Pakistani rupee hits record low amid IMF bailout delay | Canada News Media
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Pakistani rupee hits record low amid IMF bailout delay

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Pakistani rupee dropped by 6 percent against the US dollar, while interest rate was raised to 20 percent as the country waits to unlock $1.1bn IMF fund.

The Pakistani rupee has touched a record low, while a bigger-than-expected interest rate rise has failed to revive its markets as the South Asian country struggles to unlock critical funding from the International Monetary Fund (IMF).

The rupee hit a record low of 284 per US dollar in local trading on Thursday, Eikon data showed. It retraced some losses to end at 279 per dollar, still down by some 6 percent.

To try to tackle soaring inflation, shore up its currency and fulfil another IMF demand, Pakistan’s central bank announced a larger-than-expected 300-basis-point interest rate hike.

Policymakers lifted the key lending to 20 percent, its highest level since October 1996, by bringing forward a meeting that had originally been scheduled for March 16.

The country’s international bonds fell by more than three cents in the dollar.

The currency, which has weakened by nearly 20 percent since the start of the year, has been sliding after delays in a deal between Pakistan and the IMF.

“A delay in IMF funding is creating uncertainty in the currency market,” said Mohammed Sohail of Topline Securities, a Karachi-based brokerage house.

The IMF funding is critical for the country, which has been in economic turmoil, to unlock other bilateral and multilateral external financing.

Pakistan’s central bank’s foreign exchange reserves have fallen to levels barely enough to cover three weeks of imports.

IMF demands

Pakistan entered a $6bn IMF programme in 2019, which was expanded to $6.5bn last year. It received a tranche of $1.17bn in August last year, but the next tranche of $1bn has not been released as IMF conditions are still unmet. Last month, Pakistani Prime Minister Shehbaz Sharif said the IMF conditions were “beyond imagination” but Islamabad had no choice but to agree to the bailout conditions.

“Our negotiations with IMF are about to conclude and we expect to sign a staff-level agreement with IMF by next week,” said finance minister Ishaq Dar on Twitter – though his comments did little to reassure the markets.

The IMF’s prerequisites are aimed at ensuring Pakistan shrinks its fiscal deficit in advance of its annual budget which is expected to be announced in June.

Pakistan has already taken most of the other prior actions, which included increases in fuel and energy tariffs, the withdrawal of subsidies in export and power sectors, and generating more revenues through new taxation in a supplementary budget.

The fiscal adjustments demanded by any deal, however, are likely to add to record high inflation, which hit 31.5 percent year-on-year in February, analysts said.

Bilateral and multilateral external financing have been among the other IMF demands, but progress has been slow.

Long-time ally China is the only country that has refinanced $700m to Islamabad.

Speaking at a regular China foreign ministry media briefing on Thursday in Beijing, spokeswoman Mao Ning said China and Pakistan were “all-weather strategic partners and solid friends” and called on all creditors to “act together and play a constructive role in stabilising Pakistan’s economy and society”.

Last’s year devastating floods that caused damage worth more than $30bn have further compounded hardship in the country mired in political crises.

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Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

The Canadian Press. All rights reserved.

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