Pakistan Economy - News & Updates - Archive

[Neo]

Govt needs $4bn to settle subsidies, circular debt: ADB​

ISLAMABAD: Asian Development Bank (ADB) has assessed that the settlement of the past subsidies owed by the government of Pakistan will cost $1.1 billion.

Similarly, addressing the circular debt and debt overhang is likely to need $3 to $3.5 billion over 2008-2010.

ADB in its report on ‘Accelerating Economic Transformation Programme’ said that specific policies are needed to deal with the root causes and consequences of high energy prices. Although the current political economy and global landscape pose complex policy challenges, the government has taken certain key actions under the programme. These include: ensuring up-to-date payments of the tariff differential subsidies to power distribution companies (DISCOs), allocating sufficient resources for energy subsidies in the budget to meet the forecast needs over FY2009, and determining the extent of circular debt and debt overhang in the electricity sector and ring fencing the debt owed by DISCOs. The settlement of the past subsidies owed by the Government will cost $1.1 billion.

Another achievement of the programme is to enhance awareness of the need to move from the poorly targeted and inefficient subsidies in the food and energy sectors to a more targeted safety net system.

To sustain high rate of growth, Pakistan needs to address immediate distortions in the economy, particularly in the agriculture and energy sector. The pricing and procurement system for wheat needs to be restructured, and subsidies should be better targeted to benefit the poor and vulnerable. The poorly targeted subsidies cost the government Rs 40 billion ($600 million) in FY2008, not including the additional resource requirements – estimated at $1.6 billion at a minimum - to cushion the poor against the escalating prices. Pakistan also needs to fix its subsidy system in the electricity sector. In the absence of an automatic adjustment mechanism, the government has not been able to settle the payments owed to distribution companies, which has resulted in a vicious circular debt problem and debt overhang in the sector. This problem needs to be addressed urgently to resolve the present energy crisis facing Pakistan.

While energy prices have also gone up by about 30 percent in the first quarter, the rise in poverty incidence is estimated to be much smaller of about 1.5 percentage points. ADB’s analysis also shows that, if every poor person were to be compensated to offset the loss in real expenditure, the government may incur Rs 18.5 billion (0.3 percent of GDP).

In addition, parliamentary approval was obtained to reduce electricity subsidies through:

(i) elimination of generalised sales tax subsidies for all domestic consumers and up to 500 units for commercial consumers; introduction of automatic monthly fuel price adjustments through a surcharge; and introduction of an additional surcharge to be levied on all consumers to reduce the gap between determined and notified tariffs. sajid chaudhry

 

[Neo]

Pakistan, Japan sign agreement to avoid double taxation​

ISLAMABAD: Pakistan and Japan exchanged diplomatic notes to ratify a revised and already signed Pak-Japan convention on avoidance of double taxation between the two countries.

The ceremony to ratify the revised convention, which was signed on January 23, 2008 in Islamabad following in-depth deliberations and negotiations between the two governments was organised at the FBR Headquarters and the two sides were represented by Chihiro Atsumi , Japan ’s ambassador extraordinary to Pakistan , and Irfan Nadeem, member (direct taxes) Federal Board of Revenue, from Pakistan.

The convention modernises the regulations of the existing convention signed in 1959 with a view to positively promote mutual investment between the two countries. Based on the international model income tax treaty, the new convention revises the taxation formula for business income and royalties paid in the respective countries and contains extensive revisions of the existing convention for the first time in 49 years.

The main features of the revised convention include tax exemption for government-owned banks and financial institutions as well as exemption on remuneration to students and business apprentices from 360,000 Japanese yen to 1,500,000 Japanese yen.

 

[Neo]

CDWP approves 32 projects worth billions of rupees​

ISLAMABAD: The Central Development Working Party (CDWP) on Friday approved 32 projects of national importance out of 60 worth billion of rupees and the remaining would be discussed today (Saturday). Planning Commission Deputy Chairman M Salman Faruqui presided over the meeting of the CDWP. The officials discussed and approved various projects related to transport and communication, energy, physical planning and housing, governance, information technology and industry and commerce. However, the details of the meeting would be disclosed after completion of the CDWP agenda on Saturday, officials in the planning commission told Daily Times. Some important projects related to water resources, agriculture and food, higher education commission, education, nutrition and other would be taken up and approved on Saturday.

 

[dr.umer]

Pakistan-China to sign Investment Protocol next week ​

BEIJING, Oct 11 (APP): Pakistan and China will ink an agreement on Investment Protocol during President Asif Zardari’s visit to China next week. Pakistan’s Ambassador to China Masood Khan told APP Saturday that negotiation between senior officials of ministries of commerce of Pakistan and China have been completed on Investment protocol to make FTA more comprehensive.

“I am fully confident that during President Zardari’s state visit to China both the countries will sign agreement on it which further push forward their economic partnership”, he said.

Khan pointed out that negotiations between the two countries on FTA in Trade and Services were going on successfully. “We hope to complete that phase in the coming month of December”.

Ambassador Khan said that Pakistan was the first country with which China has signed the FTA. When the FTA was fully implemented, it would further give boost to the bilateral trade. First phase of FTA in Goods and Investment has been completed in July this year and became operational, he said.

 

[Neo]

Pakistan seeks Iranian oil on deferred payment​

ISLAMABAD (October 11 2008): Pakistan on Friday requested Iran for supply of oil on deferred payment with increase in the time period. The Iranian Foreign Minister promised to take up the matter with his government. The request was made by Foreign Minister Shah Mahmood Qureshi, during talks with his Iranian counterpart Manoucheher Mottaki.

This was disclosed at a joint press conference after the meeting of foreign ministers. "If implemented the facility will certainly help stabilise economic situation in Pakistan and improve balance of payment position," Qureshi said.

He said under Iranian law crude oil could be imported on deferred payment for a maximum of three months and Mottaki had said the Iranian government would consider extending this period further so that Pakistan could reap maximum benefits.

Mottaki also hinted that Pakistan and Iran would go ahead with a trans-regional project to pipe Iranian gas to south Asia even without India. Qureshi said Iran-Pakistan-India (IPI) gas pipeline project was of strategic significance and as it has been agreed in a meeting of presidents of Pakistan and Iran in New York in September 2008, it has been again stressed that it should be executed on fast track basis for the economic benefit of the two countries.

Referring to the outstanding issues relating to IPI, the Foreign Minister said out of five issues, four have been resolved while the fifth issue relating to pricing of the gas being sorted out and it would be settled soon. The minister said both the countries also agreed to establish a joint financing company to gather resources for executing the gas pipeline project.

Qureshi said Pakistan has also shown interest in buying additional 1000 MW electricity from Iran. The modalities for purchase of this power will be chalked out later by the experts of both the countries. Iranian Foreign Minister has given nod for the transaction to further expand economic and trade relation between the two countries.

He said: "We condemn terrorist activities that took place in last several weeks in Pakistan which will not benefit any country in the region but would increase insecurity and instability."

Referring to the importance of 1000-km border between Pakistan and Iran, Mottaki said: "We have to protect it, because of projects like IPI, road and railway links." He expressed interest in importing rice from Pakistan and said that volume of trade between the two countries would be expanded which will be of mutual benefit.

 

[Neo]

SBP disburses $25 million at notional rate of Rs 80 to exchange companies​

KARACHI (October 11 2008): The State Bank of Pakistan has disbursed some 25 million dollars at the notional rate of Rs 80 to the exchange companies aimed at stopping free fall of the rupee. However, no positive impact was witnessed on Friday, as once again the PKR lost 50 paisa against the dollar to close at Rs 80.70 in the open market, Business Recorder has learnt.

Although, on Thursday the central bank intervention had dealt a positive impact on the currency market and the rupee recovered some 25 paisa in the interbank and some 30 paisa in the open currency market. On Friday once again the dollar demand surged in the open currency market as the general public made huge buying of dollar amid strong rumours of banks' defaults. But, the interbank market remained stable due to the slow activity.

Sources said that exchange companies are taking full advantage of the SBP's offer to get dollar at a notional rate of Rs 80 to meet customers' requirements and during the last two days exchange companies acquired some 25 million dollars from the central bank.

"We have acquired some 10 million dollars on Thursday from the central bank, while on Friday about 15 million dollars were also taken to overcome the dollar shortage in the open currency market," said Munaf Kalia, general secretary of Exchange Companies of Pakistan.

He said that the SBP has assured full logistic support to maintain the dollar at a reasonable rate and it is expected that more positive results would be seen in the next few days. He said that the open currency market is still facing huge demand of the dollar, therefore some pressure was witnessed on Friday and the dollar closed at Rs 80.30 with a gain of 10 paisa.

However, market sources said that on Friday the rupee further depreciated, losing 50 paisa against the dollar to close at Rs 80.70 despite the SBP intervention. Sources said that Lahore and Peshawar currency markets see more demand of the dollar and in these markets the dollar was sold at Rs 81 on Friday and if the supply would not improve, it would go up further.

Munaf Kalia said that Lahore and Peshawar markets have huge demand, which would be met with the help of the SBP. He indicated that exchange companies would acquire more dollars on Saturday from the central bank. He requested the general public not to hold dollars, as its price would soon decline and they can suffer huge losses.

 

[Neo]

Oil sector posts 41 percent profit growth in fiscal year 2008​

KARACHI (October 11 2008): The entire oil sector of Pakistan (E&P, Refineries-ex-Bosicor, and OMCs) marked a record profitability growth of 41 percent on year-on-year basis in FY08 with total profits amounting to Rs 114 billion. E&P secured the largest share of 68 percent in FY08 oil sector profits (down from 84 percent in FY07 due to increased share of refineries and OMCs in the total), whereas OMCs and Refineries stood second and third in the row.

All three listed OMCs combined punched in a spectacular profit growth of 206 percent in FY08. Contrary to FY07, sector's gross profits grew at a staggering 132 percent on yearly basis owing to a number of factor ie volumetric growth, ex-refinery prices, product margins and the most noteworthy one, repayment of the PDCs arranged by the government.

PSO, Shell and APL shared 64 percent, 24 percent and 12 percent of the FY08 overall profit pie. Khurram Schehzad, senior analyst at Invest Capital and Securities said that the profitability growth can be attributed to a number of factors, which fuelled bottom lines of the OMCs. Firstly, volumetric growth of POL products at 9 percent (triggered by FO 3 percent, HSD 11 percent and Mogas 27 percent) - along with increased sales of high-margin products like Lubes, Naphtha and CNG. This resulted in an extraordinary 35 percent on yearly basis rise in the sector's topline to Rs 688 billion, he added.

Secondly substantial after-tax estimated inventory gains of around Rs 13.7 billion owing to sharp rise in oil prices in the international market (average Arab Light rose 52 percent on yearly basis in FY08, leading to 71 percent average jump in ex-refinery prices of different POL products and 20pps rise in margins) against estimated inventory losses of Rs 2.9 billion last year (due to steep decline in oil prices). Therefore, FY07's inventory losses also resulted in low profitability base leading to a pronounced growth of 206 percent for FY08. Net after-tax inventory gains for PSO were estimated at Rs 10.7 billion (EPS impact Rs 62.5) while Rs 2.55 billion (EPS impact Rs 46.6) and Rs 0.41 billion (EPS impact Rs 8.5) for Shell and APL, respectively in FY08 - contributing 55 percent, 26 percent and 23 percent to PSO, Shell and APL's gross profits. As a consequence, gross margins of the sector leapt by 2.90pps to 6.96 percent in FY08.

Finally, the entire recovery of the previously lingering PDCs (completely paid by the GoP by Jun-08) led to only 15 percent on yearly basis rise in financial charges (61 percent in FY07), which further strengthened the bottom line of the OMCs. These factors made their way to the bottom line of Rs 21.8 billion in FY08 (net margins rose by 1.77pps to 3.17 percent) against paltry Rs 7.13 billion in FY07.

PSO, due to its largest share of above 70 percent in almost all POL products, grabbed 64 percent of the total sector's profitability (68 percent in FY07). Shell (10 percent profit share in FY07), managed to increase share to 24 percent in FY08 while APL (24 percent in FY07) bagged a slice of 12 percent in the OMC profits in FY08.

 

[Neo]

Rumour-mongers to be punished: Dr Ashfaq ​

Sunday, October 12, 2008

ISLAMABAD: The government will give stern punishment to the culprits who made last Wednesday the blackest day in economic history of the country, Dr Ashfaq H Khan, Adviser to the Finance Ministry told The News on Saturday.

On that particular day, some unscrupulous elements in some of the banks under an engineered plot came up with rumours that banks are running short of liquidity that led to unprecedented panic among depositors.

The State Bank of Pakistan and Ministry of Finance are engaged in investigating the issue and once the culprits are found, they would be severely punished accordingly, Dr Ashfaq H Khan said.

To a question, he said: “We will leave no stone unturned in fixing the responsibility on those people who caused a colossal loss to the banking sector last Wednesday.”

He said that the State Bank of Pakistan made timely intervention by reducing Cash Reserve Requirement by 2 percentage points and offering dollars to exchange companies at Rs80 per dollar.

“This has stabilised the banking and forex markets to a great extent,” Dr Khan said. A few banks attempted to manoeuvre the market, particularly exchange market, and the government is trying to find out real culprits, who will be severely punished. Dr Khan said that in 2005, similar type of artificial pressure was created on exchange market. The then government took action against the culprits and one of treasurers of the banks was thrown out of country.

He said that the rumourmongers have deliberately targeted Bank Alfalah and have been spreading rumours against the bank. The Bank Alfalah is the healthiest bank in the country and backed by Abu Dhabi Group, which is chaired by His Highness Shaikh Nahayan Mabarak Al Nahayan.

“This group has invested $10 billion in various sectors of economy in Pakistan.” He said that spreading rumours for such a strong bank simply confirmed the ulterior motives of the rumourmongers.

He said that inter-bank call money rate ranges between 10-13 percent as of today trade. The pressure has now eased in foreign exchange market as rupee traded with range of 79.15 to 79.25 and market closed at 79.17.

He said that Pakistan’s banking and financial sector is one of the strongest in the Asian region because of reforms introduced since 1988-89. Dr Khan said that first and second generation reforms initiated two decade before have made Pakistan’s banking sector one of the best in the region.

 

[Neo]

India says it won’t oppose US-Pakistan nuclear deal​

WASHINGTON, Oct 11: India has indicated it would not object to the United States offering a civilian nuclear deal to Pakistan, although the United States has said it cannot offer a similar agreement to Islamabad.

“We believe every country has the right to use nuclear energy for peaceful purposes,” said Indian External Affairs Minister Pranab Mukherjee when asked at a news conference about Pakistan’s demand for an India-like nuclear deal with the US.

“We will like to encourage civil nuclear cooperation for peaceful use of nuclear energy,” said Mr Mukherjee after signing an implementation document with US Secretary of State Condoleezza Rice.

The document, known as the 123 agreement, will allow India access to nuclear reactors, fuel and technologies from the US after a gap of 34 years. The US terminated nuclear cooperation with India after New Delhi conducted a nuclear test in the Pokhran desert of Rajasthan in 1974.

While the US administration is presenting the nuclear deal with India as a major foreign policy breakthrough, it has refused to offer a similar agreement to Pakistan.

“It is unique to India, not a model for anything else,” said US Assistant Secretary of State Richard Boucher when asked at a briefing earlier this week if Washington could also sign a similar nuclear deal with Islamabad.

Pakistan believes that the deal would allow India to dedicate some of its existing reactors for producing weapons and thus create a strategic imbalance in South Asia. Mr Mukherjee, however, disagreed with the suggestion that any gain for India in this field is a loss for Pakistan.

“There is no reason, for any apprehension in Pakistan,” he said. “We are determined to build good relations with Pakistan. In fact, we are doing so through the composite dialogue process. We are addressing all outstanding issues between our two countries.”

President Asif Ali Zardari’s recent statements about India never being a threat to Pakistan and Islamabad having no objection to the India-US nuclear deal were “really encouraging”, Mr Mukherjee said.

The minister recalled that India had imposed a unilateral voluntary moratorium to nuclear tests after it conducted five-in-a-row tests in 1998. “India’s commitment to non-proliferation is second to none,” he said.

Earlier, India and the US sealed the landmark civil nuclear deal, after three years of tough negotiations.

The deal guarantees uninterrupted supply of US nuclear fuel to India and allows American companies to benefit from the multi-billion-dollar Indian nuclear programme.

“This is truly a historic occasion. Now there is nothing we cannot do,” said Secretary Rice after signing the implementation document with Mr Mukherjee.

 

[Neo]

Pakistan to seek compensation for Chenab losses​

ISLAMABAD, Oct 11: Indus Water Commissioner Jamaat Ali Shah has said that he will press his Indian counterpart to ensure that Pakistan is compensated for last month’s water loss of 0.2million acre feet (MAF) when he visits India for a week from next Saturday.

India had completely blocked the supply of regular water (23,000 cusecs a day) to Pakistan from the Chenab River last month while filling its Baglihar Dam, badly affecting Pakistan’s share of irrigation water. The move is being considered by Pakistan a violation of the Sept 1960 Indus Water Treaty.

Talking to Dawn on Saturday, Mr Jamaat Ali Shah said the treaty was between two nations, and not two persons to be taken too lightly or be violated.

“We must respect this treaty as responsible nations. I tell you there are no guarantors in bilateral agreements between nations, but the nations concerned are its guarantors,” Mr Shah replied when asked whether the treaty has any guarantor(s) for the World Bank, which arbitrated the treaty, has cleared its position by calling its status as that of a “mediator”.

Mr Shah will be leading a Pakistani delegation to New Delhi on October 18 to discuss last month’s violation of the treaty by India. The delegation will stay in India till Oct 24 and will also visit the Baglihar dam site in held Kashmir.

In reply to a question, he said the meeting of the commission was the first step in resolving water issues related to the Indus Water Treaty. He said it was premature to say anything about the outcome, but Pakistan reserved the right to take up the issue with the World Bank again if India refused to compensate it.

He said that India had violated the Indus treaty by unilaterally blocking the flow of the Chenab River to Pakistan. He said there were always some loopholes in all water treaties, but this did not mean that a nation should use this to its advantage and to the detriment of the other. Mr Shah said at present Pakistan was getting the normal flow of water from Chenab.

 

[Neo]

47 development projects worth Rs 50 billion approved​

* CDWP okays construction of Ghabir Dam worth Rs 2.16bn​

ISLAMABAD: The Central Development Working Party (CDWP) in a two-day meeting that concluded on Saturday approved 47 different development projects worth Rs 50.1 billion including foreign exchange component (FEC) worth Rs 5.8 billion.

This was the second meeting of the CDWP in the current fiscal year 2008-09 and the projects approved will be financed from three-eight years.

Of the total 47 projects, the infrastructure sector has 25 projects while the social sector has 18 projects, besides four other projects.

Planning Commission Deputy Chairman M Salman Faruqui chaired the CDWP meeting.

In the transport and communication sector, 18 projects were approved by the CDWP mainly to provide modern and safe travel to the general public.

The Infrastructure Project Development Facility (IPDF) was asked to seek expression of interest from private parties to finance these projects including Hasanabdal-Havailian-Mansehra Expressway worth Rs 2.997 billion.

Ghabir Dam: In the water sector, the CDWP approved the construction of Ghabir Dam worth Rs 2.164 billion in district Chakwal, Punjab province. The government of Punjab will provide the entire cost of the project through the Annual Development Plan allocation.

The CDWP also approved the PC-II to undertake detailed engineering design and tender documents of Munda Dam project worth Rs 651.862 million with FEC Rs 224.826 million. The Munda Dam project will generate 748MW electricity and help increase agriculture production through irrigation over 23,000 acres of land.

In the education sector, a new college of home economics and management sciences will be established in Islamabad. Similarly, a project has been approved for the development of the university faculty.

The CDWP also conceptually approved the upgrading of Training Equipment of Pakistan Marine Academy project worth Rs 1.230 billion with Rs 1.140 billion FEC.

Additional chief secretaries (ACSs) (development) represented their respective provincial governments and special areas. The sponsoring agencies were represented by the respective secretaries or their heads.

The IPDF and Board of Investment (BoI) have also been made permanent members of the CDWP to solicit their views over which of the projects under consideration could be shifted to the public private partnership mode.

However, due to non-presence of the NWFP ACS (development) in the last two meetings, a project of national importance, the Chashma Right Bank Canal (CRBC) (Lift-Cum-Gravity) worth Rs 39 billion with FEC Rs 10.675 billion was deferred.

The official absence also affected other important projects related to the NWFP and the Planning Commission deputy chairman also expressed serious concerns over the situation, a senior official told Daily Times.

The main objective of the CRBC project was to provide sustainable irrigation water supply to 286,140 of agricultural land so as to increase agricultural production and uplift the socio economic condition of the inhabitants, the official added.

The vast area of piedmont plain in Dera Ismail Khan district having high agricultural potential was lying barren due to shortage of water. At present this area is under less productive rod kohi (hill-torrent) and barani (rain fed) agriculture.

Due to shortage of water and fodder, the livestock population is also low. The CRBC project plans to provide perennial irrigation to 286,140 acres productive land falling in DI Khan, Kulachi, Paharpur and Daraban tehsils of DI Khan district. The project area is contiguous with the right bank of CRBC project. Due to unfavourable topography, irrigation water diverted from Chashma barrage through a feeder canal will be pumped into the main canal though 64-feet lift.

Realising the importance of the CDWP meeting, National Assembly Deputy Speaker Faisal Karim Kundi also attended it.

 

[Neo]

WB to provide $ 1.4 billion this year, DFID doubles economic assistance ​

WASHINGTON (October 12, 2008): The World Bank has pledged to provide $ 1.4 billion support for Pakistan in the current year which can be front-loaded to fast track investment projects and budgetary lending. The amount includes $ 600 million for investment portfolio and $ 800 million for budget support as macroeconomic stabilisation program moves forward.

The offer, first made by World Bank President Robert Zoellick at a meeting with President Asif Ali Zardari last month in New York, was reiterated Saturday as Pakistan’s Adviser on Finance met with the Bank’s Managing Director Ngozi Okonjo-Iweala.

Meanwhile, Department for International Development has doubled its economic assistance for Pakistan to UK pound 586 million. Minouche Shafik, Permanent Secretary of DFID told the Pakistani delegation that the Department plans to expand its development work to federally administered tribal areas and Balochistan.

The advisor to prime minister also had productive meetings with German minister for Economic Cooperation and Development Wieczorek-Zeul, United States Undersecretary of State for Economic, Energy and Agricultural Affairs, Reuben Jeffrey and Assistant Secretary of State for Economic, Energy and Business Affairs Daniel Sullivan.

The German minister vowed to provide support for social safety nets and also offered debt swap for HIV AIDS and Malaria Global Fund.

The U.S. officials reaffirmed Washington’s continued support for Pakistan’s economic development. Tareen also discussed bilateral cooperation with Afghan Finance Minister Anwar ul Haq Ahady.

Shaukat Tareen briefed his interlocutors about the current economic challenges and blew impact of the war on terrorism that Pakistan being the front line state has to face on its economy. He spoke of the tough and difficult measures that have been taken by the elected government. He also expanded on Pakistan’s program to deal with these challenges including social safety nets for targeted subsidies.

The Finance Adviser urged donors’ support for Pakistan’s efforts to pull itself out of the current difficult phase. He also highlighted the impact of global financial crisis on developing countries, particularly on those intending to access capital market but cannot do so because of liquidity crunch.

The World Bank, DFID, U.S. and German officials appreciated the courageous measures taken by Pakistan to correct the macroeconomic imbalances and reaffirmed their commitment to support the country in meeting its economic challenges and establishing safety nets for the poor.

The Pakistani delegation including Governor State Bank Dr Shamshad Akhtar, Finance Secretary Dr. Waqar Masood, Secretary Economic Affairs Division Farrukh Qayyum and Economic Minister at the Pakistani embassy in Washington Wajid Rana also participated in a number of events including the WB-IMF Constituency Meeting, Saarc Finance Governors Meeting and the International Monetary and Finance Committee meeting.

 

[Neo]

Rs 31 billion injected in banking system​

KARACHI (October 12 2008): Some Rs 31 billion was injected in the banking system on Saturday as the State Bank of Pakistan has reduced Cash Reserve Requirement (CRR) by one percent, enabling banks to meet their liquidity shortage, banking sources said on Saturday. The banks were facing huge liquidity shortage from last few weeks and liquidity constraint in the system has resulted in a rising trend in overnight call rates touching peak level of 40-48 percent, they said.

Therefore, taking a sudden step aimed to provide relief to the banks, the State Bank of Pakistan (SBP) on Wednesday announced reduction in the Cash Reserve Requirement (CRR) by 200 bps to 7 percent from 9 percent in two phases, to facilitate big payments. However, the central bank announced reduction in the CRR for all deposits up to one-year maturity by 100bps to 8 percent from 9 percent effective November 11.

SBP was expecting that market liquidity would be increase by Rs 61 billion with 200 bps reduction in CRR. "The first reduction of 100 bps from 9 percent to 8 percent has been effected from Saturday and central bank has injected some 31 billion in the banking system," sources said.

They said that overnight call rate has already declined, however this step would also help to ensure that call rates are reflecting the real fundamentals in the money market. Due to the implementation on the reduction announcement, banks have not used discounting counter of SBP on Saturday, they added.

Sources said that SBP has some Rs 680 billion on account of Cash Reserve Requirement and Statutory Liquidity Requirement (SLR), which stood at 8 percent and 19 percent respectively. The SBP has held close to Rs 600 billion on account of SLR and some Rs 280 billion on account of CRR, they added.

 

[Neo]

Zardari for ending loadshedding on war footing​

ISLAMABAD (October 12 2008): President Asif Ali Zardari on Saturday said power and energy was most critical for economic development of the country and directed swift measures to end loadshedding and power shortages on a war footing.

During a detailed presentation on "International Competitive Bidding for new IPP and Rental Power Projects on Fast Track," the President asked the ministry and the Planning Commission to consider new and innovative models to attract international investment in energy sector. The presentation team was led by Minister for Water and Power Raja Pervez Ashraf. The President asked the team to study the models of other countries that have addressed their power crisis through international investments.

He said setting up of dedicated power plants for specialised sectors like the industrial units should also be given consideration. The President evinced keen interest in the measures taken for resolving the power crisis in Karachi and asked that the required steps be taken expeditiously.

He said that he will chair another meeting on the power situation in Karachi and other parts of the country that had been affected by electricity shortages that have had a negative impact on the national economy and caused hardships for the people.

The progress made and the issues involved in raising of Mangla dam and desalting of Tarbela dam were also discussed during the meeting. Earlier the Federal Minister for Water and Power Raja Pervez Ashraf mentioned the steps taken so far to end loadshedding by the end of next year.

He thanked the President for his support to end loadshedding in the country. The meeting was informed that the entire bidding process was completed by the PPIB in a record time of 117 days after the Cabinet decision of May 14 to invite bids for 1,000 MW IPPs and 500 MW rental projects as against almost one year taken normally by such bidding process.

As a result of encouraging response, 42 requests for proposals had been issued to the interested sponsors and investors. The presentation reflected that a total of 12 bids were received by the bid submission deadline and the evaluation of bids was conducted under a completely transparent process and was submitted before the ECC on September 10 after due deliberations by a cabinet sub committee.

As a result the ECC approved three IPPs of 929 MW and two rental projects of 437 MW. Following the approval Nepra was advised to approve the tariff of the aforesaid approved projects, in accordance with the provisions of the government guidelines for determination of tariff for IPPs.

The meeting was attended by Salman Farooqi, Deputy Chairman Planning Commission, Muhammad Ismail Qureshi, Secretary Water and Power Shakeel Durrani, Chairman Wapda Khalid Saeed, Chairman Nepra Navid Ismail, Chief Executive KESC Fazal Ahmad Khan, MD Pepco and Fayyaz Elahi MD PPIB.

 

[Neo]

CDA to execute Ghazi Barotha water project soon​

ISLAMABAD (October 12 2008): Capital Development Authority is soon executing the Ghazi Barotha Water Supply Project (GBWSP) costing Rs 47 billion to overcome water shortage in Rawalpindi and Islamabad. This was stated by Tariq Mehmood, new chairman of CDA while briefing the media here on Saturday.

He said that the authority has submitted the feasibility report of the project to Indus River System Authority (Irsa) for approval. He said that CDA is trying to remove the concerns of different quarters, including Sindh, NWFP and especially Irsa, which are not in favour of sharing water with the twin cities as the provinces are already running short of water to meet the irrigation needs.

Due to reservations of provinces about the project, the government in the current year's Public Sector Development Programme (PSDP) has not allocated funds for the project, but CDA is trying to convince the provincial representatives.

According to the plan a separate water supply line would be laid for Rawalpindi from Ghazi-Barotha along with a 65-km supply line for Islamabad. Besides, CDA is planning to construct two more dams in the Capital. One for fulfilling the drinking water needs of the Capital residents and the other to meet the future demand after the expansion of the city.

Almost everyday the authority receives 800-900 complaints of water shortage from various localities of the Capital but majority of them were not responded. Besides the filtration plants installed by CDA in various sectors are also out of order. People who are already suffering from the heat of high inflation, unemployment, wheat crisis and loadshedding can not bear the water shortage.