Pakistan Economy - News & Updates - Archive

[Janbaz]

Breakthrough in engineering exports

By our correspondent

LAHORE: Pakistan has emerged as a potential supplier of cane crushing machines in global sugar industry after the sale of 20,000 tonne capacity sugarcane crushing plant to a US based sugar manufacturer.

This was stated by the chairman Engineering Development Board Imtiaz Rastgar while talking to the media during the visit of the mill that succeeded in marketing its plant for the first time to a sugar mill of developed country. He said Pakistan’s engineering potential was not exploited earlier due to lack of marketing skills.

He said sugar industry is expanding at a very rapid pace globally as it also provides bio-fuel that is in great demand after increase in crude oil rates. He said global sugarcane crushing capacity has increased from 132 million tonnes in 1999-2000 to 150 million tonnes in 2005-06. He said the capacity is projected to increase to 200 million tonnes by 2012.

He advised the Pakistani manufacturers to exploit the global market through dedicated marketing to major sugar producing countries like Brazil, India and Indonesia. He said Engineering Development Board that would soon be converted in to an autonomous authority would fully facilitate the engineering sector in exploring global markets.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=42322

 

[Janbaz]

Major financial institutions satisfied with Pak performance

Staff Report

ISLAMABAD: Three reputed international financial institutions such as Citigroup, JPMorgan and Merrill Lynch’s have expressed satisfaction with Pakistan’s economy and indicated that the economic policy will achieve its medium-term goals and growth rate, according to Update on Pakistan’s Economy released by Debt Office, Ministry of Finance here on Saturday.

The report says that the first week of the month of February 2007 has been highly encouraging for Pakistan’s economy as three international financial institutions released their reports/economic analysis on Pakistan’s current and future economic outlook. JPMorgan market primer entitled “Pakistan: Just Push Play” gives a comprehensive outlook of the Pakistani economy in the New Year.

This was followed by another document by Citigroup entitled “Asia Sovereign Monthly-Finding Value in a Frothy Market”. In this update Citigroup reviewed the performance of Pakistan’s economy and future prospects.

Finally, Merrill Lynch’s economic analysis on Pakistan entitled “2007 to be a Challenging Year for Pakistan” was also unveiled. This Report reviewed the economic environment in Pakistan. All the three economic analysis have many good things to say on Pakistan’s economy and its future prospects. According to the JPMorgan, Pakistan’s economic performance in the past five years has been commendable. The industrial sector has performed well in recent years, growing at close to a double digit pace. The start of 2006-07 has been good with July-Sep. manufacturing growth is around 11.2%. JPMorgan believe that manufacturing will continue to post double-digit growth in the medium term, as new capacity comes on line in key sectors.

Rivalling the strong growth in industry is the recent track record in services. This is particularly true of growth in telecom and financial sectors. Pakistan’s financial sector has seen tremendous growth in the past few years and has been the driving force behind sustained above average services sector growth. The banking sector profitability has broken its own record year after year.

The boom in mobile phone subscribers and the number of motor vehicles on the road have provided the impetus for value addition in transport, storage, and communications sub sectors. Driven by these two sectors, the overall services are likely to continue to increase its weight in GDP in the medium-term.

The inflation in Pakistan has stayed persistently high, with the most recent reading in Dec. 2006 jumping to 8.9%. Surging exports, and an expansionary fiscal stance, and abundant liquidity have underwritten rapid output growth over the last three years.

These factors, together with the rapid rise in the energy cost have fuelled the country’s high inflation rate. The monetary policy, which had been very accommodative since 2001-02, gradually began to tighten starting in mid 2004. While the headline CPI remains alleviated, core inflation has fallen to 5.5% in Dec. 2006 from 7.4% a year earlier. The higher level of CPI stems from higher food prices still prevalent in the economy. Pakistan’s external account has seen significant swings, first into large surplus and now deficits of a similar magnitude.

On the other side of the balance of payments, the surge in capital inflows has been more than sufficient to cover the alleviated current account deficit, allowing foreign exchange reserves to be stable-to-higher.

Over the medium term, financing the current account deficit will require sustained inflow non-debt creating capital. This means that the recent success of the privatisation programme must continue, as must Pakistan’s increased attractiveness to foreign investors. In addition, Pakistan has shown the ability to access international capital markets at attractive spreads over low US treasury yields. The IMF, in its recent assessment has stated that it believes that Pakistan’s external financing prospects can remain favourable for several years.

According to the Citigroup Report, macroeconomic trends are supportive of an improving credit story in Pakistan, which is already increasingly reflected by its recent out performance of its dollar bonds (particularly the Pakistan 2036). In addition, Pakistan has succeeded in bringing down public debt from more than 90% of GDP in 2000-01 to an estimated 56% in 2005-06, which is estimated to further fall to about 53% in 2006-07. Pakistan this year again has been dogged by persistently high inflation of 8.9%, which is hence accompanied by a tight monetary policy by the SBP. Citigroup has also mentioned about the widening of current account deficit on the back of a strong aggregate demand. However, both JPMorgan and Citigroup agree that large inflows on the financing side of balance of payment including foreign direct investment has ensured a full financing of the current account deficit in 2005-06 and added to foreign exchange reserves. The prospects for a similar outcome in 2006-07 and beyond looked good according to these institutions.

According to Merrill Lynch, the strength of Pakistan’s economy in the face of various exogenous shocks in 2005-06 and the country’s future prospects in 2006-07 appears to be on track. In their opinion, the continuation of positive structural trends of Pakistan’s economy is due to the government’s far reaching macroeconomic and structural reforms initiated over the last several years, which subsequently have propelled the economy to an annual expansion of about 7 percent over the last five years. A new dynamism has taken hold in economic activity and social indicators have improved which together augur well for continued rapid development, said the Analysis. Merrill Lynch estimates that Pakistan’s economy is likely to grow by 7-7.5 percent in 2006-07 – backed by robust domestic consumption. They also see great progress in reducing inflation from 9.3% in 2005-06 to 7.75% in 2006-07.

Daily Times.
http://www.dailytimes.com.pk/default.asp?page=2007\02\11\story_11-2-2007_pg5_11

 

[Owais]

PM says PSO sell-off with maximum return soon


LAHORE (updated on: February 11, 2007, 02:39 PST): Prime Minister Shaukat Aziz on Saturday said that Pakistan State Oil (PSO) was the next state owned enterprise to be privatised.

'This is a national asset, government is trying to get maximum return for it,' he said while talking to mediamen at Governor's House here.

He said that the privatisation process was going on according to schedule.

About government's efforts to keep the prices of commodities stable, Shaukat Aziz said that government was taking necessary measures to keep the prices of daily use items at a reasonable level.

He referred to government's action to bring down the prices of cement and added that government had convened the meeting of the stakeholders to address the situation arising after the recent increase in the prices of the commodity.

On the current wet spell, Shaukat Aziz said the rains were going to have salutary effects on the crops especially wheat.

"I congratulate the entire nation on the in time rains," he said.

brecorder.com

 

[Owais]

Need stressed to raise level of trade between EU and Pakistan

KARACHI (February 11 2007): Despite gradual removal of barriers and liberalisation granted to Pakistan by the European Union it accounts for 0.3 percent of EU exports and imports.

Sabastian Edathy, Chairman of the Home Affairs Committee of the German National Parliament, speaking on "Regional Co-operation in South Asia in the German and European Perspective" at a local hotel on Saturday said that there was need to raise the level of trade and commerce between the EU and Pakistan. Karachi Council on Foreign Relations, Economic Affairs and law had organised this lecture.

Edathy said that EU is Pakistan's largest trading partner, accounting for 28 percent (3 billion Euro) of its export and 17 percent (2 billion Euro) of its imports in 2004. Pakistan is, however, only the EU's 43rd trading partner accounting for 0.3 percent of EU exports and imports. Germany consumed around 4.8 percent of Pakistan's exports which consisted mainly of textiles, clothing and agricultural products.

He said that while Pakistan's main export to EU were textiles, clothing and agricultural products, the EU's main export items were machinery (45 percent of 1.3 billion Euro) and chemicals (18 percent or 525 million Euro).

He said that in view of Pakistan's contribution in fight against international terrorism, from 2002 onwards the EU had lowered tariffs on Pakistan textile exports to the benefit of Pakistan's economy. "Both parties signed a co-operation agreement in 2001 which took effect from 2004 onwards and are currently negotiating the third generation of an agreement."

He said that Pakistan's exports to the EU had been increasing in recent years (7.3% in 2004, 3 percent in 2003, 3.8 percent in 2002 and 8.4 percent in 2001) but a lot was yet to be done to make it grow and become self-sustaining.

He said that the EU is a strong advocate for fostering regional co-operation and integration. "Pakistan on the other hand has also engaged in regional co-operation for quite some time."

Edathy said that Pakistan had been on the forefront of regional integration in Asia, which was evident from its role in Saarc, its accession into the Commonwealth of Nations in 2004 and becoming a member of Asean Regional Forum.

He said, "The EU takes the view that it can help consolidate the ongoing integration process through its economic influence in the region, its own historical experience of economic and trade integration and of dealing with diversity, and its interest in crisis prevention."

He said that the European Commission, the EU executive body, was in the process of designing a new. Broader programme of co-operation with Saarc, which should notably seek to promote the harmonisation of standards: facilitate trade, raise awareness about the benefits of regional co-operation, and promote business network in the Saarc area.

Talking about the assistance package given in January 2007 by the EU commissioner for external relations and neighbourhood policy, Benita Ferrero-Waldner, to Prime Minister Shaukat Aziz, said that it had been proposed to give 200 million Euro over the next four years.

"A major part of 200 million Euro will be spent on rural development in the NWFP and Balochistan to strengthen natural resource management, develop community infrastructure and to improve livelihoods and employment opportunities, thus contributing towards enhancing Pakistan's economic and social cohesion."

He said that the overall aim of EC operations in Pakistan was to fight poverty and to help Pakistan in following a sustainable growth path and a stable development.

Over a five-year period from 2002-2006, the European Commission has provided a total of 125 million Euro in development co-operation funding to Pakistan.

He said that the European Union was still in need of a common constitution and foreign policy without which its effectiveness would remain diluted. "There are issues that the member states have to sort out to avoid such difference of opinion as was witnessed on the question of Iraq - who should support the USA stand and who should not."

He said, "After what amounts to half a decade of European integration, the EU is now at a crucial point. Over the last 50 years it has grown almost fivefold in terms of member's states, and has been a major force in pacifying and sustaining economic growth in the region which has almost 500 million inhabitants. It is an economic heavy weight and aspires to become a political heavy weight, too."

Chairman of the Karachi Council on Foreign Relations, Economic Affairs and Law retired justice Saeed-uz-Zaman Siddiqui in his brief remarks spoke about the ineffectiveness of the EU in matters of trade and commerce vis-à-vis Pakistan.

http://brecorder.com/index.php?id=527369&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Pakistan going through exciting period: London Mayor

LAHORE (February 11 2007): London Lord Mayor Alderman John Stuttard has said that there is a huge untapped potential to further increase co-operation between Pakistan and the United Kingdom, particularly in the areas of trade and investment.

He stated this while speaking at the Lahore Chamber of Commerce and Industry (LCCI) on Saturday. LCCI President Shahid Hassan Sheikh, Senior Vice President Yaqoob Tahir Izhar and Vice President Mubasher Sheikh also spoke on the occasion.

Alderman John Stuttard appreciated the economic stability achieved by Pakistan during the recent years and said that Pakistan stands out within Asia as an example of economic growth. "Pakistan is going through an exciting period. Improvement in economy, high growth, increase in GDP and political stability achieved during the last seven years are unrivalled in its history and contributing to elimination of poverty," he added.

According to him, the openness of economy has encouraged global investors and international companies to expand their operations in Pakistan. The success of Pakistan's reform agenda has not been fully brought to the attention of the world. The success of Pakistan's reform agenda is a hidden secret, which needs to be publicised more.

Talking about Pakistan's efforts to promote regional co-operation, Shahid Hassan Sheikh said that Pakistan is ideally situated to be a regional anchor for peace and stability. Pakistan, he said, provides the shortest access to the sea for the landlocked Central Asian States as well as western China through Karachi, Bin Qasim and Gwadar Ports. He said that the economy of Pakistan has undergone a structural change under the present regime. "Pakistan's strength at present lies in textiles, however the automotive sector, pharmaceuticals and electronics/electrical/home appliances are showing great promise on the basis of a fast growing middle class, consumer financing and capacity utilisation," he added.

He further said the share of agriculture in GDP has fallen from 39 percent in 1969-70 to 21.6 percent in 2005-06. During the same period share of services sector has increased from 38.4 percent to 52.3 percent and manufacturing to 18.2 percent. This robust growth has mainly been contributed by wholesale and retail trade, transport and communications and finance and insurance sub-sectors, he said, adding, the finance and insurance sub-sectors registered a growth of 23 percent during last year.

Although it was a little lower than 29.7 percent of the previous year it was still a significant improvement. There was a considerable improvement in the profitability of the commercial banks and insurance companies. The financial institutions of the country have never had it so good. Their profits are at record levels due to high banking spread and unprecedented consumer financing, he added.

"The UK is the third largest country, which has made investment in Pakistan. British investment in Pakistan stood at US $224.5 million, which was six percent of total foreign investment made in Pakistan up to the end of 2005-06. About 70 British multinationals have invested in various sectors such as food, tobacco and cigarettes, textiles, chemicals, petroleum refining, oil and gas, pharmaceuticals, cosmetics, cement, power, communications, financial services, etc. The Lahore Chamber is particularly keen in British investments that could provide transfer of technology to Pakistan and help Pakistan become a knowledge-based economy," he told the Mayor.

LCCI Senior Vice President Yaqoob Tahir Izhar said that the Higher Education Commission of Pakistan is revamping the higher education in the country and setting up Technical Universities. "UK is the major source of knowledge and the Pakistanis would appreciate if the UK could consider setting up some state-of-the-art scientific and technical universities in Pakistan in consultation with the HEC besides setting up chairs of some universities of UK in the engineering universities of Pakistan. The UK may also consider granting of generous scholarships to Pakistani students. The Pakistanis living in the UK who have become an integral part of the British community are not only contributing to the British economy but have also been a major source of foreign remittance for Pakistan," he added.

LCCI Vice President Mubasher Sheikh said that London has a population of over 7.5 million but the local government system of the City of London is so deep rooted and disciplined that every civic responsibility is being discharged most efficiently. He observed that there are no traffic jams, no violations of traffic, no pollution, no littering of streets with dust and garbage etc. Lahore has almost the same population. He urged the delegation to extend co-operation so that Pakistan could be able to streamline its civic services.

http://www.brecorder.com/index.php?id=527409&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Lahore-Rawalpindi bullet train: Railways signs feasibility study deal

ISLAMABAD (February 11 2007): Pakistan Railways on Saturday signed an agreement with an Austrian and Spanish-based consortium to carry out feasibility study for high-speed train between Rawalpindi and Lahore. The study for laying high- speed track, to be completed in nine months, was signed at the Ministry of Railways here.

Minister for Railways Sheikh Rashid Ahmed and Secretary and Chairman Railways Shakil Durrani were present. General Manager Railways Assad Saeed signed the agreement. Managing Director Mr Santiago represented the consortium, M R Consult.

Officials from the embassies of Austria and Spain also were present there to witness the signing ceremony. Pakistan Railways has planned to start high-speed train service between Rawalpindi and Lahore before 2010. The train's speed is estimated at 250 to 300 kilometres per hour.

M R Consult is the firm which has won the contract for quoting the lowest rates of Rs23.97 million among eight bidding companies from USA, China, France, Sweden, Austria and Spain.

http://www.brecorder.com/index.php?id=527437&currPageNo=2&query=&search=&term=&supDate=

 

[Neo]

'Laws to be changed to suit investors'

ISLAMABAD (February 10 2007): The government on Friday promised outright changes in such laws which are being seen by international organisations, like the World Bank, as hurdle to foreign investment in Pakistan.

At a news conference here, Labour Minister Ghulam Sarwar said that the government was contemplating many options to consolidate laws, especially those related to hiring and maintaining industrial labour.

He told media that suggestions from potential overseas Pakistani investors in the process would be given due consideration at a conference here early next month. "We (government) would certainly be moulding laws in such a way that could attract more and more foreign investment," he said.

Many international organisations, including World Bank (WB), have of late been critical of what they call too many and too confused labour laws in Pakistan. They have several times pressed Pakistan government to consolidate such legislation's.

Sarwar said that the first ever 'Overseas Pakistanis Investment Conference', scheduled for March 5-7 in Islamabad, would provide guidelines to initiate altering these laws. More than 250 potential overseas Pakistanis have confirmed their participation in the conference being conceived as an opportunity for them to explore investment prospects back home.

Around 200 entrepreneurs from within the country would also attend the conference, titled as 'Opportunities that Belong to You' and being organised by Overseas Pakistanis Division.

Thirty-six participants will come from Saudi Arabia, 29 from UK, 22 from UAE, 12 from Qatar, and some foreign investors (partners of overseas Pakistanis) have also shown interest to attend the conference.

http://www.brecorder.com/index.php?id=527072&currPageNo=3&query=&search=&term=&supDate=

 

[Neo]

Analysts suggest caution as KSE touches 9-month high

By Salman Siddiqui

KARACHI: The outgoing week (February 06-09) is the seventh in sequence of closing the Karachi bourse on positive note. However, the process of much awaited technical correction was initiated on weekend.

KSE 100-Index moved ahead by another 255.01 points on week-on-week basis and closed above nine-month high record at 11,844.65 points despite of the bearish resistance it faced during week.

To calculate the future movement of the benchmark, it is worth mentioning here that 100-Index breached through 12,000 points on aggressive buying on Friday, but market failed to sustain this level. Corrections reversed the earlier gains after touching 12,047.72 points peak level this week.

Moreover, 100-Index has surged by 1,804.15 points or approximately 18 per cent in calendar year 2007 to date.

On the other hand, free float shares based 30-Index breached through 15,000 points level for the first time in its brief history, adding another 408.34 points during the week and closed at 15,023.93 points. It hit the intra week high of 15,336.87 points in the last twin-trading session at KSE.

Market on Monday (February 05) remained closed on account of Kashmir Day. It saw only four sessions all were volatile. Out of four, first three sessions of the week managed to close in green, while weekend twin-trading session closed in red.

“A deeper correction is expected in initial sessions of coming week that is still overdue, but in the long run market would sustain well above 12,000 points level in the ongoing financial results announcement season”, said Ahsan Mehanti of Shazad Chamdia Securities.

The daily turnover in the ready market remained above nine month high in their respective single sessions. The average daily turnover in this market increased significantly from 380.270 million shares of the last week to 433.815 million shares this week, therefore, the total turnover of the proceeding week stood at 1.735 billion shares.

Prominent buying in telecom and cement sectors besides uploading of other stocks injected another Rs69 billion in overall market capitalisation that reached to Rs3.226 trillion this week.

Ali Khizar of JS Research observed that unlike last few weeks, where heavy weight E&P and Banks rallied the market, telecom and cement sectors were the main drivers of the indices this week. Although the oil prices rebound to $60 per barrel in the international markets, E&P sector under performed the market by 3.1 per cent. PTCL was the best performer amid foreign buying and gained 12 per cent, thereby, leading the sector to outperform the market by 9.3 per cent, he added.

In cement, sector record high dispatches and rising prices kept the investors on the toes and the sector outperformed the market by 7.6 per cent. Moreover, PSO remained hot on the basis of news on the privatisation front as the scrip price has soared by 4.5 per cent on week on week basis, he added.

Muhammad Sohail, Head of JS Research, said, “It is hard to measure the investment strategy of foreign fund managers in conformity with sentiments prevailing at Karachi bourse. But persistently increasing inflow of foreign portfolio investment, that surged by another $110.055 million only in February 2007, gave a guess that they would continue to invest here.”

Special Convertible Rupee Accounts (SCRAs), which is the foreign portfolio investment account managed by SBP, reached record high at $491.693 million from July 2006 to date, according to SBP website.

Moreover, All Pakistan Cement Manufacturers Association (APCMA), at a meeting with Federal Minister for Industries and Special Initiatives, Jehangir Tareen Khan, fixed average retail price of cement at Rs260 per 50 kg bag on Saturday, would play its role but positive, another analyst said.

Cement price at preset stood at Rs275 per bag that surged from Rs180 per bag in a short span. Rs15 per bag is not a deeper cut and is not likely to affect market sentiments badly, he added.

The Continuous Funding System (CFS) value showed a marginal decline of Rs300 million and was recorded at Rs51 billion on Friday. This shows that genuine buyers are entering the market replacing the weak holders. Average CFS rates on the other hand, was recorded at 17.6 per cent - up by 103 bps.

On the future counter, open interest in February’s contract swelled by 18 per cent to Rs9.3 billion, whereas, cost of carry was down by 190bps to 3.2 per cent at the end of the week. Thus, some shifting from CFS to futures was also observed.

http://www.thenews.com.pk/daily_detail.asp?id=42317

 

[Neo]

IFIs paint rosy picture of Pak economy

By Khalid Mustafa

ISLAMABAD: Three international financial institutions (IFIs) including JP Morgan, Citigroup and Merrill Lynch have painted a rosy picture of Pakistan’s economy, saying the GDP growth is higher, poverty rates are down, FDI is up and fiscal deficits are down.

However, in their analysis and reports about Pakistan’s economy, the three IFIs mentioned that the current account balance had shown deficit, although overall external balances are healthy.

According to Update Pakistan’s Economy, the first week of the month of February 2007 has been highly encouraging for Pakistan’s economy as three international financial institutions released their reports and economic analysis on the country’s current and future economic outlook.

JP Morgan market primer entitled “Pakistan: Just Push Play” gave a comprehensive outlook of Pakistan’s economy in the new year. This was followed by another document by Citigroup entitled “Asia Sovereign Monthly-Finding Value in a Frothy Market”. In this update, Citigroup reviewed the performance of Pakistan’s economy and future prospects.

Finally, Merrill Lynch’s economic analysis on Pakistan entitled “2007 to be a Challenging Year for Pakistan” was also unveiled. This report reviewed the economic environment in Pakistan.

All the three reports and economic analysis have many good things to say on Pakistan’s economy and its future prospects. According to JP Morgan, Pakistan’s economic performance in the past five years has been commendable. GDP growth is higher, poverty rates are down, inflation is lower, FDI is up and fiscal deficits are down. However, the current account balance has turned towards deficit, although overall external balances are healthy.

Driving all of these improvements has been an environment of relative political stability under the pro-reform administration of President Musharraf and Prime Minister Shaukat Aziz.

Pakistan’s economy grew 6.6 per cent during 2005-06 - the third consecutive year of GDP growth exceeding 6 per cent compared to the rest of emerging Asia. Recent track record puts Pakistan’s GDP growth rate solidly in the top half of the region’s fast growing economies.

Pakistan’s government is targeting a 6-7 per cent range for real GDP growth over the medium term. Though this target may seem aggressive against a 10-year historical average of close to 5 per cent, recent structural reforms and privatisations have improved the overall business and investment climate substantially.

The industrial sector has performed well in recent years, growing at close to double-digit pace. The start of 2006-07 has been good with July-Sept manufacturing growth around 11.2 per cent.

JP Morgan believes that manufacturing will continue to post double-digit growth in the medium term, as new capacity comes on line in key sectors.

Rivaling the strong growth in industry is the recent track record in services. This is particularly true of growth in telecom and financial sectors.

Pakistan’s financial sector has seen tremendous growth in the past few years and has been the driving force behind sustained above average services sector growth. Banking sector profitability has broken its own record year after year.

The boom in mobile phone subscribers and the number of motor vehicles on the road have provided the impetus for value addition in transport, storage and communications sub-sectors.

Driven by these two sectors, overall services are likely to continue to increase its weight in GDP in the medium term.

Inflation in Pakistan has stayed persistently high, with the most recent reading in December 2006 jumping to 8.9 per cent. Surging exports, an expansionary fiscal stance and abundant liquidity have underwritten rapid output growth over the last three years. These factors, together with the rapid rise in energy cost, have fueled the high inflation rate.

Monetary policy, which had been very accommodative since 2001-02, gradually began to tighten in mid-2004. While headline CPI remains elevated, core inflation has fallen to 5.5 per cent in Dec 2006 from 7.4 per cent a year earlier. The higher level of CPI stems from higher food prices still prevalent in the economy.

Pakistan’s external account has seen significant swings, first into large surplus and now deficits of a similar magnitude. On the other side of the balance of payments, the surge in capital inflows has been more than sufficient to cover the current account deficit, allowing foreign exchange reserves to be stable-to-higher.

Over the medium term, financing the current account deficit will require sustained inflow of non-debt creating capital. This means that the recent success of the privatisation programme must continue, as must Pakistan’s increased attractiveness to foreign investors.

In addition, Pakistan has shown the ability to access international capital markets at attractive spreads over low US treasury yields. The IMF, in its recent assessment, has stated that it believes that Pakistan’s external financing prospects can remain favourable for several years.

According to the Citigroup report, macroeconomic trends are supportive of an improving credit story in Pakistan, which is already increasingly reflected by the recent outperformance of its dollar bonds (particularly the Pakistan 2036).

In addition, Pakistan has succeeded in bringing down public debt from more than 90pc of GDP in 2000-01 to an estimated 56pc in 2005-06, which is estimated to further fall to about 53pc in 2006-07.

Pakistan this year again has been dogged by persistently high inflation of 8.9pc, which is hence accompanied by a tight monetary policy by the SBP.

According to Merrill Lynch, the strength of Pakistan’s economy in the face of various exogenous shocks in 2005-06 and the country’s future prospects in 2006-07 appear to be on track. In their opinion, the continuation of positive structural trends of economy is due to the government’s far-reaching macroeconomic and structural reforms initiated over the last several years, which subsequently have propelled the economy to annual expansion of about 7 per cent over the last five years.

A new dynamism has taken hold in economic activity and social indicators have improved, which together augur well for continued rapid development, said the analysis.

Merrill Lynch estimates that Pakistan’s economy is likely to grow by 7-7.5 per cent in 2006-07, backed by robust domestic consumption. They also see great progress in reducing inflation from 9.3pc in 2005-06 to 7.75pc in 2006-07.

http://www.thenews.com.pk/daily_detail.asp?id=42323

 

[HASEEB66]

KARACHI AND LAHORE ESPECIALLY KARACHI NEEDS UNDERGROUND TUBE SYSTEM AND ALL OTHER CITIES NEED ESPECIALLY MIDDLE SIZE CITIES LIKE HYDERABAD SUKKUR FAISALABAD SIAKKOT GUJRAWALA..BAHAWALPUR..NEED RING ROADS..

 

[Owais]

World Bank cautions against go-slow towards dams

ISLAMABAD (February 12 2007): The World Bank's visiting team has cautioned that Pakistan's go-slow policy for construction of the new water reserviours could threaten the country's very survival. The delegation, headed by World Bank senior advisor on water and other related issues, David R.C. Grey, held detailed discussions with the officials on 'The future progress in water sector including implementation of water country strategy and note on Indus 21'.

The delegation came to Pakistan on February 7 and held detailed discussions with the officials of the Ministry of Water and Power, Economic Affairs Division (EAD), Ministry of Finance and Advisor to Prime Minister Dr Salman Shah till February 10.

Sources told Business Recorder on Sunday that the World Bank delegation presented the strategy paper to the officials during the meetings, which covered Pakistan's key issues relating to water. These in particular included the quickly shrinking water availability to farms; wastage of water and its improper utilisation; poor distribution system; and construction of the new big water reserviours.

Sources said that the officials presented details of the steps taken by the government for improvement in water utilisation and construction of new dams. The delegation was also given a comprehensive briefing on five mega dams under process for construction to increase water storage capacity to an optimal level.

The strategy paper also covers challenges confronting Pakistan as far as construction of mega dams, including Kalabagh and Basha dams.

They said that the delegation wanted implementation of the country's water strategy as a whole to help Pakistan address its water related issues.

The strategy said that Pakistan is an arid country. The balance between population and available water already makes Pakistan one of the most waterstressed countries of the world. It said that with rapid population growth it would soon enter a condition of absolute water scarcity. In the cultivable plains, rainfall ranges from about 500 mm a year along the Punjab border with India (which receives some rainfall from the summer monsoon) to only 100 mm a year in the western parts of Pakistan. These low precipitation levels mean that rain-fed, or barani, agriculture is not possible on a large scale in Pakistan.

Throughout history, people have adapted to the low and poorly distributed rainfall by either living along the river banks or by careful husbanding and management of local water resources. One of the greatest of human civilisations - the Indus Valley (Mohenjodaro and Harappa) civilisation flourished along the banks of the Indus. But, under natural conditions, population densities were necessarily low.

It counted challenges confronted by Pakistan and said that the first challenge for Pakistan is a political challenge which arose because the hastily-drawn lines of Partition severed the irrigated heartland of Punjab from the life-giving waters of the Ravi, Beas and Sutlej rivers (Figure).

The second challenge is a hydraulic challenge, because there is now a mismatch between the location of Pakistan's water (from the Indus, Jhelum and Chenab, the so-called western rivers) with the areas that had previously been irrigated from the Ravi, Beas and Sutlej (which are now 'India's rivers').

The third challenge is neither political nor hydraulic, but ecological. It is this last reality which gives rise to the third major water challenge which Pakistan has to face at and after Independence. Hundreds of billions of cubic metres water is now stored in the naturally-deep aquifers of Punjab alone. The groundwater table rose dramatically and in many areas water tables now reach the level of the land. And, these waters are rich in salts, which have been absorbed from the soil. After the water evaporated, the land is covered with a crispy layer of life-suppressing salt.

In the early 1960s it appeared that Pakistan was doomed, ironically, to a watery, salty grave. It added that the response of public and infrastructure partition both created Pakistan and did it in such a way that the very survival of the country was put in jeopardy.

http://brecorder.com/index.php?id=527623&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

779 percent increase in July-November trade deficit with India

KARACHI (February 12 2007): Pakistan's trade deficit with India is likely to cross $1 billion this fiscal year, as it was already over $416 million during July-November 2006 against $47 million in the same period of last fiscal year, depicting an increase of $369 million or 779 percent.

The State Bank of Pakistan statistics show that trade with India is not in favour of Pakistan and the country faces huge deficit. Statistics shows that Pakistan trade deficit with India has been reached to $ During this period, Pakistan's imports from India amounted to $495 million, while exports remained to only $78 million.

According to SBP statistics, Pakistan's exports to the India during July-November 2005 were around $127.59 million (Rs 7.665 billion), while imports were up at $174.31 million (Rs 10.458 billion), depicting a deficit of $47 million. During first two months of current fiscal year (July-August 2006), trade deficit with India amounted to $248 million--$101 million in July, and $147 million in August.

During September 2006, the deficit was of $65.8 million; October $65.7 million; and in November $35.5 million.

During last fiscal year (2005-06) Pakistan's total trade deficit with India was $506 million, but economic analysts' fear that at the end of the current fiscal year Pakistan's trade deficit with India may touch all-time high, crossing $1 billion.

Traders said that rising food items imports from India had put a negative impact on the balance of trade with India, causing gradual increase in Pakistan's trade deficit with that country.

They said that during last two years the government had taken some steps to boost the bilateral trade with India, but only India was getting benefit of these steps.

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[Owais]

Shaukat sees $6 billion FDI during current fiscal year

ISLAMABAD (February 12 2007): Prime Minister Shaukat Aziz Sunday said due to liberal, consistent and investment friendly economic policies of the government, there will be a record foreign direct investment of over six billion dollars during the current fiscal year.

Talking to a group of newsmen here at Prime Minister House, he said Pakistan, is fast becoming a regional hub for investment and attracted $3.2 billion foreign direct investment last year - the largest in the country's history, which is expected to increase $6 billion.

The Prime Minister said that in the last seven years the size of the country's economy and its per capita income have doubled and increased to dollars 846. He said due to over 7 per cent growth in the economic sector in the last five years, job opportunities have been increased and middle class is expanding.

Shaukat Aziz said there has been a huge potential for investment in many sectors including baking, services, information and technology and infrastructure improvement.

He said the international organisations have also ranked Pakistan as the top reformer in South Asia and tenth in the world.

Shaukat Aziz said due to its geographical location and its presence at the crossroad of South Asia, Central Asia and other countries of the region, Pakistan has a unique location for foreign investment.

He said the government has given importance to ensuring continued stability, consistency and continuity of policies and good governance so that the country can reach its full potential.

The Prime Minister said that the benefits of economic development and growth have started reaching the people and the government is making every effort to bring about a meaningful and positive change in the life of the common man.

He said Pakistan has been making efforts for energy, food and water security with the help of other neighbouring countries, as these are most important to promote progress and development.

He said that political and economic stability in the country is the result of the reform initiated and introduced by President Pervez Musharraf.

The Prime Minister said the parliament is functioning well, the opposition is playing its due role, and the media is free.

He especially mentioned over 50 TV channels working in the private sector and the freedom of press being enjoyed by the media.

The Prime Minister said Pakistan is also committed to ensure peace in the region and working with the world community as strong partner in the war against terrorism.

He regretted that some elements are wrongly associated Islam with terrorism saying that Islam is a religion of peace and promote interfaith harmony.

He said Pakistan and India are engaged in dialogue process to resolve the core issue of Kashmir according to the aspirations of the Kashmiris in a peaceful manner to ensure peace and security in the region.

The Prime Minister while referring to the recent visits of President General Pervez Musharraf to many Arab and neighbouring countries of Palestine, said Pakistan has been making sincere efforts to resolve the Palestine issue peacefully. He said there is need to promote interfaith harmony so that the gap between the West and Islam could be bridged.

The Prime Minister said root causes of the terrorism should be identified and resolve so that the efforts in the war against terrorism could be succeeded.


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[Owais]

Macroeconomic indicators favourable for poverty reduction in 2005-06: report
FAISALABAD (February 12 2007): The macroeconomic indicators have in general been favourable for poverty reduction as, despite rising oil prices, the widespread damage caused by the earthquake of October 8, 2005 and the rising domestic interest rate, 12.78 million people were brought out of poverty in the last four years.

For instance, the real GDP growth increased monotonically from 3.1 percent in 2001-02 to 8.6 percent in 2004-05, the year when poverty declined sharply. Although the real GDP growth of 6.6 percent in 2005-06 was less than the target of 7 percent, it surpassed the PRSP projected target of 6 percent.

According to Annual Progress Report 2005-06, released by PRSP Secretariat - Finance Division, the government has set the GDP growth target of 7 percent for FY07, which seems to be achievable.

Poverty Reduction Strategy, initiated in 2001, has been successful in reducing unemployment and poverty in both urban and rural areas of the country primarily due to high sustained growth during last four years.

PRSP expenditures were in line with Fiscal Responsibility and Debt Limitation Act 2005. They increased by 37.4 percent in FY06 with respect to FY05 to Rs434.6 billion. Increase in PRSP expenditures was seen in all regions in FY06 as compared to FY05.

PRSP expenditures, as percentage of GDP, increased from 3.8 percent in FY02 to 5.6 percent in FY06. To achieve universal primary education by 2015, there was a trend of spending largest proportion of pro-poor expenditures on education and largest proportion of education expenditure on primary education. Direct transfers, amounting to Rs 13.7 billion, were made to 5,363,000 beneficiaries in FY06. However, there is a need to enhance further micro facilities so that it can cater to all the poor and needy persons in the country.

Regarding the progress in intermediate indicators, the number of total functional public schools observed a decline since FY02. They declined by 5,130 schools since FY02 to 141,186 in FY05. Provision of basic facilities in public schools was dismal; urgent measures should be taken to improve them. Coverage of LHWs has been increasing since 1994. In 2006, 75 percent of target population was covered by LHWs.

Results of PSLM 2004-05 at district level have been discussed for the first time in this report, although comparable data for previous years for all indicators discussed are not available. Results are mixed. However, the analysis shows that a belt of districts, starting from Lahore in Punjab to Abbottabad in NWFP, Karachi, Hyderabad and Sukkur in Sindh and Quetta in Balochistan were much better than rest of the districts in the country in health, education and water supply and sanitation sectors.

These intra-district gaps may be narrowed down through investing more in districts with low levels in socio-economic indicators

Rebuilding in earthquake affected areas took off at a good pace, as the government of Pakistan's strategy avoided the mistake made in the post-tsunami regions, where governments relied on relief agencies and local officials, and the results proved slow and inefficient. ERRA released housing subsidy amounting to Rs 29.3 billion to 415,900 beneficiaries by November 2006.

The experience of monitoring the PRSP progress provided a good base, but surely it needs to be strengthened. Evaluation component of the M&E system needs to be strengthened.

Rising trends in poverty during the 1990s led to the launch of 'Interim Poverty Reduction Strategy Paper' (I-PRSP) in 2001. The full PRSP (or PRSP-I) was launched in 2003, which completed its tenure in June 2006.

PRSP-II for the 2006-09 period was under preparation and was expected to be launched very soon. This is the fifth annual report of the PRSP, which has monitored the progress in input, intermediate and output indicators during the fiscal year 2006 (FY06). While PRSP-I has completed its tenure, an attempt has also been made in this report to give an overview of the PRSP progress since its inception.

According to the report, PRSP initiative was successful on many fronts, although several challenges remain. GDP grew on average by nearly 7 percent during the last four years.

This recent growth is broad-based, and it has been underpinned by the macroeconomic policies of the government. Visible progress has also been made in reducing macroeconomic imbalances, reducing debt burden and accelerating efforts towards privatisation.

High economic growth created job opportunities and consequently unemployment rate declined from 8.3 percent in 2001-02 to 7.7 percent in 2003-04, which further declined to 6.5 percent during July-March 2005-06 period. Both the high growth and the decline in unemployment, along with considerable increase in pro-poor expenditure during the PRSP process, rise in per capita income, large inflow of remittances and direct transfers to the poor through zakat, Pakistan Bait-ul-Mal and micro-credit contributed in 10.6 percentage points decline in absolute poverty from 34.46 percent in 2000-01 to 23.9 percent in 2004-05. Although poverty reduced substantially, income inequality increased marginally during the same period.

According to Fiscal Responsibility and Debt Limitation Act 2005, poverty alleviation expenditures are not to be reduced below 4.5 percent of estimated GDP for any given year. PRSP expenditures adhered to this Act. These expenditures as percentage of GDP consistently increased from less than 4 percent in FY02 to 5.63 percent in 2005-06. The spending level on health and education sectors also showed considerable improvement. These high levels of spending contributed to improving the social indicators. The net primary enrolment ratio, adult literacy, and child immunisation increased substantially and a reduction in infant and child mortality was also witnessed. Access to safe drinking water also showed upward trends.

In short, the current economic and social conditions in Pakistan were better than in 2001 when the PRSP process was initiated.

However, there are many challenges ahead. High sustained economic growth is required for longer period to achieve the MDG/PRSP targets by 2015. There is a need to broaden the inclusiveness of economic growth to reduce income inequality level in the country. Despite a sharp decline in rural poverty, it is still almost double the poverty levels in urban areas. The challenge of further reduction in poverty particularly in rural areas requires more targeted interventions. Gender gaps still persist in literacy and primary school enrolment. District level variations are also high in literacy, school enrolment, child immunisation, pre- and post-natal consultation and water supply and sanitation. The Government of Pakistan is aware of these challenges and these would be addressed in PRSP-II.


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[Neo]

779 percent increase in July-November trade deficit with India

KARACHI (February 12 2007): Pakistan's trade deficit with India is likely to cross $1 billion this fiscal year, as it was already over $416 million during July-November 2006 against $47 million in the same period of last fiscal year, depicting an increase of $369 million or 779 percent.

The State Bank of Pakistan statistics show that trade with India is not in favour of Pakistan and the country faces huge deficit. Statistics shows that Pakistan trade deficit with India has been reached to $ During this period, Pakistan's imports from India amounted to $495 million, while exports remained to only $78 million.

According to SBP statistics, Pakistan's exports to the India during July-November 2005 were around $127.59 million (Rs 7.665 billion), while imports were up at $174.31 million (Rs 10.458 billion), depicting a deficit of $47 million. During first two months of current fiscal year (July-August 2006), trade deficit with India amounted to $248 million--$101 million in July, and $147 million in August.

During September 2006, the deficit was of $65.8 million; October $65.7 million; and in November $35.5 million.

During last fiscal year (2005-06) Pakistan's total trade deficit with India was $506 million, but economic analysts' fear that at the end of the current fiscal year Pakistan's trade deficit with India may touch all-time high, crossing $1 billion.

Traders said that rising food items imports from India had put a negative impact on the balance of trade with India, causing gradual increase in Pakistan's trade deficit with that country.

They said that during last two years the government had taken some steps to boost the bilateral trade with India, but only India was getting benefit of these steps.

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