Pakistan Economy - News & Updates - Archive

[Janbaz]

In post 589 it is said that the external debt has soared. What is external debt, it is same as trade deficit and why isn't it eliminated by the growing economy?

 

[Janbaz]

UK keen to multiply investment

By our correspondent

LAHORE: Yorkshire is a region of exciting opportunities for being gateway to 370 million customers in Europe and having a huge potential in engineering, information technology, biotechnology, healthcare, education and tourism for Pakistani businessmen.

This was stated by Mohammad Ahmad, leader of a 14-member business delegation from Yorkshire, while speaking at the Lahore Chamber of Commerce and Industry (LCCI) on Friday.

Ahmad said that Yorkshire is one of the fastest growing economic areas in the United Kingdom with solid industrial base.

He said that the volume of trade between Pakistan and the United Kingdom is bound to double in near future as consistency in policies and economic reforms are sending positive signals to the foreign investors.

UK Deputy High Commissioner Hamesh Danial said the UK being the largest investor in Pakistan, wants to multiply its investment and is taking all necessary steps in this regard.

LCCI President Shahid Hassan Sheikh invited the UK businessmen to invest in low-cost housing sector as there is a shortage of over 5 million houses in Pakistan.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45240

 

[Janbaz]

Govt encourages private power generation

By our correspondent

ISLAMABAD: Prime Minister Shaukat Aziz has said that the government is encouraging private sector participation in the power sector in order to meet the future needs. The government has announced a policy for power generation projects that has received encouraging response, he said. He was talking to Dato’ Sri Che Khalib Bin Mohammad Noh, President and Chief Executive Officer, TNB Liberty Power Ltd, Malaysia who called on him here on Friday. Liberty Power Ltd, Malaysia government-owned company established a power plant in Pakistan in 1995. Demand in power sector is growing by 9.5 per cent annually and the government is encouraging local and foreign private sector investments to keep a balance between demand and supply of electricity, the prime minister said.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45247

 

[Janbaz]

Pakistan faces trade deficit with India

OUR STAFF REPORTER
KARACHI - Federal Trade and Commerce Minister Humayyun Akhtar has said that Pakistan is facing problems in trade with India due to the imposition of non-tariff barriers on Pakistani products.
He was speaking at a press conference here on Friday. He said that Pakistan’s exports to India remained $350 million while imports from the said country amounted to $1 billion in this fiscal that led to more than half billion dollars deficit to Pakistan.
Humayun Akhtar was of the opinion that India, in spite of its MFN status given to Pakistan, was not reducing its non-tariff barriers on Pakistani products while Pakistan wants to resolve such trade related issues through the dispute resolution mechanism for which it has also voiced at South Asian Free Trade Agreement (SAFTA) meeting recently held at Kathmandu.
He also said that Pakistani products got the market access in last five years due active trade diplomacy of Pakistan and is also going to conclude Free Trade Agreements (FTA) with the countries of ASEAN including Malaysia, Indonesia and China. He added that negotiations are in pipeline for FTA with Thailand. “Pakistan”, he said “is also willing to sign free trade agreements with the countries of Gulf Cooperation Council (GCC) and for that purpose we have urged Saudi Arabia to use its good offices for the conclusion of this agreement”. Humayyun Akhtar also said that under the Third Generation Agreement with European Union (EU), the working group on trade of joint commission of Pakistan-EU is to discuss the trade related issues but still EU is not ready to sign FTA with Pakistan as these talks will not cover FTA talks.
Federal Minister observed that the global pattern of trade and commerce have exclusively changed and Pakistani products are facing stiff competition in international markets. He said that for enhancing the quality of Pakistani products, government has increased the Research and Development budget enormously and also ready to give all possible support to the exporters.
He further said that Pakistan has increased 110 percent of its overall export from 1999. He hoped that Pakistan will be able to reduce its trade deficit and observed that whenever the economy of a country show robust growth, the country had to face certain challenges which Pakistan is also facing like inflation, trade deficit and fiscal deficit. He also pointed out that the electricity rates are much cheaper in Pakistan than the regional countries like India, Sri Lanka and China while exporters must standardized the quality of their products.

The Nation.
http://www.nation.com.pk/daily/mar-2007/3/bnews2.php

 

[Contrarian]

Yes, Pakistan will sign FTA with every country in the world EXCEPT India. And India is so bloody keen on it.

 

[Neo]

In post 589 it is said that the external debt has soared. What is external debt, it is same as trade deficit

External debt is the part of a country's debt owed to creditors outside the country. This includes debt owed to private commercial banks, governments, or international financial institutions such as the IMF and World Bank.

...and why isn't it eliminated by the growing economy

You raise a very interesting question here. Before we restored the 'democracy' in 1988 our external debt stood at around $18 billion. Thanks to national corrupt crooks like BB and NS and Co the External Debt skyrocketed to $38 billion with 11 years and we became one of the most indebted countries in the world!!!

Once Mushrraf took over, his main concern was to reduce the debt remboursement by atleast 50% within ten years.

To achieve this goal he appointed internationally known banker Shaukat Aziz and put him incharge. At the same time he implemented FRL - Fiscal Responsibilty Law. The FRL is to prevent acquiring international credit without Parliamentry fiat. NA's aproval is required for any external loan so we won't have BB or NS era kind of monetary mismanagement by future governmets.

Then 9/11 happened and US initiated WoT. Ironaically Pakistan became one of the countries that took benefit from this development. Paris Club endorsed many of our heavy credits, waived some $4 billion and reschedulled a great part against soft terms. This was a major relief since billions that were lost from the budget as repayments could now be used to finance development projects.

To finance ongoing projects Pakistan still needs foreign credit as we simply can't pull it off from our own resources yet. Much of the short term loan, usually a very expensive loan due high interest, has been repayed by funds that bacame available by selling government assets, i.e. privitisation.

Aziz' economic reforms are designed to bring back the credit to $20 billion by 2015. I'm pretty optimistic he'll succeed.

Hope this answers your question.

 

[Janbaz]

Thank You for the reply brother. It gives me a clue of what it is.

 

[Janbaz]

Govt facilitating private sector

OUR STAFF REPORTER
LAHORE - Advisor to Prime Minister on Finance and Economic Affairs Dr Salman Shah said that the government was doing its job by facilitating the private sector.
Now the private sector has to come up with high quality of professionalism and innovations to compete in the changing global scenario, he said.
He said that government would provide subsidy in order to offset increase in international price of edible oil and price at national level would be maintained at the current level. Talking about the increase in the energy prices, he said that the energy price in the country was at higher than China and India. The advisor said that the 10 percent increase in electricity tariff was necessary following an increase Wapda’s input cost.
Earlier, addressing the function, the advisor appreciated the efforts made by CBR and its field formations. Giving a historical view of the economy he said that the county had come a long way form the brink of bankruptcy to a strong position in the international capital market.. He acknowledged the efforts of CBR in the public sector reforms programme.
While comparing the economy of Pakistan on the global level, Salman Shah remarked that Pakistan was now equated with the fast growing economies like China and India is maintaining growth rate at 7-8 percent.
Achieving 4.5-percent growth in agriculture sector is a big task which means we have to improve our resources improvement and modernise wholesale and retail markets, infrastructure and human resource management etc. We need to double our growth in all sectors after every 7-8 years.
Talking to journalists after attending a presentation at Regional Tax Office (RTO) on tax reforms, here on Saturday,he said that the role of CBR was very crucial. Highlighting the role of CBR, presently contributing 10-percent of the GDP, he stressed the need to improve it to 4-18 percent in next 10 years.
In order to achieve this objective he said that the ongoing 150 million dollar reforms programme in CBR is aimed at improving its systems and procedures, provision of world calls facilities to the taxpayers in the workforce along with enhancement in professional skills was a step in right direction.
Earlier, Regional Commissioner of Income Tax (RCIT) Haji Ahmed gave a detailed presentation on restructuring and automation. He underlined the commitment and determination of the government to launch comprehensive reforms in the CBR.

The Nation.
http://www.nation.com.pk/daily/mar-2007/4/bnews1.php

 

[Janbaz]

Clifton the sleepy town of yore turns into commercial hub

By Muhammad Yasir

KARACHI: Clifton one of the most posh, prestigious and peaceful localities of the city is witnessing rapid commercialisation and has become a bustling shopping hub of the city.

In an interview with The News Syed Izhar Ahmed a real estate consultant and Director of Clifton Estate infomed about the rising commercial activities and value of real estate in different blocks of Clifton.

Syed Izhar Ahmed said entrepreneurs see this area as best place for business. The area between Schon Circle and Three Swords is the most valuable and expensive commercial area of Clifton, he said.

The area around Schon Circle to Three Swords and from Dehli Colony roundabout to Boat Basin is being developed under a plan to build up big shopping centres and office plazas. Therefore the real estate prices in these areas have skyrocketed, he informed.

“Land facing main roads (near Schon Circle and Three Swords) has a current cost Rs0.25 million per sq. yard which was Rs40,000 per sq. yard five years back and it would increase with the passage of time,” he added.

He also said that the offices situated adjacent to these places are also very costly and being sold at Rs700 to Rs1000 per square feet, while the rental value has reached Rs0.3 million for 500 square feet.

These are the ideal places for shopping centres, fast food, cell phone franchises, banks, showrooms and departmental stores. Owing to relaxed regulations of Clifton Town administration and CDGK it is now a common trend that people are running their offices in residential houses.

Clifton being secure, un-polluted, and without parking and traffic jam hassles is very alluring for businessmen for establishing their offices, he said. Izhar Ahmed attributed the commercial trend to the rising rental value of homes, which has reached to lakhs. Homeowners take advantage of soaring rental value put up their houses on rent and live somewhere else enjoying attractive returns on their property.

Clifton being the oldest posh locality of the city had some very old and dilapidated houses with owners living in new homes or overseas. Shrewd investors started tapping this treasure a few years back, Izhar said. Investors purchased old rundown houses renovated or rebuilt the whole structure and placed them on rent.

Clifton developed for the British and their coterie of Nawabs and Sardars had plot sizes measuring 2000 to 5000 square yards, which were bifurcated over the generations to smaller and smaller sizes.

“The rental value of a 500-yard home starts from Rs40,000 per month and reaches up to Rs0.3 million per month according to its condition and location. The rental values were Rs15,000 to Rs0.1 million per month three years before,” he said.

Regarding value of shops, he termed that Zamzama is the best and expensive place because the business runs in full swings in the shopping plazas of this place.

Zamzama is known as the fashion hub of the new generation. He evaluated that small traders seek better revenue earning opportunities besides other shopping areas of the city so they are shifting their business to Clifton’s shopping centres thus increasing the demand for shops.

The land prices in Clifton block seven and eight are high and available at Rs150 million to Rs300 million per 500 sq. yard while the prices of land in block four, five, six are relatively moderate at Rs100 million to Rs150 million per 500 sq. yard. Moreover, the prices of land are lowest in Clifton Block one and two the least commercialised and the oldest of the vicinity. Here land is available at Rs8 million to Rs10 million per 500 sq. yard. Director Clifton Estate said the rate of land transaction is very low as compare to the transaction of houses and offices in Clifton, adding the demand of rental offices and shops is surging.

The News.
http://thenews.jang.com.pk/daily_detail.asp?id=45364

 

[Neo]

Thank You for the reply brother. It gives me a clue of what it is.

FRL works as I explained earlier:

Fiscal responsibility law: ministry claims public debt targets achieved

ISLAMABAD (March 04 2007): The Ministry of Finance has claimed that the targets of public debt, under the Fiscal Responsibility and Debt Limitation (CDRL) Act, 2005, have been achieved and, in certain cases, exceeded.

A 26-page 'Fiscal Policy' and 29-page 'Debt Policy' statements, issued by the Debt Policy Co-ordination Office (DPCO) for 2006-07, say that the targets of reducing revenue deficit, ensuring that public debt does not exceed 60 percent of total GDP and higher expenditures on social sector have been successfully met.

It claims that Pakistan has made considerable progress in fiscal consolidation over last six years and it has undoubtedly contributed to a sharp recovery in economic growth within a stable microeconomic framework.

The report on compliance with the FDRL Act 2005 requires the measures by the federal government to reduce total public debt and maintain it within prudent limits thereof and identify targets to reduce the revenue deficit to nil till June 13, 2008 and thereafter maintain a revenue surplus.

Revenue balance (Total Revenue minus current expenditure) averaged 0.4 percent of GDP for last four years (2003-04 to 2006-07). However, it is fractionally in deficit by 0.2 percent of GDP but budgeted 0.6 percent of GDP in surplus for 2006-07. It implies that the government has already eliminated revenue deficit ahead of target date 2007-08 envisaged in FRDL Act 2005.

FDRL Act requires to ensure "that within a period of ten financial year, from July, 1 2003 to June, 2013, the total public debt at the end of the tenth financial year does not exceed 60 percent of the estimated GDP for that year and thereafter maintaining it (public debt) below 60 percent of GDP) for any given year."

The Ministry claims that the government has already met, and actually exceeded, the requirement on the level of public debt as a percentage of GDP. Further, this limit has been realised within three financial years, instead of 10 years, as envisaged by the FRDL Act.

At the beginning of July 2003, the total public debt stood at 75.1 percent of GDP while at the end of June 2006, the same item stood at 56 percent of GDP. By end-September 2006, the public debt-to-GDP ratio stood at 50.1 percent of the projected GDP for 2006-07.

The Act requires to ensure "that in every financial year, beginning from the first July, 2003, and ending on June, 13, 2013, the total public debt is reduced by no less than two-and-a-half percent of the estimated gross domestic product for any given year, provided that social and poverty alleviation related expenditures are not reduced below 4.5 percent of the estimated gross domestic product for any given year and budgetary allocation to education and health, will be doubled from the existing level in terms of percentage of gross domestic product during the next 10 years."

The government has successfully met and exceeded this requirement in fiscal year 2005-06. Public debt stood at 61.5 percent of GDP by end-June 2005 and declined to 56.0 percent of GDP by end-June 2006, which implies 5.5 percentage points reduction in public debt to GDP ratio against specified target of 2.5 percentage points. By end-September 2006, the public debt-to-GDP ratio further went down to 50.1 percent, which implies a further reduction of 5.9 percent of GDP in one quarter of 2006-07. This is an indication that the government is fiscally prudent as required by the FRDL 2005. The important thing about this fiscal prudence is that it is not achieved at the expense of reduction in social sector and poverty related expenditure. These expenditures are 4.9 percent of GDP in 2005-06 and are targeted to rise further to 5.1 percent of GDP in 2006-07. It means legal obligation to keep these expenditures at 4.5 percent of GDP is well taken care of.

Expenditures on education and health are also growing briskly. "New guarantees, including those for rupee lending, bonds, rates of return, output purchase agreements and all other claims and commitments that may be prescribed, from time to time, for any amount exceeding two percent of the estimated gross domestic product in any financial year: Provided that the renewal of existing guarantees shall be considered as issuing a new guarantee."

The government met and exceeded this requirement for fiscal year 2005-06 where the total number of new guarantees issued amounted to Rs 14 billion or 0.18 percent of GDP which is fraction of what is required by FRDL 2005.

The Ministry says that a sound fiscal policy is essential for preventing macroeconomic imbalances and realising full growth potential. Pakistan has made considerable progress in fiscal consolidation over the last six years. The overall fiscal deficit is down from an average of 7.0 percent of GDP in the 1990s to 3.4 percent last year (2005-06) and underlying fiscal deficit is still below 4 percent of GDP in 2006-07. The associated public debt burden also declined sharply from over 100 percent of GDP to close to 50.1 percent in the same period.

It claims that the fiscal consolidation has undoubtedly contributed to a sharp recovery in economic growth within a stable macroeconomic framework. Every effort will be made to continue to improve the fiscal balance, notwithstanding the pressure generated by the earthquake of October 2005. Revenue performance on the other hand is better than the target and will help ease some pressure on the earthquake-related spending. Going forward, Pakistan will have to allocate substantially large resources for strengthening the country's physical and human infrastructure to sustain the growth momentum.

The challenge will be to significantly enhance Pakistan's tax-to-GDP ratio in order to generate the resources required to finance the development of both human and physical infrastructure.

The government will, therefore, have to make efforts to broaden the tax base ie to hitherto untaxed or under taxed sectors. Broadening of tax base will enable the government to reduce marginal tax rates, which will help further stimulate investment and production and will promote voluntary tax compliance.

Broadening of tax base will also ensure fair distribution of the tax burden among various sectors of the economy. The overall services sector including wholesale and retail trade as well as agriculture are potential candidates for broadening the tax bases, it said.

http://www.brecorder.com/index.php?id=534717&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Government hopeful of $6 billion investment by expatriates

ISLAMABAD (March 03 2007): The government is anticipating an investment of $6 billion by overseas Pakistanis, for which government provides a conducive atmosphere to attract more investment, said Minister for Labour, Manpower and Overseas Pakistanis Ghulam Sarwar Khan in a press briefing here on Friday.

A two days Overseas Pakistanis Investment Conference commencing from March 5 is the reflection of the government's initiative taken due to interest shown by overseas Pakistanis, he added.

The minister believed the conference would be a great success as they have received encouraging response from overseas Pakistani businessmen from 35 countries. About 454 overseas Pakistanis were registered for the conference, out of which 222 have confirmed their participation, who are likely to invest $6122 million, he added. He attributed an excess of $5 billion remittances expected this year from overseas Pakistanis.

Speaking on the incentives, the minister said, the government has kept a low figure of $2 million as minimum investment to encourage maximum overseas Pakistani investors. It has also invited local businessmen to set up joint ventures. Moreover, all stakeholders including, high government officials, industrialists, chambers of commerce and industries, and others who could facilitate the process are invited to attend the conference, he added.

Sarwar Khan said, the overseas Pakistanis are interested in 30 business areas, of which, main are: Power plants, construction, agro-farming, services, tourism light engineering, information and technology, pharmaceutical and export sectors.

The largest investment, he said, $500 million has been indicated in power sector, $496 million in construction, and $372 million in agro-farming. Whereas, a total of $906 million investment is conceived through services, tourism, light engineering, information and technology, pharmaceutical and export sectors, he added.

The largest number of confirmed participants is coming from USA, which is 64 followed by UK confirming 55 participants. The other important countries are from Middle East such as Saudi Arabia, UAE, Bahrain, Qatar, Oman etc. Investors from Italy and Canada are also participating in the conference.

He said, about 200 local businessmen have approached to participate in the forthcoming conference. One of the purposes of this conference is to provide opportunities to local businessmen for setting up their interaction with overseas Pakistanis.

He said that conference would provide an ideal opportunity to bring together all relevant stakeholders from federal and provincial governments, local business people and potential overseas investors for identifying areas of investment opportunities and forming trade and joint ventures partnerships.

Answering a question of providing incentives and a conducive environment, he said government has initiated a 'one window' operation for the convenience of investors and also assured for providing all kind of facilities like electricity, gas, roads etc.

To another question of security risks and law and order situation, he said, would be given special attention to build the confidence of the investors. However, he said, these are Pakistanis having deep roots in our society and are well aware of its culture. It would not be difficult for them to cope with the situation, but the government would do its best to encourage them and remove all their fears.

He quoted Bestway Group as a very good example of overseas Pakistani's investment, whose business in Pakistan has flourished enormously. Now they are going to install another cement plant that would be fourth to their credit in Pakistan. Such success stories would help investors a lot, he added.

Talking to Business Recorder, the minister said, there is no restriction of manpower export to Libya and we would be having agreements with them also. There is scope of teachers and paramedical staff in Libya, but the people are not keen to go to Libya, as the salary package is not very attractive as compared to Middle East, he added.

However, Libya discourages Pakistani labour on the ground as they misuse their entry as transit for European countries, he added. Federal Secretary Ministry of Labour, Manpower and Overseas Pakistanis Malik Asif Hayat and Managing Director OPF Mushtaq Ahmad were also present in the press conference.

http://www.brecorder.com/index.php?id=534327&currPageNo=3&query=&search=&term=&supDate=

 

[Neo]

Infrastructure financing to enhance public debt

By Mehtab Haider

ISLAMABAD: Pakistan’s public debt is set to increase in coming years owing to borrowing requirements for financing the upcoming bigger infrastructure projects in the next decade, said Fiscal Policy Statement 2006-07 issued by Ministry of Finance on Saturday.

“Although public debt is now on a solid downward footing, sustaining the momentum will be a continuing challenge,” the report states. The coming years, the report said, will see an increased borrowing requirement particularly in the foreign currency component to finance the infrastructure development program. The large infrastructure projects envisaged in the next decade will increase the debt burden if sufficient revenues are not generated from within the country.

The report says as a result of slower pace of growth in pubic debt as against GDP growth rate, public debt as a percentage of GDP has continued its declining trend. Public debt as share of GDP fell from 61.5 percent at the end of June 2005 to 56 percent at the end of June 2006, which is similar to the level of debt during the 1970s.

In another report of Debt Policy Statement, the finance ministry states at the end of FY06 total domestic debt stood at Rs2,312 billion which is 30 percent of GDP. The net increase in domestic debt was Rs153 billion from end of FY05 where domestic debt was Rs2158 billion. This represents a growth rate of 7.1 percent, which is slightly higher than the average growth rate since FY00 of 6.6 percent.

Therefore, a supportive yet prudent fiscal policy based on principles of sound macroeconomic fundamental is crucially important to lead the country to a higher growth trajectory.

Fiscal consolidation has undoubtedly contributed to a sharp recovery in economic growth within a stable macroeconomic framework. Every effort will be made to continue to improve the fiscal balance, notwithstanding the pressure generated by the earthquake of October 2005. Revenue performance on the other hand is better than the target and will help ease some pressure on the earthquake-related spending.

Going forward, Pakistan will have to allocate substantially large resources for strengthening the country’s physical and human infrastructure to sustain the growth momentum. The challenge will be to significantly enhance Pakistan’s tax-to-GDP ratio in order to generate the resources required to finance the development of both human and physical infrastructure.

The government, the report said, will therefore, have to make efforts to broaden the tax base i.e. to hitherto untaxed or under taxed sectors. Broadening of tax base will enable the government to reduce marginal tax rates, which will help further stimulate investment and production and will promote voluntary tax compliance.

Broadening of tax base will also ensure the fair distribution of the tax burden among various sectors of the economy. The overall services sector including wholesale and retail trade as well as agriculture sector needs to be fully taxed.

Total revenue for the fiscal year 2006-07 is estimated at Rs1163.0 billion as against Rs1,087.0 billion in the previous year (2005-06) thus projecting a growth of 7.0 percent. Tax revenue, accounting for 76.1 percent of total revenue is targeted at Rs885.7 billion, which is 15.5 percent higher than last year. Tax collection by the Central Board of Revenue (CBR) is targeted at Rs835 billion and accounts for 94 percent of the total tax revenue. The CBR tax collection is projected to rise by 17.0 percent over last year.

During the first quarter (July-September) of the current fiscal year (2006-07) total revenue amounted to Rs255.7 billion as against Rs236.6 billion in the same period last year, thus registering an increase of 8.1 percent. Tax revenue stood at Rs191.6illion, which is 20.9 percent higher than the corresponding period of the last year. Similarly, non-tax revenue amounted to Rs64.0 billion and declined by 10.7 percent in the same period. CBR tax collections are important component of tax collections and account for lions share in overall tax collection.

The Government is moving ahead on its agenda to improve expenditure management and fiscal transparency. The New Accounting Model (NAM) has been used for 2004-05 federal budget. However, because of capacity constraints at the provincial level the NAM is used in parallel with the existing model except only in the North West Frontier Province (NWFP), while implementation in other provinces will take some time.

The overall fiscal deficit is targeted at Rs373 billion or 4.2 percent of the projected GDP. On the basis of the developments on revenue and expenditure front, the overall fiscal deficit during the first quarter (July-September) stood at Rs86.7 billion or 1pc of GDP.

http://www.thenews.com.pk/daily_detail.asp?id=45358

 

[Neo]

March 04, 2007
Banks earn huge profit in 2006

By Shahid Iqbal

KARACHI, March 3: Banks in 2006 continued to make huge profits, higher than last year, but most of their income remained dominant of high banking spread which means positive for banks and negative for depositors.

The listed banks’ earnings in 2006 grew by 32 per cent to reach Rs60.1 billion. This is lower than previous year in terms of percentage, but higher in terms of cash.

Last year banks posted a rise in profit by 40 per cent and 82 per cent in 2004 and 2005, respectively. However, banking spread remained the highest. The banking spread was 7.4 per cent. The average spread for the year 2005 was 6.3 per cent as compared to 4.1 per cent in the year 2004, an increase of 220bps.

In 2006, earnings growth of listed banks continued as their profitability went up by 32 per cent to Rs60.1 billion versus Rs45.6bn in 2005.

The profits were driven mainly by the rising net interest income of the banks which rose by 33 per cent to Rs115bn in 2006 as compared to Rs86bn in 2005.

This was in contrast with 2002 to 2004 net interest income increase where growth was mainly driven by rising advances of the sector.

In 2006, growth in net interest income came from higher spreads between lending and deposit rates of the banking sector.

According to the SBP data, banking sector average spread in 2006 went up by 110bps to 7.4 per cent while growth in advances during 2006 was 18 per cent or Rs365bn.

According to a research report prepared by the JS Research, a brokerage house, non-interest income of the banks grew by 29 per cent to Rs43.2bn.

Although major contribution came from fee income (36 per cent share in the total non-interest income), its growth remained subdued as it grew by only one per cent to Rs15.6bn.

Dividend income showed a growth of 60 per cent, driven mainly by the record payout by mutual funds and others corporate.

Dividend income of the banking sector rose to Rs7.1bn in 2006 and capital gain income of the sector declined by 12 per cent to Rs3.8bn from Rs4.3bn in 2005.

“This is the fifth consecutive year of positive profitability growth posted by the banking sector of Pakistan,” said the JS report.

However, depositors were neglected by the banks as they kept most of profits by themselves as reflected in the high banking spread.

Despite concerns showed at the top level in Islamabad, nothing went in favour of depositors. The governor of State Bank, Dr. Shamshad Akhtar, promised during the last month for the year 2006 to bring some correction for providing relief to depositors, but nothing changed.

Banks have started offering higher returns, but they want to engage deposits for a longer period, which a common small deposit-holder can’t afford.

In 2006, National Bank earned a profit-after-tax of Rs17.022 billion, MCB Bank Rs12.142 billion, United Bank Rs9.468 billion, Allied Bank Rs4.397 billion, Bank of Punjab Rs3.804 billion, Faysal Bank Rs2.817 billion, Askari Commercial Bank Rs2.250 billion, Habib Metropolitan Rs2.096 billion, Bank Al-Falah Rs1.763 billion, Bank Al-Habib Rs1.761 billion, Soneri Bank Rs985 million, PICIC Commercial Bank Rs969 million, Mybank Rs493 million and NIB Bank Rs126 million.

http://www.dawn.com/2007/03/04/ebr4.htm

 

[Owais]

Economic policies attracting foreign investment: minister
SIALKOT (March 04 2007): Federal Privatisation and Investment Minister Zahid Hamid has said the foreign investors are making huge investment in the country due to prudent economic policies of the present government. In an interview with APP at Sialkot Public School here on Saturday.

He said government had made investment friendly policies to provide equal opportunities to the foreign as well as overseas Pakistanis to invest in Pakistan. Zahid Hamid revealed that due to good policies of government foreign investment amounting to more than 3.50 billion dollars had been made while more foreign investment is expected in a couple of months in the country.

The minister further stated that the process of privatisation was being carried out in a transparent manner in the country and as many as 163 transactions had so far been accomplished as a result of which government had obtained US 7 billion dollars through the business deals.

He disclosed that privatisation of Pakistan State Oil, Habib Bank Limited, United Bank Limited and National Bank would be undertaken within couple of months. Besides, the privatisation of Jamshoro power project, hotels and coalmines were in the pipeline, the minister added. Zahid Hamid said the government had made privatisation policy transparent and crystal clear keeping in view the national interests.

He said due to solid policies of the govt, the national economy had improved a lot, adding with the passage of time it will further be strengthened. Earlier, addressing annual sports day of Sialkot Public School the Privatisation Minister disclosed that the development work on cadet college Pasrur had been initiated and its inaugural ceremony would be held soon

http://brecorder.com/index.php?id=534758&currPageNo=1&query=&search=&term=&supDate=

 

[Owais]

SPI up 8.52 percent on year-on-year

ISLAMABAD (March 04 2007): The weekly Sensitive Price Indicator (SPI) for the week ending on March 1--SPI on Year-on-Year (YoY)--has gone up by 8.52 percent as compared to the corresponding week of last year, but it has decreased against 9.14 percent increase posted last week. After a long time, all income groups experienced a single-digit increase, indicating some stability in prices.

The income group up to Rs 3000 shows 9.84 percent increase YoY; Rs 3000-Rs 5000 9.38 percent; Rs 5000-Rs 12000 9.32 percent; and the group above Rs 12000 shows 7.73 percent increase. The Federal Bureau of Statistics (FBS) bulletin, based on 53 essential daily-use items from 17 urban centres, showed that 14 items showed increase in prices, 12 posted decrease, while 27 items remained unchanged during the week.

Among those registering increase were tomatoes, eggs, rice (basmati broken and Irri-6), firewood, mash pulse all of concern to the poor segment of society. Similarly, some of the daily-use items showing decrease during the week were onions, potatoes, garlic, gur, sugar, masoor, gram, moong, and LPG. But all the items were costlier YoY, except for tomatoes and sugar.

Out of 53 items, 43 were costlier on YoY with 29 by double-digit. The significant items consumed by the lower income groups, which were dearer on YoY basis were: onions 141 percent; rice basmati broken 24 percent; rice Irri-6 17 percent; salt 19 percent; garlic 15 percent; vegetable ghee 22 percent; gram pulse 46 percent; moong 21 percent; mash 38 percent; gur 6 percent; milk 13 percent; curd 11 percent; tea 13 percent; match box 23 percent; firewood 13 percent; kerosene 7 percent and gas by 10 percent.

However, a few items like tomatoes by 67 percent, potatoes by 26 percent, and sugar 13 percent have shown considerable decline in their prices over the corresponding week of last year.

The items of importance having substantial difference in their minimum and maximum prices from different cities are: onions (Rs 16 - 40 per kg), potatoes (Rs 8 - 20 per kg), wheat (Rs 11 - 15 per kg), masoor (Rs 36 - 56 per kg), moong (Rs 50 - 65 per kg), mash (Rs 60 - 84 per kg), gram (Rs 40 - 52 per kg), rice basmati (Rs 20 - 32 per kg), rice irri-6 (Rs 15 - 24 per kg), sugar (Rs 29 - 36 per kg), gur (Rs 30 - 50 per kg), eggs (Rs 42 - 55 per dozen), LPG (Rs 550 - 660 per 11-kg cylinder), and firewood (Rs 120 - 280 per 40-kg) etc.


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