Pakistan Economy - News & Updates - Archive

[Neo]

KARACHI, Aug 29: Despite assurances by the banks depositors still get much low return on their deposits making negative earnings on savings in the wake of prevailing high inflation.

The banking spread has increased further in July, 2006 against July last year. The spread was 7.42 per cent in July 06 compared to 6.90 per cent in July 05 for all banks.

The return on fresh deposits has significantly increased during last 12 months but the analysts say the contribution of fresh deposits is not significant as compared to huge volume of banks’ deposits. The lending rate has also gone up.

“The monthly average fresh deposits are around Rs22 billion and during January to July 2006, Rs151 billion were deposited in the banking sector,” said an analyst. In July Rs26 billion were deposited.

The bank deposits have reached Rs2.81 trillion, which means the fresh deposits are just 5 per cent of over all volume of bank deposits.

The weighted average lending rate in July, 2006 was 10.42 per cent and the return on deposits was 3.09 per cent making the spread as 7.42 per cent.

In July 2005, the lending rate was 8.96 per cent and return on deposits was 2.06 per cent making the spread as 6.90 per cent.

However, weighted average return on fresh deposits went up to 5.15 per cent from 2.97 per cent in July 2005. But the lending rates on fresh loans were not provided.

Bankers said that most of the lending is being made on floating rates and estimated that 80 to 85 per cent lending was on the basis of floating rate.

The Karachi Inter Bank Offered Rate (Kibor) is the benchmark and lending is usually made on the prevailing Kibor rate plus the spread, which varies.

Bankers said the 6-month Kibor rate is 10.38 per cent and the lending rates must be over the Kibor by 1.5 to 2 per cent.

“The fresh lending is being made at around 12.20 to 12.5 per cent--this again brings the spread as high as 7.15 per cent--keeping the return on fresh deposits at 5.15 per cent,” said an analyst.

In May, the State Bank governor had asked all banks to share profits with the depositors but the situation remained almost same even after four months.

Banks have been offering higher return on deposits--even more than 10.5 per cent--but the depositors are asked to fix their money for longer terms.

Most of the depositors keep their money either in the saving accounts or current accounts.

According a brokerage house report the share of current accounts in the total deposits was about 24 per cent.

“The saving accounts are the biggest attraction for the customers as they serve both the purpose by providing return as well as an access to liquidity,” said the analyst.

Analysts said that the depositors would continue to suffer the losses as the return was much below the inflation. The State Bank has already said that no action would be taken against the high banking spread.

Banks have been making record profits and foreign banks have also started taking interest in the presence of high profitability offered by the banking system. However, the high profitability is being made at the cost of depositors’ money.

Bankers complain that most of the customers keep their money in current/ saving accounts, which offer low returns and they do not opt for time deposits, which offer better return. This is the reason for low return to the depositors, they said.

In fact, it was because of financial conditions of the people, who prefer to keep their money in current accounts. They can not afford to engage their liquidity for a longer period.

 

[Neo]

SINGAPORE (updated on: August 30, 2006, 19:35 PST): Pakistan's diesel demand is forecast to jump 70 percent in a decade to 15.07 million tonnes, as the overall fuel consumption almost doubles, forcing the country to boost imports, an oil official said on Wednesday.

Total demand for oil, which accounts for 31 percent of the country's energy needs, will grow to 32.51 million tonnes by 2015 and 66.84 million tonnes by 2030, from 16.8 million tonnes last year, said M Adil Khattak, chief executive of Attock Refinery.

To cope with the demand, Pakistan is seeking investments of up to $16 billion for oil-related infrastructure, including refineries, pipelines and storage facilities, he told an oil conference.

But domestic diesel production, even after taking into account three proposed refinery projects, could only yield 10.93 million tonnes a year, a shortfall of more than 4 million tonnes by 2015, he said.

The shortfall of all oil products by 2015 is projected at 30.33 million tonnes, up from 13.18 million tonnes in 2005, he said, adding that the deficit would be covered by imports.

"We need the oil and we need to import. Despite the plans to generate more energy using other means including natural gas and LNG, we still need to import substantial volumes," he told Reuters on the sidelines of the conference.

"We will need to import and large volumes at that. And we will need to have the infrastructure in place to cater for the incremental volumes," he said, without giving import projections.

Demand for diesel, used for transportation and agriculture, is projected at around 8.88 million tonnes this year, and domestic inventories currently stand at 30 days, well below the required 45 days, Khattak added.

NEW REFINERIES

Demand for fuel oil, used mainly for power generation, was also expected to grow at a fast rate, he said, without giving any figures. Most of Pakistan's new power plants are oil-fired thermal units, due to the country's depleting natural gas reserves.

Khattak said part of the incremental demand could be met by supplies from neighbouring India.

"Reliance had been very interested in supplying diesel to the country but it will take some time before that is going to happen. I am sure that it will happen but it would take maybe three to five years," he said.

Pakistan is pushing ahead with the development of three refineries, in addition to the existing six with a total refining capacity of 285,500 barrels per day (bpd).

The latest proposal is an oil plant near Karachi with a planned capacity of 250,000 bpd.

The government will invite investors to bid for the project, estimated to cost $1.5-$1.8 billion, in two months and it is expected to be operational in about two years at the earliest, he said, adding that China and Kuwait are among the interested parties.

Another facility, the 100,000-bpd privately funded Indus refinery project, is expected to be ready in about 15 months while the third -- the 120,000-bpd Bosicor project -- has a two-year timeline.

Khattak said the Bosicor project, which will upgrade the existing facility from its 30,000-bpd capacity, is at the process-design stage

 

[Owais]

LNG-specific energy plan approved


ISLAMABAD (August 31 2006): President Pervez Musharraf on Wednesday approved an alternative energy plan with main focus on import of LNG and setting up of its countrywide network to provide a cheaper source of fuel to industrial and domestic sectors. He also okayed a proposal of the petroleum ministry to cap private sector's 350 million dollar investment for setting up of an LNG terminal at Qasim port, Karachi.

The president asked the ministry to encourage the private sector for LNG import and remove all bureaucratic hurdles to attract investment in this key area.

The president also directed the ministry and other departments to make LNG import plan and delivery of the alternative source of energy a success in the shortest possible time.

He was presiding over a meeting held here to review the progress made on the availability of cheaper sources of energy to industrial, commercial and other sectors to keep the pace of economic growth at the current level.

Sources told Business Recorder that the president was given a detailed presentation during the meeting on local gas resources, steps being taken by the ministry to cap investment for oil and gas sector and the private sector's eagerness for import of gas. It also covered a comparative study on prices of LPG, LNG as these two could be major resources in the future to supplement the gas supply to ensure continuous availability to the industrial and other sectors.

The president was informed that more than one Pakistani groups were keen for LNG import for industrial and domestic use. He was told that a Dubai-based group had committed 211 million dollar investment to set up a separate berth at Bin Qasim port Karachi to handle specifically imported LNG.

He was informed that the private sector was willing to import LNG and set up a separate terminal at Qasim port and then transport imported gas to different parts of the country to use it as an alternative to LPG.

LNG will be also used for power generation to produce cheaper electricity. The president was told that Karachi Electric Supply Company (KESC) and Wapda were two major sources for buying of LNG from the private sector since it costs much less than furnace oil. LNG will also be a good alternative to LPG due to its comparative less cost.

 

[Owais]

IPPs expansion project allowed on 88 percent capacity availability


ISLAMABAD (August 31 2006): The Private Power Infrastructure Board (PPIB) has agreed not to force the independent power producers (IPPs), interested in capacity expansion, to function at 90 percent annual availability, especially for plants running on furnace oil.

Sources in PPIB told Business Recorder on Wednesday that the National Transmission and Dispatch Company (NTDC) has also 'stamped' the decision, saying that it would have put further financial burden on the consumers.

Sources said that the Economic Co-ordination Committee (ECC) of the Cabinet had decided on May 29, 2006 that "project-specific negotiations be conducted by PPIB under the umbrella of security documents, with the approval of the Board. However, in case of any deviation from the policy, or an increase in GoP's financial and contingent liability, the matter be placed before the ECC for approval".

According to sources, PPIB was expecting that most of the new thermal IPPs would use gas as fuel. Accordingly, one of the key improvements from the security documents of the 1994 policy was increase in annual availability from 86 to 90 percent.

During negotiations on security package, power generation projects based on 'Combined Cycle Gas Turbine' (CCGT), using gas as primary fuel, had agreed to the increased annual capacity availability of 90 percent, sources said.

However, almost all of the IPPs, interested in capacity expansion of their existing facilities, and the leading business houses, both part of GoP's initiative to enhance the power generation capacity on fast track basis, asked the PPIB that annual capacity availability of 90 percent would be too high for the reciprocating plants running on furnace oil. The IPPs were of the view that this binding would significantly increase the operation and maintenance (O&M) cost of the power generation facility, which would ultimately translate into increase in consumer-end tariff, sources said.

While most of the IPPs are still insisting on 86 percent capacity availability, in line with the 1994 agreements, the PPIB argues that 88 percent availability should be economically viable.

According to sources, PPIB also obtained power purchaser, NTDC, point of view, which said that 'diesel plants can achieve 88 percent availability without any additional cost, but in case of furnace oil, O& M cost would increase.

The PPIB in its meeting discussed the issue, and allowed minimum annual availability of 88 percent for power plants based on reciprocating engines, running on furnace oil, in the light of technology to be used in expansion, sources added.

 

[Owais]

Rs 45.07 billion decline in banks' net foreign assets in July


ISLAMABAD (August 31 2006): The net foreign assets (NFA) of the banking system (central and scheduled banks) have gone down to Rs 717.61 billion during July 2006, against Rs 762.67 billion in June before the end of 2005-06, illustrating a decline of Rs 45.07 billion.

The reason is said to be the widening trade deficit that resulted in massive outflows of foreign assets as well as lower net receipts in external financing.

The central bank's 'Pakistan Monetary Survey', which is analytical account of the State Bank of Pakistan (SBP) and scheduled banks, based on monthly reporting released on Wednesday showed that both central and scheduled banks contributed to the overall decline in the NFA.

SBP's own analytical account, which excludes scheduled banks, there was a decline of Rs 28.62 billion in NFA held with SBP. During the first month of the new fiscal 2006-07--July--NFA with the bank stood at Rs 609.88 billion, against Rs 638.51 billion at the end June 2006.

The scheduled banks' NFA declined to Rs 107.73 billion from Rs 124.17 billion in June 2006 showing a decrease of Rs 16.44 billion.

The analytical accounts say that the scheduled banks' claims on non-residents (FAs) stood at Rs 136.57 billion, among which, foreign currency with scheduled banks was worth Rs 6.48 billion, deposits Rs 55.32 billion and securities other than shares stood at Rs 74.77 billion, while liabilities to non-residents stood at Rs 28.84 billion that comprised deposits worth Rs 23.418 billion and loans at Rs 5.428 billion.

The decline in the central bank's NFA was inline with the volume of its intervention in the forex market to reduce exchange rate volatility, while the decline in scheduled banks' NFA was the outcome of stable exchange rate expectations that led to robust increase in trade-related lending against foreign exchange cir-25 (FE-25) deposits.

During the month (July) total claims of non-residents were worth Rs 969.48 billion (declined from Rs 1.023 trillion in June 2006) among which their liabilities were at Rs 251.87 billion. On balance, the NFA (central and scheduled banks) stood at Rs 717.61 billion.

The NFA with the Sate Bank stood at Rs 609.88 billion; its claims on non-residents (FA's) stood at Rs 832.91 billion, while their liabilities to non-residents were Rs 223.03 billion.

Out of total non-resident claims, money gold coin and bullion stood at Rs 77.56 billion; special drawing rights (SDRs) holdings with IMF and SBP at Rs 13.13 billion, foreign currency Rs 1.39 billion, securities other than shares (foreign securities) Rs 523.35 billion and deposits stood at Rs 125.22 billion.

During June 2006, these stood at Rs 77.66 billion, Rs 13.02 billion, Rs 1.39 billion, Rs 555.31 billion and Rs 121.51 billion, respectively.

Liabilities to non-residents (foreign liabilities) of SBP increased to Rs 223.03 billion in July from Rs 222.64 billion in June 2006.

During the month under review these liabilities comprised deposits of Rs 42.30 billion, securities other than shares (N.N.N.I.B securities) at Rs 84.28 billion and loans (IMF loan I, PRGF and SDF) stood at Rs 96.45 billion.

 

[Owais]

Gwadar Port to become operational in six months


ISLAMABAD (August 31 2006): The Gwadar Port project would become operational within six months, Minister for Parliamentary Affairs Dr Sher Afgan Khan Niazi told the National Assembly here on Wednesday. He was answering a supplementary question by Muhammad Hussain Mehanti in the question hour on behalf of Minister for Ports and Shipping Babar Khan Ghauri, who was not present in the House.

The replies from the Minister for Parliamentary Affairs were criticised by the opposition members, who pointed out that the question hour lacks sanctity in the absence of the relevant ministers.

Earlier, Speaker Chaudhry Amir Hussain endorsed this irregularity and politely reminded Sher Afgan that the relevant minister or his parliamentary secretary should be present to reply to the questions. Even these remarks from the Speaker could not shake the confidence of Sher Afgan, who retorted, "the point arises if I am not able to answer the questions properly." The question hour started an hour late for lack of quorum, which was pointed out by Abdul Mujeeb Pirzada and Hafiz Hussain Ahmed.

Sher Muhammad Baloch was deeply hurt on the casual approach of Sher Afgan particularly the way he spoke about cold-blooded murder of Nawab Akbar Bugti. Replying to Samia Raheel Qazi's question on the security concerns of the Chinese working in Gwadar, after the colossal operation and murder of Akbar Bugti, Minister for Parliamentary Affairs said that things would settle down in Balochistan within three or four days and security situation will be soon back to normal, adding everything would be fine.

However, Speaker did not allow the infuriated opposition member to speak for long by switching off his mike. Another supplementary question by Abid Sher Ali about award of contract of Gwadar Port to a firm, Dubai Port, without tenders was rejected by the Speaker, terming it irrelevant and not having merit to be a supplementary question.

M P Bhandara from the treasury benches in a point of order asked the Speaker that the question hour is often interrupted with point of orders and Assembly does not reach to any conclusion on serious issues. This practice should be checked and point of orders should not be allowed during the question hour.

To a question by Nawab Abdul Ghani Talpur on making any port duty-free in the country, the minister said that there was no such proposal under consideration.

Answering a supplementary question of Muhammad Hussain Mehanti on the pension rules of Karachi Port Trust (KPT), Sher Afgan said that 25 percent increase in pension of was given to KPT employees w.e.f 1-7-99 who did not take benefit of the memorandum of settlement, effective from 1-4-98.

Further he clarified the pension scheme 2001 was not applicable in the case of the federal government employees. They have de-linked their scales from basic pay scales, which are subject to increase in pay and allowances after every two years as per Charter of Demand, he added.

The minister said notification regarding increase in pension as announced in the recent budget will not be applicable in the case of ex-employees of KPT as per clarifications of the Ministry of Finance that the pension rules of the federal government are not applicable to the employees of the autonomous bodies having their own pay scales.

 

[Owais]

Flawed economic growth

(August 31 2006): Speaking at the launching of "Asia-Pacific Human Development Report 2006" in Islamabad on Tuesday, a senior UNDP official, Dr Hafiz Pasha, made the thought-provoking observation that "economic growth does not ensure eradication of poverty on its own."

He went on to cite the examples of the Chinese and the Indian economies which grew by nine and five percent, respectively, during the 1990s, while employment growth, in the corresponding order, was only one percent and below one percent. In fact, one does not need to refer to other countries' examples to ascertain the falseness of trickledown theorists' claims.

Our own government takes a lot of pride in declaring that ours is the second highest economic growth rate for the region, if not for the world. And yet, the twin scourges of poverty and unemployment refuse to show any significant sign of decline.

It is another matter, though, that the government professes to have brought down poverty during the last couple of years from 30 percent (according to unofficial estimates the figure stood at a staggering 40 percent) to a few points above 24 percent. Critics point out that the claims are based on an arbitrary definition of poverty rather than any change in the real situation.

This is an undesirable pattern of growth both in terms of the principle of equity and the long-term interest of the developmental process. Of course, there are those who argue that it is, a well-trodden path for generating surplus capital that is essential to achieve high growth rates. They hold that the creation of such capital and the concept of equitable income distribution cannot go together.

According to others, all economic activity should be geared towards betterment of the quality of human life. The fact of the matter is that societies are changing and so are the demands of modern economies. What was acceptable in the past is unacceptable now. Income inequalities generate resentment and lawlessness, which is why even western donor agencies have started to tell our government to address the issue. The UNDP official made a valuable assertion in this regard.

The level of employment, he said, is a dependable indicator to gauge the nature and content of growth. And increase in employment rate reflects that benefits of expansion in economic activity are shared by the people.

Modern economies do not depend anymore only on the capital, managerial capabilities and technical know-how of a few people sitting at the top while majority of the masses toil away in factories or fields; they are increasingly becoming knowledge-based and innovation-driven. It is plain, therefore, that irrespective of egalitarian considerations, there is need for a rethink on our economic growth policy.

Its main focus, aside from increasing employment opportunities, has to be human resource development. Since majority of our population still lives in the rural areas, literacy and skill training programmes are necessary to boost production and improve value addition standards at different levels of agriculture related economic activity.

It is equally important for the government to play the lead role in upgrading and expanding the higher education sector, promoting linkages with commerce and industry. Indeed, the present government has taken some creditable initiatives in that direction. But considering that human resource development, for long, has been a low priority subject for successive governments, the task requires major investments and a sustained focus.

 

[Owais]

President for more private sector participation in oil and gas

RAWALPINDI (August 31 2006): President General Pervez Musharraf on Wednesday emphasised the need for greater private sector participation in the oil and gas sector, and expressed the hope that all concerned government bodies would take necessary steps for their facilitation.

He was chairing a meeting here to review the progress on the supply of natural gas across the country. Musharraf said private sector's participation in the oil and gas sector was essential to give much-needed impetus for ensuring fuel for Pakistan's sustained high economic growth rate and socio-economic development.

The participants of the meeting were briefed about the various initiatives being taken by the concerned organisations of gas in various parts of the country.

Amanullah Jadoon, Minister for petroleum & Natural Resources, Babar Khan Ghauri, Minister for Ports & Shipping, Dr Akram Sheikh, Deputy Chairman Planning Commission, and other senior officials were present.

 

[Owais]

Jadoon lauds BP to undertake offshore seismic survey

ISLAMABAD (August 31 2006): The President of British Petroleum (BP) company, Tariq Khamesani called on Federal Minister for Petroleum and Natural Resources, Amanullah Khan Jadoon here on Wednesday and briefed him on his company's programme to undertake offshore seismic survey by the first quarter of next year.

He told that British Petroleum would explore oil and gas in three offshore blocks covering an area of 21,000 sq kms in ultra deep water and would initially invest $50 million.

The minister appreciated the BP's contribution for promoting the oil and gas exploration activities in the country and wished them success in their upcoming offshore exploration activities.

Jadoon said that the government was taking tangible steps to accelerate the pace of oil and gas exploration activities in the onshore and offshore areas aimed at putting the country on the road to self-reliance in the energy sector. "We are here to facilitate and provide all out co-operation to investors in oil-gas exploration," he added.

 

[Owais]

TRG signs term sheet for $35 million investment

KARACHI (August 31 2006): TRG Pakistan Limited announced on Wednesday that it has signed a term sheet for a $35 million investment in the TRG group by an international investor consortium.

The investor consortium is comprised of Kingdom Zephyr Management Company (a joint venture between Kingdom Holdings and Zephyr Management L.P.), the Dutch Development bank FMO, and the Pan-African investment funds AfricInvest and Cauris Croissance -PR

 

[Owais]

Foreign debts increase to $1.430 bln

KARACHI: During the fiscal year 2005-06, foreign debts of Pakistan increased to $1.430 billion.

According to State Bank statistics, at the end of FY2004-05, Pakistan had $35.830 billion foreign debts, which rose to $37.36 billion with an addition of $1.43 billion.

The foreign debts of Pakistan in 1999-2000 were at $37.9 billion with its foreign exchange reserves were at only $1.96 billion.

Thus, the proportion of debt and foreign remittances in 1999-2000 was 19.33 percent, which dwindled to 2.84 per cent.

According to a high official, the proportion of Pakistan’s loans and GDP also decreased.

However, statistics revealed that during FY2005-06, debt servicing was also reduced to $2.71 billion and $2.89 billion. In contrast, during FY2003-04, debt servicing was at $4.96 and in FY2002-03 at $3.15 billion.

 

[Neo]

ISLAMABAD (August 31 2006): Minister of State Planning Commission Dr Akram Sheikh on Tuesday said the government was focusing on knowledge-based economy and required skilled manpower in manufacturing, service and agriculture sectors for rapid economic growth.

He stated this while addressing as the chief guest at the launching ceremony of Hino Dutro Light Duty Truck and Hino CNG urban Bus service manufactured for the first time in Pakistan.

The State Minister said the government was focusing on technical education so as to generate skilled manpower, adding "we have a very clear future policy with more concentration on knowledge-based economy".

He termed the improvement in the infrastructure critical for uplift of the common man and vowed for major improvement in next couple of years.

Akram Sheikh lauded the steps taken by the present government for economic stability in the country. The growth in auto-sector, increase in exports and better economic position of an individual reflected the economic growth in the country, he said.

 

[Neo]

ISLAMABAD (August 31 2006): The target date for completion of New Islamabad International Airport (NIIA) is last quarter of 2009. Minister for Defence Rao Sikandar Iqbal stated this in a written reply to a question from Samia Raheel Qazi in the National Assembly on Wednesday.

The MNA had asked about the present status of New Islamabad Airport and date of its completion.

According to the written reply of Defence Minister, the NIIA would be completed by the end of 2009 and Civil Aviation Authority (CAA) is constructing the New Islamabad International Airport (NIIA) on self-financing basis.

He said, the project management consultant has been selected with the approval of CAA Board. Contract agreement with the selected consultant Louis Berger Group of USA, was signed in January 06, 2006.

The contractor has initiated work from February 13, 2006, and Master Plan Phase is in progress, he added. The selection of design consultant, the Minister said is under process. Five firms have been short-listed from which the consultant is likely to be finalised by October, 2006.

Giving details, he said, the design proposals bids were opened on February 16, 2006, and the same are in the process of evaluation. The financial bids of technically top five firms were opened on May 25, 2006. The design of the consultancy proposal, he said, was presented to the CAA Board during its meeting on August 10, 2006.

About the construction contractor, he said advertisements for Expression of Interest (EoI) have been issued and process of short-listing is being followed. The contract is likely to be awarded in January 2007.

 

[Neo]

ISLAMABAD, Aug 30: Prime Minister Shaukat Aziz said on Wednesday that bilateral trade between Pakistan and China would cross $5 billion mark during the current fiscal year.

The premier was talking to a 16-member delegation of Chinese Communist Party Political Bureau, led by member of Politburo and Secretariat of Central Committee and Minister of Publicity Department Liu Yunshan who called on him in his chamber at the parliament house.

An official announcement said that the premier told the delegation that Karakoram Highway provides the shortest link for export of goods from western China and the ports of Gwadar and Karachi provide the shortest route for import of gas and oil to China.He said that this would help in increasing the volume of bilateral trade between the two countries particularly following the sighing of the early harvest programme (EHP) effective from January last.

The prime minister said as a result of the macro-economic stability, Pakistan had become an attractive destination for the private and public sector companies of China.

He said it was heartening to note that a large number of Chinese companies had started joint ventures with Pakistani companies for domestic consumption and export.

 

[Neo]

Thursday, August 31, 2006javascript:; http://www.dailytimes.com.pk/print.asp?page=2006\08\31\story_31-8-2006_pg5_12

* Standing cotton crop on around 365,000 acres damaged
* Cotton production could fall short of target by 365,000 bales

KARACHI: The recent heavy monsoon rains in Pakistan have damaged the country’s key cotton crop but other crops such as sugarcane and rice are expected to benefit from the rains, according to a senior government official.

Ministry of Food and Agriculture Agriculture Development Commissioner Qadir Bux Baloch said standing cotton crop of around 365,000 acres (147,710 hectares) had been damaged by the heavy monsoon rains this season.

The ministry carried out an assessment of the damage caused to the crop late last week and the findings of the assessment aren’t “very encouraging,” he told Dow Jones Newswires in an interview from Islamabad late Monday.

Baloch said the cotton crop this season covered an area of around 8.1 million acres, including 6.5 million acres in central Punjab, 1.5 million acres in southern Sindh and the remainder in western Balochistan and the North West Frontier Province.

“According to our estimates, the crop on 200,000 acres has been damaged mainly in areas along the rivers in Punjab,” he said. Out of this, about 150,000 acres were in Sindh while 15,000 acres were in the remaining two provinces.

Pakistan’s monsoon season usually coincides with the start of the cotton harvest and while moderate rains are considered healthy for the crop, the rains were very heavy this year.

Govt may revise cotton crop forecast downwards: The Agriculture Ministry earlier estimated that the 2006/07 cotton crop would be around 13.86 million bales, up from the 13 million bales in the previous year. The cotton harvest begins in September in Sindh and October in Punjab.

Baloch said increased moisture due to the heavy rains and overcast conditions throughout the country could also increase the possibility of a pest attack.

But he said he couldn’t predict how severely cotton production would be affected this season.

“I can’t give you any estimate. We will hold a meeting in the first week of October to assess the situation and to give an initial estimate about production this season,” he added.

In Pakistan, on an average one acre yields one bale of cotton, which means this year cotton production could fall short of the target by at least 365,000 bales.

Pakistan’s export revenues are largely dependent on cotton and textiles, accounting for around 60 percent of total exports. A good cotton harvest is considered vital not only for the textile industry but for the country’s economic prospects as well.

The country’s domestic cotton consumption is estimated to be 15 million bales in the current fiscal year. Pakistan imports about 1.5 to 2 million bales of high-quality cotton each year to meet the domestic shortfall.

Sugarcane and rice to benefit: Baloch said the above average rains this season would lead to increased availability of irrigation water that will benefit agriculture in general.

“Although the cotton crop has been damaged, heavy rains will be beneficial for other important crops like sugarcane and rice,” he added.

He said the 2006/07 sugarcane crop is estimated to be 50 million tons, up from the 44 million tons last year.

The rice output target has been set at 5.5 million tons this season, unchanged from last year’s level, Baloch added. “But after these rains, we expect actual production to be higher than 5.5 million tons,” he said.

Agriculture accounts for about 25% of Pakistan’s gross domestic product, which is forecast to grow by 7 percent in the current fiscal year, compared with a 6.6% growth recorded in the last fiscal year ended June 30.

According to government estimates, agriculture is expected to grow by 4.5 percent this year, compared with the 2.5 percent growth in the previous year. dow jones newswires