“Public sector development has been left behind. In the last four decades, there has barely been any major project for health, education or housing,” he said.
Najeeb, the former government adviser, said the main challenge for the country in the coming days was to put together a framework that could result in growth “based on productivity and investment”.
“We must remember that Pakistan already owes them [IMF] $7bn,” he added.
Bengali signed off with a warning: Even the IMF could be reluctant to put in large sums of money to help Pakistan come out of its financial crisis.
“No bank will give you loans indefinitely, especially when they see a deteriorating balance sheet,” he said.
(Aljazeera)
Business
Industry and Entrepreneurship Development Minister Handunneththi’s visit to Lumala highlights key industrial concerns
With the aim of assesing the current challenges faced by local industrialists and explore avenues for government support, Minister of Industry and Entrepreneurship Development Hon. Sunil Handunneththi visited City Cycle Industries Manufacturing (Pvt.) Ltd., widely known as Lumala, on March 24 at its factory in Panadura.
During the visit, Minister Handunneththi engaged with senior officials and employees to understand their concerns and operational difficulties. In a statement shared on social media, the Minister acknowledged the pressing challenges affecting Sri Lanka’s manufacturing sector and emphasized the government’s commitment to providing swift and effective solutions.
Minister Handunneththi further reiterated the government’s intent to position local manufacturers as key stakeholders in Sri Lanka’s economy by addressing regulatory hurdles, market imbalances, and supply chain constraints.
The visit comes amid growing concerns from Lumala employees and management regarding the state of Sri Lanka’s bicycle manufacturing industry, in the backdrop of facing significant challenges, including an influx of imported bicycles and components that circumvent regulatory checks. In addition, the high taxes on raw materials used in local manufacturing has further exacerbated production costs, making it difficult for domestic manufacturers to remain competitive.
Earlier this year, Lumala employees called for urgent government intervention to address these challenges, warning that ongoing financial strain could lead to further shutdowns of critical production units, job losses, and setbacks to the broader industrial ecosystem. With a local value addition of 50-70 percent verified by the Ministry, its workforce remains hopeful that government action will help achieve an ethical manufacturing industry.
Lumala, a household name in Sri Lanka’s bicycle industry, has been a key player in sustainable mobility solutions for over 35 years. The company was recently honored with the Best National Industry Brand award under the Large-Scale Other Industry Sector category at the National Industry Brand Excellence Awards 2024.
With a production capacity of 2,000 bicycles per day and a workforce of 200, Lumala continues to cater to both domestic and international markets, producing a diverse range of bicycles, electric bikes and light electric vehicles. In line with Sri Lanka’s goal to expand forest cover to 32 percent by 2030 and cut GHG emissions by 14.5%, Lumala is actively contributing to this mission—both as a company and through its diverse range of products.
As Sri Lanka works towards strengthening its local manufacturing sector, Minister Handunneththi’s visit signals a crucial step toward addressing industrial concerns and reinforcing government support for sustainable and competitive domestic production.
Sri Lanka’s country rating was upgraded from ‘Restricted Default’ to ‘CCC’ following the successful exchange for the new International Sovreign Bonds (SL ISBs) during December 2024. The three types (03) of exciting new sovereign bonds have restored foreign investor confidence.
The Central Bank of Sri Lanka (CBSL) has performed a remarkable role in guiding the economy out of default status and restored economic stability, and gained Sri Lanka a non-default Country Rating of ‘CCC’. Among the key achievements of CBSL, have been to reduce treasury interest rates under 9% and stabilize the currency while rebuilding foreign reserves to $ 6Bn.
SL offers four Macro Linked Bonds (MLBs) linked to GDP growth, a Governance Linked Bond (GLB) and a short term, Fixed Coupon Bond for unpaid Past Due Interest (PDI). The MLBs offer variable returns depending on SL’s GDP growth from 2024 to 2027, (e.g. haircuts can vary between 16% to 39%). The GLB interest can vary depending on meeting 15.3% and 15.4% of Total Revenue/ GDP thresholds in 2026 and 2027 respectively. The PDI bond offers a fixed coupon of 4% until 2028 and trades at around $94.
This combination of unique, variable returns offers global investors an exciting opportunity to capitalize on SL’s economic revival and US interest rate movements. Sri Lanka’s economic resurgence in 2024 was promising, with a 5% GDP growth rate. With improving investor confidence, SL ISB daily turnover now exceeds $10mn.
The Ceylon Dollar Bond Fund (CDBF) is the only USD Sovereign Bond Fund that is exclusively invested in SL ISBs with Deutsche Bank acting as the Trustee and Custodian Bank. The Fund reported returns of 53% in 2023 and 39% in 2024.
We invite foreign investors to enter CDBF while Sri Lanka is rated at ‘CCC’ and consider realizing their investment upon SL reaching a Country Rating of ‘B- ‘. Other advantages of CDBF are, the ability to withdraw anytime and being tax exempted.
Ceylon Asset Management (CAM), the Fund Manager, has commenced an advertising campaign to promote the CDBF to the Sri Lankan Diaspora, South Asian, Middle Eastern and Australian Investors. CAM is an Associate Company of Sri Lanka Insurance Corporation (SLIC) and licensed under the Securities and Exchange Commission of Sri Lanka Act, No. 19 of 2021.
Meanwhile, the Ceylon Financial Sector Fund managed by CAM emerged as the top performing rupee fund in Sri Lanka during 2024, with a return of 64%. Investors can find out more on www.ceylonassetmanagement.com or write to us on info@ceylonam.com.
Past performance is not an indicator of the future performance. Investors are advised to read and understand the contents of the KIID on www.ceylonam.com before investing. Among others investors shall consider the fees and charges involved.(CAM)
CSE plunged at open, falling for the second consecutive day yesterday, down over 300 points in mid- morning trade.US President Donald Trump has imposed a 44 percent tax on Sri Lanka’s exports in an executive order which he claimed, spelt out discounted reciprocal rates for about half the taxes and barriers imposed by the island on America.
As a result both indices showed a downward trend. The All Share Price Index dropped 300 points, or 2.32 percent, to 15,294.94, while the S&P SL20 dropped 101 points, or 2.71 percent, to 4,517.37.
Turnover stood at Rs 3.1 billion with six crossings. Those crossings were reported in Sampath Bank which crossed 1.6 million shares to the tune of Rs 181 million and its shares traded at 109, JKH 4.1 million shares crossed to the tune of 80.5 million and its shares sold at Rs 19.5.
Hemas Holdings 400,000 shares crossed for Rs 45.6 million; its shares traded at Rs 114, CTC 25000 shares crossed to the tune of Rs 32.2 million; its shares traded at Rs 1330, Commercial Bank 200,000 shares crossed for 27 million; its shares traded at Rs 135 and TJ Lanka 157,000 shares crossed for Rs 20 million; its shares traded at Rs 46.
In the retail market top six companies that have mainly contributed to the turnover were; Sampath Bank Rs 296 million (2.9 million shares traded), JKH Rs 220 million (11.2 million shares traded), Haylays Rs 195 million (142,000 shares traded), HNB Rs 151 million (519,000 shares traded), Commercial Bank Rs 138 million (1 million shares traded) and Central Finance Rs 129 million (735,000 shares traded). During the day 218 million shares volumes changed hands in 22000 transactions.
It is said the banking sector was the main contributor to the turnover, especially Sampath Bank, while manufacturing sector, especially JKH, was the second largest contributor.
Yesterday, the rupee opened at Rs 296.75/90 to the US dollar in the spot market, stronger from Rs 296.90/297.20 on the previous day, dealers said, while bond yields were up.
A bond maturing on 15.10.2028 was quoted at 10.35/40 percent, up from 10.25/30 percent.
A bond maturing on 15.09.2029 was quoted at 10.50/60 percent, up from 10.45/55 percent.
A bond maturing on 15.10.2030 was quoted at 10.60/70 percent, up from 10.30/65 percent.
By Hiran H Senewiratne
Heavy rainfall of above 100 mm are likely at some places in Western, Sabaragamuwa, Central, Uva and Southern provinces
IPL 2025: Marsh, Markram and Rathi shine as LSG edge MI in thriller
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