PETALING JAYA: Malaysian companies with business interests in Pakistan are monitoring the republic’s ailing economy.

       Pakistan’s deteriorating finances and uncertainty over the International Monetary Fund’s (IMF) bailout plan had weighed on the country’s rupee, according to a Bloomberg report.

       The report pointed out that the currency had declined about 7% in May – the steepest drop since March 2020, as the country negotiates a bailout package with the IMF and other nations to keep its economy afloat and avert a default.

       A Business Standard report also said the restoration of Pakistan’s delayed IMF programme would depend on the government’s capacity to make a fiscal adjustment of about 2.5% of the gross domestic product.

       To demonstrate its commitment to implement the “reform agenda”, the Pakistan government must end the subsidies of petrol and diesel prices, and also raise electricity tariffs, according to the report.

       (Maybank) has a stake in MCB Bank Ltd, which is one of the largest banks in Pakistan, with a total customer base of eight million, according to Maybank’s website.The MCB Bank has a network of about 1,400 branches across Pakistan" src="https://apicms.thestar.com.my/uploads/images/2022/06/07/1613420.jpg" onerror="this.src='https://cdn.thestar.com.my/Themes/img/tsol-default-image2017.png'" style="width: 620px; height: 413px;">Malayan Banking Bhd (Maybank) has a stake in MCB Bank Ltd, which is one of the largest banks in Pakistan, with a total customer base of eight million, according to Maybank’s website.The MCB Bank has a network of about 1,400 branches across Pakistan

       Malayan Banking Bhd (Maybank) has a stake in MCB Bank Ltd, which is one of the largest banks in Pakistan, with a total customer base of eight million, according to Maybank’s website.

       The MCB Bank has a network of about 1,400 branches across Pakistan and in countries such as Sri Lanka, Bahrain and Dubai. In an email reply to StarBiz, Maybank said it is “monitoring the economic developments in Pakistan closely but does not anticipate material financial impact to the group as its contribution to the group’s profit before tax is at 1% for the financial year ended Dec 31, 2021 (FY21).”

       Maybank noted that its effective interest in MCB Bank is 19% and is deemed a non-controlling interest.

       “It has been a long-term investment of over 10 years and has performed relatively well over the years as one of the largest private sector banks in Pakistan,” said Maybank in the email.

       Meanwhile, Axiata Group Bhd’s 63%-owned subsidiary edotco Sdn Bhd has a portfolio of over 1,600 towers and managed sites in Pakistan.

       In an emailed reply to StarBiz, Axiata said it regularly assesses any business, operational and financial risks as part of its operations across Asean and South Asia.

       “The potential impact from edotco Pakistan to the group is minor at 1.48% of its net assets as at March 31, 2022,” said Axiata.

       For its first quarter ended March 31, 2022 (1Q22), Axiata had posted a net loss of RM43mil compared with a net profit of RM75.6mil a year earlier, mainly due to foreign exchange (forex) losses of RM476.9mil, largely incurred by its mobile operations in Sri Lanka.

       Axiata had explained that the net loss in 1Q22 arose from unrealised forex losses due to weakened Sri Lankan rupee and ringgit against the US dollar.

       In a recent report, PublicInvest Research noted that out of Axiata’s total FX losses in 1Q22, RM462.5mil is unrealised loss.

       “Stripping out non-core items, normalised 1Q22 net profit was at RM370mil, slightly above our and market estimates at 31% of full-year forecast,” said the research unit, adding that it is concerned over the group’s potential operational and investment risk in Sri Lanka and Nepal.

       “We expect further downside risk in terms of forex translation losses and provisions,” added the research unit.

       PublicInvest Research said while it is positive on Axiata’s recent acquisitions in Indonesia and the Philippines that should enable the group to diversify into high-growth emerging markets, they are not likely to contribute to higher earnings in the near-term due to higher financing cost and depreciation charges.

       Back home, the timeline for the rollout of 5G network remained uncertain with the four largest players (including Celcom) now seeking a majority stake in the country’s 5G agency, Digital Nasional Bhd.

       The justification for a controlling stake is to enable the telecommunication companies to exercise their influence to safeguard their investment in 5G, according to the research house.