General info

Pakistan will receive a $7.6 billion bailout from the IMF. Pakistan’s inflation rate hit a 30 year high in October. It could become dangerous for everyone in the world, if Pakistan’s economic situation continues to destabilize. Pakistan is a nuclear armed nation, with terrorists infested within the country and region, including the group that didn’t have any issues with taking down the World Trade Center (twin) towers. An economically unstable Pakistan increases the chances of nuclear weapons moving into the hands of terrorists.

To make ends meet, Iran needs to see the oil price in the range of $70 – 100. They will be pushing for another 1 – 1.5 million barrel per day cut in OPEC oil production, at the upcoming emergency OPEC meeting later this month. OPEC nations continue to have discussions with non-OPEC nations, to have non-OPEC nations cut production also. Russia is one of the non-OPEC (major) oil producers they are in discussions with. In total, 50 million barrels are produced on a daily basis by non-OPEC members.

Over the last few months, Iran converted their financial reserves into gold.

There is talk that China is seriously considering a plan to diversify more of its foreign-exchange reserves into gold.


1) Pakistan agrees on $7.6 bln IMF loan

Sat Nov 15, 2008 10:05am EST

By Sahar Ahmed

KARACHI (Reuters) - Pakistan has agreed with the International Monetary Fund (IMF) on a $7.6 billion emergency loan to stave off a balance of payments crisis and pave the way for a broader economic rescue plan.

The IMF said on Saturday its executive board was expected to meet shortly on the 23-month standby credit, after IMF staff and Pakistan agreed on a reform program.
"This support is part of a broader package that includes financing from other multilateral institutions and regional development banks," IMF Managing Director Dominique Strauss-Kahn said in a statement.

The international community is concerned that an economic meltdown in the nuclear-armed state could play into the hands of al Qaeda and allied Islamist militant groups seeking to destabilize the Muslim nation of 170 million.

The eight-month-old civilian government is banking on good will toward Pakistan during its transition to democracy after more than eight years under former army chief Pervez Musharraf, who quit as president in August to avoid impeachment.
World leaders were meeting in Washington at the weekend to discuss the worst global economic turmoil since the 1930s and consider reforms to world financial institutions such as the IMF.

Shaukat Tarin, the recently appointed adviser to the prime minister, said the formalities should be concluded next week.

"We are expecting it this month," he told a news conference in Karachi when asked when the first tranche might arrive.

"We have requested IMF to give as much as they can."

The interest rate on the credit facility would vary between 3.51 and 4.51 percent with changes according to market conditions, and would be payable between fiscal 2011/12 and 2015/16, Tarin said.

The IMF did not disclose details. But it said the credit under its emergency funding facility would be tied to Pakistani economic reforms, including higher official interest rates and tighter fiscal policies, plus a well-funded social safety net to protect the poor.

Pakistan expects the World Bank and other lenders to step forward with several billion dollars of additional loans, and steadfast ally China to pitch in with $500 million. But other multilateral lenders and friendly governments were waiting for the IMF accord before acting, in order to bring some discipline to Pakistan's economic management, analysts said.

Other potential donors are gathering in Abu Dhabi on Monday for a "Friends of Pakistan" conference.

State Bank of Pakistan Governor Shamshad Akhtar said the IMF money would be used to build up the central bank's foreign currency reserves, which Tarin said should be equivalent to more than three months import cover.

The central bank's reserves stood at $3.5 billion on November 8, equivalent to just nine weeks worth of imports, and Pakistan faced defaulting on international debt obligations in February next year unless it received a multi-billion dollar infusion.


2) Iran wants new oil output cut, price of $70-100

Sat Nov 15, 2008 8:40pm IST

By Zahra Hosseinian

TEHRAN (Reuters) - Iran wants OPEC to cut oil output by a further 1 to 1.5 million barrels per day (bpd) when it meets in Cairo later this month, the Islamic Republic's representative to the cartel was quoted as saying on Saturday.

Iran's OPEC governor Mohammad Ali Khatibi also said talks were underway on cooperation with crude producers outside OPEC to reduce output, after the oil price fell by more than 60 percent from a peak of around $147 per barrel in July.

He told state television that members of the Organisation of the Petroleum Exporting Countries (OPEC), supplier of more than a third of the world's oil, needed a price of at least $70-100.

The market remained oversupplied, despite a move by OPEC to reduce production by 1.5 million bpd last month, he said.

"This is the minimum price that we believe should exist," he said in a live interview. "If prices are lower we believe the global oil industry chain will be faced with problems."

The oil price has tumbled in recent months as the global economic crisis hit demand in big consumer nations, with U.S. crude falling $1.20 to $57.04 on Friday.
OPEC countries, expected to meet in the Egyptian capital on Nov. 29, are calling for action to halt oil's slide as they face reduced revenues and a struggle to finance domestic projects.

The website of state broadcaster IRIB said Iran, the world's fourth-largest oil producer and seen as a price hawk, would propose that OPEC reduce its output again at the meeting in two weeks' time.


3) Iran switches reserves to gold - report

Sat Nov 15, 2008 1:29pm IST

TEHRAN, Nov 15 (Reuters) - Iran has converted financial reserves into gold to avoid future problems, an adviser to President Mahmoud Ahmadinejad said in comments published on Saturday, after the price of oil fell more than 60 percent from a peak in July.

Iran, the world's fourth-largest oil producer, is under U.N. and U.S. sanctions over its disputed nuclear programme and is now also facing declining revenue from its oil exports after crude prices tumbled.

"With the plans of the presidency...the country's money reserves were changed into gold so that we wouldn't be faced with many problems in the future," presidential adviser Mojtaba Samareh-Hashemi was quoted as saying by business daily Poul.
He gave no figures or other details.

Before oil prices plunged by more than 60 percent from a peak of $147 per barrel in July, Iran made windfall gains from its crude exports and in April estimated its foreign exchange reserves at about $80 billion.


4) Gold Rush

Benjamin Scent

Friday, November 14, 2008

The mainland is seriously considering a plan to diversify more of its massive foreign-exchange reserves into gold, a person familiar with the situation told The Standard.

Beijing is considering changing its asset allocations during the financial tsunami in order to build up gold reserves "in a big way," the source said.

China's fears about the long-term viability of parking most of its reserves in US government bonds were triggered by Treasury Secretary Henry Paulson's US$700 billion (HK$5.46 trillion) bailout plan, which may make the US budget deficit balloon to well over US$1 trillion this fiscal year.

The US government will fund the bailout by printing new money or issuing huge amounts of new debt, either of which will put severe pressure on the value of the greenback and on government bond yields.

The United States holds 8,133.5 tonnes of gold reserves valued at US$188.23 billion. China holds gold reserves of just 600 tonnes, worth only US$13.89 billion.
Beijing's reserves could easily go up to 3,000 to 4,000 tonnes, Tanrich Futures senior vice president Colleen Chow Yin-shan said.

Until now, the United States has had little choice but to issue massive amounts of debt to fund its deficits, and China has had little choice but to purchase it, as there are not many markets deep enough to absorb the mainland's US$30 billion to US$40 billion in monthly capital inflows.

Government officials involved in the management of China's reserves are beginning to see gold as an attractive place to park some of these funds. They see it as a real, tangible asset that will not lose its value over time - in stark contrast to the greenback, which is becoming more disconnected from economic realities as more bills are printed.

"It's the right time to increase the gold reserves, as the price is about US$710 to US$720 per ounce," said Wan Guoli, vice secretary general of the China Gold Association.

The International Monetary Fund has made reducing global payment imbalances one of its priorities in the aftermath of the financial tsunami.

"I think China probably will expand its strategic reserves into commodities during this downturn," said a Hong Kong-based strategist.

"China will continue to buy treasuries ... otherwise the system would get distorted," he said.

"But I think China will diversify its reserves."