Pakistan set to hold rates, dollar bonds slide in shadow of Israel-Iran conflict
Pakistan set to hold rates, dollar bonds slide in shadow of Israel-Iran conflict/node/2604375/pakistan
Pakistan set to hold rates, dollar bonds slide in shadow of Israel-Iran conflict
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Pakistanis watch a news channel telecasting report about the Israeli attacks on Iran, in Peshawar, Pakistan on June 13, 2025. (AP)
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Updated 13 June 2025
Reuters
Pakistan set to hold rates, dollar bonds slide in shadow of Israel-Iran conflict
Several brokerages initially expected a cut but revised their forecasts after Israeli strikes sparked fears of a broader conflict
Long-dated dollar bonds for Israel, Egypt, Pakistan slipped Friday, Israel’s shekel tumbled following Iran strikes
Updated 13 June 2025
Reuters
KARACHI: Pakistan’s central bank is expected to hold its policy rate on Monday, a Reuters poll showed, as many analysts shifted their previous view of a cut in the wake of Israel’s military strike on Iran, citing inflation risks from rising global commodity prices.
Israel said on Friday it targeted nuclear facilities, ballistic missile factories and military commanders in a “preemptive strike” to prevent Tehran from building an atomic weapon.
Several brokerages had initially expected a cut but revised their forecasts after the Israeli strikes sparked fears of a broader conflict. The escalating hostilities triggered a sharp spike in oil prices — a worry for Pakistan given the broader impact on imported inflation from a potentially prolonged conflict and tightening of crude supplies.
Eleven of 14 respondents in a snap poll expected the State Bank of Pakistan (SBP) to leave the benchmark rate unchanged at 12 percent. Two forecast a 100 basis-point cut and one predicted a 50 bps cut.
“There remains an upside risk of a rise in global commodity prices in light of geopolitical tensions which could mark a return to inflationary pressures,” said Ahmad Mobeen, senior economist at S&P Global Market Intelligence.
“The resultant higher import bill could also threaten external sector performance and bring pressure to the exchange rate.”
Inflation in the South Asian country has been declining for several months after it soared to around 40 percent in May 2023.
Last month, however, inflation picked up to 3.5 percent, above the finance ministry’s projection of up to 2 percent, partly due to the fading of the year-go base effects. The SBP expects average inflation between 5.5 percent and 7.5 percent for the fiscal year ending June.
The central bank paused its easing cycle in March after cumulative cuts of 1,000 basis points from a record high of 22 percent, and resumed it with a 100-basis-point reduction in May.
The policy meeting follows the release a tight annual budget, which saw Pakistan raise defense spending by 20 percent but overall expenditure was reduced by 7 percent, with GDP growth forecast at 4.2 percent.
Pakistan says its $350 billion economy has stabilized under a $7 billion IMF bailout that had helped it staved a default threat.
Some analysts are skeptical of the government’s ability to reach the growth target amid fiscal and external challenges.
Abdul Azeem, head of research at Al Habib Capital Markets, which forecast a 50-bp cut, said a lower rate could “support the GDP target of 4.2 percent and reduce the debt financing burden.”
Separately, long-dated dollar bonds for Israel, Egypt and Pakistan slipped on Friday, and Israel’s shekel tumbled following the Iran air strikes.
The shekel was 2 percent weaker by 0713 GMT standing at 3.63 to the dollar after touching 6.793 in overnight trade, its softest in seven weeks.
Israel’s bond maturing in 2140 shed 1.45 cents, to be bid at 65.61 cents on the dollar, while Egypt’s 2049 bond fell nearly 2 cents to be bid at 77.36. Pakistan’s 2031 bond fell just over 1 cent to be bid at 78.61 cents.
Four, including two soldiers, killed during clash in Indian-administered Kashmir
Gunbattle started Monday in Kulgam territory when soldiers launched search for armed militants
Rebel groups have waged insurgency against Indian rule in disputed Kashmir territory since 1989
Updated 6 sec ago
AFP
SRINAGAR, India: Two suspected rebels and as many soldiers were killed during a two-day clash in Indian-administered Kashmir, officials said Tuesday.
The gunbattle started Monday in forests in southern Kulgam in the disputed territory when soldiers launched a search for armed militants after receiving a tip-off.
It triggered a “fierce exchange of gunfire” over two days leading to the deaths, the army’s Chinar Corps said on social media.
“#IndianArmy expresses deepest condolences and stands in solidarity with the bereaved families” of the slain soldiers, the statement added.
The identities of the militants was being investigated.
Muslim-majority Kashmir is divided between India and Pakistan since their independence from British rule in 1947, and both claim the territory in full.
Rebel groups have waged an insurgency against Indian rule since 1989, demanding Kashmir’s independence or its merger with Pakistan.
The conflict has left tens of thousands dead, mostly civilians.
ISLAMABAD: Senior officials of Pakistan and Turkiye on Tuesday pledged to deepen defense and economic ties, agreeing on new initiatives in energy, technology and agriculture during a ministerial meeting in Islamabad.
The joint ministerial commission’s 16th meeting was co-chaired by Pakistan’s Commerce Minister Jam Kamal Khan and Turkiye’s Minister of National Defense Yaşar Güler. The engagement is a sign of growing cooperation between both nations, who have resolved recently to enhance defense, economic and investment relations, and announced plans to expand bilateral trade to $5 billion.
“An agreement has been reached to enhance cooperation in renewable energy, oil, gas, and LNG sectors,” the commerce ministry said in a statement.
Khan said defense cooperation is the hallmark of Pakistan’s ties with Turkiye, noting that the two sides had held discussions on boosting defense technology, joint production, and capacity building cooperation.
“Agriculture, food security, and health have been identified as new areas of cooperation,” the statement added.
The Pakistani commerce ministry said special emphasis was placed on boosting cooperation in IT, e-commerce, fintech, and artificial intelligence. Both sides also announced collaboration in workforce, media, culture, and tourism sectors, while Pakistan said it would facilitate Turkish investors in its special economic zones.
“Both sides resolved to transform Pakistan–Türkiye ties into a productive economic partnership,” the statement said.
Pakistan and Turkiye have moved closer since Ankara’s public support for Islamabad during its four-day skirmish with India in May. The military forces of the two Muslim-majority countries have since then resolved to forge stronger ties in defense and trade amid regional tensions.
Turkish Foreign Minister Hakan Fidan and Güler arrived in Pakistan in July for high-level discussions with political and military leaders. The visit was described by Pakistan’s foreign office as a sign of “deepening strategic ties” with Ankara. It said the visit included consultations on regional stability, trade expansion, and defense modernization.
ISLAMABAD: Pakistan on Tuesday discussed enhanced economic and regional connectivity with Kazakhstan’s Deputy Prime Minister and Foreign Minister Murat Nurtleu, saying Islamabad was keen to secure overland access to Central Asia and onward to Europe through road and rail corridors.
Pakistan was among the first nations to recognize Kazakhstan’s independence in December 1991, with formal diplomatic ties established in February 1992 during President Nursultan Nazarbayev’s visit to Islamabad.
Relations between the two countries are rooted in shared Islamic heritage and a growing strategic partnership, with Pakistan offering the landlocked Central Asian republics access to southern seaports for global trade.
Nurtleu arrived in Islamabad on Monday for a two-day visit, accompanied by Kazakhstan’s transport and deputy trade ministers, and held meetings with his counterpart, Senator Ishaq Dar, and separately with Federal Minister for Communications Abdul Aleem Khan, Minister for Food Security Rana Tanveer Hussain and Railways Minister Hanif Abbasi.
“Both countries can benefit from mutual experiences in the communications sector,” Khan said during the meeting, according to an official statement released by his ministry.
“Trade corridors and better transport links are our priority,” he added. “Pakistan is keen to gain access to Central Asia and Europe. Enhanced connectivity through rail and road networks will boost trade.”
Both sides agreed that they can undertake substantial work in the field of transport and communications. They also hoped the visit to Pakistan would be mutually beneficial for the two countries and brighten prospects for expanding future cooperation between them.
Separately, the Foreign Office said Dar and Nurtleu reaffirmed their resolve to deepen political and economic ties, strengthen regional connectivity and maintain close coordination ahead of Kazakh President Kassym-Jomart Tokayev’s planned visit to Pakistan in November.
ISLAMABAD: Pakistan has ruled out the possibility of forming a joint security force with China to protect thousands of Chinese workers in Pakistan, the information minister said on Monday, despite concerns raised by Beijing during recent high-level talks between the two countries.
Last week, as Prime Minister Shehbaz Sharif visited China for the SCO heads of state summit, President Xi Jinping pressed him to improve security for Chinese nationals who have been repeatedly attacked by militants while working on Beijing-funded multi-billion-dollar infrastructure projects in the South Asian country. The China-Pakistan Economic Corridor (CPEC) is a showcase for Chinese President Xi Jinping’s global Belt and Road Initiative projects but security threats to Chinese workers in the country have become a source of tension between the close allies.
Media have also widely reported that recent attacks — particularly a bombing in the southern port city of Karachi that killed two Chinese engineers last year — have angered Beijing and pushed it to seek a joint security management system with Islamabad.
In an exclusive interview with Arab News, Information Minister Attaullah Tarar ruled out the possibility of a joint security force or Islamabad allowing Beijing to bring in its own security staff to provide protection to thousands of Chinese citizens working in Pakistan.
“Obviously, there has to be cooperation, there has to be intel-sharing, there has to be a lot of exchange of ideas, that happens all the time,” said Tarar, who was part of Sharif’s delegation to China.
“But with regard to on-ground security [presence of Chinese forces], I think Pakistani security forces, Pakistani armed forces, are well equipped to deal with the situation and they’re already dealing with it.”
Chinese President Xi Jinping shakes hands with Pakistan Prime Minister Shehbaz Sharif at the Great Hall of the People, in Beijing, China, on September 2, 2025. (China Daily via REUTERS)
Pakistan has deployed tens of thousands of army troops, paramilitary units and police to protect Chinese projects, including power plants and the Arabian Sea port of Gwadar. But much of the planned $60 billion investment is widely believed to have been put on hold, partly due to security concerns. Both religiously motivated and separatist militants have targeted Chinese personnel.
Projects have been hit particularly in the southwestern province of Balochistan, where Gwadar is located.
Major incidents also include a suicide bombing outside Karachi airport late last year that killed two Chinese engineers, and a March 2024 attack in which five Chinese engineers and their Pakistani driver died when a bomber rammed a convoy near a dam project in northwest Pakistan. In 2021, a bus bombing in Dasu, also in the northwest, killed 13 people, nine of them Chinese nationals.
Tarar acknowledged Beijing’s concerns.
“I think as far as the security situation is concerned, yes, it’s a concern,” the information minister said.
“And the prime minister [Sharif] also raised this in his speeches [in China] that we are faced with a situation where a security situation does exist, but things are getting better gradually.”
CHINESE INVESTORS ‘READY TO RELOCATE’ TO PAKISTAN
Tarar described Sharif’s recent trip to China as “historic,” highlighting the success of business-to-business (B2B) meetings held on the sidelines of the SCO summit. He said 900 business participants from both countries signed joint venture agreements worth $1.5 billion and memorandums of understanding (MoUs) worth $7 billion.
“I think this B2B conference was a great matchmaking event in which the EV [electric vehicle] sector, the textile sector, the mining sector, the energy sector, all sectors were covered,” the minister said.
“Chinese investors are ready to even relocate their industry to Pakistan because it is beneficial for them to export their products from Pakistan because the port is near, the Gwadar port [in Balochistan], the Karachi port.”
Asked which companies are planning to come to Pakistan, he said several textile firms, electric vehicle manufacturers and software development companies had shown interest.
“A number of joint ventures will be on the ground within the next six months,” Tarar said. “You will see a lot of business activity going on in Pakistan, with Chinese businessmen coming here, Chinese firms moving their offices here, opening new offices, and relocating industry.”
A policeman stands guard under the national flags of China and Pakistan along a road ahead of the visit of Chinese Vice Premier He Lifeng, in Islamabad on July 30, 2023. (AFP/File)
In response to a question on whether the Asian Development Bank would fund upgrades to part of Pakistan’s creaking railway system, replacing China after prolonged delays in financing, Tarar said “a lot of negotiations are going on.”
Reuters reported last month, citing multiple anonymous sources, that the ADB is in advanced talks to lead financing of a $2 billion upgrade of a 500-km stretch of the ML-1 railway line from Karachi to Rohri in the south, which had previously been part of the CPEC project.
“We have a lot of discussions going on. And even in China, they were very positive with regards to facilitating any process with regards to the ML-1,” Tarar said, without providing further details.
“I don’t see any negativity on any side with regard to the ML-1. And ML-1, whichever arrangement is finalized, I think there will be cooperation and there will be facilitation from the Chinese side as well. Let’s see how it turns out eventually.”
US TIES
Tarar also discussed a striking turnaround in Pakistan’s ties with the US after years of mistrust and diplomatic drift. In July 2025, the two countries finalized a landmark trade agreement that significantly reduced reciprocal tariffs — from around 29 percent down to 19 percent — on key Pakistani exports like textiles, leather goods, surgical instruments, IT services, and agricultural products, marking one of the lowest tariff levels among major Asian economies.
Just this week, Pakistan inked a $500 million memorandum of understanding (MoU) with the US Strategic Metals and the Frontier Works Organization to develop its critical minerals sector, including immediate exports of antimony, copper, gold, tungsten, and rare earth elements, as well as plans for a US-backed poly-metallic refinery in Pakistan.
Analysts say this revival of Pakistan–US cooperation could inject new friction into its “iron brotherhood” with Beijing, forcing Pakistan into a delicate balancing act between its two most powerful patrons.
Asked if China was concerned, Tarar said Islamabad’s relations with other countries are “independent and unique“:
“With regard to the entire situation, the geopolitical situation, global politics, you’ve seen that Pakistan has gained importance, and Pakistan is seen as a serious country. And we’ve had a lot of diplomatic successes. So, I think one relationship is not at the cost of the other.”
ISLAMABAD: Pakistani health authorities have vaccinated over 19.3 million children against poliovirus since Sept. 1, the National Emergency Operations Center (NEOC) said in a statement on Tuesday, as the nine-day anti-polio nationwide drive concludes today.
Islamabad launched the nationwide campaign against the disease on Sept. 1, as it grapples with poliovirus, which remains endemic only in Pakistan and Afghanistan. Polio is an incurable, highly infectious virus that can cause lifelong paralysis and can only be prevented through repeated oral vaccination and routine immunization.
Pakistan has enhanced its efforts to vaccinate millions of children ever since it reported an alarming 74 polio infections in 2024. This was a sharp rise in infections from six cases in 2023 and just one in 2021, highlighting the challenge of eradication.
“Today marks the final day of the special anti-polio campaign,” the NEOC said in a statement. “By the end of yesterday, more than 19.3 million children had been administered polio drops.”
Giving a breakdown of the vaccinations, the NEOC said over 4 million children were given polio drops in Pakistan’s eastern Punjab province while in Sindh, nearly 8.431 million children received the vaccine since Sept. 1.
In Pakistan’s northwestern Khyber Pakhtunkhwa (KP) province, 3.993 million children were vaccinated and in its southwestern Balochistan province, 2.182 million children received the vaccine.
In the federal capital Islamabad, the vaccination of approximately 464,000 children has been completed while in the northern Gilgit-Baltistan region, 112,000 children were inoculated. In Azad Jammu & Kashmir, 164,000 children have been vaccinated against poliovirus, the NEOC said.
The NEOC urged parents to play their role in stemming the spread of poliovirus, calling on them to welcome polio volunteers.
“Ensure that every child under five years of age receives polio drops during every campaign,” it added.
Pakistan has made major gains since the 1990s, when annual cases exceeded 20,000, reducing the toll to eight by 2018. But vaccine hesitancy, fueled by misinformation and resistance from some religious hard-liners, continues to hamper progress.
Health teams have also faced frequent militant attacks, particularly in KP and Balochistan, where vaccinators and security personnel have been killed while administering drops in remote communities.
Officials say such violence, coupled with natural disasters such as the current flooding, are complicating nationwide eradication efforts.