Pakistan Economy - News & Updates - Archive

[Neo]

Time on the economic front is running out ​

(August 22 2008): A senior Standard and Poor's executive has stated that while Musharraf's resignation has solved one dimension of the political crisis, the government has to grapple with an entire range of other issues - on the political and economic fronts.

There is sufficient evidence to conclude that Musharraf's departure led to the subsequent strengthening of the stock market as well as the external value of the rupee. However, analysts, political as well as economic, are reluctant to accept these corrections as long term for two major reasons.

First, the stock market in this country is manipulated by a few big players and it is significant that the former President Musharraf occasionally used the performance of the stock market in the aftermath of any rumour to dislodge him from his office as proof positive that the market supported him.

Musharraf's final departure led to a strengthening of the stock market which, therefore may only partly reflect the relevance of political uncertainty as a key determining factor in the stock market's behaviour; for it is fairly evident to all that after the President's departure political instability may have been reduced but not completely eradicated as issues between Coalition partners associated with the restoration of the November 2 judiciary appear to have resurfaced.

Second the rupee value has strengthened in the open market vis-a-vis the dollar at a time when the dollar is also strengthening in value against all major currencies of the world; however the interbank rupee-dollar parity being less than in the open market, indicates that speculation against the Pak currency is rampant and SBP will be well advised to counter the tendency to hoard forex currencies to hedge against inflation.

What is, however, significant for the people of this country is that the domestic value of the rupee, or in other words the inflationary spiral unleashed by flawed economic policies of the previous regime, has not yet been reversed.

There is also a growing consensus that the present government appears to be drifting with respect to its economic policies - a stance that stands many a government in good stead if the macroeconomic fundamentals are good. However, today Pakistan's macroeconomic performance is close to abysmal with high rates of government borrowing, both from the internal and the external marketplace, failure to raise revenue in line with a rise in expenditure, and a rising budget deficit.

Add these figures with the two indicators that directly impact on the people, the voting base of the government, namely, inflation and unemployment and there must be cause for serious concern at the highest level of government.

This concern unfortunately is not visible. In contrast the general perception is that the government is complacent on the economic front, a condition that fails to reflect the ominous fact that time is running out for the Coalition. And with Musharraf no longer in the picture as well as with the lapse of sufficient time since the newly elected government was installed - nearly six months - people are now likely to lay the blame for their economic woes on the present government.

In addition the coming month of Ramazan, a month where retailers make windfall profits, is going to increase pressure on the government to maintain the prices of essential food items. It is to be hoped that the government understands that it does not have the luxury of tackling one issue at a time but needs to deal with a multiplicity of issues simultaneously.

 

[General Fujita]

Argentina for boosting trade ties with Pakistan

Saturday, 23 August 2008 00:00 Pakistan Daily

Argentina was keen to further boost and strengthen its bilateral relations with Pakistan including trade for the mutual benefit of the people of the two countries.

"The Economic and Commercial section of the embassy of the Argentine Republic is strongly committed to improving the level of bilateral trade and to find new business possibilities with Pakistan," Ambassador of Republic of Argentina to Pakistan, Rodolfo J. Martin Saravia told in an interview here Thursday.

The ambassador said that Pakistani businessmen are always invited to visit Argentina to develop new trade contacts. Quality and competitive prices have turned these products into favorite of Argentine buyers, who value the "Made in Pakistan" imprint, he remarked.

He said Pakistan's sports good are also stand high on the list of products preferred by the people of Argentineans customers. "The presence of Pakistan exporters in the Argentine market has also made itself felt in the medical and odontology instruments," he added. The ambassador further said many Argentine companies have turned from German to Pakistan suppliers of the products.

He said his country ranks first among CNG users in the world and it is the major producer and exporter of CNG cylinders, car kits, CNG station compressors and dispensers. He said the sales of Argentinean CNG equipments to Pakistan have risen to $2.34 million in the first trimester of 2008.

The Ambassador Rodolfo J Martin Saravia said an Argentine company, Argentoil SA has decided to invest in Pakistan for the local production of the cylinders.

He said the partner for this joint venture is Wah Industries Limited, the commercial branch of the largest and the most important industrial company of Pakistan.

The new joint venture, he said, envisages the construction of a plant in the Wah area, the transfer of top of line technology and the local production of CNG cylinders for motors vehicles and filling stations.

The ambassador said in the second semester of 2008 a pharmaceutical plant in Lahore at a cost of $10 million would be inaugurated to produce medicines to treat cancer and hepatitis. This project, he said, would be a product of joint venture between the Argentinean Pharmaceutical company 'LaboratorsiosBago' and Pakistan's 'Ferozesons Laboratories.' This Pak-Argentine Joint Venture would help people of Pakistan access to cheaper medicines as well as to reduce foreign imports of those essential products.

He said Pakistan manufacturers are also keen user of Argentine laminated steel, seamed and seamless pipes for the hydrocarbons industry and his country is currently the main provider of these types of products.

 

[General Fujita]

ZONG China Mobile new offer in Pakistan

Saturday, 23 August 2008 00:00 Pakistan Daily

ZONG, China Mobiles has stunned the Pakistani market once again with another revolutionary offer. ZONG now offers a 50 paisa per 30 second call to any one international number.

ZONG's 8-Anay users will now be blessed to call at any one international number covering UK, USA, Canada, China, Germany, Ireland and Spain at 50 paisa per 30 second only. The users will be charged only 40-paisa extra for the first minute. ZONG has yet again introduced a unique offer which is currently not being offered by any operator in the country.

Furthermore, customers can now be in touch with their close relatives, family and friends who are in far-off lands. Speaking to the media, Salman Wassay, Director Marketing stated, "China Mobile has always set new trends in the industry by introducing innovative and consumer-friendly offers.

It will continue to innovate and improve its services in the days to come."

 

[Neo]

General Fujita, please support your posts with offcial link when quoting a news article.

Unsupported posts will be deleted.

Thanks.

 

[Neo]

61pc hike in power tariff on the cards ​

Saturday, August 23, 2008

ISLAMABAD: Another inflation bomb is ready to hit poor masses as the National Electric Power Regulatory Authority (NEPRA) has hinted at a massive increase of 61 per cent in electricity tariff of power distribution companies and the government is considering fully passing on the said rise to end-consumers, a senior official at the Ministry of Finance told The News.

Since March 2008, there has been no increase in power tariff despite the massive increase in prices of fuel used in thermal houses in the country. Fuel cost has gone out of control and there is a need of a hefty increase in power tariff.

Right now the Pakistan Electric Power Company (PEPCO) has been trapped in a logjam of huge fiscal constraints, as it has no money to pay various Independent Power Producers, which are threatening to shut down their power plants.

The IPPs have also threatened to encash government guarantees against dues which PEPCO is liable to pay. IPPs are also facing the music, as they are running short of liquidity and are unable to pay oil marketing companies for the fuel they used to run their power plants.

The circular debt has reached unmanageable levels. So the massive increase in power tariff is inevitable to bail out PEPCO from its huge fiscal trap.

However, the official said that NEPRA is still busy in finalising its most frightening determination to this effect. NEPRA has hinted at a 61 per cent increase in power tariff to the Ministry of Finance in its preliminary calculations.

When contacted, a senior official at the Ministry of Water and Power said that by the end of the current month the ministry will receive much-awaited tariff determination. After consulting the top man at the Ministry of Finance, a formal notification for increase in power tariff would be issued.

 

[Neo]

Falling rupee yet to get floor ​

Saturday, August 23, 2008

KARACHI: The Pakistani rupee weakened to a record low against the dollar on Friday as investors worried about the future of the country’s government and economy, adding pressure on authorities to move to rescue the falling currency.

Traders said the rupee hit a record low of about 77.15 against the dollar. By the end of trade, it had pared losses and was last traded at 76.10/20.

Analysts said Pakistan’s political tension and shaky economy will further pummel the rupee in coming weeks, and the government and the central bank needed to take steps such as getting financial aid from abroad, and cutting imports to halt the currency’s dive.

“They have very limited time available. They need to search for a helping hand from countries that can quickly give them a loan with low interest rates,” said Haider Hussain, an economist at Elixir Securities. “The long-term options are to increase investor confidence, boost exports, and cut imports,” he said.

Inflation is soaring, high oil prices have depleted reserves, and the trade and fiscal deficits are widening.

Investors fear Pakistan cannot pay for its imports given that reserves have fallen to a level worth less than three months of imports, and this has dragged on the rupee.

Pakistan is in talks with Saudi Arabia to defer an estimated $5.9 billion worth of oil payments, and is also in discussions with the World Bank and the Asian Development Bank for over $1 billion worth of loans. But none of these loans are finalised.

Friday’s decline effectively erased all gains the rupee made when it strengthened on Monday and Tuesday on investors’ hopes Musharraf’s resignation will allow the government to focus on reviving the economy, and not be distracted by politics.

But that is unlikely. The coalition on Friday pushed back a deadline for the restoration of judges deposed by Musharraf last year, further delaying the resolution of a problem that threatens to split the alliance.

Panic: The rupee’s previous record low of 76.95 was struck on Aug 15. The currency, which sunk to record lows for five consecutive sessions last week, has lost nearly a quarter of its value this year.

“It’s just panic in the markets,” said a currency trader who declined to be identified. “The stock market is still falling, and there is talk of rating downgrades. We just don’t see any good news,” he said.

 

[Neo]

Govt may slash development budget by Rs100bn ​

Saturday, August 23, 2008

ISLAMABAD: A major exercise is under way to reduce expenditures by scaling back development budget to the tune of Rs100 billion as well as saving Rs55 billion through other avenues in order to bring down the yawning fiscal deficit during the ongoing fiscal year, The News has learnt.

It will be a unique move on the part of PPP’s finance managers to revise its major budgetary estimates especially on expenditure side before the end of the first quarter (July-Sept) of the current fiscal year.

The finance managers are also proposing to the government to curtail subsidies which would pave the way for saving Rs40 billion on POL products and power sector subsidies by passing on whole 61 per cent increase determination done by NEPRA and Rs10 to 15 billion through Benazir Income Support Programme (BISP) as so far the government remains failed to kick-start this initiative.

The Planning Commission has sent official communication to all ministries/division and attached departments to ‘rationalize’ their development schemes by prioritizing them and also identified those schemes which were meant for public private partnership (PPP).

“We have given a deadline to the ministries to furnish all relevant details by start of the next month (Sept 2008), which will enable us to work out the cash development plan for the second quarter (Oct-Dec) period of the current fiscal year,” the Planning Commission Official Spokesman Asif Sheikh confirmed when The News asked him in this regard.

However, sources in the Finance Ministry said that the government allocated Rs550 billion for development outlay with operational shortfall of Rs77 billion, so the envisaged allocation for Public Sector Development Programme (PSDP) touched Rs473 billion.

“We are asking the political leadership to reduce the PSDP outlay by Rs100 billion in order to cut down expenditures. If the incumbent regime decides to scale down PSDP by Rs100 billion then the development expenditures will be reduced to Rs373 billion,” added the sources.

It is relevant to mention here that the PC high-ups used term of “rationalization” rather than cutting down the development outlay as they argued that the government would not abandon those certain schemes and it would be put under the new initiative of public private partnership (PPP) through Infrastructure Project Development Facility (IPDF).

Sources in the Finance Ministry said that the government allocated Rs140 billion for provision of POL related subsidy for the current fiscal year. It is commitment of the government to fully implement automatic price adjustment formula after December 2008. If prices in international market remain at the existing level of $120 per barrel, the government should not reduce POL prices in the domestic market.

The government is providing major subsidy on diesel, which have come down from Rs31 per liter to Rs19 per liter owing to recent decrease in its prices in the international market.

“For petty political gains, the government should not reduce POL prices in the domestic market,” added the official. On power sector, the government allocated Rs75 billion subsidy for the current fiscal year. If the government decides to pass on 61 per cent increase in power tariff determined by the NEPRA in one go or in two phases, it will help to save Rs10 billion.

On imported wheat subsidy, the government is going to spend a huge amount which can be saved by curtailing smuggling. For fertilizers, the government allocated Rs40 billion for the current fiscal year by providing farmers a bag at the rate of $40 against international price of per bag at $71.

“The price differential between international and domestic market stood at 71 per cent” the official said and added that there would be definitely slippages going on to Central Asian Republics (CARs) through Afghanistan. The government has allocated Rs34 billion for BISP, which would be started from Sept 1, 2008. This scheme would take some time for gaining its full momentum which will help to save Rs10 to 15 billion, said the official and added that if the government wanted to ensure transparency then it could not spend its whole allocated money of Rs34 billion. But if it wants to distribute money for political patronage then it could spend the whole amount.

 

[Neo]

$400m Saudi credit facility sought for urea ​

Saturday, August 23, 2008

ISLAMABAD: Pakistan has approached Saudi authorities for another credit facility of $400 million for the provision of urea fertiliser, The News has learnt.

Finance Minister Syed Naveed Qamar telephoned Saudi Commerce Minister on the direction of Prime Minister Syed Yousuf Raza Gilani seeking another facility of $400 million for urea fertiliser, sources privy to the development told this correspondent.

The facility would be used for importing nearly 400,000 tonnes of urea fertiliser from the Kingdom of Saudi Arabia to meet local consumption, as the MINFAL reported to the prime minister that the country can face shortage of nearly 400,000 tonnes of urea fertiliser during the coming Rabi season, the same official said.

Saudi authorities finalised a credit facility of $125 million for importing urea fertiliser last month as it is deficit of the commodity for the next crop and from this facility, nearly 200,000 tonnes would land at the end of this month while the remaining would be shipped after this.

Before this credit facility of $125 million for fertiliser, Pakistan has nearly availed the existing Saudi credit facility of $133 million tonnes, which the Kingdom pledged during a devastating earthquake in 2005 and Pakistan imported the urea fertiliser, as the country is urea deficit for the last couple of years.

Secretary MINFAL, Mohammad Zia-ur-Rehman is also leaving for Saudi Arabia to finalise the modalities for this credit facility and also expedite the shipment of 200,000 tonnes commodity to avert the shortage in the local market.

The prices of the commodity in the local market are increasing due its shortage and farmers are complaining about scarcity of urea and overcharging by the dealers. The urea prices are being reported at Rs800-900 per 50 kg bag against its ex-factory price of Rs650 per 50 kg bag.

Out of the total consumption basket of seven million tonnes of fertilisers, 5.4 million tonnes are urea fertilisers while the remaining 1.6 million tonnes are phosphorous and potash fertilisers. For the urea fertilisers, the country has local production of 4.8 million tonnes and 0.6 million tonnes shortage is met through imports.

 

[Neo]

Karachi’s skyline finally taking shape ​

DHA Phase VIII projects foresee completion in 3 years

Saturday, August 23, 2008

KARACHI: Karachi is creating a new skyline along the coast of Arabian Sea in Defence Phase 8. Currently, four international projects are under construction in this area, on their way to establish the first creek enclave in Pakistan.

It may be recalled that the Defence Housing Authority (DHA), Karachi, announced its plan to develop Phase 8 in 1987 but it was only in 1994 that DHA began allotting plots to army officers and announced permission for construction in its first three belts.

All residential and commercial plots in DHA Phase 8 today are owned by the private sector and permission for construction has only been granted for a portion of the phase.

As a result of the Pakistan property boom that began in 2001, big names of the international real estate industry also sat up and took notice of the Karachi coastline. ‘Crescent Bay’ by Emaar Pakistan, ‘Creek Vista’ and ‘Creek Marina’ by Meinhardt Singapore Pte Ltd and ‘Creek Side’ by Abu Dhabi based Injaz Mena Investment Company PSC, joined with UK-based Global Haly Investment Ltd, are all multi billion dollar projects expected to be completed within the next three years.

Sysmax, a Malaysian firm, developed the DHA Golf Club in Phase VIII and is currently working on the soon-to-be-built Raffles International Club. According to further details, construction of new roads, new sewerage lines, water supply lines, water reservoirs and KESC lines is under way and will be completed within the three-year timeframe. The contractor for this project is the National Logistics Cell (NLC) and the cost of construction for the roads is estimated to be around Rs2.07 billion.

An industry analyst informed The News that the UAE based DAMAC developers were also in line to start a project. However, conflict with the government and the DHA led to their backing out of the deal. One important question that arises is with what price tags are these projects expected to bring for their properties. An official of one of the projects informed that their prices ranged between Rs15 and 25 million. He hesitated to reveal more since his company’s polices do not allow the project to be discussed as yet.

A real estate agent, who specialises in DHA and Clifton properties, shared that all four projects were competing with each other and therefore, any information regarding their work was considered sensitive.

He said that one particular project was in fact being bad-mouthed by estate agents, since developers had refused to involve these agents in the project. “On an average, all these apartments are roughly priced between Rs10 million to Rs25 million depending on the developer, the locality, the tower, etc. This is without adding the taxes and other additional charges,” the source added.

General Manager of Sales and Marketing, Creek Marina, Shabbir Siraj, said that due to inflation and the increasing prices of cement, steel and other construction materials, they were compelled to add the rising cost of production to the bills of their potential new clients.

He informed that the new prices would be 15-20 per cent higher than their earlier quoted ones, before quickly adding that property prices did increase with time and it was therefore, keeping the local market price in mind, that the new evaluation was being done.

“Clients who had booked apartments that were sold earlier during our first launch will remain on the earlier contract and pay their remaining instalments as was agreed in the initial project,” he clarified.

A sales executive of another project who preferred to remain anonymous (also due to company policies) said that most of the buyers of these projects were overseas Pakistanis. “If 60 per cent of all these projects have been sold collectively, then about 40 per cent are owned by those Pakistanis who have dual nationalities or have well-established businesses abroad and consider these complexes to be a part of their future investments.”

He further reasoned that high level projects are introduced after thorough research is carried out regarding the market and its consumers. “Obviously we do have buyers, that’s why we can see these projects coming up. No business likes to play blindly and get established first and then wait for customers.”

 

[Neo]

Plan to slash PSDP by Rs100bn​

ISLAMABAD, Aug 22: The government has decided to cut the federal Public Sector Development Programme (PSDP) by Rs100 billion to contain fiscal deficit at 4.7 per cent level and allow a ‘hefty increase’ in electricity tariff to achieve macro-economic stability, says Minister for Finance and Privatisation Naveed Qamar.

“One of the most serious issues is our depleting foreign exchange reserves, which have come down to about $10 billion because of exchange rate pressure, and, therefore, urgently needed to be enhanced through more privatisation and by attracting new foreign inflows,” he said at a press conference in his parliament chambers here on Friday.

The government, he said, had decided to take a number of steps to contain the fiscal deficit target during 2007-08 and for this purpose “we will have to slow down the economic activity.”

He, however, said that oil prices, which had gone down to $112 a barrel after peaking $148 barrel in the international market and then again rose to nearly $120 a barrel, would not be brought down “unless the government achieves an equalization.”“We will pass on the benefit of reduced oil prices when the government starts buying and selling oil at the same price.”

He said all supplementary grants to the ministries and divisions had been stopped along with a directive to cut back on foreign tours and stop buying physical assets.

He said that funds would be withdrawn from development projects which do not have any economic impact.

Terming it unfortunate, he said that the government would have to slash its development budget from Rs550 billion to Rs450 billion to avoid piling up problems.

He said that the International Monetary Fund (IMF), which was insisting on keeping fiscal deficit pegged at 4.3 per cent target, had been told that it was not possible, but it had been assured that the deficit would not exceed 4.7 per cent target which had been fixed in the budget.

The National Electric Power Regulatory Authority (Nepra) is believed to have recommended a 61 per cent increase in electricity tariff, which the government was anxious to pass on to consumers.

Without hinting about the exact amount of the power tariff increase, the finance minister said: “It will be a fairly hefty increase to help remove Wapda’s growing financial difficulties.”

He said that Wapda needed to make payments to Independent Power Producers (IPPs), which had threatened to shut down their plants because of non-payment.

He said the government could not offer sovereign guarantees to the IPPs but that they would be made their due payments by allowing Wapda to go for substantial power increases.

“Pakistan has to survive as a normal country. It also favours the IPPs.”

He said that all government subsidies, including on oil and electricity, would be eliminated by June 2009, and consumers would have to share the burden of increase in prices of all commodities.

“Wapda’s circular debt is increasing, which will have to be cut by allowing the increase in electricity charges.”

The finance minister said that Wapda and Pepco had been ordered to eliminate line losses.

The minister said that the government had decided to control expenditure by reducing unnecessary borrowing from the State Bank, which had earlier tightened its monetary policy.

Instead, he said, the government would borrow from the National Savings Directorate and a target of Rs150 billion had been set which would be achieved by launching new schemes.

Mr Qamar also said that the government would impose more taxes on import of luxury goods and non-essential items, adding that the rate of duty on such items would be increased from 35 per cent shortly after the federal cabinet’s approval.

He said the government would launch a new commercial instrument to mop up Rs300 billion deposits of ministries and other public sector corporations, adding that they had been ordered to withdraw their funds from various savings accounts which would be used for launching the instrument.

Initially, he said, that Rs40 billion would be used for launching the instrument next month.

He said the cabinet was considering approving a five-day work week.

Referring to petroleum export, he said, the export of oil to Afghanistan would be controlled by imposing a regulatory duty on subsidised petroleum products.

“Oil is being bought at a subsidised rate and then exported to Afghanistan and in the process, people are earning considerable profits. This practice will be discouraged by imposing a regulatory duty,” he added.

He, however, clarified that the regulatory duty would only be applied on the subsidy for oil export.

The finance minister also said that the government had worked out a plan for privatisation which would be unveiled on Tuesday next and is aimed at achieving over $2 billion.

“The government will raise Rs52 billion from the privatisation other than big ticketing items.”

He said there would be more foreign inflows, including $26 million coming from privatisation of the PTCL and $750-800 million through the launching of a new bond scheme.

“These new bonds will be securitised against workers’ remittances,” the finance minister said.

He said that the CNG prices are expected to be fixed at Rs49 a kilogramme for which OGRA is finalising details.

In reply to a question, he said that the government was in touch with the government of Saudi Arabia to import 120,000 barrels of oil on deferred payment.

He, however, said that unless the issue was finalised, he could not reveal the cost in dollar terms.

He also disclosed that the US and Canada had offered to give wheat on deferred payment.

“All subsequent wheat imports will be made on deferred payment and this will be in addition to the wheat to be received from the US under the PL-480 programme.”

He said that the IMF had issued a ‘letter of comfort’ on the basis of which the World Bank and the Asian Development Bank would soon start disbursing funds to Pakistan.

But he made it clear that the government did not seek any new IMF programme.

 

[Neo]

Politico-economic issues keep KSE in red, index sheds 243 pts​

KARACHI: Unabated cycle of political instability in the country coupled with declining value of the local currency against US dollar kept the Karachi stock market in red zone.

Karachi bourse remained in the negative zone Friday, as the benchmark KSE-100 shed 243 points on the last trading day of the weak besides falling below the psychological level of 10,000 points. Commenting over negative closure of the market, analysts said the market opened negatively with an initial loss of 165.93 points extending its losses further at the end of the trading session

The KSE-100 share index lost substantial 242.85 points and closed at 9,993.81 points compared to 10,236.66 points of the previous session. The KSE-30 index lost 400.57 points and closed at 11,355.09 points.

The market turnover went down to 13.98 percent and traded 103.35 million shares as compared to 120.15 million shares traded in the previous session.

The overall market capitalisation went down to 2.16 percent to Rs 3.116 trillion as compared to previous session’s Rs 3.185 trillion. Out of 284 companies, 78 closed in positive zone, 188 in negative while 18 remained unchanged.

Hasnain Asghar Ali, analyst at Aziz Fida Husein said atleast yet another deadline for resolution on judges issue would certainly keep the volatility and suspense on higher side, with economic, political, social, geo political and law and order issues slipping out of control.

He said nothing really was positive for the market men, the recent surge in international oil prices and further weakening of rupee continues to offer extra bucks for the oil and gas exploration stocks.

Ahsan Mehanti, senior analyst at Shahzad Chamdia said intense selling was continue as political uncertainty, reinstatement of judges issue affected market sentiment negatively and fall in rupee value, S&P/Moody’s economic outlook, high interest rates, foreign selling and law & order situation in the country remained a concern.

Trading activity was worst as compared to the last trading session as the ready market volume stands at 103.350 million shares as compared to last trading session 120.150 million shares. Future market volume however decreased and stands at 14.827 million shares as compared to last trading session 19.161 million shares.

OGDC, for the third consecutive trading session was the volume leader, with 14.43 million shares as it closed at Rs 108.20 after opening at Rs 111.42 shedding Rs 3.22.

The futures’ market turnover went down to 14.82 million shares as compared to 19.16 million shares traded in the previous session. Four of the companies closed in positive zone, while thirty two in negative while one remained unchanged.

 

[Neo]

No unnecessary money from SBP: government to borrow from savings schemes now, says Naveed​

ISLAMABAD (August 23 2008): The government has decided to control its expenditure by not unnecessarily borrowing from the central bank which had earlier announced a tight monetary policy. Instead, the government would borrow from the national savings schemes, which have an ambitious target of Rs 150 billion to be achieved by launching new saving schemes in the current fiscal year.

Speaking to a select gathering of newsmen here on Friday, Finance Minister Naveed Qamar said the government was enhancing its foreign exchange reserves by privatising state-owned assets estimated at over $2 billion next month and would be separately receiving more than $1 billion foreign inflows including $266 million from the privatisation of Pakistan Telecommunication Company Limited (PTCL).

The government has prepared a detailed privatisation programme, which will be unveiled next Tuesday aimed at achieving over $2 billion, he said, adding that the government would manage Rs 52 billion from the privatisation of other than big ticketing items. No time frame or the identities of the entities to be privatised was mentioned.

He said there will be more foreign inflows including $266 million coming from the privatisation of the PTCL and $750-800 million through the launching of new bond scheme.

"One of the serious issues is our depleting foreign exchange reserves which have come down to around $10 billion due to exchange rate pressure and there is an urgent need to enhance our forex reserves through more privatisation and new foreign inflows," he added.

"In fact we have decided to take a number of measures to achieve 4.7 percent fiscal deficit target in 2007-08 and for this purpose we have to slow down the pace of economic development, " he said. To another question, he said that the IMF has issued a "letter of comfort" due to which the World Bank and the Asian Development Bank would start disbursing their funds to Pakistan soon.

But he made it clear that the government has no plan whatsoever to seek any new IMF programme. However, he said that oil prices, which came down to $112 a barrel from earlier high of $145 per barrel in the international market, have again gone up to $120 a barrel due to the Russian and American stand-off in Georgia. This price rise would place further pressure on the government to achieve its budget deficit.

Giving details, Naveed said that all supplementary grants to the ministries and divisions have been stopped along with a directive to them that they must restrict their foreign tours and stop buying physical assets. He said funds will be withdrawn from those development projects which did not have any economic impact.

He said that it was unfortunate that the government would have to slash its development budget from Rs 550 billion to Rs 450 billion to avoid piling up of more problems. He said, IMF which was insisting on Pakistan brining down the deficit to 4.3 percent during the current financial year, was told that it was not possible and that 4.7 percent target fixed in the current budget would not be revised upward later.

Naveed said that a decision has been taken to impose tax on import of luxury goods and non-essential items. He said that there was already 35 percent duty on such items which will be further increased shortly after the approval of the federal Cabinet.

He said the government would launch new commercial paper by 'mopping up' Rs 300 billion deposits of the ministries and the state corporations. They have been directed to withdraw their funds from various savings accounts which will be used for launching the new commercial paper. Initially, he said, Rs 40 billion will be used out of Rs 300 billion deposits for launching this commercial paper next month.

He said a five-day week has been proposed to be approved by the Cabinet. On the petroleum side, he said a decision has been taken to control the export of oil to Afghanistan by imposing regulatory duty on the already subsidised petroleum products.

Naveed said that CNG prices were expected to be fixed at Rs 49 per kg for which Ogra was finalising the details, which will be made public shortly. In reply to a question, Naveed said the government was in touch with the Saudi government to import 120,000 barrels of oil on deferred payments. However, he said that unless the issue was finalised, he would not indulge in the cost in dollar terms.

The finance minister also disclosed that the United States and Canada have offered to export wheat to Pakistan on deferred payments. "Now all subsequent wheat imports will be made on deferred payment and this will be in addition to the wheat that will be received from the United States under PL 480 programme," he said.

 

[Neo]

Sequel to rupee nosedive: public debt up by Rs 630 billion in 45 days ​

ISLAMABAD (August 23 2008): Pakistan's public debt has gone up by Rs 630 billion due to depreciation of rupee against dollar in the past one-and-a-half months. Since Pakistan's public debt is all time high, depreciation of one rupee against dollar would add Rs 45 billion to it. Dollar-rupee parity was around 1:64 some one and half months back. Then unending rupee nosedive changed this ratio to 1:76.50 on August 22.

The difference of 14 rupees against dollar simply means addition of Rs 630 billion in public debt in 45 days or so, without getting loan of even a single dollar from any source. The Ministry of Finance (MoF) is in shock over this development, but it seems tied up in the shackles of autonomy granted to the State Bank of Pakistan (SBP) to govern the monetary market under its Act of 1956.

The dollar is gaining substantially vis-à-vis rupee for long and, on Friday, the last working day of the money market, it crossed the level of 76.50 in open market. It is the first time in Pakistan's history that the rupee is on such a sharp decline and no assurance seems working either of the federal government or the SBP about better performance of the local currency.

The rupee is so fragile against dollar that it is shedding value at a most alarming pace. It did show slight recovery for only two days during the last a couple of months--on August 18 and 19--on President Musharraf's resignation. After two days, the rupee again reverted to worse performance. Between August 20 and 22 it lost more than four rupees.

This has been a cause of concern for the economic team of the government, headed by Finance Minister Naveed Qamar. But they say that SBP is an autonomous body and any direction for correction would be against the rules of the game. But, will the federal government keep on sitting on the back seat, or wait for even worst, or it has some solution for SBP to suggest for correction?

Special Secretary Finance Dr Ashfaque Hasan Khan, who is also Director General of Debt Management Office, looks visibly disturbed over rupee depreciation. He is worried over the rising public debt due to rupee downfall. However, like other top level officials of MoF, he also has no direct answer to the question whether there could be some role for the federal government to ask SBP to take some corrective measures, or it would keep on watching the downfall of the rupee indefinitely.

Senior officials of MoF are of the view that since the SBP is enjoying full autonomy, it is the only authority to take corrective measures for checking any fluctuation in exchange rate. Talking to this correspondent one MoF official said: "Technically and legally speaking it's for the SBP to intervene in the money market. However, it's an issue which is of great concern for MoF." One can ask the policy makers whether other Asian countries also enjoy the same level of autonomy as SBP is enjoying under its Act 1956.

 

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Massive outflow of foreign investment witnessed​

KARACHI (August 23 2008): A massive outflow of over 25.035 million dollars of portfolio investment from the country's equity market was witnessed during the outgoing week ended August 22, 2008. The recent outflow of foreign investors portfolio investment from the country's equity market was mainly due to the offshore investors' concerns over the prevailing political uncertainty and depreciating local currency value, analysts said.

The cumulative outflow of foreign investment in the local share market has increased to 37.954 million dollars in the current month from August 01, 2008 to August 22, 2008 while the offshore investors have withdrawn over 347.907 million dollars in the current year from January 01, 2008 to August 22, 2008. According to data, released by National Clearing Company of Pakistan Limited (NCCPL), the net outflow of 2,627,552 dollars of portfolio investment was witnessed on Monday while the foreign investors withdrew another 2,655,687 dollars on Tuesday.

On Wednesday, an inflow of 1,251,427 dollars foreign investment was recorded, however, a massive outflow was witnessed on the remaining two days of the week, as the foreign investors withdrew 8,267,451 dollars on Thursday and 12,735,787 dollars on Friday.

 

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BMA extends financial, investment services to NWFP​

PESHAWAR (August 23 2008): BMA Capital has extended financial and investment services to NWFP with the objective of the facilitation and promotion of investment in the province. This was announced at a function held at a local hotel with NWFP Minister for Finance Mohammad Hamayun Khan as chief guest.

BMA Capital Chief Executive Officer Junaid Iqbal gave a detailed presentation on various modes of investment and particularly mutual funds. The BMA, he said, would provide facilitation in 20 different kinds of mutual funds.

The company, he said, would provide research on the mutual companies and offer investment and would help get a status of their products in the market. The company would also carry research on transaction, risk and rate of return and would provide it to the people.

BMA would encourage investments in mutual funds as it had less risk and handsome return, he said, adding that it would work as risk manager and review situation of stock market on daily basis.

The company would also hold functions in educational institutions, banks, chambers of commerce and other government institutes for encouraging people to investment in mutual funds. Speaking on the occasion, NWFP Minister for Finance Mohammad Hamayun Khan said the government was making efforts for bringing investment to arrest the growing problem of employment.

He said that the provincial government had constituted a committee, headed by the Chief Minister, to give incentives to private sector for promotion of private investment in the province.

The minister said that the provincial government was also making arrangements for the establishment of Reconstruction Opportunity Zones (ROZs), and added the US Congress was likely to give approval to the product by November. The provincial government, he said, started creating space for the project in the existing industrial estates.

He said that they were in close contact with the business community of the province through chambers of commerce and industry to encourage private sector to come and invest in the province. He also extended thanks to BMA for extension of services to the province.