Pakistan Economy - News & Updates - Archive

[Neo]

Qureshi for greater market access of Pakistani products to EU ​

ISLAMABAD (September 04 2008): David Cameron, British Conservative Party leader called on Foreign Minister Shah Mehmood Qureshi and held talks on the Pak-UK bilateral relationship, here on Wednesday.

David Cameron is on a two-day visit to Pakistan, he expressed views regarding the existing momentum and direction of the multifaceted relationship especially in trade, development assistance and investment fields between the two countries.

The Foreign Minister briefed Cameron on developments taking place in Pakistan with the advent of the democratic government. He emphasised the need for greater market access of Pakistani products in the European Union to generate employment and to root out poverty and extremism. Cameron concurred with Pakistan's position and agreed to take up this issue within the European Union.

Regional and international issues including fight against terrorism and extremism, relations with India and Afghanistan and nuclear non-proliferation were discussed. The Foreign Minister said that the democratic government was determined to carry forward its fight against terrorism and extremism, particularly since the scourge was undermining Pakistan's own wellbeing. He highlighted measures aimed at promoting peace and stability in Afghanistan to prevent Pakistan's territory from being used for subversion in Afghanistan.

The Foreign Minister also apprised Cameron about the ongoing composite dialogue with India and endeavours to resolve all outstanding issues including Jammu & Kashmir dispute. Qureshi further underlined Pakistan's policy on nuclear non-proliferation and to bring about a just and non-discriminatory nuclear non-proliferation regime. Cameron appreciated Pakistan's position on these issues and assured the Foreign Minister of the support.

 

[Neo]

Government firm to bring country out of economic crisis: Soomro ​

ISLAMABAD (September 04 2008): Acting President Muhammadmian Soomro on Wednesday said the government is determined to bring the country out of economic crisis, and would provide relief to the business community and general masses.

Addressing at the ground breaking ceremony of Export Display Centre by Islamabad Chamber of Commerce and Industry (ICCI), Soomro termed entrepreneurs a "valuable asset" for the country, and said the government would provide them maximum opportunities to benefit from their potential.

Soomro expressed satisfaction over the establishment of Export Display Centre in Islamabad, which he said would prove a good show window for the export industry including international market. He said Pakistan was passing through a very critical situation and the government had to face a number of economic challenges due to rapid global changes. He mentioned the oil prices and energy crisis putting negative impact on the economy and stressed the need for devising a concrete strategy to cope with the challenges.

He urged the need for focusing on the principles of skill development, cost of business and setting up markets beyond the geographies, which also proved helpful in the formation of strong world economies.

Soomro asked the business community to encourage women entrepreneurs as well as make efforts to boost cottage industry for the uplift of national economy. He said the government would support entrepreneurs in carrying out their businesses smoothly by rationalising the tax rate.

On the demand of business community for a housing scheme, Soomro said he would take up the proposal with Capital Development Authority to prepare feasibility of the project and submit it to the government for consideration.

He also favoured for the promulgation of Rent Control Act in Islamabad like other cities to help resolve disputes between the owners and tenants. President Islamabad Chamber of Commerce and Industry Muhammad Ijaz Abbasi said the Export Display Centre to be constructed with the help of ICCI would provide an excellent opportunity to the buyers and sellers to transact business deals with minimum hassle under one roof.

He said ICCI was fully determined to provide support to the government for the acceleration of country's exports, which still had not touched the desired level.

He said ICCI had been constantly involved with the government in the formulation of the Budget and Trade Policy and expressed satisfaction that some of very important proposals had been accepted by the government. The ICCI President urged for early approval and promulgation of Rent Control Act in Islamabad by the parliament, which had already been approved by the Law Ministry. Senior Vice President ICCI Munawar Iqbal also spoke on the occasion.

 

[Neo]

Our precarious fiscal position ​

EDITORIAL (September 04 2008): The provisional figures on the fiscal outcome for the year 2007-08, released by the Ministry of Finance, confirm our worst fears that public finances of the country are in a state of crisis. According to the consolidated data on budgetary operations, the overall deficit of the country rose to a record Rs 777.2 billion or 7.4 percent of GDP as against the target of Rs 398 billion or 4.2 percent of GDP set by the previous government for 2007-08.

The deficit was also 106 percent higher than previous year's actual deficit of about Rs 377 billion or 4.3 percent of GDP. In order to finance this massive deficit, the government had to depend on highest-ever bank borrowings of Rs 625 billion against the budgetary target of only Rs 81 billion, showing an excessive recourse to bank borrowings of about 673 percent. During 2006-07, bank borrowings for deficit financing were much lower at Rs 178 billion.

The Federal Government had to restrict development spending under the Public Sector Development Programme (PSDP) to Rs 451 billion against the budgetary allocation of Rs 520 billion in an attempt to partially contain the deficit. A simple explanation of this dismal performance is that the government failed to mobilise adequate resources to meet its sharply rising expenditure requirements.

Although total revenues increased by almost Rs 200 billion to stand at Rs 1.499 trillion in 2007-08, the position was quite discouraging when compared in terms of movement in important relevant ratios.

The most depressing feature was a substantial decline in revenue receipts from 14.9 percent of GDP in 2006-07 to 14.3 percent during 2007-08 while tax revenues and non-tax revenues dropped by 0.2 percentage point and 0.4 percentage point to 10 percent and 4.3 percent of GDP respectively during the year. In contrast, total expenditures during 2007-08 increased substantially to 21.7 percent of GDP as compared with 19.2 percent a year before.

In absolute terms, total expenditures rose by more than Rs 600 billion or 36 percent. Current expenditures showed an increase of Rs 483 billion or 35 percent. Although defence expenditures increased to Rs 286 billion against an allocation of Rs 275 billion, these, however, declined as a percentage of GDP to 2.7 percent from 2.9 percent in 2006-07.

The government earned about Rs 89 billion on account of royalties on oil and gas, discount retained on domestic crude oil production and development surcharge on oil and gas, which included Rs 14.4 billion of petroleum development levy. From the above data, it could be easily concluded that fiscal performance during 2007-08 was probably at its worst.

Not only overall budget deficit at over Rs 777 billion was the highest-ever in the country's history, most of it was financed through bank borrowings, again touching a record level of Rs 625 billion. It was also sad to note that revenue/tax receipts as a percentage of GDP declined during the year which belies the claims of the FBR to have successfully implemented various structural and organisational reforms in order to increase tax revenues.

In fact, fall in tax to GDP ratio is an indicator that tax collectors are not even able to maintain the same level of effort and their efficiency has declined. On the other hand, current expenditures of the government are increasing sharply and development budget has to be axed to contain the overall fiscal deficit.

Another disappointing aspect was that fiscal discipline achieved so painstakingly over the last few years seems to have been frittered away during 2007-08. Overall budget deficit amounting to 7.7 percent of GDP during 1997-98 was brought down to 2.4 percent by 2003-04 but grew steadily to reach 4.3 percent of GDP by 2006-07.

The picture during 2007-08 has sharply aggravated an already negative trend. It also shows that the budget deficit target of 4.7 percent of GDP fixed for 2008-09 is almost impossible to achieve, particularly when no major revenue mobilisation efforts or expenditure cutting measures seem to be contemplated or are in place.

The consequences of this highly negative development are visible in the shape of high inflation rate estimated at about 25 percent, widening of current account deficit, fast depreciation of the rupee and loss of foreign exchange reserves. More distressing is the misery inflicted on the ordinary people due to erosion of the purchasing power of their savings and incomes.

Even basic necessities of life are now getting out of their reach. Monetary measures adopted by the State Bank to curb inflation are also not yielding the desired results due to highly expansionary fiscal strategy of the government.

If the fiscal trend witnessed during 2007-08 is not soon reversed, major macroeconomic indicators of the economy could deteriorate further and the life of ordinary people would become more difficult. In our view, it is time for the government in Islamabad to give serious consideration to the worsening fiscal balance because this is an area which has a pervasive and profound impact on all aspects of the economy.

 

[nitesh]

mods, I don't know if this is the right thread, but this should be allow to have a better relationship:

Transport owners demand import of Indian CNG buses​

http://thenews.jang.com.pk/daily_detail.asp?id=133731​

http://thenews.jang.com.pk/daily_detail.asp?id=133731

Thursday, September 04, 2008
By Atif Nadeem

LAHORE

WHILE keeping in mind cost-factor for importing new CNG buses, the transport owners have demanded the government import new CNG buses from India, which will be used for public transportation in Punjab.

The Punjab government has already announced import of at least 800 new buses to meet the needs of public transportation especially after a deadlock over the increase in fares in urban areas, which have caused a great financial crunch for the transport owners as they have almost failed to manage cost of oil and diesel.

While talking to The News, the office-bearers of Urban Transport Union said the provincial government had decided to import at least 800 new CNG buses for which the government would provide 25 per cent subsidy to the transport owners so that they could ply more new environment-friendly buses on urban routes, which would also help alleviate burden of increased fares on the commuters as CNG would cost the transport owners less than the oil and diesel.

The transport owners said though the provincial government had decided to provide subsidy yet the cost-factor would make the transport owners bankrupt in the near future if the provincial government would not provide loans to the transport owners so that they could purchase these buses.

They said the provincial government should ask the Indian government for CNG buses as it would reduce the cost to be incurred on the import of the buses from South Korea and Japan for the transport owners.

Urban Transport Union President Arshad Khan Niazi, while talking to The News, said the transport owners were worried about the cost of the new CNG buses to be imported as they had already taken loans from different banks and they were paying heavy instalments to the banks and, in this condition, it would be difficult for them to ask the banks for financial support in form of loans when they were already on the

brink of bankruptcy due to unprecedented hike in oil and diesel pries. He said the government had not provided them subsidy in the wake of rise in the oil-prices which had caused a great financial loss to all the transport owners, especially for the small transport owners. He said the government had not increased fares of the public transport as cost of per kilometre had tremendously increased for the transport owners.

The former government of PML-Q had provided them subsidy when oil prices had increased in 2005 but, later, the government had not paid even any subsidy to them which was highly unfortunate for the transport owners.

Talking about the new CNG buses, he said the government should take measures regarding provision of loans to the transport owners, as they would not be able to purchase new buses with their own capital on account of losses they had to bear in the last few months. He said the government should purchase buses and hand them over to the transport owners so that they could charge fares according to the wishes of the government and the public. The News has also learnt that many transport owners had contacted to the private-investors who provided the transport owners with capital for the sake of their interests on that money. The banks have almost denied the transport owners any loans for the CNG buses as the transport owners are already bankrupt and the government has pledged to provide 25 per cent subsidy to the transport owners on the purchase of new buses. The transport owners were of the view that the government should import CNG buses from India as it would not compel the transport owners to ask for more loans from the banks or the private-investors as it would be harmful for the new system.

They said a CNG bus from India would not cost them more than Rs 1.5 million while they had to pay at least Rs 4 million for a new bus which would be assembled in Pakistan but with Japanese or Koreans engines and gears. They said the transport owners would not have to take loans from the banks and they would also fix fares of public transport vehicles on the urban routes according to the wishes of the government. They said taking money from private-investors would be highly risky for the system, as they would seize their buses whenever they were short of their instalments along with the interest rates. They said the government should seriously think about this option, as it would help the government provide financial support to the transport owners. They were of the view that if the Indian films could be screened in the Pakistani cinemas then what would be the wrong with the Indian buses to be plied on the Pakistani roads.

They also said the government should not impose its will on the transport owners but, on the other hand, the transport owners should be consulted with in a friendly manner so that they could make public transport system without any impediment. They said the provincial government should not be reluctant to give subsidy to the transport owners by Rs 50 per litre so that they could charge Rs 10 from the commuter on the first stage of the fares on public routes.

 

[Neo]

IMF team due on 12th to discuss economy bailout​

Friday, September 05, 2008

ISLAMABAD: In a crucial development, a most important technical mission of the International Monitory Fund with its jaws open to bring Pakistan’s beleaguered economy into its programme with ultra tough conditions will land in Islamabad on September 12. The delegation will stay in the liquidity crisis hit country up to September 24.

The delegation is to be headed by Mr Detata that put stringent conditions before the country’s economic managers for IMF programme that includes the squeezing of budget deficit to 4.2 per cent from 4.7 per cent announced in the Budget 2008-09.

Although Pakistan is not under the IMF programme right now, the Fund holds consultation process with all member states and a mission is likely to visit Islamabad to get first hand knowledge about the country’s economy under Article IV consultation.

According to a senior government official, the coming meetings with IMF would really be tough ones to bail out the country from financial crunch. The Fund mission may also ask the government not to go for more than 3.5 per cent GDP growth, keeping in view the challenges the country is abreast with.

The official said the Fund is also likely to force the government to bring more measures for further tightening of monetary policy with a view to reduce the inflation, which has actually sucked the amount from the pockets of the poor.

No doubt, the new regime took charge at the helm of affairs when it was supposed to take drastic measures to bring the economy on radar screen. But unfortunately the economic managers could not initiate concerted efforts in stopping the bleeding economy. Last time, the IMF had extended $1.2 billion under Poverty Reduction and Growth Facility.

Although the Finance Minister Naveed Qamar time and again has said that Pakistan will not go into IMF programme, but the worsening economic situation may force the government to seek help from the Fund.

The International Monetary Fund (IMF) was gaining its lost importance as Pakistan had said ‘goodbye’ to the Fund after completion of its last programme, Poverty Reduction and Growth Facility (PRGF) a few years back.

The rampant depreciation of rupee against dollar and rapidly depleting foreign currency reserves are clear indication that the government desperately required dollar inflows to keep its reserves at a comfortable level. Otherwise, Islamabad will have to approach the IMF to remove its BoP woes. The rupee has touched Rs77 against dollar while reserves stand at $4billion in real terms.

“In case dollar inflows do not come in one month period to rescue the dwindling reserves then there will be no other option but to approach the IMF for a bailout package,” said sources. Pakistan is also striving hard to get Saudi Oil Facility (SOF) worth $5 billion as Islamabad estimates to import oil worth $14 billion during the current fiscal year.

The IMF team held extensive talks with high-ups of the newly elected government before the announcement of the budget 2008-09.

IMF and WB projected the GDP growth target hovering around 3.5 per cent for fiscal year 2008-09 against Islamabad’s projected target of 5.5 per cent.

 

[Neo]

SBP, govt to restore macroeconomic stability: Shamshad ​

WB to support $1bn investment programme, Ijara Sukuk to be launched soon​

Friday, September 05, 2008

KARACHI: State Bank of Pakistan Governor Dr Shamshad Akhtar has said that the federal government and the central bank are working in tandem to restore macroeconomic stability.

In a press statement issued on Thursday, she said that the government and the central bank were taking several measures to improve the macroeconomic situation which had been adversely affected as a consequence of various global events such as turbulence in the financial markets in the US and Europe and escalating commodity and fuel prices in international markets.

Referring to the financing plan for meeting the budget and external sector requirements of the federal government, she said the World Bank had reassured its support for a fast-track investment programme of close to $1 billion focused on high priority development projects.

The government has negotiated a $500 million programme with the Asian Development Bank for accelerated economic transformation that focuses on supporting financial sector reforms, among others.

Moreover, she said that the government was planning to selectively privatise some assets and had been in dialogue with international financial institutions to meet the financing gap.

“The timing of these global developments could not have been worse. Not only was our economy’s business cycle maturing after a strong and resilient performance but the socio-political set-up was also undergoing a transitional phase,” she said and added that a combination of these elements would put the resolve of any government to test and Pakistan is no exception.

Dr Akhtar said that there had been a 350-basis-point cumulative increase in interest rates since July 2007 which had been accompanied by appropriate market-led exchange rate adjustment in the wake of balance of payments challenges. The government has further assured of its resolve to curtail fiscal deficit, a critical element of the macroeconomic stabilisation programme, and to strive to ensure net zero central bank borrowing for each quarter. Fiscal tightening is being pursued through a combination of measures ranging from recurrent expenditure controls, removal of subsidies and rationalisation and prioritisation of development expenditures.

She added that the early indications were that revenue growth was above expectations for the current fiscal year. Dr Akhtar observed that continued resolve to deal with short and medium-term power sector constraints and the dialogue with overseas investors is likely to bear fruitful results in attracting more foreign investment in the sector.

SBP Governor said that in order to support the efforts to diversify the borrowings mix, the government and the State Bank are working to launch the first Government of Pakistan Ijara Sukuk in the first week of Ramazan. “This will not only help deploy the liquidity available with Islamic banks but also help the government to diversify its debt,” she said and added that given the growth in the Islamic banking industry, Shariah-compliant government securities are imperative to bring the Islamic banks parallel to their conventional counterparts in terms of instruments available for liquidity management.

Dr Akhtar said that eventual uniformity of regulatory reserves of Islamic banks with that conventional bank is also essential for ensuring the stability of the financial and banking system.

Banking system is also being incentivised through the introduction of minimum deposit rate (to better remunerate savers) and easing of reserve ratios to mobilise more aggressively long-term resources to be able to meet the growing and diverse requirements of the economy.

SBP Governor pointed out that the first quarter (January-March of CY 2008) statistics show that the banking system is on track in terms of solvency, asset quality, earnings and service to society. She said that the system also registered a growth though at a slack pace as compared with past trends for the first quarter. The asset base of the banking system since the last quarter of 2006 has grown by 22 per cent to Rs5.2 trillion that is well supported by 36 per cent growth in the equity and 21 per cent growth in deposits. The risk based capital adequacy ratio stands at 13.1 per cent, well-above the minimum required level of 8 per cent. “It is this buffer that continues to provide resiliency to the banking system,” she added.

She said although Non-performing loans (NPLs) in volume increased by Rs18 billion during the first quarter, the higher level of provisioning has ensured that the infections impact remain in check as evidenced from the Net-NPL-to-Net-Loans ratio which was 1.3 per cent in March 2008 as compared to 1.6 per cent in December 2006, signifying that the banks set aside more reserves out of their earnings to cover the increase in loans that had become non-performing. Accordingly, the NPL coverage ratio and capital impairment ratio have improved; NPL converge ratio stood at 84.1 per cent in March 2008 as compared to 78 per cent in December 2006, while capital impairment improved from 9.7 per cent in December 2006 to 6.8 per cent in March 2008.

“This improvement was also backed by the regulatory drive of SBP whereby the provisioning requirements were further strengthened in line with best international practices,” she said and added that due to this change in regulatory requirement, banks had to provide additional provisioning expenses in 2007.

The banks’ strong earning capacity enabled them to absorb this additional charge and post a pre-tax profit of Rs 28.1 billion in March 2008 quarter ñ which was slightly less than the Rs 33.1 billion profit of the corresponding quarter of March 2007, she added.

 

[Neo]

Power projects of about 1,500MW ​

to be completed within 18 months​

Friday, September 05, 2008

ISLAMABAD: Federal Minister for Water & Power, Raja Pervez Ashraf on Thursday, said the government is fully committed to eliminating load-shedding by end of 2009.

In order to achieve this objective, fast track power generation projects have to be taken up on priority basis.

He said fast track power projects of about 1,500MW should be completed within the prescribed timeframe of 18 months.

The minister said this while presiding over a meeting in the Ministry to review the progress of the projects, current power situation and one time solution of circular debt of Wapda, Pepco, IPPs and fuel supply companies.

The meeting was attended by Secretary Water and Power, Adviser Water and Power, Chairman Wapda, MD Private Power Infrastructure Board (PPIB) and other senior officials of the Ministry, PPIB and Pepco.

The minister reviewing the current power situation expressed his satisfaction over the improved power supply during Sehar and Iftar timings and directed all resources should be used to minimize the load-shedding in Ramazan and thereafter.

He also warned the Pepco officials to avoid unscheduled load-shedding and any deviation from this direction would be viewed very seriously.

He said there should be no shutdown on minor faults and the power plants should generate maximum electricity during peak hours to meet the demand. He also stressed the need for reduction in line losses and early recovery of outstanding dues. The meeting also discussed issues of circular debt in detail and considered various options to resolve it.

 

[Neo]

Forex reserves fall to $9.13bn​

KARACHI, Sept 4: Foreign reserves of the country fell to $9.13 billion in the week that ended on Aug 30, from $9.38 billion in the previous week, the central bank said on Thursday.

The State Bank of Pakistan said its reserves fell to $5.76 billion from $6.01 billion previously, while those held by commercial banks were flat at $3.37 billion.

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 country’s political uncertainty.

The rupee closed at 76.85/95 to the dollar on Thursday recovering from a record low of 77.45 on Wednesday.—Reuters

 

[Neo]

Pakistan may avoid debt default with IMF support​

HONG KONG, Sept 4: Pakistan will probably avoid the sovereign debt default that markets increasingly expect, even though the country faces more downgrades to its credit rating as it grapples with dwindling reserves and a sliding currency.

The stability of Pakistan, a key US ally in the war on terrorism, is so important a geopolitical factor that institutions such as the International Monetary Fund will eventually help it meet obligations to creditors, analysts said.

“Is this going to get into a default scenario? No,” said Dilip Shahani, Asia-Pacific research head at HSBC.

“Negotiations with the likes of IMF will help stabilise the situation,” he said.

Investors are not so sure. Pakistan’s credit default swaps--contracts investors use to insure debt -- have been widening since the departure last month of president Musharraf.

The five-year credit default swaps have jumped 200 basis points to 900/1,000 basis points since Musharraf quit on Aug 18. That means it now costs at least $900,000 to insure $10 million worth of debt against default, compared with around $700,000 at the end of the Musharraf era.

It is now cheaper to insure five-year bonds of Argentina, which has been in default since a 2001-02 economic crisis.

Argentina’s 5-year credit default swaps are at 780-800 basis points.

Pakistan’s credit default swap numbers implied “a significant risk of sovereign default” in the run up to the maturity of Pakistan’s $500 million bond in February, Citigroup economist Mushtaq Khan said. He, too, did not think a default would occur. Investors do have reasons to be concerned.

DECLINING RESERVES: The political chaos has raised questions about whether the government will be able to tackle the country’s many economic problems. “It seems the government is not getting its act together, making it difficult to actively address the decline in the forex reserves,” said Yang-Myung Hong, sovereign rating analyst at Lehman Brothers.

Currency reserves have shrunk to $9.38 billion from a record high of $16.5 billion ten months ago, the current account deficit is at 8.4 per cent of gross domestic product and the rupee is at a record low, having lost over 20 per cent against the dollar this year.

Import costs have surged in the past year as the price of oil and most commodities hit record highs, driving up inflation to nearly 25 per cent. Economic growth is forecast to be the slowest in six years.

NO DEFAULT: A stock market, which rallied for six years, has slumped 41 per cent off a life high in April, and 34 per cent this year, making it the worst-performing market in Asia after China and Vietnam. A debt default will probably not be added to this list of woes.—Reuters

 

[Neo]

Agreement with S Arabia to import 150,000 tonnes of urea​

ISLAMABAD: Realising the shortage of urea for upcoming Rabbi season 2008-09, the Ministry of Food, Agriculture and Livestock has signed another agreement with Saudi Arabia, according to which Pakistan would import 150,000 tonnes of urea from at the end of this month.

The agreement was materialised during a recent meeting of MINFAL Secretary, Ziaur Rehman with Saudi Arabia officials. Before signing this agreement, Pakistan also signed another agreement according to which Saudi Arabia is to provide urea worth $133 million to Pakistan. The last consignment of this agreement had arrived at Karachi port and would be immediately distributed across the country.

There was sufficient quantity of urea in the country but the prices of urea started rising in the international market and reached $800 per tonne but the price in Pakistan remained below $200 per tonne. This huge price difference triggered smuggling of the commodity coupled with hoarding by the local dealers. ijaz kakakhel

ECC rejects linking LPG prices with Aramco formula

ISLAMABAD: Economic Coordination Committee (ECC) of the cabinet has rejected the move of Economic Monitoring Committee to revive import parity pricing mechanism by linking Liquefied Petroleum Gas (LPG) prices with Saudi Aramco Contract Price formula, it is learnt. Economic Monitoring Committee (EMC) in its meeting held on August 21 had proposed to link LPG prices with Saudi Aramco Contract Price to curtail oil import bill while ensuring availability of LPG in the country. They said that the proposal was moved in the meeting of ECC of the cabinet held on August 26 and was rejected. zafar bhutta

 

[Neo]

Cement exports grow by 33.66%​

KARACHI: As the demand of the cement has unabatedly increased in the regional market, Pakistan’s cement export witnessed a growth of 36.66 percent and reached the mark of 786,497 tonnes in August 2008 as compared to 575,551 tonnes in the same period of the last year, sources told Daily Times.

Robust regional demand for cement, fueled by the boost in construction in UAE, Afghanistan and excess demand in India have encouraged the local companies to invest in plan expansion. The capacity utilisation has also improved to around an average of 80 percent. The Middle East, India and African countries have been the main market for the Pakistani cement export. The cement export in the first two months of the current fiscal year surged by 57 percent and crossed the mark of 1.5 million tonnes, statistics released by All Pakistan Cement Manufacturers Associations revealed.

Cement industry’s installed capacity had more than doubled during the last five years, which helped the industry achieve high export growth. “Competitive rates of Pakistani cement has also helped in capturing the regional market,” a leading cement exporter said.

Government’s decision regarding restoration of the duty drawback has also raised the cement export and the reconstruction work in Afghanistan and faster pace of development work in Dubai have led to an increase in demand for cement, and Pakistani cement sector has been taking full advantage of this opportunity.

The growth in the cement sector has been slow during this period as compared to corresponding period of the last year because of the country’s uncertain political landscape, analysts remarked and added the transporters strike during the last days has also affected growth. Local cement supplies decreased by 21.27 percent, to 1.545 million tonnes in August 2008 as against 1.963 million tonnes in August 2007.

 

[Neo]

Chinese team to visit Pakistan in October​

ISLAMABAD: A 10-member Chinese delegation will visit Pakistan in October 2008 to explore business opportunities in the country. Yang Shouzheng, Head of Political Section and Mr Li Ming, Secretary to Ambassador, Embassy of China had expressed these views during a meeting with Islamabad Chamber of Commerce and Industry President, Mohammad Ijaz Abbasi. They assured that Chinese government would continue to encourage Chinese companies to enhance cooperation with Pakistani companies in areas including finance, telecom, energy and transportation.

 

[Neo]

‘Load shedding to end by 2009’​

ISLAMABAD: Federal Minister for Water and Power, Raja Pervez Ashraf on Thursday said that the government is fully committed to eliminate load shedding by end of 2009. In order to achieve this objective, fast track power generation projects have to be taken up on priority basis. He directed that projects of about 1500MW should be completed within the prescribed time frame of 18 months. Sources said that Ministerial level meeting would be held here on Friday to finalise the tariff for the 1500MW thermal and rental power plants on fast track basis.

 

[Neo]

Pakistan may avoid debt default with IMF support​

HONG KONG, Sept 4: Pakistan will probably avoid the sovereign debt default that markets increasingly expect, even though the country faces more downgrades to its credit rating as it grapples with dwindling reserves and a sliding currency.

The stability of Pakistan, a key US ally in the war on terrorism, is so important a geopolitical factor that institutions such as the International Monetary Fund will eventually help it meet obligations to creditors, analysts said.

“Is this going to get into a default scenario? No,” said Dilip Shahani, Asia-Pacific research head at HSBC.

“Negotiations with the likes of IMF will help stabilise the situation,” he said.

Investors are not so sure. Pakistan’s credit default swaps--contracts investors use to insure debt -- have been widening since the departure last month of president Musharraf.

The five-year credit default swaps have jumped 200 basis points to 900/1,000 basis points since Musharraf quit on Aug 18. That means it now costs at least $900,000 to insure $10 million worth of debt against default, compared with around $700,000 at the end of the Musharraf era.

It is now cheaper to insure five-year bonds of Argentina, which has been in default since a 2001-02 economic crisis.

Argentina’s 5-year credit default swaps are at 780-800 basis points.

Pakistan’s credit default swap numbers implied “a significant risk of sovereign default” in the run up to the maturity of Pakistan’s $500 million bond in February, Citigroup economist Mushtaq Khan said. He, too, did not think a default would occur. Investors do have reasons to be concerned.

DECLINING RESERVES: The political chaos has raised questions about whether the government will be able to tackle the country’s many economic problems. “It seems the government is not getting its act together, making it difficult to actively address the decline in the forex reserves,” said Yang-Myung Hong, sovereign rating analyst at Lehman Brothers.

Currency reserves have shrunk to $9.38 billion from a record high of $16.5 billion ten months ago, the current account deficit is at 8.4 per cent of gross domestic product and the rupee is at a record low, having lost over 20 per cent against the dollar this year.

Import costs have surged in the past year as the price of oil and most commodities hit record highs, driving up inflation to nearly 25 per cent. Economic growth is forecast to be the slowest in six years.

NO DEFAULT: A stock market, which rallied for six years, has slumped 41 per cent off a life high in April, and 34 per cent this year, making it the worst-performing market in Asia after China and Vietnam. A debt default will probably not be added to this list of woes.—Reuters

Pakistan will probably avoid debt default ​

HONG KONG (September 05 2008): Pakistan will probably avoid the sovereign debt default that markets increasingly expect, even though the country faces more downgrades to its credit rating as it grapples with dwindling reserves and a sliding currency. The stability of Pakistan, a key US ally in the war on terrorism, is so important a geopolitical factor that institutions such as the International Monetary Fund will eventually help it meet obligations to creditors, analysts said.

"Is this going to get into a default scenario? No," said Dilip Shahani, Asia-Pacific research head at HSBC. "Negotiations with the likes of IMF will help stabilise the situation," he said. Investors are not so sure. Pakistan's credit default swaps - contracts investors use to insure debt - have been widening since the departure last month of President Pervez Musharraf.

The five-year credit default swaps have jumped 200 basis points to 900/1,000 basis points since Musharraf quit on August 18. That means it now costs at least $900,000 to insure $10 million worth of debt against default, compared with around $700,000 at the end of the Musharraf era.

It is now cheaper to insure five-year bonds of Argentina, which has been in default since a 2001-2002 economic crisis. Argentina's 5-year credit default swaps are at 780/800 basis points. Pakistan's credit default swap numbers implied a "a significant risk of sovereign default" in the runup to the maturity of Pakistan's $500 million bond in February, Citigroup economist Mushtaq Khan said. He too did not think a default would occur. Investors do have reason to be concerned.

DECLINING RESERVES: Musharraf, who came to power in a 1999 military coup, resigned to avoid impeachment, ending months of speculation and sometimes violent protests against his rule. But that kicked off a new phase of uncertainty, especially after the second-largest party in the ruling coalition withdrew support from the five-month-old civilian government.

The political chaos has raised questions about whether government will able to tackle the country's many economic problems. "It seems the government is not getting its act together, making it difficult to actively address the decline in the forex reserves," said Yang-Myung Hong, sovereign rating analyst at Lehman Brothers.

Currency reserves have shrunk to $9.38 billion from a record high of $16.5 billion ten months ago, the current account deficit is at 8.4 percent of gross domestic product and the rupee is at a record low, having lost over 20 percent against the dollar this year.

Analysts estimate its foreign exchange reserves can only pay for less than three months of imports, having sunk by around $800 million a month. Import costs have surged in the past year as the price of oil and most commodities hit record highs, driving up inflation to nearly 25 percent. Economic growth is forecast to be the slowest in six years.

NO DEFAULT: A stock market which rallied for six years has slumped 41 percent off a life high in April, and 34 percent this year, making it the worst-performing market in Asia after China and Vietnam.

A debt default will probably not be added to this list of woes. Pakistan's stability is a vital factor in the war against the resurgent Taliban in Afghanistan, where the death toll is rising among foreign forces. The party of slain former Prime Minister Benazir Bhutto enjoys the support of the United States and other Western nations.

Still the scramble for funds, is keeping markets on edge. Last month, an International Monetary Fund official said Pakistan does not need to turn to the IMF for money in the next 10 months if the government cuts spending and gets other sources of funding to offset falling reserves.

Islamabad 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 Asian Development Bank for more than $1 billion in loans. Central Bank Governor Shamshad Akhtar said the World Bank was seeking to speed up close to $1 billion in investments as he sought to calm jittery markets.

"If the facilities like the Saudi oil payment deferral don't come through, then Pakistan could start to face pressure in meeting its external obligations," said Lehman's Hong. The bond maturing in February 2009, a thinly traded security, was quoted at 93.50/97.50 cents to a dollar on Thursday. The more active benchmark - the 2017 bond - has dropped by 5 points to 63 cents to a dollar in the past week.

Even if it does not default on the 2009 bond, Pakistan's sovereign credit rating could be lowered a notch if Islamabad does not improve on its macroeconomic performance. That would make future borrowing more costly. In June, Standard & Poor's cut the country's rating to B from B-plus with a negative outlook, meaning another downgrade is on the cards.

Moody's Investors Service, which downgraded Pakistan to B2 from B1 in May this year, may also cut again if funding is delayed so much that "even some limited amount of assistance may not help Pakistan meet its external obligations," said Moody's analyst Aninda Mitra.

 

[Neo]

Gwadar, China rail link not commercially viable: Senate told ​

ISLAMABAD (September 05 2008): The government has informed the Senate on Thursday that linking Gwadar with China through rail is not commercially viable and the work on the project could only be started if it is required by Pakistan and China for strategic purposes.

The Ministry of Railways informed the House in written replies that a pre-feasibility study for provision of rail link from Havelian to Khunjrab on Pak-China border has been completed in June 2008. A separate study has also been executed for linking Gwadar with Mastung. This link would integrate Gwadar with the rest of existing railway network in the country.

The execution of the two projects was necessary for linking Gwadar with China. The Railway Ministry said the project is not commercially viable. The ministry is of the view that project will be forwarded to the Planning Commission with a request that it might be approved for strategic purposes.

An official, when contacted, said that in this regard Pakistan will require the consent of the Chinese government. According to the official, the projects being launched for strategic purposes, require strong commitment from the two sides as such projects are left unattended if strategic purposes are achieved.

In reply to another question, the ministry admitted that 6.79 acres of land out of total 20.66 acres of railway land are in illegal occupation in Quetta. In Chaman, 60 acres are in illegal occupation out of 373.42 acres. The ministry informed the House that it could not spend Rs 1.43 billion allocated for 1000 High Capacity Wagons during 2007-08. The allocation was revised to Rs 162 million against which Rs 142.68 million was spent.

The ministry said that international tender for procurement/manufacturing of 500 high capacity wagons was re-advertised and it is under evaluation process. Besides this, the work on local manufacturing of 30 bogie brake vans has been started out of which 22 have been completed.

Meanwhile, the Interior Ministry informed that Karachi police have made significant breakthrough in reducing the street crimes. These have been reduced by 40 percent in May 2008 as compared to March 2008. There is 50 percent reduction in vehicle snatching, 25 percent reduction in mobile snatching and 18 percent reduction in cash snatching in 2008.