Tag: financial sustainability

  • Daraz Group plans layoffs amid market challenges

    Daraz Group plans layoffs amid market challenges

    In an internal communication obtained by Reuters on Tuesday, Alibaba-owned e-commerce platform Daraz Group revealed its decision to implement layoffs across the company.

    Acting CEO James Dong stated that the move aims to “adopt a more streamlined and agile structure” to address challenges faced by the company in the market.

    While the memo did not specify the exact number of individuals affected by the layoffs, it acknowledged the necessity of saying farewell to numerous valued members of the Daraz family.

    The company, operating in Pakistan, Bangladesh, Nepal, Sri Lanka, and Myanmar, declined to provide details on the percentage or absolute number of employees impacted.

    Last year, Daraz employed 3,000 individuals globally. However, the company had to reduce its workforce by 11% due to various challenges, including difficult market conditions, the Ukraine crisis, supply chain disruptions, inflation, higher taxes, and reduced government subsidies.

    James Dong emphasised the group’s commitment to addressing the market’s unprecedented challenges and stated, “Despite our efforts to explore different solutions, our cost structure continues to fall short of our financial targets. Facing unprecedented challenges in the market, we must take swift action to ensure our company’s long-term sustainability and continued growth.”

    Dong outlined the group’s strategy moving forward, highlighting a focus on improving the consumer experience.

    This involves diversifying the offerings of value-for-money products, expanding product categories, and enhancing the operational efficiency of sellers on the Daraz platform.

    The company, founded in Pakistan in 2012 as an online fashion retailer, was acquired by Chinese internet giant Alibaba in 2018. James Dong assumed the role of acting CEO in January, succeeding outgoing CEO Bjarke Mikkelsen.

    Mikkelsen had previously noted that Pakistan and Bangladesh are the group’s largest markets.

    Daraz Group, encompassing e-commerce, logistics, payment infrastructure, and financial services, serves more than 30 million shoppers, boasts 200,000 active sellers, and collaborates with over 100,000 brands, according to company statements provided to Reuters.

  • Fitch and Moody’s: IMF loan provides temporary relief for Pakistan, but risks remain

    Fitch and Moody’s: IMF loan provides temporary relief for Pakistan, but risks remain

    Fitch Ratings and Moody’s Investors Service issued warnings on Monday regarding Pakistan’s financial sustainability, despite the recent acquisition of a much-needed $3 billion lifeline from the International Monetary Fund (IMF).

    Last week, Pakistan signed a short-term (nine-month) loan programme worth $3 billion with the IMF, as the previous $7 billion programme was prematurely ending on the same day.

    The objective of the new loan programme is to provide the necessary foreign exchange to reopen imports, support listed companies in gradually resuming partially closed production, and stimulate economic activities within the country.

    Additionally, this programme serves as a signal to other donor agencies and friendly nations, which had pledged $9 billion at a Geneva meeting in January 2023, to extend new financing to Islamabad.

    However, the two global rating agencies caution that risks persist for Pakistan’s economy, particularly as the government faces a daunting $25 billion debt repayment challenge in the upcoming year starting in July.

    Krisjanis Krustins, Fitch’s Director of Sovereigns for APAC, emphasised that Pakistan will require significant additional financing beyond IMF disbursements to meet its debt obligations and support an economic recovery.

    While the IMF likely sought and received assurances for such financing, there remains a risk that it could prove insufficient, especially if current account deficits widen again.

    In order to secure the initial agreement with the IMF, Pakistan had to implement measures such as tax increases, spending cuts, and raising its primary interest rate to a historical peak.

    Although the markets responded positively to this initial agreement, leading to a significant surge in stocks and improved performance of dollar bonds, it still awaits approval from the IMF Executive Board.

    Moody’s analyst Grace Lim, based in Singapore, expressed doubts about Pakistan’s ability to secure the full $3 billion IMF financing during the stand-by period of the loan programme. Lim stated that it remains uncertain whether the Pakistani government will be able to secure the complete amount.

    Furthermore, she highlighted that the government’s commitment to implementing ongoing reforms will be tested as the country approaches elections scheduled for October 2023.

    It is worth noting that Pakistan had previously obtained a $1.1 billion loan in August, which was subsequently halted due to Islamabad’s failure to comply with certain stipulated conditions.

    According to Moody’s, the towering $25 billion debt repayment comprises both principal and interest, amounting to nearly seven times Pakistan’s foreign exchange reserves.

    Lim further added that only after the elections will it become clear whether the country will be able to enter into another IMF programme.

    Until a new programme is agreed upon, Pakistan’s ability to secure loans from other bilateral and multilateral partners in the long term will be severely limited, she cautioned.