Pakistan Economy - News & Updates - Archive

[Neo]

The laundry list of economic woes ​

ARTICLE (August 28 2008): Has the time come for the government to stun the nation by making an admission that it has expended all its energies towards "effecting a change in the political system" and that its focus on political issues is badly undermining its ability to deal with a rapidly worsening economy?

Will it also admit that it has not taken with much seriousness the recent international rating agencies' warnings that if a deterioration in Pakistan's credit fundamentals becomes irreversible in coming weeks and months, negative actions will follow as many of the credit stresses which led to the downgrading of country's sovereign credit ratings to B2 from B1 in May 2008 are still there?

That the central bank increased the key discount rates on two different occasions in less than six months, inflation is still alarmingly high as consumer price inflation already hit a 30-year high of 21.5% while food price inflation soared to 32% in June.

It has reached menacing proportions this month even when the government has not fully withdrawn subsidies on food and fuel with a view to reducing the growing fiscal deficit. It is widely believed that the government has contributed directly in the rise of inflation through its recourse to heavy borrowings from the State Bank of Pakistan despite firm commitments to the contrary.

A growing power deficit that has now widened to as much as 4,500mw notwithstanding, the circular debt that engulfs the entire oil and power sectors is a strong sign of an unmanageable energy crisis that is going to occur very soon in the shape of a massive decline in fuel supplies for the generation of electricity.

Again, it is the government which is said to have failed to tackle the circular debt in excess of Rs 200 billion, threatening not only the shutdown of IPPs but also badly affecting the ability of OMCs to make timely import of POL deficit products, particularly diesel and furnace oil possible.

Barring a two-day recovery following Pervez Musharraf's resignation on August 18, stocks have been losing their gloss for six consecutive sessions. The KSE-100 index has lost as much as 43 percent since April 21 this year, the day it hit a record high.

More and more foreign investors are shifting their funds to other destinations mainly because of political uncertainty while the incidence of flight of capital is also attributable to a significant increase in margin calls due to a global economic slowdown. Is the present stock market slump not a fatal haemorrhage?

That the serious economic fault lines were very much there even much before the present government came into office, the government has hardly done anything effective and meaningful to lessen those pressures that have been exacerbating the fiscal imbalances.

The absence of any meaningful policy-making has also caused a negative impact on foreign investment inflows, thereby seriously diminishing the prospects of improvement in the economic indicators even in the long term.

Although the US has announced a plan to provide US $115.5m in food aid to Pakistan while UK intends to double its aid to US $950m during the next three years, the present situation has given birth to serious doubts about the government's ability to successfully meet its objectives that it spelled out in the FY09 budget. Among other things, it remains to be seen whether or not the government will be meeting its fiscal deficit target.

The government's inability to promptly tackle the recent goods transporters protest is also a case in point. Not only has it led to the crowding of a large number of containers of imported items, the shipments of export cargoes worth millions of dollars are facing inordinate delays on account of the strike that ended very late and that too only partially.

The laundry list of economic woes is painfully very long. Although the foreign minister has made a sudden dash to Saudi Arabia to hold talks on oil facility against deferred payment, this seemingly priority plan seems to have run into snags on account of an inordinate delay owing to the government's lack of focus on this key economic issue.

Last, but not the least, the lack of focus on increasing the agri surplus to ease pressure on BoP and current account deficit also betrays the government's lack of interest in a sector which contributes around 25 percent to the country's GDP.

Wednesday was not much different from the past many days and weeks. The stocks further plunged with KSE-100 index nose-diving to below 9,000 points before ending at 9,020.50 points. The only consolation came on account of appreciation in the rupee against the US dollar. A badly battered and beleaguered rupee did make a slight recovery, the erosion of its value against the greenback over the past many weeks and months has been disappointing nevertheless.

 

[Neo]

Is wedlock imminent between US war on terror and our economy? ​

ARTICLE (August 28 2008): The fiscal 2007-08 witnessed historical current account deficit of $14 billion. This was mainly because of unprecedented trade deficit as the imports were almost double of our exports. The current account deficit was partly financed by the workers' remittances exceeding $6 billion and partly from capital/foreign investment inflows. Thus, the overall balance of payments deficit amounted to $5.8 billion.

The situation does not seem to have taken any positive turn during the first month of the current fiscal FY-09 as the trade deficit amounted to $1.6 billion. The result is that there is heavy drawdown on foreign exchange reserves which have come down to 10.159 billion as on the 1st August, 2008. This table contains details about drawdown on reserves since the close of the fiscal FY-07:

It may be mentioned here that the reserves held with the commercial banks represent the amounts of foreign currency deposits collected by the banks from both the residents and non-residents. These funds cannot, therefore, be utilised for meeting country's foreign currency needs. It will be seen from the table that there has been a drawdown of $1.716 billion [from SBP reserves]during the quarter May-July,2008 ie $572 million per month.

At that speed, these reserves can keep us afloat at the most for one more year. What possible solutions are under the consideration of the government to tackle the alarming situation? Apparently-none. During 1980s/1990s, the foreign exchange deficits used to be around $1.5-2 billion and we used to cover them by borrowings through International Monetary Fund, World Bank, other multilaterals and floating foreign currency sovereign bonds etc.

Now that balance of payments deficit is $5.8 billion in FY-08 and may exceed that in FY-09. Will it be possible to borrow such huge funds internationally? The possibility is rather remote. When the present government took over in February,2008, there was a lot of talk about inflow of $3-3.5 billion from overseas. This also does not appear to have materialised as merely $500-600 million is reported to have been received from China.

About a decade back, there has been a lot of talk about the overseas holdings of the Pakistani feudals/corrupt bureaucrats and industrialists and the amount was put at $100 billion. During the last one decade, there has been a rampant corruption in all walks of life.

The earlier estimated amount may have at least doubled now. Can an appeal to these 'wealth grabbers' to transfer a part of their overseas wealth - say - up to $25-30 billion to Pakistan to let the country tide over the present difficult situation prove effective? This scribe is not the least hopeful. What could be the other alternatives: The following need to be considered immediately:

-- The repayments under some of the foreign loans rescheduled in the aftermath of 9/11 will also become due during FY-09 which will raise the foreign exchange payments liabilities still further. Therefore, there seems to no option but to once again go for rescheduling and/or debt forgiveness. This will save foreign exchange approximately to the extent of $3 billion in FY-09.

-- There has been lot of talk about import of crude oil from Saudi Arabia either on deferred payment basis or cost free. This, if materialised, could save another $5-6 billion in FY-09. The deferred payment to be sought should not be for one year alone; it should be for at least 2-3 years so that we may tide over our difficulties during that span.

-- The import of cars/cosmetics, mobile phones and other unnecessary items should be completely banned. The raise in import duty is not likely to serve the purpose as the 'wealth grabbers' have enough money to pay the higher costs. Simultaneously, the government will have to gear up its machinery to lay hands on the smugglers.

-- There is a strong need to develop mass transit system for big cities of the country with a view to saving the expenditure on fuel imports. The Sindh Governor had been endeavouring for the revival of Karachi Circular Railway but has not been successful because of stiff resistance from strong transport mafia.

As an initial stage of developing the mass transit in the city, the project needs to be promptly taken in hand. It is not only the northern areas where the government needs to establish its writ, it has also to do so over the strong mafia pockets which exist in the big cities.

-- The huge coal reserves in Thar (Sindh) are obviously not meant to be formed part of the history for the coming generations. They are for utilisation in the country and also for exports. It seems that the provincial government of Sindh and the federal government are currently busy in establishing their respective "writs" over these reserves even in the difficult time the country is passing through.

This entangle must end forthwith and the coal deposits should be exploited and used not only for generating electricity but also for exports so as to ease pressure on foreign exchange resources. The purpose will not be served unless the matter is tackled on "war footing".

It is unlikely that the debt rescheduling/ forgiveness and seeking of deferred payment facility from Saudi Arabia for oil imports will be possible without the help of USA. The acquisition of such assistance will obviously be attached with such conditionalities as may coerce us in a wedlock with USA in its war on terror.

This can be avoided if the Pakistani 'wealth grabbers' who are holding huge resources overseas, if they are patriot Pakistanis, instantly transfer to Pakistan a part of their overseas resources as hinted earlier in this write-up. A corollary to the current difficult foreign exchange situation is the exchange rate movement during the last two months or so.

It will be recalled that the banks authorised to deal in foreign exchange (Authorised Dealers-A.D.s) were - until November,2001, permitted to undertake purchase/sale of foreign currencies among themselves provided such purchases/sales were backed by the "permissible" transactions. This conditionality was withdrawn by the State Bank of Pakistan [SBP]vide F.E.Circular No 20 dated the 21st November,2001.

In other words, speculative purchases/sales between the A.D.s were allowed. We have recently witnessed the oil price bubble in the crude oil market at international level which is generally attributed to the speculators. Can we not, therefore, deem that the current exchange rate scenario in the country is also the [partial] result of speculative activities by the big market players in our banking industry.

Another aspect of the issue is that when rupee is falling against foreign currencies, the ADs stand to gain by building up foreign currencies stock. The SBP had abolished the limits given to the A.D.s for maintaining foreign currency balances. Currently, the control is being exercised by the SBP through the open position limits given to the ADs by it. The SBP,therefore, needs to exercise utmost vigilance to ensure that no A.D. is crossing its allotted exposure limits with a view to minting money.

(The writer is retired Additional Director, Foreign Exchange, SBP)

====================================================
Foreign Exchange Reserves
[Figures in billion US$]
====================================================
Position as of With With Total
SBP banks [2+3]
1 2 3 4
====================================================
30-06-2007 13.328 2.283 15.611
08-05-2008 8.684 2.573 11.257
06-06-2008 8.386 2.566 10.952
04-07-2008 8.324 2.799 11.123
11-07-2004 7.953 2.877 10.830
18-07-2008 7.778 2.950 10.728
25-07-2008 7.448 3.039 10.487
01-08-2008 6.968 3.191 10.159
====================================================
SOURCE: SBP website.

 

[Neo]

Indications of tough times ​

EDITORIAL (August 28 2008): It is no secret that the Pakistan economy is under a lot of stress and appropriate responses are urgently needed to keep it on the right track. Finance Minister Naveed Qamar, worried by the rapidly deteriorating situation of the main economic indicators, outlined his strategy, in broad and general terms, to tackle some of the serious issues now confronting the economy.

Speaking to a select gathering of newsmen on 22nd August, he revealed that the government had decided to cut the federal Public Sector Development Programme (PSDP) by Rs 100 billion from Rs 550 billion to Rs 450 billion to contain fiscal deficit at 4.7 percent of GDP and allow a "hefty increase" in electricity tariff to achieve macroeconomic stability.

Oil prices, which had declined to about $120 a barrel after peaking at $148 a barrel in the international market, would not be brought down in the domestic market "unless the government achieves an equalisation". Funds would be withdrawn from development projects which do not have an immediate impact.

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. All supplementary grants to the ministries and divisions had been stopped along with a directive to cut back on foreign tours and the purchase of physical assets.

The government would borrow an amount of Rs 150 billion from the National Savings Directorate and reduce its dependence on the State Bank which had tightened its monetary policy. The IMF had been assured that the government would not exceed the budget deficit target of 4.7 percent. One of the most serious issues was the depleting foreign exchange reserves which had come down to about $10 billion.

The government would enhance the level of reserves through more privatisation and fresh foreign inflows. In order to restrict the import bill, the government would impose more taxes on the import of luxury goods and non-essential items. The US and Canada had offered wheat on deferred payment. The government was also in touch with the authorities of Saudi Arabia for the import of 120,000 barrels of oil on deferred payment basis.

Upward adjustment in power tariff rate, though inevitable, would be very painful. The National Electric Power Regulatory Authority (NEPRA) has proposed 61 percent increase in electricity tariff which the government was anxious to pass on to the consumers to remove Wapda's growing financial difficulties. Wapda needed huge amounts of money to make payments to the IPPs which had threatened to shut down their plants because of non-payment.

Circular debt has reached unmanageable levels. IPPs are running short of liquidity and are unable to pay to oil marketing companies (OMCs) for the fuel they use to run their plants. In short, the whole system is trapped in a logjam of huge financial constraints and if something is not done immediately, the collapse of the system is imminent.

What the Finance Minister has told the media actually makes a lot of sense. For obvious reasons and appallingly, the economy of the country has come under great pressure over the last year or so and main macroeconomic indicators are deteriorating rapidly. Budget deficit is growing, current account deficit is worsening, foreign exchange reserves of the country are depleting fast, exchange rate of the rupee has sunk to new lows and, worst of all, inflation rate has increased by nearly 25 percent over the last one year.

Food inflation is even higher and it is not difficult to visualise the sufferings of a common man. The situation in some of the key economic areas is not even sustainable in the short to medium term. For instance, current account deficit equivalent to 8.4 percent of GDP experienced during 2007-08 cannot be allowed to continue because foreign exchange reserves are low and resort to external borrowings cannot be limitless.

The profligacy at such a scale would certainly drive the country towards a default situation which would have highly negative consequences for the economy. Seen against the emerging scenario, therefore, most of the measures proposed by the Finance Minister are worthy of serious consideration. In the absence of any viable alternatives and given the imperatives of the economy, such measures seem inevitable to improve the fundamentals of the economy.

Nonetheless, the shift in policy strategy like huge increase in electricity tariff, slashing of development expenditures and elimination of subsidies on various items would further hit the ordinary people of the country and severely reduce their consumption levels. Of course, very tough times lie ahead for the citizens of this country due to past mismanagement of the economy and highly unfavourable external developments.

However, in our view, some of the problems could be mitigated and life of ordinary people can be made a bit easier by undertaking certain overdue and imaginative measures. For instance, a higher level of resources could be mobilised by bringing the untaxed sectors of the economy under the tax net and improving tax compliance. These resources could then be utilised to subsidise very essential commodities like wheat to avoid hunger on a mass scale.

Similarly, the proposed increase in electricity tariff could be reduced by forcing Discos and KESC to bring down their line losses at par with international standards. We apprehend that a steep rise in power tariff would further increase the pilferage of electricity and only punish the honest consumers.

In short, in abnormal times like this, the rich, irrespective of their sources of income, need to be heavily taxed while the corrupt and cheaters must be forced to mend their ways in order to provide some relief to the ordinary people and reduce their miseries. By all reckoning, the days of easy options, it seems, are over, at least for now.

 

[Neo]

Pakistan extends daylight saving time through October ​

Islamabad - Energy-strapped Pakistan on Wednesday decided to extend the daylight saving time till October end as prolonged power cuts triggered violent protests throughout the country.

Clocks were set forward by an hour on June 1 for three months to save electricity by benefiting from longer daylight. The move placed the local time six hours ahead of the Greenwich Mean Time (GMT).

"The federal cabinet has extended the daylight saving time on the suggestion of the Ministry of Water and Power that said the step proved beneficial," Information Minister Sherry Rehman told reporters in Islamabad.

Pakistan is facing an energy deficit of around 4,500 megawatts with low hydroelectric power generation, as the authorities focus on storing more water in reservoirs ahead of reduced inflows.

Irate consumers have taken to the streets in several cities, especially in eastern Punjab and southern Sindh provinces, to protest prolonged power cuts of as long 16 hours a day.

The demonstrators chanted slogans and burned tyres to block roads. There were also some reports that protesters pelted the offices of power generation and distribution companies with stones and ransacked property.

The ruling Pakistan People's Party alleged that not a single megawatt of energy was added to the national energy grid during more than eight years of rule by military strongman Pervez Musharraf, who resigned as president last week while facing impeachment.

Musharraf refuted the claim but conceded that power generation was not in proportion with consumption, which galloped in the wake of massive industrialization promoted by his government's economic policies.

Pakistan also switched to daylight saving time in 2002, but backtracked as the change was not followed by many people, particularly in rural areas. (dpa)

 

[dr.umer]

Pakistani exhibitors get encouraging response at Textile exhibition in Shanghai ​

BEIJING, Aug 27 (APP)- Pakistan exhibitors who are participating in the annual exhibition of textile products in Shanghai started Tuesday, said they were getting good response from intending buyers.

As many as 15 key entrepreneurs doing business in textile and related fields from Pakistan are taking part in the exhibition to showcase their products, the marketing manager of one of the exhibitors told APP from Shanghai.

Pavilion from Pakistan return this year after its success in 2007, said organizer of the 3-day Intertextile Shanghai Home Textiles Exhibition-2008.

We held a number of good business meetings with customers here during the last two days, said Abdul Ghaffar Gai Gai, Marketing Manager of Aziz Sons.

This is an important opportunity for Pakistani exporters to display their quality products for obtaining new orders from customers attending the exhibition from across the world?, he said.

The Consulate General of Pakistan has obtained a pavilion at a conspicuous place for the country?s exporters to display their goods in a better way.

Spreading over 100,000 sqm of trade space, the fair is expected to surpass the previous visitor levels as more than 900 exhibitors are attending the exhibition.

The show is one of the largest home textile trade events in Asia, with nine halls. The international halls will feature special zones for bedding, towelling, curtains and upholstery.

Products were displayed by famous suppliers. Four country/region pavilions have been established for group suppliers.

Pavilions from Pakistan and Portugal returned this year after their success in 2007; and for the first time at the show, stalls from Taiwan and Turkey will also be established, said the organizer.

To strengthen co-operation and interaction between suppliers and buyers, a special buyer?s programme is also part of the exhibition, featuring customers from famous department stores, wholesalers and agents.

Over 100 important buyers are attending the fair from across China and also Australia, Austria, Belgium, France, Germany, Italy, Korea, New Zealand, Russia, Singapore and Taiwan.

Intertextile Shanghai Home Textiles is organized by Messe Frankfurt (HK) Ltd., the Sub-Council of Textile Industry, CCPIT and China Home Textile Association (CHTA).

 

[Neo]

Cabinet body approves 1,000MW power projects ​

Friday, August 29, 2008

ISLAMABAD: A meeting of the Cabinet Committee on Fast Track Power Generation was held here on Thursday under the chairmanship of Federal Minister for Water and Power, Raja Pervez Ashraf.

The meeting was attended by Special Assistant to PM on Social Sector, Secretary and Adviser of Ministry of Water and Power, Secretaries M/O Petroleum & Natural Resources and Environment, Chairmen WAPDA & NEPRA, Additional Secretary, M/O Water & Power, MDs PPIB & PEPCO, Member PIC and senior officers of PPIB.

The minister apprised the participants that the government was fully committed to eliminating load-shedding by the end of 2009. In order to achieve this objective, fast track power generation projects have to be taken up on priority basis, he said.

The Committee meeting considered the proposals in depth in the light of the evaluation criteria, approved by the Cabinet and cleared three projects of 1,000 MW. Out of these, two projects of 775 MW are likely to be operational within one and a half year, while the third project of 230 MW (Barge Mounted) shall be operational in six months. The entire process of clearance from the date of the tender notice has been completed in about three months through transparent International Competitive Bidding (ICB) on fast track basis. The Minister appreciated the efforts of the committee members and hoped that the generation of 1000 MW electricity on fast track basis would help minimise load shedding in the country.

 

[Neo]

Reserves fall to $9.38bn, rupee firms ​

Friday, August 29, 2008

KARACHI: Pakistan’s foreign reserves fell to $9.38 billion in the week that ended on Aug. 23, from $9.57 billion in the previous week, the central bank said on Thursday.

The State Bank of Pakistan, said its reserves fell to $6.01 billion from $6.26 billion previously, while those held by commercial banks rose to $3.37 billion from $3.30 billion. Pakistan’s foreign reserves hit a record high of $16.5 billion in October last year but have since been depleted by high payments for oil imports, and foreign investors withdrawing money because of the country’s political uncertainty.

The rupee closed firmer at 75.90/76.05 to the dollar on Thursday compared with Wednesday’s close of 76.00/10, data from Reuters showed. But traders said the long-term outlook for the currency was still uncertain.

 

[Neo]

Plan to raise $135m for areas hosting Afghans​

ISLAMABAD, Aug 28: The United Nations High Commissioner for Refugees and Pakistan have launched a joint appeal to raise $135 million for rehabilitation and development of areas where Afghan refugees had lived for a long time.

Donations received in response to this appeal would be used for development of basic infrastructure in the NWFP and Balochistan, UNHCR spokesman told Dawn.

He said that basic services in health, education, water and sanitation would be upgraded in the affected areas.

The pilot project, ‘Refugee affected and hosting areas’, will be implemented as a joint programme in the two provinces.

An accord to launch the initiative was reached during a three-day visit by UNHCR chief Antonio Guterres who had arrived in Islamabad on Tuesday.

During his stay, Mr Guterres met Prime Minister Syed Yousaf Raza Gilani, Minister of States and Frontier Regions Najamuddin Khan and senior officials of the ministries of interior and foreign affairs.

He also met representatives of European Union and G-8 countries in Islamabad who pledged support for the appeal.

Under another agreement the UNHCR will revise the repatriation plan for Afghan refugees who will be allowed to stay in the country beyond 2009.Pakistan had earlier set the 2009 deadline for all registered Afghan nationals to return to their country and said that beyond the year their stay in Pakistan would be considered illegal.

The two sides agreed that improvement in the situation in Afghanistan was imperative for repatriation.

The high commissioner informed the government that an international conference on return and reintegration of Afghan refugees would be held in Kabul in November this year.

On the request of Pakistan, the high commissioner assured UNHCR’s support for people displaced by the ongoing operation in Swat and Bajaur.

 

[Neo]

Rs2bn project to build shrimp farms​

QUETTA, Aug 28: The Federal government is implementing a project to construct 11 shrimp farms and two hatcheries in Balochistan and Sindh at a cost of about Rs2 billion.

Out of 11 eight model shrimp clusters eight would be constructed in coastal areas of Balochistan. “Major portion of the fund allocated for the project would be spent in the province,” sources in provincial Fisheries Department told Dawn.

Chief Executive Officer of Fisheries Development Board of the ministry of food, agriculture and livestock Dr. Nasim Akhtar held meetings with all concerned officials and apprised them about the federal government’s project in detail.

Sources said that these model farms and hatcheries would be constructed on the basis of private-public partnership in both these provinces for developing this sector. Of the eight model shrimp farms, every one will comprise of up to 100 pond units of 1-2 acres each, 75 per cent of these ponds will be for private sector.

Under the plan a model fish market would also be constructed in coastal town of Gwadar. The Fisheries Development Board also plans to introduce intensive fish cage culture at Sabkzai and Meerani dams. “The objective of the project is to develop the coastal areas and alleviate poverty in these areas of Balochistan,” Secretary Fisheries Balochistan Ruhail Baloch told Dawn, adding that through this project employment opportunities and other allied economic activities would generate in the province.

The CEO of the Fisheries Development Board, Dr. Nasim Akhtar during his recent visit to Balochistan visited coastal areas and identified sites for shrimp farms and shrimp hatchery at Gadani, Dam Ormara, Pasni, Kalmat, Pishukan and Jiwani. The Provincial Secretary fisheries said that his department had moved a summary to the Balochistan government for the allotment of around 500 acres of land free of cost at each site identified for the project. “Around 100 acres of land is required for the construction of proposed hatchery complex,” he said.

 

[Neo]

Production drops by 50pc in five estates: Power outages​

KARACHI, Aug 28: Prolonged load-shedding in five major industrial estates is inflicting billions of rupees losses as the production activity has almost dropped to 50 per cent.

The frequent and unannounced power outages is not only causing production loss but also damaging costly industrial plants and equipments thereby sending the industry out of production for longer period.

The worst-affected are small and medium size industrial units, which could not afford self-generation and have to fully depend on the power utility, KESC, which is faced with a shortfall of around 700MW against a total demand of 2200MW.

The leaders of these estates – Site, Korangi, North Karachi, Landhi and Federal B Area -- criticised the power utility saying it is totally mismanaged and there is no one who could be approached for resolving their problems.

Sheikh Fazle Jalil, chairman Korangi Association of Trade and Industry said that his association had invited KESC’s hierarchy, including the managing director and general managers on Monday to discuss energy problems being faced by the industrial units but nobody turned up except a few lower ranking staff.

Mr Jalil suspected a sort of conspiracy against the manufacturing sector because he felt presently, most of the policies were against the industry and this indicated that “some forces want us to close down our units”.

He raised a question that as to why the government was not paying outstanding dues to the tune of Rs11 billion to the independent power plants (IPPs) and bring them into full operation to generate power badly needed to sustain industrial production.

F B Area Association of Trade and Industry chairman Idrees Gigi said that the goods transporters’ strike for eight days crippled exports and created raw material shortages. Now prolonged power outages are causing production losses resulting in delays in shipment of export consignments.

Mr Gigi said the production had gone down up to 45 to 50 per cent owing to frequent and prolonged power outages.

North Karachi Association of Trade and Industry chairman Noor Ahmed Khan said that his estate was faced with the duel problem of power shortage as well as law and order. He said owing to prolonged power outages 50 per cent of industry went out of production.

He said it was becoming most difficult to run the industry under these circumstances where multiple problems remained unresolved.

He said the association members on Thursday held a meeting with the CCPO Wasim Ahmed to discuss law and order problem. He was accompanied with DIG Saleem Jaffri.

The police officials were informed that the theft cases were on the rise and industrialists did not feel safe while moving in and out of the industrial area.

He further said that the association had approached Sindh Minister for Industries Rauf Siddiqui and sought his help in sorting out power shortage problem. It has also contacted Federal Minister for Water and Power Raja Ashraf Parvez.

Site Association of Industry chairman Nisar Shaikhani said without giving due importance to the manufacturing sector country’s economic woes could not be overcome. If the country has to improve its foreign exchange reserves it has to increase exports, he added.

 

[Neo]

Senate standing committe expresses concern: Rs 700 billion public money in private banks​

* Government decides to utilise money by issuing commercial papers with better return​

ISLAMABAD: The Senate Standing Committee of Finance and Revenues here on Thursday expressed its concerns over various public sector enterprises and corporations keeping their money in private banks instead of National Banks.

The committee and asked the Ministry of Finance for an immediate end to this practice and observed that ‘banks should not thrive on public money’. The total estimated amount of public money deposited in private banks is Rs 700 billion.

The Senate Standing Committee on Finance, Economic Affairs & Revenue, which met at the parliament house under the chairmanship of Senator Ahmad Ali, was informed that at present public money of Rs 700 billion is deposited at private banks by the federal as well as provincial public sector enterprises and corporations. Out of this amount, Rs 400 billion belongs to federal public sector enterprises and corporations and Rs 300 billion the provincial public sector entities.

The meeting was also informed that the federal government has decided to utilise this money for meeting its financial obligations by issuing government commercial papers to these public sector enterprises with better rate of return on such funds. This would help the government to minimise borrowing from State Bank of Pakistan, which fuels inflation.

In order to eliminate this practice, the federal government would open a special account in the National Bank of Pakistan where all the public money would be deposited. The public sector enterprises would draw money from this account as per requirements and no corporation or public sector entity would be released more than required funds.

Besides this, the Committee discussed the situation and structure of tax collection.

Senator Haroon Khan was of the view that the tax collection has improved due to 24 percent inflation and 25 percent loss in value of the rupee. Professor Khurshid Ahmad stated that the tax to GDP ratio is yet to register any significant increase and it continues to be one of the lowest in the region. This is a cause of concern and the economic managers must address this issue by broadening the tax base to turn the economy around. Senator Safdar Abbasi observed that levying 16 percent sales tax is coercive and it burdens the general public the most. Senator Nisar A Memon suggested that professionals like doctors, engineers, lawyers, consultants etc be brought into the tax nets.

The Committee also praised the reforms introduced by the former Chairman FBR, and observed that the reforms have simplified procedures and made filing of returns easy. It, however, took exception to the manner in which the ex-Chairman was removed noting “though the government has the right to remove him yet the manner in which this right was exercised is questionable”.

The meeting recognised and appreciated the efforts of the FBR in streamlining and enhancing tax collection on the whole. The meeting expressed concerns over the fact that the government borrowings are still very high and the Debt Limitation Act is not being adhered to. Senator Ishaq Dar termed this practice as ‘scandalous’. Some members of the Committee said that external debt has risen to unsustainable level and remedial measures must be taken in this regard.

The meeting was attended, among others, by Senators Ms Pari Gul Agha, Muhammad Amin Dadabhoy, Haroon Khan, Nisar Ahmad Memon, Prof Khurshid Ahmad, Dr Safdar Ali Abbasi and Muhammad Ishaq Dar besides the Chairman, FBR and senior officials of the Ministry of Finance and FBR.

 

[Neo]

‘Outages to render 100,000 NWFP industrial workers jobless’​

* Industrialists seek uniform electricity rates throughout the country * Say only 800 of 2,200 industrial units in operation​

PESHAWAR: Industrialists in NWFP have said that more than 100,000 industrial workers would be rendered jobless if the “unscheduled” power outages continued.

They also blamed the Water and Power Development Authority (WAPDA) for charging higher per unit power rates from NWFP-based industrialists as compared to other provinces and warned to take the matter to the court.

Speaking at a joint press conference here on Thursday, Sarhad Chamber of Commerce and Industry (SCCI) President Haji Asif and Small Industries Kohat Road President Engineer Maqsood Anwar Pervez said only 800 of the total 2,200 industrial units in the province were operating.

However, the long hours and unscheduled load-shedding would push the rest of industries towards closure which would render more than 100,000 industrial workers jobless, they added.

Anwar Pervez said the overall load-shedding hours reached 18 out of 24 hours which was a big loss for industrialists.

The frequent power outages were not only increasing the production cost but also affecting the labourers who did not get jobs.

In his tirade against WAPDA, Anwar Pervez said the NWFP-based small industrialists were paying 2.30 rupees for a single unit of electricity they consumed, which he said, was the highest throughout the country.

Besides, he added, WAPDA was imposing tax if their monthly electricity bill exceeded 20,000 rupees. He said the industrial consumers of B-2, B-3 and B-4 categories in NWFP were paying higher electricity charges than those in Punjab.

He asked the government and WAPDA to bring uniformity in rates of electricity for industries in Punjab and NWFP. “The matter would be taken to the court if the government failed to implement uniform rates,” he warned.

The industrialists said load-shedding was not only causing huge losses to the economy of the country, but also creating hurdles in the way to achieve the export targets.

They asked the government to take practical steps to solve the problems of industrialists instead of blaming their predecessors for all ills.

They also raised the issue of lawlessness in the province and said the prevailing situation was blocking the industrial growth in the province.

They said the kidnapping of industrialists was a serious cause of concern while the provincial government had so far failed to alley their fears by ensuring them safety of life and property.

 

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Progress in talks over Saudi oil for Pakistan​

LAHORE: There has been progress in talks between Foreign Minister Shah Mehmood Qureshi and Saudi officials regarding oil supply to Pakistan, Geo News reported on Thursday.

The channel quoted its sources as saying that the negotiations focused on supply of 110,000 barrel of oil to Pakistan. However, these were initial talks and the procedure for the oil supply was yet to be determined, the sources said, adding that the final decision in this regard would be made on the return of Saudi King Abdullah from Spain.

Sources in the Petroleum Ministry told Daily Times on Sunday that Pakistan was likely to get an additional oil credit facility from Kuwait for a further 30 days to import oil on deferred payments.

Pakistan’s oil reserves decreased during the previous financial year, 2007-08, due to non-payment of billions of rupees in differential claims to oil marketing companies.

 

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Foreign debt payments: Pakistan urged to seek IMF help to avoid default ​

KARACHI (August 29 2008): US-based Citibank has advised Pakistan to secure help from the International Monetary Fund (IMF) to avoid default on its foreign debt repayments in the face of an ongoing political crisis.

In a report, "Pakistan: could the political chaos lead to sovereign default?" released in New York Wednesday, Citibank cited a rising chance of default over mounting political instability, dwindling foreign exchange reserves and the weakening Pakistani rupee. "Pakistan perhaps now needs an IMF stabilisation programme to manage the dire situation," it said.

The bank said if Pakistan opted to default, it would have to reschedule all of its debt, which amounted to 2.6 billion dollars in self-issued bonds and 13.9 billion dollars in bilateral debt. "Such a rescheduling would undermine the country's ability to attract foreign investment, which is desperately needed to support a ballooning trade deficit," the report said. Citibank also said it expected the rupee's fall to continue in the light of government inaction and this week's break up of the government coalition, warning that if the currency continued slipping, Pakistan would be forced to reschedule its debt payment of around 500 million dollars due in February.

The rupee has fallen more than 18 per cent in the past four months, taking an especially hard hit since the split of the country's two major political parties. Pakistan's benchmark stock index has also lost around 45 per cent of its value in six months.

 

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Additional actions needed to safeguard Pakistan's economy: World Bank ​

ISLAMABAD (August 29 2008): The newly-appointed World Bank Vice President South Asia Region, Isabel Guerrero, on her first visit to Pakistan after taking over from Praful Patel, who has retired, called on Prime Minister Yousuf Raza Gilani, Finance Minister Naveed Qamar, State Bank Governor Dr Shamshad Akhtar and PPP Co-Chairman Asif Ali Zardari, separately.

Ms Guerrero stated that additional actions are needed to safeguard the economy against further shocks in an effort to ensure that Pakistan will be able to meet the development challenges it is facing today. She denied media reports that $500 million loan for budgetary support was likely in the near future. Such programme lending is linked to prevailing macroeconomic conditions, which are just not right in Pakistan today. She added that the $500 million loan was never appraised.

Guerrero was in Pakistan on a two-day visit essentially as a prelude to her meetings with the Pakistani delegation during the World Bank annual meeting scheduled in October. "I wanted to meet counterparts in the government, especially the economic team, prior to welcoming them in Washington during the WB-IMF annual meetings later this year," said Guerrero. She noted that the government has taken a number of steps to support the country in the face of high oil and food prices in the international market.

A press release issued by the WB said that Guerrero met with the government's economic team led by Finance Minister Naveed Qamar to discuss the government reform plans and the WB programme. The Finance Minister briefed the delegation about the series of measures taken by the government to stabilise the economy. He reiterated the government commitment to stabilise the economy at the earliest and reaffirmed willingness to take additional measures.

He said the government is making efforts to protect the poor and deserving segments of the society from rising prices through 'Benazir Income Support Programme'. Promoting economic growth with emphasis on commodity producing sectors, job creation, poverty alleviation, restoring macroeconomic stability and building foreign exchange reserves top the agenda of the democratic government. He invited the development partners like the World Bank to play their role in assisting the government in achieving its objectives.

The Finance Minister also briefed the visiting delegation about the ongoing political developments in the country and informed that with the election of the President of Pakistan the country will achieve a stable political environment, which is essential for achieving the economic objectives of the government.

In a meeting with Prime Minister Yousuf Raza Gilani and Pakistan People's Party Co-Chairman Asif Ali Zardari, the WB team discussed power, infrastructure, water management, education, safety nets, public health and nutrition as priority areas for development support.

In addition to the planned loans and credits, Ms Guerrero offered World Bank technical and analytical support to ensure Pakistan has the best international expertise to address its development challenges. During her visit Ms Guerrero reconfirmed the WB's ongoing commitment to Pakistan, saying that the Bank's investment programmes in Pakistan are on track despite some political and security uncertainty over the past few month.