Pakistan Economy - News & Updates - Archive

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Friday, June 02, 2006

KARACHI: The country’s domestic debt surged to Rs 2.249 trillion in July-March 2006, up by Rs 116 billion or 5.4 percent compared with June 30, 2005.

During the said period, the permanent debt of the country soared up by Rs 17.617 billion to Rs 483.257 billion compared with Rs 500.874 billion, the data of the State Bank of Pakistan (SBP) said here on Thursday.

According to the data, the country’s domestic debt surged to Rs 116.097 billion in first nine months of this fiscal, despite outflows of Rs 45.275 billion from the Special Saving Certificates (bearer), Rs 11.439 billion of regular income certificates.

On June 30, 2005, the domestic debt of the country stood at Rs 2.133 trillion, the data said.

The Central Board of Revenue has claimed that it has collected Rs 600.63 billion taxes in 11 months of the current fiscal, showing an increase of 20 percent. The tax collection target for the current fiscal was set at Rs 690 billion.

The federal and provincial governments had borrowed an amount of Rs 56.271 billion from the State Bank and the commercial banks till May 20, 2006, the SBP data said.

The debt profile of the federal government has been increasing in the current fiscal owing to the earthquake relief work in AJK and the country’s higher import bills.

“The federal and provincial governments are borrowing money from the SBP and the banks to fulfill their budgetary support,” the analyst said. They said the GDP growth has come down this year because of heavy borrowing from the central bank.

Permanent borrowing of the federal government has declined by 3.5 percent in the nine months to Rs 483.2 billion compared with Rs 500.874 billion despite the outflows in special government bonds, federal government bonds, special government bonds for the SLIC and Pakistan Investment Bonds (PIBs). Major outflows were recorded in the Special Government Bonds for the SLIC (Capitalization) of Rs 1.448 billion.

The unfunded debt of the country has gone up by Rs 5.609 billion to Rs 859.6 billion till March 31 this fiscal compared with Rs 854.044 billion on June 30, 2005.

The country’s floating debt stood at Rs 906.267 billion up by Rs 128.104 billion on March 31. On June 30, 2005, it stood at Rs 778.163.

External Debt and Liabilities: The country’s overall external debt has shot up by 4.11 percent or $1.380 billion in the third quarter of the current fiscal, despite the inflows of over $4 billion.

The medium-and long-term debt of Paris Club, Euro bonds/ Saindak Bonds, multilateral and other bilateral debts of Pakistan has gone up during the third quarter of this fiscal.

 

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MANILA (updated on: June 03, 2006, 21:55 PST): Australian government through Australian Agency for International Development (AusAID) has made A$20 million contribution to Asian Development Bank's (ADB) Pakistan Earthquake Fund (PEF).

"We are very grateful for this contribution from Government of Australia, which will be used for much needed reconstruction of education and health facilities in Azad Jammu & Kashmir damaged by earthquake," says Werner Liepach, Principal Director of ADB's Office of Co-financing Operations.

Half of contribution will be used to partly finance reconstruction of at least 150 identified priority middle schools in four administrative districts of Azad Jammu and Kashmir - Muzaffarabad, Neelum, Poonch & Bagh.

While the other half will focus on reconstruction of a rural health centre and 29 basic health units in Poonch.

 

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ISLAMABAD (updated on: June 03, 2006, 21:54 PST): Engro Chemical on Saturday donated twenty five metric tons of maize hybrid seed to the October 8 earth quake affectees.

The seed were formally donated to Federal Minister for Food, Agriculture and Livestock Development Sikandar Hayat Khan Bosan at a ceremony here.

The seed will bring as much as two thousand five hundred acres of land under maize which is the major crop of the area for which sowing has been started.

The seed will be distributed among farmer free of cost.

 

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ISLAMABAD (June 03 2006): President General Pervez Musharraf on Friday approved a two-pronged strategy to pass on the benefits of Rs 200 billion subsidy to the common man through the Prime Minister's relief package.

The strategy includes greater role of Utility Stores Corporation (USC) to cater the needs of essential items to maximum number of the people at subsidised rates and cut down imported kitchen and other essential items' prices at the ports.

The USC outlets and number of mobile units will be increased substantially in 2006-07, to ensure availability of essential items at reduced rates to maximum number of people for immediate relief.

Sources said the relief package would cover all important essential items such as flour (atta), sugar, vegetable ghee and oil, pulses, dry milk, etc. However, the rate of subsidy will vary from item to item.

Musharraf also directed the government to put in place an anti-hoarding mechanism to check market exploitation and protect the vulnerable people from profiteering.

The relief package was discussed in detail at a meeting chaired by the President here. Prime minister Shaukat Aziz, was also present. Musharraf said the government should take all possible measures to gear up economic activities such as construction of mega projects as well as foreign investment ventures in prospective sectors, self-employment schemes and micro-finance facilitation to create maximum jobs.

He said the best way to transfer economic gains to common man was to pass on their benefit to all segments of the society. The President said young people in both rural and urban areas should be equipped with necessary skills to enable them reap fruits of tremendous economic activity underway in agrarian and industrial sectors.

Musharraf said the government after achieving economic turnaround should now launch far-reaching projects for tangible and visible improvement in all key areas to improve living standard of the common man.

Prime Minister Shaukat Aziz observed that poverty reduction and employment generation are inter-linked. He said the government would encourage public-private partnership in meeting the goal of more employment opportunities for common man and also offer incentives to the private organisations for return on their investment.

The meeting was also attended by Information Minister Muhammad Ali Durrani, Minister for Political Affairs Engineer Amir Muqam, Minister for Women Development Sumaira Malik, PML Secretary General Senator Mushahid Hussain Sayed, Chief Minster Sindh Arbab Ghulam Rahim, Chief Minister Balochistan Jan Muhammad Yousaf, Punjab Minister for Law Raja Basharat, Deputy Chairman Planning Commission and senior officials.

 

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ISLAMABAD (June 03 2006): Prime Minister Shaukat Aziz has said that the World Bank's decision to provide $6.5 billion in loans to Pakistan over a period of four years, comprising soft loan of $3.1 billion under IDA, and $3.4 billion under regular IBRD credit, was a historic and a clear vote of confidence in Pakistan's economic recovery, its reform agenda and the leadership.

The Prime Minister was talking to newsmen at Prime Minister House on Friday evening. "The decision is truly historic, as no other country has ever been given this mammoth amount for a period of four years," he said.

He said that the decision would give a major boost to Pakistan's economy by providing resources for infrastructure development, and facilities of health, education and human resource development.

The unusually high amount committed by the World Bank would enable the government to achieve its objectives of food, water and energy security and to invest in developing energy, transportation and trade corridors between Pakistan and Central Asian States, the Prime Minister added.

He said that the amount would also contribute towards job creation, lead to further higher growth and result in poverty alleviation. He said, "We are also pleased that IFC will upscale its investment to $500 to 600 million over a period of six years in the private sector, which will be a catalyst in attracting equity investment and give a further boost to our economy."

Shaukat said that the World Bank's decision, coming a little before the announcement of the budget, would inspire more confidence in international lenders and investors in Pakistan's economic potential and its development strategy.

 

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ISLAMABAD (June 03 2006): The World Bank has approved $340 million for four development projects in social and infrastructure sectors, to help boost Pakistan's economy. The bank would finance these projects from its two wings-International Bank for Reconstruction and Development (IBRD) and concessionary lending arm International Development Association (IDA).

These projects, which were approved by the World Bank's Board of Executive Directors late Thursday are; NWFP First Development Policy Credit ($90 million), Punjab Education Development Policy Credit ($100 million), Punjab-Irrigation Sector Development Policy Loan ($100 million) and the Punjab Municipal Services Improvement Loan ($50 million). The NWFP First Development Policy Credit would support the implementation of the provincial government's medium-term reform programme which is based on four pillars: reforms to accelerate human development and improve basic social service delivery; promoting growth and private sector development; fiscal reforms; and governance reforms in public financial management, procurement, civil service, and administrative devolution.

The Punjab Education Development Policy Credit would help the provincial government to implement wide-ranging reforms in the education sector. The credit is the last in a series of three development policy credits supporting the Punjab government's three-year Education Sector Reforms Programme (PESRP), designed to enhance access, improve quality of education and gender parity. Since the launch of the reform programme, more than one million more children have been enrolled in Punjab schools.

For these two projects, the amount would be provided by the International Development Association (IDA) carries 0.75 percent service fee, 10-year grace period and a maturity period of 35 years.

Other two projects Punjab Irrigation Sector Development Policy Loan and Punjab Municipal Services Improvement Project, financed by the International Bank for Reconstruction and Development (IBRD), are fixed spread loans, payable in 20 years, including 8 years grace period.

For the Punjab-Irrigation Sector Development Policy Loan, the bank would provide financing to a major provincial reform agenda to improve fiscal management and service delivery.

 

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Economic Survey on June 5

ISLAMABAD (June 03 2006): Economic Survey of the financial year 2005-06, presenting overview of the national economy will be released here on June 5, 2006 (Monday). Advisor to Prime Minister on Finance Dr Salman Shah and Advisor to Ministry of Finance Dr Ashfaque Hasan Khan will jointly release the survey at a press conference.

The economy of the country has shown positive trend during the current financial year despite the devastating earthquake of October 8, 2005 which hit many parts of Azad Jammu and Kashmir and NWFP. The economy is likely to register more than 6.6% growth rate against the target of 7 percent.

 

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RAWALPINDI (June 02 2006): President General Pervez Musharraf on Thursday said the government was committed to facilitating all investors and would ensure provision of every possible assistance and incentives to them.

He was talking to General Electric International (USA) Chief Executive Officer Ferdinando Beccalli-Falco, who called on him here. The President welcomed the US entrepreneur and appreciated his move for investment in Pakistan.

Ferdinando lauded the far-reaching economic reforms introduced by the Pakistan Government, which have not only helped stabilise economy but also served as a tremendous incentive to attract valuable foreign investment.

He said there was an excellent investment-friendly environment in Pakistan and thanked the Pakistan Government for facilitating his group.

He informed the President that the General Electric, which is one of the largest companies in the world by market capitalisation, is carrying out market study for investment opportunities in various sectors in Pakistan, including infrastructure development in energy, oil & gas, railway, and health care.

He thanked the President for the opportunity to call on him. Minister of State for Privatisation Umar Ahmed Ghuman and senior government functionaries were present during the call.

 

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ISLAMABAD (June 03 2006): The Asian Development Bank (ADB) has projected that Pakistan's Gross Domestic Product (GDP) growth would remain at 6 to 6.5 percent by the end this fiscal year. However, the growing imbalance in the external sector is a risk to economic growth and poverty reduction efforts.

The Bank cautioned that the budget deficit was expected to surpass the target of 3.8 percent and touch 4.2 percent of GDP, while with robust economic growth and a sharp increase in imports, the target for revenues was also likely to be surpassed.

"Continued policy action would be required to deal with the external imbalance and monetary overhang. In the longer run, levels of investment in the economy need to be enhanced to facilitate growth and poverty reduction efforts."

The 'Pakistan Economic Update (July-March 2005-06)', prepared by Pakistan Resident Mission (PRM) of ADB gives analysis of economic trends and presents an outlook of the economy for the whole year, which is encouraging.

It says that the growth in agriculture sector is expected to be sluggish due to the below target production of cotton and sugarcane crops along with poor growth of the livestock sub-sector. However, the large-scale manufacturing sector is projected to grow at a robust rate of 10.0 percent, as indicated by the sharp increase in imports of raw materials and rapid growth in private sector credit. In the services sector, telecom services, banking and trade are expected to sustain high growth in 2005-06.

Imports are projected to increase by 30.0 percent, because of high oil prices and continued strong domestic demand. The end of the quota regime since January 2005 and the robust growth in world trade will boost exports, which are expected to increase by 14.0 percent. The trade deficit is projected to increase to over $8.0 billion, and the current account deficit to $6.0-6.5 billion.

ADB Country Director Peter Fedon said: "The medium-term outlook for the economy looks good and although economic growth decelerated in the first half of 2005-06 the economy is expected to still post robust growth for the full year."

The 'Update' notes the significant recent decline in poverty as estimated by the government. The government continued to pursue an expansionary fiscal policy and the fiscal deficit increased.

The increase in government spending was mainly due to a sharp increase in development expenditure and payments for relief operations for victims of the October 2005 earthquake.

The 'Update' further notes that the annualised overall inflation declined by one percentage point to 8.3 percent in the first ten months of 2005-06. External trade continued to expand rapidly in the first three quarters of 2005-06, with imports increasing by 43.2 percent and exports by 18.6 percent.

The growth of imports was led by petroleum and petroleum products, which together increased by 64.5 percent to $4.6 billion. Textile and clothing was the largest contributor to export growth.

There was an almost three-fold increase in foreign direct investment, partly because of higher privatisation proceeds. The foreign exchange reserves held by SBP increased by $477 million to $10.3 billion, which are sufficient to finance 4.2 months of projected imports in the current year.

The deficit in the current account of the balance of payments almost quadrupled to $4.7 billion in the first three quarters of 2005/06, as imports grew rapidly. The increase in the current account deficit was largely offset by a sharp turnaround in the financial account.

It says that Pakistan's external debt declined by $589 million to $35.2 billion in the first half of 2005/6. In March 2006, the Government issued sovereign bonds for $500 million with tenures of 10 and 30 years. The bonds were heavily oversubscribed.

 

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ISLAMABAD (June 03 2006): Supporting Pakistan Government's priorities for sustaining growth and poverty reduction, the World Bank (WB) has substantially increased its lending for infrastructure-mainly in energy, water, and transport-and human resource development.

The World Bank on Thursday announced a new country strategy for Pakistan for 2006-09, envisaging lending up to $6.5 billion (partly reported in Business Recorder on Friday).

The Bank's strategy is aligned to Pakistan's Poverty Reduction Strategy (PRSP) and is designed around three main pillars: ie sustaining growth and improving competitiveness, strengthening governance and service delivery and improving lives and protection of the vulnerable.

The principal focus of 'Sustained Growth and Improved Competitiveness' will be to support investments and reforms needed to sustain rapid, private sector-led growth, for which the Bank will provide support to key sectors such as agriculture and infrastructure, and help the government strengthen macroeconomic management through improving public expenditures and supporting ongoing tax reforms.

As priorities in the areas of strengthening governance and service delivery, the Bank would support further reforms and investment to increase efficiency, transparency, and accountability in the use of public resources.

The Bank will focus on increased investment to education and health sectors, which are necessary to build the skilled, healthy workforce necessary to sustain recent growth performance.

According to strategy in Pakistan, IFC will increase investments with a target range of $500-600 million during the FY06-09 period. IFC activity will focus on three main sectors: financial, Small and Medium Enterprise (SME), and infrastructure. IFC has also initiated a substantial Technical Assistance program in Pakistan to build capacity and address constraints of the SME, infrastructure, and financial sectors.

The World Bank Group's assistance program will be aligned with the respective responsibilities of national and provincial governments and tailored to meet the needs of the individual provinces. Around half of the lending will be channeled to the provinces which bear most the responsibility for delivering public services such as irrigation, education, health, and water supply and sanitation.

Preparation of the CAS benefited from consultations with Federal and Provincial governments, the private sector, donors, and civil society. Consultations were carried out using a two-stage process consisting of a client survey to solicit input on Pakistan's development challenges and the role of the World Bank in Pakistan, and stakeholder consultations workshops.

"This strategy is designed to help Pakistan prosper, said John Wall, World Bank Country Director for Pakistan. The country has moved from crisis to growth, laying the groundwork for sustained economic growth and significant poverty reduction. We will substantially ramp up support to Pakistan and focus on the areas that are most critical for the country's poor and most vulnerable."

Since 2000, Pakistan has managed a remarkable turnaround. During the 1990s, Pakistan's economic growth slowed, and progress in improving social indicators stagnated. Beginning in 2000, the government initiated a more wide-ranging and ambitious reform program resulting in a dramatic turnaround. Economic growth accelerated from the average of 3.3 percent during 1997-2002 to 8.4 percent in 2004/05.

Improved fiscal performance, generous external support, and improved revenue administration have enabled the government to exceed targets for social spending.

"Pakistan's recent growth performance is encouraging, but its continuation is by no means assured," said Praful Patel, World Bank Vice President for the South Asia region. "Sustained growth will require continued sound macroeconomic management along with further improvements in the investment climate and faster progress in improving the quality of life for all Pakistani citizens, especially women."

Pakistan's infrastructure needs significant investment in order to support the country's growth and service delivery goals. Infrastructure services, including electricity, paved roads, municipal services, and telecommunications reach a relatively low proportion of the population. Moreover, inefficient operations in key sectors, like power and transport, adversely affect competitiveness.

For the poor to participate and benefit from growth, Pakistan needs to accelerate human development. While progress is being made, analysis suggests that it will be difficult to achieve the Millennium Development Goals for infant mortality, child malnutrition, primary education completion, and elimination of the gender gap in primary school enrolment.

 

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LAHORE (June 03 2006): Sundar Industrial Estate (SIE), after its completion, would receive investment worth over Rs 30 billion in the shape of buildings, plants and equipment, and would create 60,000 direct and indirect jobs within next three years.

Punjab Industrial Estates Development and Management Company (PIE) Chairman Mohsin Syed revealed this while addressing a press conference here on Friday. PIE Director Nabeel Hashmi was also present on the occasion.

Mohsin maintained that 74 percent work on road construction and drainage and sewerage, and 51 percent work on water supply had been completed in the SIE. Besides, 90 percent work on boundary wall, and 61 percent work on underground electrification had also been completed, he added.

He further said that 500 MW electricity would be available in the industrial estate, which would enable three industrial units to start their production within this month. 'We would purchase electricity in bulk from Lesco to provide the same to the industrial units. We are in the process of setting up of 225 MW power plant which would supply electricity to the industrial units at the same tariff prevailing outside the estate', he added.

The Punjab government had provided Rs one billion while the public sector contributed Rs 2.3 billion for setting up of the industrial estate. The Bank of Punjab financed the setting up of industrial units and 75 cases worth Rs 300 million were under process at present. As many as 594 plots of different size had been allotted at the SIE. The plots had been allotted for setting up units of pharmaceutical, garments, food processing, textile, steel, carpet, engineering auto parts, plastic, chemicals, paper and packaging and electronics and electrical.

Mohsin further said that 70 percent development at the estate had put the PIE into driving seat. PIE had approved building plans for 36 industrial units with another 20 industrial units under construction, he added. About the gas supply, he said that PIE had already paid Rs 460 million to Sui Northern Gas Pipeline Limited which assured for supply of gas to the industry as and when it went for production, he added.

About the Multan Industrial Estate, the PIE chief said that the sale of plots would take place on June 6 while its second phase would be started soon. To a question, he said that if any allottee of SIE did not start construction by the end of this year, his plot would be cancelled.

 

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ISLAMABAD (June 03 2006): President General Pervez Musharraf will deliver a keynote address to the OPEN Silicon Valley's annual business moot 2006 being held in California through a video conference late Saturday evening.

The theme of the 2006 conference, to be arranged by Organisation of Pakistani Entrepreneurs, is "Rising Tide" with a focus on growing optimism, energy and possibilities in the global tech economy.

 

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AFP, KARACHI

June 2: Pakistan will spend a record 415 billion rupees (6.92 billion dollars) on development this year to fight poverty and maintain a growth rate of more than six per cent, officials said.

The national budget for fiscal 2006-2007 starting July 1, to be unveiled in parliament on Monday will "focus on human and infrastructure development," minister of state for finance Omar Ayub said. Development will be allocated 415 billion rupees (6.92 billion dollars) compared to 4.5 billion dollars in the previous budget. Ayub did not divulge the size of the budget but other officials estimate it at 25 billion dollars, against the outgoing year's revised budget of 20 billion.

"The new budget would help create more job opportunities, promote developmental activities besides protecting the interest of weak segments of the society," Ayub said.

The budget comes amid resentment among the salaried class and low-income groups with inflation running at 13 per cent and unemployment at nine per cent, economists said. More than 25 per cent of Pakistan's 150-million people live below the poverty line.

In a pre-budget briefing Ayub told reporters on Wednesday that the government plans to bring down inflation to less than eight per cent. He said gross domestic product (GDP) growth was around 6.6 per cent. However the fiscal deficit rose this year from 3.5 per cent to 4.2 per cent of GDP, due to the massive earthquake in October that killed more than 73,000 people in Pakistani Kashmir and North West Frontier Province, he said. The government hopes to meet the gap through taxes and borrowing. Officials hope revenue collection will rise to 14.7 billion dollars from 11.5 billion this year.

Ayub said unemployment was declining as 5.58 million new jobs had been created over the past two years and poverty reduced to 25.6 per cent from 32.4 per cent in previous years. President Pervez Musharraf this week said Pakistan would be able to achieve the UN-set poverty ratio of 13 per cent by 2015. "Investment is flowing into Pakistan from all over the world and in every sector," Musharraf said.

"More jobs are available today - but we have to create more jobs - and we are determined to reduce poverty through employment generation." Direct foreign investment in the first 10 months of 2005-06 was three billion dollars, compared to 1.5 billion dollars the previous year.

"This is new Pakistan moving forward and we will lift the country to new heights of economic progress," Musharraf said. Officials said Islamabad would not slash its defence budget despite the devastating earthquake.

"We have fixed the allocation of the defence expenditure to three per cent of the GDP and this would remain so in the coming budget too," Prime Minister Shaukat Aziz's economic advisor, Ashfaq Hasan Khan, told AFP. Analysts criticised the heavy defence spending, especially in view of receding tensions with India. "It seems quite unwise to allocate a huge sum for defence now when tension with India is easing off," said Abid Sulehri, research fellow at Sustainable Development Policy Institute.

 

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ISLAMABAD, June 2: The chief executive of Frontier Holdings limited, a subsidiary of Proprietary Industries of Canada, Nigel McCue accompanied by its president Grahem Gamer called on the Minister for Petroleum and Natural Resources Amanullah Khan Jadoon here on Friday.

During the meeting they briefed the minister about their company’s $230 million investment plan in Pakistan‘s energy sector in collaboration with a local company M/s Petroleum Exploration limited (PEL).

Mr Nigel informed the minister that his company had entered into a partnership with PEL, which has resulted in acquiring working interests in six concession areas namely — Mirpur Mathelo, Kandra Development and Production Lease, Badin IV South, Badin IV North, Salaam and Karsal blocks while the PEL would remain the operator.

He said that the joint venture had drawn up plans to invest $120 million in oil and gas sector. They will drill 25 exploratory and development wells in three years in addition to undertaking over 650 km of seismic acquisition. The two sides will also collaborate on the establishment of a 120 MW plant, utilising the natural gas of Kandra gas field. This alone entails an additional joint investment of over $110 million.

The visiting dignitaries appreciated the investors’ friendly policies of the government in oil and gas sector particularly the onshore and offshore exploration activities.

The minister welcomed the Frontier Holdings‘ partnership with PEL and termed it an important development for the country’s energy sector, as the company was not only bringing in a huge amount of foreign investment, but also state- of-the-art technology and expertise in the country.

He spoke of the vision and resolve with which the government was pursuing the goal of attracting investment in the energy sector.

Mr Jadoon said entry of the Canadian company in Pakistan‘s oil and gas sector would help attract other multi-national oil companies, thus having a far-reaching effect on the national economy in particular in the growth of the petroleum sector. He also appreciated the efforts of PEL in the development of oil and gas sector.

Secretary Petroleum, director general Petroleum Concessions, Khurshid Anwer, managing director, Government Holdings Private limited and Zaheeruddin, chairman PEL were also present during the meeting.

 

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ISLAMABAD, June 2: Pakistan and the Gulf Cooperation Council (GCC) will sign a Free Trade Agreement (FTA) by the end of this year to remove existing tariff and non-tariff barriers.

The aim is to boost foreign direct investment, joint ventures and greater economic cooperation with the GCC members, Gulf Times online reported on Friday.

Federal Minister for Commerce Humayun Akhtar Khan while talking to reporters in Abu Dhabi after inaugurating a two-day conference of Pakistani envoys to the Gulf and Middle East said, “We are in a process of negotiating the FTA with the GCC and an agreement is expected to be concluded by the year-end.”

He said that an understanding had also been reached through regular channels for an Early Harvest Programme (EHP) leading to an FTA with Syria, and a Preferential Trade Agreement (PTA) with Yemen.