Pakistan Economy - News & Updates - Archive

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Current account deficit $8.42bn in 8 months ​

Friday, March 28, 2008

KARACHI: Pakistan’s current account deficit widened to $8.421 billion in the first eight months of the 2007/08 (July-June) fiscal year, the State Bank of Pakistan said on its Web site on Thursday.

That compared with $5.857 billion in the same period last year. The deficit is equivalent to about 5.3 per cent of Pakistan’s gross domestic product (GDP), compared with a full-year target of 4.8 per cent.

“The current account deficit is a key macroeconomic imbalance that has emerged and needs to be addressed quickly and efficiently,” said Asif Qureshi, head of research at Invisor Securities Ltd.

Analysts say the widening of the current account deficit is mainly due to rising commodity prices, including oil and food, and a short-term solution could be to reduce domestic demand through fiscal and monetary policy.

Pakistan’s trade deficit widened to $2.104 billion in February from $1.30 billion in February last year. The consumer price index rose 11.25 per cent in February from a year earlier. Analysts said the new government needed to tackle fiscal and external imbalances or they could lead to a downgrade in Pakistan’s sovereign ratings.

Standard & Poor’s maintained its negative outlook on Pakistan this week, despite an improvement in the political outlook with the appointment of a new prime minister, saying the country still faced tough decisions. It said Pakistan’s ratings could be lowered if the government proved too distracted to deal with growing economic problems.

Current account deficit $8.42bn in 8 months

 

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‘Power cost for industry up 30pc in one year’ ​

Friday, March 28, 2008

LAHORE: All Pakistan Textile Mills Association (Punjab) Chairman Akber Sheikh has slammed continuous increase in electricity tariff, raising the cost of power by 30 per cent in just 12 months, which has put an unbearable burden on the cost of doing business and has broken the back of the crisis-hit textile sector.

Talking to newsmen, he deplored the National Electric Power Regulatory Authority had notified three back-to-back tariff increases, first 10 paisa Neelum-Jhelum surcharge with effect from January 1, then around 10 per cent hike in power tariff on Jan 14 and then an additional increase of around 28 paisa per unit from March 1.

Akber said an impression was being given by NEPRA and carried in government circles that electricity rates had been raised by only 9 per cent, whereas the cumulative impact of these increases exceeded 21 per cent within one month. In addition to the recent raise in power tariff, he said, the NEPRA also pushed up electricity tariff by 10 per cent in July 2007.

To make matters worse, he added, the textile sector had been made the scapegoat of merciless load-shedding by Pakistan Electric Power Co (PEPCO). Earlier, during winter months (Jan and Feb 2008) the industry was forced to endure load-shedding for a record 56 days, despite initial assurances from PEPCO that power cut would only be for 15 days.

He said “now PEPCO has once again targeted the textile sector for two-hour daily load-shedding since Feb 19.” In a typical pattern of misrepresentation, the PEPCO informed APTMA that load-shedding would be conducted only till March 23 due to disruption in gas supply. However, power outage continued to date with no end in sight on one flimsy pretext or another.

The APTMA (Punjab) chairman questioned “why is the textile sector being targeted? Can the national economy withstand total annihilation of its most important sector?

“APTMA demands that authorities take notice of the situation and provide urgent relief in shape of a review of the exorbitant tariff increase by NEPRA with a view to revising that downward and/or sharing the burden with the textile sector as in the past.”

Besides, it also demanded that instead of taking the easy way out by targeting textiles with discriminatory load-shedding at every opportunity, the government should ensure uninterrupted power supply for the export-oriented textile industry.

‘Power cost for industry up 30pc in one year’

 

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US Ramada Plaza to franchise brand name ​

Friday, March 28, 2008

KARACHI: American hotel chain Ramada Plaza, has agreed to franchise its brand name to Karachi Airport Hotel, which up until last month, was run by the management of European market leader Accor, The News learnt on Thursday.

Mercure, one of the brands of Accor, was running the managerial affairs of the airport hotel opened in March 2007, as part of a Civil Aviation Authority (CAA) drive to utilise its commercial estates effectively.

In February last, Accor, which has over 4,000 hotels and other brands like Sofitel and Novatel around the world, announced the annulment of its contract with local United International Group (UIG), which owns the airport hotel property, without citing any reasons.

Ideally located at a few minutes drive from Jinnah International Airport Terminal in the security limits of CAA, Grand Mercure Karachi International Hotel was the first well-known foreign brand to come to Pakistan in the past many years. “We will file a lawsuit against Accor in Pakistan,” said M Azeem Qureshi, Director Operations at UIG. “They have violated terms of the agreement whereby Mercure was supposed to run the management till its replacement was found.”

Deliberating on reasons behind Accor’s rollback, he said hotel operator believed that UIG was not letting its management work by questioning its performance. “(Grand Mercure) management had failed to meet revenue target, and expenditures crossed initial estimate as well,” he said reflecting on the cause of disagreement, and added that this forced UIG to seek an explanation. “I think that offended them.”

Qureshi said UIG will use Ramada Plaza’s franchise while retaining existing human resource as part of the management. Notwithstanding the swift change in managements of Karachi Airport Hotel, the hotel industry in Pakistan is poised to see a lot of growth in the coming years, provided that the security situation improves, people associated with hospitability business say.

Hashoo Group, which runs Pearl Continental and Marriot hotels in Pakistan, has already announced the introduction of a new network of budget hotels across the country, in a bid to target the booming middle class that is looking for better standards of hospitality.

Lack of good hotels is believed to have impeded tourism growth in the country, which is blessed with diversified cultures, beautiful scenery and historical sites. Tariq Bin Yousif, General Manager of Destination of the World, an international tour facilitator, regretted that a lot of potential remains unexploited because of insufficient number of resorts. Citing Karachi as a case, he said more than a quarter million picnickers throng the seaside every weekend, and have to use the shabby huts in the absence of a hotel.

Chairman Pakistan Hotels Association Mustansir Zakir said there was a wide room for hotel business to expand here since the country had only 10-15 international quality hotels. However, he said government assistance in terms of right policy decisions was necessary. He said 8-10 per cent bed tax in addition to a 15pc sales tax, has artificially taken up the room rent, making hotels an expensive proposition. “Bed tax is charged on basis of capacity available in a hotel,” he said, adding the tax should be collected on basis of actual utilization of capacity. “We would really want the new government to waive bed tax, at least now."

US Ramada Plaza to franchise brand name

 

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UK to invest £480m for trade development ​

Friday, March 28, 2008

KARACHI: British Deputy High Commissioner Robert W Gibson has announced that the UK Department of International Development has planned to invest 480 million pounds for trade development and education in Pakistan.

Speaking to members and office-bearers of the Karachi Chamber of Commerce and Industry (KCCI) on Thursday, he said the EU was considering a Free Trade Agreement (FTA) with Pakistan and Britain was fully supporting the move.

Gibson said another eight to nine British trade delegations are prepared to arrive here within the next six months as Britain is keen to strengthen trade relations with Pakistan and is working actively to enhance the partnership and cooperation.

He further said a special team is working here in the country which has know-how of the local market. This team then provides information to potential investors back in the UK and advises them where to invest.

Gibson said the British government was very happy with the successful free and fair elections that took place in Pakistan and looked forward to working with the new government. He added this has helped enhance the country’s image considerably across the western market and hoped that it would bring in more revenue for the country now.

UK to invest £480m for trade development

 

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Pakistan rice exports seen lower at 2.8m tonnes​

ISLAMABAD: Pakistan’s rice exports will reach about 2.8 million tonnes in the year to June, about 300,000 tonnes less than a year earlier, a top rice trader said on Thursday.

Pakistan is due to produce about 5.5 million tonnes of rice in the 2007-08 fiscal year and after domestic consumption should have an exportable surplus of about 3.3 million tonnes, said the chairman of the private Rice Exporters Association of Pakistan.

But shipment problems and power shortages that have affected rice processing would limit the ability to export more rice.

“Exports this year will not be more than 2.8 million tonnes. It will be a miracle if it goes beyond that,” said Azhar Akhtar, chairman of the association that handles most rice exports.

“Demand is there, stocks are there, business is there, but non-availability of vessels is the main problem,” he said. Pakistan produced 5.4 million tonnes of rice last year and exported 3.12 million tonnes.

Rice exports in the first eight months of the fiscal year to February were 1.6 million tonnes, against 2.1 million tonnes in the same period last year, a 23 percent drop, according to data from the state Federal Bureau of Statistics.

While Basmati rice exports had increased by more than 12 percent to 655,506 tonnes, the export of other varieties fell by 36 percent to 983,112 tonnes, the data showed. Pakistan and India are the two countries that grow and export Basmati rice, while the Middle East and Europe are the main markets.

Rice, a high valued cash crop, accounts for about 8 percent of Pakistani exports and 1.2 percent of gross domestic product. Pakistan has faced power shortages in recent months which have hurt industrial activity including rice processing, Akhtar said. “The government will have to come up with alternative arrangements such as natural gas to ensure maximum industrial production and to increase export volume,” he said. But despite the lower volume of exports, Pakistani exporters had earned more than the previous year because of rising global rice prices. Pakistan sold 1.6 million tonnes of rice for $795 million in the July-February period against $730 million it earned by exporting 2.1 million tonnes rice in the same period of the previous fiscal year, according to the official data. “Given the upward global pricing trend, in spite of exporting less, we will achieve the target of $1.5 billion worth of rice exports for the year,” Akhtar said.

Daily Times - Leading News Resource of Pakistan

 

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Card Payphone industry shifting towards wireless networks​

KARACHI: Card Payphone Providers (CPP) sector is continuously losing its business charm due to rising popularity of wireless based networks across the country.

According to the report issued by Pakistan Telecom Authority (PTA), the connections for Public Call Offices (PCO) based on fixed-line have declined sharply by 50 percent for last one year while Wireless Local Loop (WLL) and mobile PCOs have witnessed more than 85 percent growth in the same period.

There were around 188,438 Fixed-line PCO’s all across Pakistan at the end of September 2006 which has declined to 121,358 at the end of December 2007. On the other hand, there was no Mobile PCO in 2006, which has reached 57,936 at the end of December 2007 while WLL PCO’s have increased from 156,550 in September 2006 to 262,116 in December 2007. A significant number of entrepreneurs, who run their PCO in the country, are replacing rapidly their Fixed-line PCO system into WLL for its mobile portability, PTA report added.

Currently there are 300 card pay phone companies operating in Pakistan. Around one year back there were 336 card pay phone companies operating, out of which 36 have cancelled their license. It is mentioned that a number of new companies have applied for Voice Class Value Added services license during the last one and a half year. Now, these companies are joining hands with the existing mobile Companies to establish Mobile PCOs rather than fixed line PCO.

The three private cellular phone giants— Mobilink, Telenor and CMPak have been witnessing growth in the WLL and Mobile PCOs since they got license from PTA. Similarly, some old players of CPP industry themselves got licenses for WLL and now they are offering services on their WLL networks. It has been observed that total card payphones have increased by about 43 percent at the end of December 2007 compared to the same period of last year. Total payphones reached to 471,410 at the end of December 2007, which were 321,155 at the end of December 2006. When compared with last quarter, Payphone number has increase by about 19 percent.

A comparison of payphones by services show that Fixed-line PCO share has declined from 42 percent in March 2007 to 32 percent in December 2007 while the Mobile and WLL PCOs share has increased by 3 percent and 7 percent respectively in same period. Telecard is the main player since 1990 for providing PCO services in Pakistan, which still holds its position in this industry. However, the group has shifted most of its business from fixed- line of PTCL to WLL at their own network.

Currently, more than 38 percent PCO’s belong to Telecard group which counts 179,021 at the end of December 2007. PTCL comes at second place in card Payphone business that still has 151,358 PCOs at their fixed-line and WLL networks. It is expected that Mobile CPP industry will further grow in coming years.

Daily Times - Leading News Resource of Pakistan

 

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Italy converts $110m of Pak debt into aid​

ISLAMABAD: A bilateral debt swap agreement has made $110 million available to Islamabad for development in the social sector, Italian Ambassador Vincenzo Prati said on Thursday.

Prati told Daily Times that the agreement, which was signed in 2003 and came into effect at the end of 2007, had converted some of Pakistan’s debt to Italy into aid for developing the social sector, with a focus on education and health. He said Pakistan would use the money over five years.

He said that according to the agreement Pakistan would deposit 20 percent of the total debt amount in a special account every year.

Prati said that under the initial 2003 agreement, Italy had waived half of the debt, and converted the remaining $110 million into aid for social sector development.

Prati said that Italy wanted the aid to be spent in the underdeveloped areas of NWFP, Balochistan, Azad Kashmir, and Northern Areas. He said the money would be spent through UN agencies, non-government organisations and relevant Pakistani government departments.

Daily Times - Leading News Resource of Pakistan

 

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Pakistan must act to avert economic crisis: World Bank ​

ISLAMABAD (March 28 2008): Pakistan must make rapid adjustments and reforms to avert an economic crisis as it suffers the impact of high international prices for petroleum and food such as wheat, the World Bank said on Thursday. Pakistan was likely to miss this year's targets for its fiscal deficit, inflation, current account deficit and foreign exchange reserves, the bank said.

"There is not yet a crisis, but the economic picture for Pakistan is not good," said World Bank Vice President Praful Patel at the end of a three-day visit. The news comes as a new coalition government is set to take power.

Patel said Pakistan had seen robust economic growth over the past few years and foreign direct investment and remittances had maintained pace and the stock market had posted gains.

But growth could be maintained only if the country adjusted to the new global reality, which included high prices for oil and food such as wheat. "Any adjustment will be painful ... there must be an appropriate safety net for the poor," Patel said in a statement. Patel held talks with leaders of the new government and its economic advisers and said they had asked for World Bank support.

Analysts say widening fiscal and current account deficits and rising inflation are the major economic problems facing the new government. Standard & Poor's Ratings Services said on Tuesday it was maintaining its negative outlook on Pakistan, and warned that despite a more positive political outlook, Pakistan's ratings could be lowered if the new rulers proved too distracted to deal with problems.

Pakistan's current account deficit widened to $8.421 billion in the first eight months of the 2007/08 fiscal year to June, compared with $5.857 billion in the same period last year.

The fiscal deficit for the first half of the financial year, to the end of December, was 3.6 percent of gross domestic product compared with 1.9 percent in the same period the previous year. The consumer price index, a key indicator of inflation, rose 11.25 percent in February from a year ago. "Pakistan will need the international community's support over the coming months," Patel said.

"If action is not taken, the economy will start to falter but with the right policies and strong support from multilateral and bilateral partners, we believe the high growth and poverty reduction path can be maintained."

Despite the looming problems, Pakistan's main stocks index, one of the best performing in Asia last year, has gained 8.5 percent since the beginning of the year and 6.4 percent since a February 18 general election.

Business Recorder [Pakistan's First Financial Daily]

 

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Gilani hints at reviewing policies ​

ISLAMBAD (March 28 2008): In the first-ever briefing, Prime Minister Syed Yusuf Raza Gilani on Thursday hinted at overall review of the existing policies for seizing downward trend in the economy, besides providing immediate relief to under-privileged sections of the society.

He stressed a more active role of private sector in policy making to make economic boost happen in a short span of time. Sources said the Prime Minister asked the economic managers to give him another presentation soon after the Cabinet sworn in to make much-needed changes for making the economy vibrant.

During the presentation, the Prime Minister was informed that Pakistan was facing Herculean task on economic front due to longest-ever spell of high petroleum product prices in the international market, worsening law and order and relatively poor performance of various important sectors of the economy during the first 8 months of the current fiscal year.

The presentation by the government economic team on the economic situation covered available financial resources, dip in exports resulting in widening of trade gap, below target revenue collection, foreign debt and resources required for servicing, privatisation proceeds matured so far, petroleum products' import bill and subsidy provided by the government to protect consumers till February this year.

The Prime Minister was informed about the measures taken for minimising trade deficit including reduction in development and non-development budget for 2007-08. He was informed that non-development expenditure and development budget were slashed to make some resources available for the elected government for possible relief to people from increasing prices of essential items.

Talking to this scribe, a member of the government economic team said "Thursday's presentation to the Prime Minister was an introduction of what policies were bring followed and what steps could be taken to meet the economic challenges".

Business Recorder [Pakistan's First Financial Daily]

 

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Sino-Pak coal-fired power corporation proposed ​

ISLAMABAD (March 28 2008): Pakistan and China are likely to establish a joint power corporation, main objective of which is stated to be making arrangements for setting up coal-fired power plants using imported and domestic raw material, sources in Planning Commission told Business Recorder.

The sources said that the issue would be part of the agenda to be discussed during the forthcoming visit of President Pervez Musharraf to Beijing. The project had been proposed by Pakistan's envoy to China Salman Bashir, in a letter to Secretary, Foreign Affairs, a copy of which was also faxed to Deputy Chairman of Planning Commission, Dr Akram Sheikh.

"Main objective of the proposed Pak-China joint power corporation would be to creating 3000 MW power generation capacity in Pakistan, based on imported coal in the short-term ie two to five years and on domestic coal in the medium and long-term, and ultimately by 2030, achieving the target of generating 20,000 MW through coal," the sources added.

The corporation would have a 50:50 equity partnership between the two countries with power supply companies and development financial institutions of the public sector as shareholders.

Being in the public sector, it would provide added security to financing through sovereign guarantees, thereby expediting funds, licensing and regulatory processes, the sources said, adding that fewer propriety issues were expected where exclusive mining right was required.

Pakistan has planned a number of major hydropower projects like Diamer Bhasha dam, Kalabagh dam and Neelum- Jhelum hydropower project in addition to numerous smaller hydroelectric power projects in the Northern Areas, NWFP and Azad Jammu and Kashmir (AJK) to increase its hydel generation capacity from the existing 6460 MW to 32,660 MW by 2030.

However, the time required for the implementation of these projects is too long and capital intensive. For oil-based power generation, the plan was to increase capacity marginally from the current 5400 MW to 7760 MW by 2030 as the rising cost of oil had made it uneconomical for energy production, the sources quoted Pakistan envoy as saying in his letter.

In the coal sector, Pakistan plans to increase its existing capacity of 160 MW to around 20,000 MW by 2030. Similar increases in power generation capacity were envisaged in the gas, nuclear and renewable fields. The total power generation capacity of Pakistan is expected to increase from the present 20,000 MW to more than 160,006 MW by 2030.

Coal-based power generation appears to be the best option for overcoming the energy deficit of Pakistan under the existing circumstances. It has been almost five years since coal reserves of 185 billion tons were estimated at Thar, but the private sector have not been able to make any headway in converting this abundant resource into tangible power generation.

According to the envoy, it appears that to establish coal power plants on a fast track, the projects should be launched in the public sector with equity participation of power companies and development financial institutions from both Pakistan and China.

Initially, coal power plants based on imported coal can be set up in the coastal areas of Pakistan near Karachi in the short-term ie two to three years. "In the intermediate term four to five years, we can set up coal power plants based on domestic coal, like Thar, Sonda Jheruk, Lakhra and Badin," he proposed.

According to him, China has a good experience in coal power generation. In China, more than 75 percent of its energy needs are being met through coal. In 2006 and 2007, China added more than 75,000 MW/year to its national grid.

China is also phasing out its older inefficient coal power plants of capacity 100 MW or less, more than 553 low efficiency plants 50-100mw capacity have been closed in 2007 alone, and instead, it is relying more and more on modem power plants with 300-600 MW capacity based on the latest ultra critical technology as well as advanced coal-fired integrated gasification combined cycle. Chinese companies and financial institutions have also established coal power plants successfully in Indonesia and Bangladesh.

A Chinese company M/s Sinocoal, International Engineering Group (SCIEG), which conducted the technical part of the feasibility study by M/s Shenhua on Thar coal and has recently expressed interest in designing the coal mines.

Chinese companies could generate power from coal by first converting into slurry, they thought that such a process might also prove useful for Thar coal, suggesting that to make Thar coal profitable, Pakistan needed to review not just the power tariffs for coal-based energy, but also the whole policy for coal, including mining, production as well as its import and export.

"They have offered to assist Pakistan review its policy provided they were formally requested through the Chinese government," the sources maintained. The sources said that if the proposal were approved, it would be made part of Pakistan-China Joint five-year programme for economic co-operation between the two countries.

Business Recorder [Pakistan's First Financial Daily]

 

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Economy likely to remain strong: Escap survey ​

ISLAMABAD (March 28 2008): Pakistan's economy is expected to remain strong in 2008, with 6.5 per cent growth despite political uncertainties and some other disturbances, the United Nations Economic and Social Commission for Asia and the Pacific (Escap) said on Thursday.

In its Economic and Social Survey of Asia and the Pacific 2008, which was launched at the United Nations Information Centre (UNIC) here, the Escap said the growth would be close to seven per cent as recorded in 2007 and the 6.6 per cent in 2006.

"In just a few years, sound macro-economic policies have transformed Pakistan's consumption-led growth to one in which investment-led growth can assume a more important role," said Innovative Development Strategies (IDS) Director Sarfraz Khan Qureshi, while commenting on the Escap survey.

In 2007, the agricultural sector recovered strongly, growing by five per cent from just 1.6 per cent in 2006, while the manufacturing sector's growth sustained at 8.4 per cent in 2007, marginally down from the 10 per cent recorded in 2006.

A major driver of growth was investment. Both domestic private and a record foreign direct investment (FDI), inflows doubled from 2006, touching 8.4 billion dollars last year, helped in boosting the economic performance. "In 2007, investment in real terms increased by over 20 per cent," the Escap said.

While Pakistan's inflation rate was 7.8 per cent in 2007, the main concern is higher food prices, which rose by 10.3 per cent with its effects felt most strongly by "people living on low and fixed incomes." Inflation in 2008 is expected to remain high, close to last year's level.

"The inflation was fuelled by global increases in some commodity prices, higher utility tariffs, and by local supply- and demand-driven factors," the Escap said, adding the government efforts to stem price hike included the expansion of the public sector utility stores network, even extending the programme of subsidies for essential edibles to rural areas.

The Escap said the government's expansionary fiscal policy was seeking to promote investment led growth and pro-poor spending, and added the development expenditure had been taking more share of overall expenditure in recent years. But the central government's budget deficit in 2007 had remained steady at 4.2 per cent of gross domestic product (GDP), it said.

Concerns were evident over a sharp slow down in the growth of Pakistan's exports and imports in 2007. The rates of growth for exports fell 3.4 per cent, while for imports the growth rate dropped by 6.9 per cent.

A widening trade deficit was partly covered by remittances from migrant workers, which in 2007 rose to a record amount of 5.5 billion dollars. At the same time, the current account deficit is expected to further widen in 2008.

The Escap said the current account deficit would remain an issue for both Pakistan and other South Asian countries due to higher oil prices and the impact on the garment and textile trade with the lifting of quota restrictions on Chinese exports over 2008. "To reduce the risk of depending too heavily on a single sector, export diversification should remain an important part of government strategies," the Escap said.

PUBLIC DEBT AND FISCAL DEFICITS: The Escap further said that for most South Asian nations, including Pakistan, public debt remains a serious problem with domestic public debt now accounting for a larger component of total.

"In Pakistan, public debt growth during the 1990s was unprecedented. A credible debt reduction strategy and fast economic growth cut the public debt burden from 84 per cent of GDP in 2000 to 57 per cent by 2006," the Escap said.

Pakistan successfully reduced its external debt burden through rescheduling, a debt swap for social spending, debt cancellation and the prepayment of expensive debt. As a result, the debt service ratio has declined substantially from 2000 to 2006 though some 30 per cent of government revenues were allocated for debt servicing. "An Escap Secretariat analysis shows a further 20 per cent decrease in public debt service to government revenue ratio could increase development spending by 24 per cent," it said.

AGRICULTURE'S REVITALISATION The Escap, in a wider view of the Asia Pacific region, said efforts to reduce poverty, especially in the rural areas, required the promotion of productivity in the agriculture sector. The rural poor accounted for some 70 per cent of the poor in the Asia-Pacific region.

"Agriculture appears to be neglected, even though it still provides jobs for 60 per cent of the working population and generates about a quarter of the region's gross GDP," the Escap said in its Survey.

"In South Asia, growth in agriculture dropped from 3.6 per cent in the 1980s to three per cent in 2002-2003," the Escap said, adding by raising the average agricultural productivity across the region some 218 million, a third of the region's poor, could be taken out of poverty bracket.

It also noted that "large gains in poverty are also possible through comprehensive liberalisation of global agricultural trade, which could lift a further 48 million people out of poverty net in the region."

Business Recorder [Pakistan's First Financial Daily]

 

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Contingency plan to ensure availability of currency in war ​

ISLAMABAD (March 28 2008): The government is chalking out a contingency plan to ensure availability of coins and currency notes and their safe transportation in an event of emergency or war for which there is a proposal to increase the storage capacity of National Bank of Pakistan's (NBP) treasuries/chests across Pakistan.

Sources told Business Recorder on Thursday that the issue was discussed in a recent meeting of the Finance Committee on Defence Planning convened at the Ministry of Finance.

It has been proposed to update the provisions of a report prepared by the Finance Committee on Defence Planning in 1994 in consultation with the SBP/NBP to ensure safety and transportation of currency in war like-situation. Some amendments in the report have been prepared for the committee.

According to sources, the government may face two difficulties in war like situation. It encompasses transportation of coins and currency/bank notes and storage facilities for reserve stocks of coins and currency bank notes.

To tackle the situation effectively, a proposal is under study that the State Bank of Pakistan may increase the storage capacity of the NBP Chests to meet the increased requirements of coins and currency/bank notes. The provincial district administration will be responsible for providing escort and transport for movement of coins, bullion and currency/bank notes.

Responding to the proposal, sources said that there are nearly 221 NBP Chests, besides SBP Chests, in 15 cities spread all over the country. Presently, sufficient storage capacity is available to accumulate 100 percent additional coins and currency/bank notes for emergency requirements.

Recently, the provincial governments have created several new districts with new headquarters. The provincial government may give instructions to these districts for responsibilities to arrange transportation and provide police escort in case of emergency.

Sources said there is a proposal that two sets of designs of emergency notes of new designs of Rs 5, Rs 10, Rs 100, Rs 1000, and Rs 5000 should be prepared and approved. The engraved plates should be kept ready with the Pakistan Security Printing Corporation during peacetime. The decision as to which design should be printed will be taken only at the time of printing. In case of any Pakistani notes being forged by an enemy during the war, the existing patterns should be demonetised. The emergency design of Rs 20, Rs 50 and Rs 500 denomination notes need not be prepared.

Responding to the proposal, sources gave justification that the new design bank notes have lower size and variety of security features. The old design emergency notes do not keep the size, design, and the updated security features required for the purpose. Besides, the new denominations of Rs 20 and Rs 5000, introduced recently, are not described in the relevant report, which may be included in the same.

According to another proposal, in case of emergency or war, the Finance Division will inform the SBP about the "Stand-by-Stage" procedure. The SBP will advise the provincial governments of the institution of this stage and will caution all the offices of the SBP to remain alert. The offices will caution the heads of districts as well as the chest officers of their areas.

As soon as the information is received, all chest officers including sub-chest officers in the 3 border areas and danger zones shall keep the following arrangements ready:

Sufficient number of boxes necessary for the packing of currency/banknotes and coins; nails, straps, and signed seals; sufficient quantity of kerosene oil, fire-wood and match boxes; chisels and hammers and selection of a place for destruction of currency/bank notes and coins, if required.

Under the proposed precautionary measures, as soon as information is received by the State Bank from Finance Division at the "Precautionary Stage" about the movement of the enemy, it will inform the provincial governments and the offices of the SBP about the situation.

The offices of the SBP will inform the head of districts and the chest officers in the border areas and danger zones, on receipt of the information. The chest officers will pack up all currency/bank notes and coins, exceeding their two weeks requirements, in the boxes, transfer them to their link chest or reserve chest, which ever is nearest. The district co-ordination officer shall provide transport for the purpose.

Responding to this proposal, committee has been informed that the previous name of Central Directorate of State Bank of Pakistan has been changed to State Bank of Pakistan. The nomenclature of Deputy Commissioner has been changed to District co-ordination officer. The above names require updating and have been proposed accordingly.

Business Recorder [Pakistan's First Financial Daily]

 

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Less important projects may be dropped from next year's ADP ​

KARACHI (March 28 2008): The Sindh Planning and Development Department will prepare a report on the basis of which projects were assigned priority for execution and funding so that the less important and uncompleted projects could be dropped from the next year's development programme, it was learnt on Thursday.

Sources said that the new and the ongoing projects could not be given impetus during the current financial year as the outgoing cabinet devoted its time in the electioneering of its respective political parties than devoting to development work.

The adversely affected projects were in the health, education, communication and works and irrigation sectors for which 75 percent of the allocation was reserved. Sources said that farm to market roads, lining of canals and opening of new health outlets and schools in the rural Sindh remained a "dream" as funds for projects in these sectors were not released with punctuality.

They said that the foreign assistance was involved in these projects. The progress report and expenditure statements should follow requests for funds from the implementing agency, that did not happen, they added.

They said that repeated requests and even harshly worded reminders did not motivate the implementing authorities to respond to the requirement for the release of funds. Sources said that in the 2008-09 Sindh budget, the ongoing projects would be completed on priority basis, if need be, and no new projects would be initiated in a district unless the old projects were completed.

The priority, sources said, would be given to improvement of agriculture, farm to market roads and lining of canals. Sites for small dams/water reservoirs and availability of potable water sources were the other two areas of concern, they said.

According to one proposal, the arid land in lower Sindh where cultivation is dependent upon rains would be converted into grazing grounds and be given on lease to those farmers, who exclusively depend upon animal husbandry.

A survey proposal of available land for this purpose has been finalised and preparation to assign the task to private consultants to prepare feasibility report has been completed.

To a question if the size of the annual development plan would be enlarged, the sources said that keeping in view the backlog of development work, there was room for only 10 to 15 percent increase in the ADP allocation. "This enlargement does not mean new schemes and fresh allocation but provision to offset effect of inflation."

They said that the next ADP would clearly indicate allocations for urban and rural Sindh. Only those projects would be preferred, which might generate employment, provide infrastructure for the expansion of economic activities and encourage small-scale agro-based industry in the rural area and cottage industry in the urban area, they added.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

NPLs of banking sector touch Rs170 billion.​

Saturday, March 29, 2008

KARACHI: The gross non performing loans (NPLs) of the banking sector have reached to a level of Rs170 billion in 2007, representing 6.5 percent of gross advances, a year earlier NPLs were recorded at Rs141 billion (5.8 percent of gross advances).

This was revealed in a study conducted by First Capital Equities Limited (FCEL) a local brokerage house on the bases of listed commercial banks which represent 96 percent of overall banking sector assets in the country.

Segment wise analysis revealed that textile sector witnessed highest increment (in absolute terms) in NPLs that increased by Rs10.4 billion or 25 percent to Rs51 billion. Textile sector was followed by individuals (mainly dominated by consumer financing clients) where NPLs growth was Rs9.8 billion or 111 percent to Rs18.6billion against Rs8.8 billion at the end of 2006. As far as the asset quality of these loans is concern, gross NPLs to gross advances ratio for textile and individuals stood at 9 percent and 4 percent respectively. At the end of 2007, the outstanding advances in these two sectors were recorded Rs565 billion and Rs426 billion correspondingly.

FCEL considered that high interest rate as the major contributory factor for unprecedented rise of NPLs in these sectors. In addition, rising input cost coupled with lower export sales added further miseries for textile sector.

The State Bank of Pakistan (SBP) withdrew ‘benefits of forced sales value of assets on non-performing loans’ and in a result, profitability of the listed commercial banks declined by 7 percent to Rs74.6 billion during the year. However, due to the said regulation, assets quality of the banks improved notably with net NPLs to net advances ratio declining to 1.6 percent. In addition, the loan loss coverage ratio of the banks also improved to 77 percent versus 68 percent a year earlier.

“After studying the international banking sectors, we found ‘to not consider value of collateral while providing provisions’ as the most appropriate practice followed by commercial banks,” FCEL said.

The analysis report further said that due to withdrawal of forced sale value of assets, loan loss coverage ratio of the banking sector improved to 77 percent at the end of 2007 from 68 percent a year earlier.

Net NPLs to net advances of the sector reduced to 1.6 percent from 1.9 percent at the end of 2006. These ratios could depict further improvement if withdrawal of FSV will also be applicable on agricultural and housing finance loans. The banking sector’s outstanding advances in agriculture finance (mentioned as agriculture, forestry, hunting and fishing in annual accounts of the banks) were recorded at Rs107 billion at the end of 2007 while NPLs against these loans were of Rs10.4 billion. The gross NPLs to gross advances ratio of agricultural segment was calculated at 10 percent while net NPLs to net advances arrived at 5 percent.

“Although the macro environment is not very much favourable as compared to last 3-4 years, strict risk management guidelines will force commercial banks to pursue a more vigilant approach on the quality of the loans. We believe this cautious approach will result in improved asset quality of the commercial banks, going forward,” FCEL said.

NPLs of banking sector touch Rs170 billion

 

[Neo]

Cement sales in March hit record 2.6m tonnes ​

Saturday, March 29, 2008

KARACHI: Cement sales during the month of March 2008 have breached the previous monthly record high of 2.56 million tonnes (Nov 2007) to reach 2.61 million tonnes by March 25, 2008.

This has been achived on the back of record breaking exports of 726,000 tonnes (previous record 645,000 tonnes in Feb 2008) and 1.9 million tonnes local sales (also close to its record for a single month).

The total expected sales at the end of March 2008 would reach 3.2 million tonnes with local sales reaching 2.3 million tonnes and exports 903,000 tonnes, JS Research projected. After analyzing first 25 days sales figures of March 2008, it is expected that the total cement dispatches in March 2008 would reach 3.2 million tonnes. This would translate into a significant growth of 42 per cent on year on year basis and 30 per cent on month on month basis.

Exports, which have already broken the monthly record of 645,000 tonnes set in Feb 2008, are believed to exceed 900,000 tonnes registering a phenominal growth of 143 per cent YoY and 40 per cent MoM. However, the local sales which made a record of 2.0 million tonnes in November 2007 are likely to reach 2.3 million tonnes in March 2008, the report said.

High cement dispatches during this period is a normal phenomena since it marks the start of peak demand season. Winter season has ended and upbeat construction activities, both in the local and the exports market, are on the rise.

Looking at the cement sales figures of March 2008, it is exected that the 9 months (Jul-Mar) of FY08 total dispatches to reach 21.8 million (already reached 21.2 million tonnes till March 25 2008), up by 25 per cent YoY.

This growth will be on the back of 140 per cent rise in exports from 2.1 million tonnes to 5.2 million tonnes, and 9 per cent rise in local sales from 15.4 million tonnes to 16.7 million tonnes during the period under review.

The company-wise sales breakup reveals that Pakistan Cement and Maple Leaf Cement would be the two companies to post cement dispatches growth of over 100 per cent in 9 months (Jul-Mar) FY08 with sales at 1.8 millon tonnes and 1.9 millon tonnes, respectively. The second highest growth of 76 per cent in dispatches will be of DG Khan, followed 49 per cent and 23 per cent by Pioneer Cement and Lucky Cement, respectively.

The President of Karachi Cement Dealers Action Committee, (KCDAC) Wali Bhai Patel said that the rise in cement prices is not just because the production cost is not what they riased, and this is just in line to make profits when government control is weak to control cement companies activities.

“We demand new government to take serious action of the investigation of Monopoly Control Authorty (MCA) now Competition Commission of Pakistan (CCP) against cement companies in previous government which after its completion did not make public and this is the need of hour to book those who are responsible of cement cartels in the country,” he added. Badruddin Fakhri, Managing Director of Galadari Cement says: “Due to high demand of cement its prices are rising in many countries and so in Pakistan. Other than that there has been a huge increase in international coal prices which is one of the base of rising cement prices in Pakistan too, which is just in any sense.” —FZ

Cement sales in March hit record 2.6m tonnes