Pakistan Economy - News & Updates - Archive

[Owais]

Musharraf stresses plan for enhanced power supply

KARACHI (July 28 2006): President Pervez Musharraf on Thursday stressed the need for evolving a plan on war-footing for increased power supply not only to Karachi, but also to the rest of the country. In this regard, he called for making short, middle and long-term planning with short-term plan to be implemented by June 2007, middle by 2008-09 and the long-term by 2011-15.

He was chairing a briefing held to review power situation in Karachi and the present and future plans of the Karachi Electric Supply Corporation (KESC) in this regard. The meeting held at Governor's House. Senate Chairman Mohammedmian Soomro, Sindh Governor Dr Ishratul Ibad Khan, Chief Minister Dr Arbab Ghulam Rahim, Federal Water and Power Minister Liaquat Ali Khan Jatoi, CBR Chairman Abdullah Yusuf, Karachi Nazim Mustafa Kamal, Karachi Naib-Nazim Nasreen Jalil, Abdul Aziz Al-Hamad Al-Jomaih, chairman, Al-Jomaih Group, which owns KESC, KESC CEO Frank Schemit and other concerned officials attended the meeting.

The President said he hopes and has confidence in the KESC that it will overcome the obtaining electricity problem and bring improvement in power supply in the city.

In this regard, he said if they would need additional support will be provided to them from Wapda. The President emphasised that a practical power improvement plan be prepared for up to June 2007 so that no problem is faced by 16 million people of this city by then. On the occasion, Abdul Aziz Al-Hamad thanked the President for this meeting and his support to the KESC.

He also thanked the governor and the chief minister of Sindh, City Nazim and related government departments for their support to the Corporation in overcoming the existing power problem. Frank Schemit briefed the meeting about Corporation's present and future plans to overcome the power supply situation through increased generation and improved distribution system.

He said the existing problem was caused by less power generation capacity, gas supply problem, and overloading of distribution network. He said the KESC will start producing additional 500 mw electricity by April 2007 and a total of 750 mw by April 2008, adding this will help overcome the problem of load-shedding while losses being faced, at present, will be overcome with voltage stabilisation.

Frank Schemit said the KESC will be investing Rs 25 billion for this purpose during the next two years and Rs 12 billion in the first year, and remaining in the second year.

The meeting was informed that the KESC is introducing a new software to improve the existing distribution system, while steps are under way for improving the operational system. The President was briefed that by 2008-09, the KESC distribution system will be brought at par with international standard.

It was pointed out that, at present, the KESC is generating 1,300 mw of electricity and deriving 600 to 700 mw by Wapda to meet the supply demand of 2200 mw. The shortfall is being met by IPPs.

As regards the demand for gas supply, the SSGC managing director said the Company will supply 180 mccf gas for additional generation by the KESC and additional 120 mccf will be imported for which Port Qasim Authorities have been approached for handling of imported gas.

The President directed the KESC authorities to plan their supplies to city on the basis of 500 mw supplied by Wapda, saying the people also need to be informed well about KESC planning. He said the people are sensible and understand their limitations and would fully co-operate with the Corporation. He assured the KESC that whatever support would be required, the government will provide them, saying the process of privatisation of the KESC will prove successful.

On reiteration of need for improved distribution system, the KESC CEO said that 20 new grid stations are being set up and by December 2009, the KESC distribution and generation system will be brought at par with international standard.

 

[Owais]

First mutual fund launched abroad

KARACHI (July 28 2006): Pakistan on Thursday has made its first portfolio investment abroad by launching the Pakistan International Element Islamic Fund (PIIF) to be managed by the Arif Habib Investments. Arif Habib Investment Management Limited chief executive Nasim Beg announced this while briefing the press at a local hotel.

He said the investment symbolises a major step forward for the country's economy. A country which was in not too distant a past considered a basket case country has now acquired the confidence to take advantage of opportunities available in leading international financial markets.

It also demonstrates the vision of economic managers and regulators of the country as they take this major step toward liberalisation. The investment has been made in three different US-run Islamic mutual funds - one representing large-cap investment in US blue chip companies, second in diverse European companies and the third in leading Far Eastern (Japanese, Korean and Chinese) companies.

The mutual funds are of the Alfanar Fund series managed by the Permal group. The group has a 22 years of experience of managing funds and has over $22 billion of assets under its management.

He said PIIF is an open-end Shariah-compliant mutual fund launched about three months ago. The fund is the first to have a specific permission from the State Bank to invest outside the country.

While the fund is permitted to invest up to 30 percent of its assets abroad, the present investment represents 3 percent of the assets. Investing aboard will help fund managers provide a more diversified portfolio for their investors.

Earlier, PIIF's IPO also demonstrated the growing interest in mutual funds in Pakistan. Over 5,000 individual investors contributed about Rs 1.4 billion in the fund.

This fund adheres to stringent Shariah criteria monitored by a Shariah council under the supervision of former Justice Taqi Usmani. The Sharia council also includes Maulana Imran Usmani, Maulana Ashraf Usmani and Maulana Zahid. Arif Habib Investments now manages seven funds - five open-end and two closed-end.

 

[Owais]

Cabinet approves new Trade Organisations Ordinance

ISLAMABAD (July 28 2006): The federal cabinet has approved new Trade Organisations Ordinance, in principle, to weed out fake trade bodies, prohibit grouping, block voting and campaigning, the sources in the commerce ministry told Business Recorder on Thursday. However, till the enactment and enforcement of the new law, the trade bodies would continue operating under the existing Ordinance, 1961, they added.

The new law would be drafted by a committee, headed by former Justice Saleem Akhtar, which had been earlier assigned to analyse the structure and working of the trade bodies besides, identification of the role of the FPCCI, the sources added.

The committee had also been asked to define the purpose, role, responsibility and operational framework for all the trade bodies and their membership criteria.

Sources said the new law would ensure good governance by putting in place establishing procedures that promote transparency, adding this would include development of code of ethics by the trade bodies, corporate and financial management.

Transparent election procedures, including resolution of disputes and prohibition of "grouping, block voting and campaigning" would be the main focus of the new law, the sources added.

According to the new law, the newly-registered trade bodies, holding valid licence, would be entitled to vote and contest elections after completion of two years of their affiliation with the apex body. The newly-enrolled members of the trade bodies would be entitled to vote and contest election after completion of two years of their valid enrolment.

Sources said the committee would also define circumstances and the mode of intervention by the regulator in the affairs of trade bodies. The trade organisations law would empower the regulator to frame rules for the enforcement of new law and achieve its objects.

The regulator would develop a detailed system to weed out fake trade bodies on the basis of new criteria after giving them opportunity of being heard and merger of trade bodies, and representation of women, commerce, trade, industry, and trade in services at the trade bodies, including the apex body.

The commerce ministry, in its summary to special cabinet meeting convened to approve Trade Policy 2006-07, had proposed that the committee may be mandated to prepare the draft law, rules required there under and model memorandum and articles of association by October 31, 2006, the sources added.

After enforcement of the new law, necessary measures would be taken to implement the reforms already being considered necessary by the ministry, they maintained.

Sources said all subsequent elections would be conducted under the new law/rules in the associations, chambers, and the FPCCI to ensure effective representation of commerce, trade industry, women, and agriculture.

They said the committee felt during discussion that rules for the purpose of enforcement of the Ordinance have been framed which allow unlimited discretion to the regulator, creating uncertainties for the trade bodies about their rights, privileges, and responsibilities.

The committee was of the view that the system is generally slow to respond to the modern day requirements of the trade bodies. The enforcement of law is selective and injudicious in application of most legal provisions, said the sources.

 

[Owais]

Government allows sale of blended fuel
ISLAMABAD (updated on: July 27, 2006, 23:29 PST): Prime Minister Shaukat Aziz on Thursday approved the sale of blended fuel in the country in view of the rising fuel cost and to diversify the sources of energy.

The decision was taken by the prime minister while chairing a meeting held here at the prime minister House.

The prime minister said that introduction of blended fuel will help the government meet energy shortfall.

Initially it will be sold under a pilot project through Pakistan State Oil (PSO) petrol pumps at Lahore, Karachi and Islamabad. The pilot project will be launched in August this year.

Based on the results of the pilot project, the blended fuel will be made available throughout the country, the prime minister added.

This is for the first time that the concept of Ethanol blending with motor gasoline is being introduced in Pakistan.

The blended fuel will have up to 10 percent Ethanol and the remaining 90 percent will be gasoline.

The prime minister said that blended fuel is environment-friendly and cheaper as it contains higher percentage of octane.

Several countries including Brazil and India are already using it, he added.

The prime minister said the provinces will be directed to amend the rules to allow the sale of blended fuel.

He said marketing companies will be encouraged to come forward to market it, as blended fuel is less costly and promotes healthy environment. It will also encourage production of bio-fuel.

The prime minister appreciated Pakistan State Oil (PSO) and Hydro Carbon Institute of Pakistan (HDIP) for launching the project and said this will have a positive and long-term impact on government's plans to overcome energy shortfall in the country.

He said in view of the high fuel cost there is a need to pursue energy conservation.

The prime minister also directed that steps be taken for better traffic management and road infrastructure improvement as traffic jams cause fuel wastage and loss of foreign exchange.

The government is working for improvement of mass transit so that people have alternative means to commute, the prime minister added.

The meeting was attended among others by Minister of State for Petroleum and Natural Resources, Muhammad Nasir Khan Mengal, Deputy Chairman Planning Commission, Dr. M. Akram Sheikh, Secretary Ministry of Petroleum and Natural Resources, Secretary Industries and Production, Chairman Alternative Energy Development Board (AEDB) and MD PSO.

 

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LAHORE (July 28 2006): Punjab Chief Minister Chaudhry Pervaiz Elahi has announced the Punjab Power Generation Policy 2006, under which power projects would be undertaken by public and private sectors individually or with mutual collaboration.

As many as 48 sites have been identified at different canals in the province where hydel power projects of 500 megawatts would be set up. He was presiding over a high-level meeting at Chief Minister's Secretariat, here on Thursday.

Provincial Minister for Power Armughan Subhani, Punjab Chief Secretary Salman Siddique, Chairman Planning & Development Suleman Ghani, Secretary Planning and Development Sohail Ahmad and Chief Engineer Power Muhammad Yaqub and other senior officers were present. Secretary Irrigation and Power, Arif Nadeem gave a detailed briefing regarding Power Generation Policy 2006.

The chief minister said that Punjab Power Development Board had been constituted which would be responsible for implementation of Punjab Power Policy. He said that local and foreign investment would be encouraged in power generation sector and implementation of Punjab Power Policy would not only help in the provision of low cost electricity to the masses but would also leave a positive impact on agriculture and industrial sectors.

The CM said that hydel power projects of international standard would be constructed. He added that Punjab government would give a practical shape to Khokhara Hydro Power Project near Mandi Bahauddin with a cost of Rs 260 million. He said that five hydro power generation projects at Okara, Pakpattan, Sheikhupura, Gujranawala and Marala (Sialkot) will be initiated with the co-operation of Asian Development Bank (ADB) which would produce 25 megawatt electricity. He said that under Punjab Power Generation Policy, the possibilities of generation of energy from thermal, solar and other sources would also be explored.

Arif Nadeem informed the meeting that Punjab Power Development Board would allocate different sites to private investors in a transparent manner for hydro power projects and Punjab development board, headed by chief minister Punjab, would provide all out facilities to private investors under one window operation.

 

[Neo]

WASHINGTON (July 28 2006): Advisor to Prime Minister for Finance and Economic Affairs Dr Salman Shah said that we have introduced Pakistan for the first time after almost 15 years and the international equity investors have shown "positive interest" in investing in the country.

While briefing the newsmen about the OGDCL GDR roadshow in Washington on Wednesday evening, he said the idea was that international investors should start investing in Pakistan's equities, and then, private sector companies should come forward for international enlisting. "This is an important link which is quite necessary for Pakistan, so that there should be our presence in the international equity markets."

He said there was a lot of interest in Pakistan, because of good economic performance of the country. "There were many investors, who have already invested much in Pakistani market," and from their perspective, "it was very good opportunity, and hence, there is a lot of interest."

He said that we are floating 10 percent shares of OGDC in London Stock Exchange in the shape of global depository receipts, and targeted investors of East Asia, Europe, and America.

Salman said that when the company would itself be marketed, then the prospective investors would give their commitments, as to how many shares they bid for and what price they offer. This process would be completed in September or October.

Subsequently, he said government wants to enlist more companies of Pakistan internationally. Banks, insurance companies, PTCL and others may also follow and be enlisted. The main idea is that international investors should start investing in Pakistan's equities. This, he stated, was "an important link", which is quite necessary for Pakistan.

Salman Shah said the delegation would now proceed to Boston on Thursday after Washington road show. Referring to the performance of the Karachi Stock Exchange (KSE), which he said, had performed remarkably than other stock markets.

He said Pakistan has the fastest growing economy in Asia, and growth rate has been at 7 percent average; and in the coming years, it has been projected at 7 to 8 percent.

In the 160 million population, 54 percent was below the age of 19, which means Pakistan's potential future market is sizeable and the country's manpower is also young.

 

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ISLAMABAD (July 28 2006): The International Finance Corporation (IFC) on Thursday signed a $52 million financing package with Dewan Petroleum (Pvt) Ltd, to support its upstream oil and gas exploration, development and production project in Pakistan.

IFC, the private sector arm of the World Bank Group, is strengthening natural gas production in Pakistan to meet the country's increasing domestic demand by supporting a local oil and gas firm. "It is encouraging to see Pakistani companies like Dewan Petroleum participating in the hydrocarbon sector of their country," said Somit Varma, IFC's Associate Director for Oil, Gas, Mining and Chemicals.

"Not only do they help in developing domestic energy resources to satisfy growing demand, but they also generate revenues for governments, create jobs and business opportunities for local suppliers of goods and services."

Dewan Petroleum, associated with the well-established Dewan Mushtaq group in Pakistan, is a new Islamabad-based oil and gas firm that is committed to environmental and social sustainability.

Dewan Petroleum and an affiliate company, REPL, have a 60 percent combined working interest in the Safed Koh block in Punjab in central Pakistan, which includes the Salsabil gas and condensate field. Dewan Petroleum and its partners, which include Rally Energy Corp, a Canadian oil and gas company, will also explore prospects for additional gas reserves in the block.

The joint venture will strengthen domestic natural gas supplies in a market where increasing demand may lead to a shortfall in domestic supply, and hence they need for gas imports.

 

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ISLAMABAD (July 28 2006): The power generation performance of all electricity establishments (thermal, hydel and nuclear) witnessed 5.7 percent growth to 88,379 million kWh during 2004-05. However, Wapda hydro power stations generated six percent less than in the year 2003-04, according to a report issued by the Federal Bureau of Statistics (FBS).

The electricity loss in transmission and distribution process was 21,603 million kWh in the year 2004-05 as against 21,117 million kWh in 2003-04. And electricity consumed in auxiliaries of power stations and system losses remained at the same level in 2004-05 (25.4 percent) as compared to previous year (25.3 percent).

The Census of Electricity Establishments (CEE) 2004-05, a report compiled by the FBS says that during the report year (2004-05), all the electricity establishments produced 88,379 million kWh of electricity against 83,607 million kWh in the year 2003-04.

While, Wapda hydro power stations, generated 25,588 million kWh during the year under review, shows a decrease of six percent (or 1784 million kWh) against the gross generation of 27,372 million kWh in the financial year 2003-04.

The CEE-2004-05 also says that the total installed capacity of all the establishments stands at 20,456 MW as compared to 20,360 MW in the year 2003-04 showing an increase of 0.5 percent.

Out of total installed capacity of 20,456 MW, the share of thermal was 66 percent whereas the hydel and nuclear stood at 32 percent and two percent, respectively.

The electricity generation of 88,379 million kWh during the year includes generation from Wapda, KESC, IPPs and captive units. The share of thermal power was 68 percent while the share of hydel and nuclear stood at 29 percent and three percent, respectively.

The report also says that the electricity consumption during year 2004-05 also increased by 6.7 percent to 63,298 million kWh as compared to 59,316 million kWh in the year 2003-04.

The pattern of consumption in the domestic sector for 2004-05 figured 43.6 percent of total electricity consumption. While consumption of commercial, industrial, agriculture and other sectors stood at 6.4 percent, 32.5 percent, 11.1 percent and 6.4 percent, respectively.

The total number of consumers/connections during the year 2004-05 was recorded at 16,718 thousand as compared to 15,841 thousand in the year 2003-04 showing an increase of 5.5 percent.

The electricity consumed in auxiliaries of power stations was 3,478 million kWh in 2004-05 as compared to 3,174 million kWh in 2003-04.

The value of electricity sold, ie, energy charges billed (revenue from sale of power and other charges) during the year 2004-05 stood at Rs 275.87 billion as against Rs 243.61 billion during the year 2003-04 showing an increase of 13 percent.

The industrial cost incurred during the year 2004-05 was Rs 137.2 billion as compared to Rs 108.6 billion during the year 2003-04. It showed an increase of 26 percent over the previous year. The share of natural gas and furnace oil in the total value of fuel used during 2004-05 was 53 percent and 39 percent, respectively.

The total value added during the year 2004-05 stood at 138.6 billion rupees as against 135.0 billion rupees in the year 2003-04, showing an increase of three percent. Value added for this year stands at Rs 138,640 million as compared to last year Rs 135,005 million, showing an increase of 2.7 percent.

 

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KARACHI, July 27: How many of us know about ‘chamak’ (light)? It is a business jargon used for the telegraphic transfer (TT) of dollars that an exchange company in Pakistan gets from an exchange company in Dubai or elsewhere. Also a funnier name —- kuchra (garbage) -- is given to all the foreign currencies other than the dollar. The US dollar is greenback or `subz patta’.

Under the system, the exchange companies in Pakistan export `kuchra’ to the exchange companies abroad, mostly Dubai. All this `kuchra’ -- a mix of many currencies -- is monetised in dirham value in Dubai. These dirhams are then converted into dollars for which the present rate is 3.673 dirham to a dollar.

The annual turnover of exchange companies’ business is estimated at around $3.5 billion. The exchange companies in Pakistan collect all foreign currencies from those who come to get Pakistani rupees. Mostly they are the Pakistanis who have come from abroad or they have received foreign currency from their relatives.

About three years ago when these exchange companies started business under a State Bank licence, they were allowed to open a Nostro account (Nostro, a Latin word that means my money with you), in an exchange company in Dubai or any foreign country. Except dollars, all foreign currencies are exportable that are transferred to the partner exchange company in Dubai or other place. The dollars are then remitted through chamak to the exchange companies in Pakistan.

On July 8, the State Bank of Pakistan instructed more than two dozens licensed exchange companies to close down their accounts with the exchange companies by July 25, and instead do business through accounts in foreign commercial banks or their foreign currency accounts in Pakistan. These companies have also been instructed to report on transaction-to-transaction basis, with relevant dates of export of foreign currencies, except the US dollar, date of receipt of credit, the name of branch and bank.

As the rupee parity is coming under severe strain because of the deteriorating terms of trade in the last five years, and it was worst in the fiscal year 2005-06, plus a host of other factors, the State Bank has instructed all the exchange companies to sell a minimum of 10 per cent of currencies exported and a minimum of 10 per cent of inward remittance of dollars in the inter-bank market.

“This is a first step towards preparation for steep rise in the international oil price in coming days,” a market analyst said. He pointed out that the oil import bill was mostly financed from the inter-bank market, which might exceed $7 billion in 2006-07 if the government failed to take any effective energy conservation method.

By asking the exchange

companies to carry out their currency business through accounts in foreign or Pakistan commercial banks, the State Bank wants a close and effective monitoring of the transactions that could plug leakages taken place previously in the business through accounts in the foreign exchange companies. By doing so, the State Bank is also complying with instructions of the US government that wants a close watch on all international monetary remissions.

Close watchers of the currency market and a few at the State Bank observed that in the last one year dirham was pegged at about Rs16.20 when foreign currencies were exported to Dubai but was assessed at Rs16.60 and Rs16.70 through inward remission of the dollar. The parity of dollar exceeded Rs61 plus. “Why was this happening and who is plugging the gap of dollar sales than Rs61 when it was costing a company Rs61 plus?”

“There has been a massive over- and under-invoicing in the export and import trade in the past years and touched a record level in 2005-06,” said an active money exchanger. He pointed out that accounts in the foreign exchange companies had become a big source of leakage of Pakistan’s foreign exchange. “Many known Pakistani businessmen used to transfer their foreign exchange illegally to Dubai for buying property in the UAE,” he added.

Munaf Kalia, secretary of the Exchange Companies Association of Pakistan (ECAP), has hinted at the possibility of State Bank’s intervention by way of dollars injection sometimes early next week in the open currency market to check any volatility in the rupee parity with dollar.

On Thursday, the local currency market was abuzz with rumors of central bank’s intervention by way of injection of a few million dollars that was said to have brought down the dollar parity with rupee to Rs60.85 from Rs61.15 on Wednesday. Mr Munaf did not confirm the rumors but indicated that his association was working with the State Bank to keep a close watch on the market. “May be on Monday or after a day or two, the situation may warrant injection of dollars,” he observed.

“We intervene in the market within the framework of a built-in mechanism of our exchange value system,” a well-placed source at State Bank replied without being specific and not elaborating much. He explains that normal fluctuation in the rupee parity is taken in stride, but the central bank intervenes when there is volatility in the rupee parity.

Haji Haroon, president of the ECAP, does not see much of a problem in the currency market when the central bank intervened early this month to put in place a new system for remission of dollars from Dubai and other countries. Through a circular, the State Bank asked all the local exchange companies to close down their all Nostro accounts with foreign exchange companies by July 25. These exchange companies now remit inward and outward foreign exchange through their accounts in commercial banks abroad or through foreign currency accounts in Pakistan.

 

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LONDON Jul 28(APP) British Pakistani expatriate family, on average is sending a little over £1000 remittances to Pakistan per year which is more than £870 being sent by other minorities living in the UK, said a survey.

The survey was conducted with the cooperation of the British Department for International Development (DFID) by a company International Communication Marketing (ICM) to understand the characteristics of migrant remittances in order to help maximise their developmental impacts.

Details of the the survey were revealed here on Thursday at a briefing at DFID's. The DFID's junior Minister Gareth Thomas in his remarks on the occasion said "This new survey fills this gap, and improving understanding will help banks, community groups and financial service providers offer more options to people wishing to send money home to relatives."

A representative of ICM Martin Boon said there could be many reasons for Pakistanis for sending more money. One reason can be perhaps they remitted more money to help affected people of the devastating earthquake which struck the country in October last year.

The key findings of the survey were that about 38 per cent of ethnic minority households who responded to the survey sent an average of £870 back home last year, the equivalent of an overseas holiday; of the 50 plus developing countries receiving money from the UK, the five largest recipients were Nigeria, India, Pakistan, Jamaica and Ghana. The average income of the senders was £22,000 and 70 per cent were between 25-44 years old.

In almost 50 per cent of cases people were sending money to their parents, another 25 per cent to other close relatives like cousins and 15 per cent were sending money to spouses and children.

According to the survey 31 per cent of senders said the money would be used to buy food, 21 per cent said it would help with medical bills and 17 per cent reported the funds would help pay for schooling; and 80 per cent said the money would make a real difference in the lives of their relatives back home.

 

[Owais]

First private undersea fibre optic cable system launched
KARACHI (updated on: July 29, 2006, 02:51 PST): Prime Minister Shaukat Aziz on Friday performed the inauguration of Pakistan's first private sector undersea fibre optic cable system.

The launching ceremony to this effect was held at a hotel here on Friday evening.

Speaking on the occasion, the prime minister described the occasion as a very important day for Pakistan as a very important undersea fibre optic cable system has been opened to connect Pakistan with the rest of the world.

The Transworld Associates Limited (TWI) is Pakistan's first private undersea fibre optic cable operator.

With direct cable landings in Karachi, Fujairah (UAE) and Al-Seeb (Oman) and through its connectivity with a number of international and regional undersea cable systems, TWI Network offers true end-to-end, direct broadband, high speed connectivity to Pakistan's growing number of telecom operators, internet service providers and corporate customers.

The TWI is a 1,250 kilometre long state of the art 1.28 Terabit per second DWDM system.

 

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National airline facing losses: Chairman PIA KARACHI: Pakistan International Airlines (PIA) chairman, Tariq Kirmani has said that the PIA income was not breaking in any profit and the national airline was facing losses in the wake of surging prices of oil in the international market.

Addressing the maiden International Global Customer Care Conference here, Tariq Kirmani told that he has proposed to the government for the setting up of a fund for the stabilization of oil prices. He said that the soaring oil prices by 70 percent during the next few months have sent the expenditures swirling high manifold.

Tariq Kirmani told that the efforts were afoot for increasing the income and curtailment of expenditures.

PIA global network’s 40 employees also participated in this conference held in a local hotel here.

 

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ADB to provide Pakistan loans in local currency ISLAMABAD: Asian Development Bank (ADB) intends to provide long-term loans to Pakistan in local currency.

ADB Country Director, Peter Fedon told Geo News that the provision of local currency loans would be more beneficial for project financing, as these projects yield revenue in local currency.

He further said that the ADB was satisfied with the Pakistan’s economic indicators.

 

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ISLAMABAD (July 29 2006): President General Pervez Musharraf has said concerted efforts need to be made to translate the geo-strategic importance into opportunities for economic growth of the country. He made these observations at a high-level meeting also attended by Prime Minster Shaukat Aziz.

The meeting reviewed initiatives being taken to convert Pakistan into a developed, industrialised and knowledge-based economy by utilising its geo-strategic location as an energy, transport and industrial corridor for the countries of the region, including Middle East, Central Asian Republics, China, South Asia and South-East Asia.

The President said Gwadar port can play a very major role to achieve the objective and emphasised the need for fast-track development of rail, road, fibre optics, oil and gas pipeline linkages with the rest of the country and the region. He said all ministries and departments concerned need closer interaction and co-ordination for achieving desired objectives.

The President said continuity of policies of last seven years have brought major dividends for the country in terms of macro-economic development, industrialisation and infrastructure development.

The President expressed his firm commitment that these policies will be ensured and sustained in the medium- and long-term so that the fast-paced economic growth was maintained.

He said the long-term vision of Gwadar port as an energy hub and gateway for the countries of the region is in line with our vision for economic prosperity of the country. The President and the Prime Minster said there was marked improvement in environment for investment and the foreign direct investment has shown a quantum increase. They said there is improved security environment and policies are investor's friendly.

The meeting decided that there will be a policy and supervisory board which will provide strategic vision, lay down policy guidelines, ensure timely decisions and regularly review and monitor progress on various infrastructure and other projects related to the Gwadar port.

There will also be a steering committee under the board, which will be headed by the planning commission deputy chairman and will be entrusted with the implementation of the entire process and finalisation of terms to achieve the objective. The meeting also decided to create special economic zones in Gwadar and other suitable areas to promote investment and industrialisation.

 

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Affluent Pakistanis do not necessarily feel the compulsion any more of retaining a good part of their savings in foreign currencies a reversal of trends from the days when the economy was going through a so called 'dollarisation'.

More than five years of a sustained exchange rate of the rupee versus the US dollar which is the main foreign currency used by the country, has indeed raised the confidence in the Pakistani currency.

An increasing number of Pakistanis feel the confidence to save and spend in rupees while an increasing number are giving up on foreign currencies as a necessary hedge against devaluation. But is the exchange rate of the rupee going to remain similarly sustainable?

In the short term, the outlook for sustainability of the exchange rate probably remains in the affirmative. Analysts broadly expect the bank to adhere to its recently begun move of tightening the spread between lending and borrowing rates.

This follows a long proclaimed view of Dr Shamshad Akhtar, governor of the central bank, to force banks to narrow their spreads.

For many analysts, the policy push by the central bank is meant to raise interest rates on the one hand and curb inflationary pressures on the other.

The combination of these two objectives is bound to keep the rupee within stable limits.

However, a complicating factor in all such efforts is bound to be the continuing pressures emerging from an ever widening international trade deficit which this year has soared to about $12 billion.

There are many among the community of Pakistani analysts who vouch for a devaluation of the rupee, hoping that such a policy choice would spur exports and trim the trade deficit.

In the past, Pakistan has indeed taken the road to devaluation as a way to curb its recurring large global trade deficits, all with the aim of reducing the per unit cost of exportable items. This however has been more a temporary solution rather than a long term fix.

In many categories of Pakistani exports, the more relevant issues have to do with issues which drive up production costs as well as factors which undermine the quality of finished end goods.

Most of Pakistan's industrial producers would instantly complain of the back-breaking costs of inputs such as electricity which undermine their competitive positions.

This is the result of an inherently inefficient power generation and transmission system which sees a large chunk of the electricity entering the system, simply go waste in the name of losses during the transmission phase.

Besides, devaluation of the rupee must instantly also raise the cost of imports including the cost of imported fuels. In turn, the cost of locally generated thermal electricity is bound to rise as its directly linked to oil prices.

Barring an unexpected surprise, the conversion rate of the Pakistani rupee is likely to remain largely unchanged for now.

While the temptation to devalue may be shared by some analysts, the era of Pakistan's so called "dollarised" economy appears to be locked in history.

- The writer is a journalist based in Pakistan.