Pakistan Economy - News & Updates - Archive

[Neo]

$200m inflow from IDB slows reserves slide​

KARACHI: The Islamic Development Bank (IDB) provided $200 million to Pakistan as aid a few days ago, a central bank official said on Thursday.

The spokesman for State Bank of Pakistan (SBP), Syed Wasimuddin, said the country had received $200 million from the bank on November 6.

This inflow helped the central bank restrict the depletion in foreign exchange reserves during the week from November 1 to 8. The country's liquid foreign reserves dropped to $6.736 billion on November 8 from $6.758 billion on November 1, a decline of $22 million or 0.32 percent. This depletion in reserves was much smaller than those recorded during previous many weeks. The country had been losing, on average, $400 million every week for past few months owing to extremely high trade and current account deficits.

The country is expected to receive large funds from International Monetary Fund and friendly countries within the next month after signing an agreement with the multilateral lender. Top officials have had meeting with IMF in Dubai and reportedly agreed on various measures to take the country out of the quagmire it is stuck in.

A huge gap between country's imports and exports has eaten away the foreign exchange reserves by more than half during last one year, as the central bank had to spend dollars to protect the rupee from extreme volatility.

Since the beginning of the current calendar year, the central bank has been intervening in the foreign exchange market quite frequently to support the rupee, which sharply lost its value against the dollar. Besides, the central bank has to give dollars to banks for their customers' oil import payments.

Whereas the support extended to rupee resulted in sharp depletion of foreign exchange reserves, it did not succeed in stopping the rupee's slide. The rupee has lost about 32 percent value against the greenback since January. The dollar is now available in the interbank market at around Rs 81 compared with Rs 61 at the beginning of the year.

Foreign reserves held by the State Bank of Pakistan fell to $3.496 billion from $3.529 billion, a drop of $33 million or 0.93 percent.

Net foreign reserves held by banks other than SBP rose to $3.239 billion from $3.228 billion, up by $11 million or 0.34 percent.

 

[Neo]

Rs 130 billion Neelum-Jhelum Hydroelectric Power Project​

Donor countries to offer funding in foreign exchange​

* IDB, Saudi Fund for Development, Kuwait Fund for Development and Abu Dhabi Fund for Development would attend meeting on 17th to discuss project

By Ijaz Kakakhel

ISLAMABAD: The bilateral donor countries and institutions are likely to offer Pakistan the much needed funding in foreign exchange for the construction of the Rs 130 billion Neelum-Jhelum Hydroelectric Power Project, sources told Daily Times on Thursday.

The donors’ meeting is likely to be held on November 17. The Neelum-Jhelum Hydroelectric project was launched by former president General (r) Pervez Musharraf in February this year. With the depreciation of the Rupee and increase in the value of the Dollar, the cost of the project would further increase, sources added. For the construction of the project, the government had enhanced its efforts and was seeking financial assistance from Friends of Pakistan and international donor agencies.

Willingness: For financing the Neelum-Jhelum Hydroelectric power project, the sources said, four Islamic institutions had expressed willingness and confirmed that they would attend the joint meeting of donors likely to be held on the 17th. The Islamic Development Bank, Saudi Fund for Development, Kuwait Fund for Development and Abu Dhabi Fund for Development are the four institutions. The sources said these institutions were expected to financially help the government in the construction of the much-needed hydroelectric power project. The sources said the country faced an energy shortage and such a power project would greatly help the government to meet its energy requirements, which is badly needed for the economic development of the country.

The hydroelectric project would help the government to generate 969MW and would help in producing about 5,150 giggawatt-hours electricity annually.

Officials in the Ministry of Water and Power told Daily Times it was a very important project and would have ‘far-reaching strategic implications’. The project would be completed with Chinese assistance in eight years. The officials described it as yet another symbol of Pak-China friendship and added it would also contribute towards the economic progress of the country.

The project is located in the vicinity of Muzaffarabad in Azad Jammu and Kashmir. It envisages the diversion of the water of Neelum River through a tunnel into Jhelum River. The intake of Neelum-Jhelum is at Nauseri, 41 kilometres east of Muzaffarabad. The powerhouse would be constructed at Chatter Kalas, 22 kilometres south of Muzaffarabad. After passing through the turbines, the water would be released into the Jhelum River about 4 km south of Chatter Kalas. The construction contract of the project was awarded on July 7, 2007 to M/s CGGC-CMEC Consortium China. Under the project, water from the Neelum River would be diverted through a 47km-long tunnel.

Federal Minister for Water and Power Raja Pervez Ashraf, answering a question in the National Assembly a few days ago regarding the construction of Kishan Ganga Project by India in Indian-held Kashmir, had said India started the project on River Neelum in

IHK in 1994. The project features include storage of 0.14MAF of water and its diversion to Wular Lake located on Jhelum Main, which was against the Indus Water Treaty.

He said Pakistan raised objections based on the design of the project and having adverse affects on Pakistan’s Neelum-Jhelum Hydroelectric Power Project. He said that now Pakistan had started construction of Neelum-Jhelum project and under the international law, India could not reduce the flow of water.

For meeting the energy demand, the minister in a statement said work on 11 projects with an accumulative power-generation capacity of more than 12,000MW would start by 2009. These projects include Bunji (5,400MW), Dasu (4,000MW), Kohala (1,100MW), Spatgah and Palas Valley (1,230MW), he added.

 

[Neo]

China to provide $500m aid to Pakistan​

ISLAMABAD: Following President Asif Ali Zardari’s visit to China, the Chinese government has agreed to provide financial assistance of $500 million to the Pakistani government. According to an official statement issued by the Ministry of Finance on Thursday night, this gesture by the Chinese government bears testimony to the close relations between the two countries.

 

[Neo]

Terror war will now cost Pakistan $8bn ​

* Ministry of Finance estimates $34.5 billion losses to Pakistan since 2001​

ISLAMABAD: The direct and indirect cost of the war on terror borne by Pakistan is likely to increase to $8 billion per annum in the next couple of years from the current $6 billion, an official source told Daily Times on Thursday.

According to the official, estimates compiled by the Ministry of Finance indicate that during the eight years since 2001, direct and indirect losses to Pakistan’s economy due to the war on terror have been estimated at $34.5 billion. According to the official, the loss of lives and economic cost imposed by the war is now rising to an unbearable level and a very negligible portion of these costs is defrayed by the government’s development partners.

Since 2001, losses of $5 billion have been estimated in foreign direct investment, more than $5 billion in exports and $5.5 billion in privatisation, the official said.

Impact: There has also been deterioration in law and order. Travel advisories have been issued against Pakistan by the United States and other major allies in the war on terror, which has resulted in a reduction in the number of intending investors, foreign buyers interested in taking part in the privatisation of major national assets. The official said this had an impact on the privatisation programme, exports, and resulted in a decrease in the foreign direct investment and revenue collection due to the economic slowdown.

The official said expenditures related to security have multiplied in recent years. Physical infrastructure like bridges, roads, girls’ schools and official buildings has been destroyed, resulting in increased cost of maintenance or reconstruction.

Hundreds of thousands of people have been left with no option but to migrate from areas where security operations are being conducted, he said. The government is bearing the costs of facilitating the migrating families.

The official said Pakistan’s tourism destinations like Swat, Gilgit and Naran were no longer attractive for local or foreign tourists. The decline in tourism has resulted in loss of revenue as well as employment.

 

[Neo]

Zardari calls Clinton, gets support for the Biden-Lugar $15 billion package ​

NEW YORK November 14, 2008): President Asif Ali Zardari on Friday called Senator Hillary Clinton on telephone who has emerged as a choice of President-elect Barack Obama for the US Secretary of State.

The President, now in New York to attend the dialogue on interfaith harmony, said Pakistan was striving for peace in the region and its nascent democracy needed support and cooperation of the international community to confront several challenges it was facing.

Hillary Clinton, a senator from New York, extended full support to President Zardari for the dollar 15 billion assistance under the Biden-Lugar bill for the next ten years as a long-term engagement with Pakistan.

Hillary Clinton said the United States of America was keen to see the economic and social uplift of the people of Pakistan and the new US administration and the Congress would work together to attain that objective.

The US media reported Clinton was the top contender for the slot of U.S. Secretary of state, following her meeting with President-elect Barack Obama on Thursday to discuss her role in the new administration.

 

[Neo]

Country to miss growth target by 1.5 percent in fiscal year 2009 ​

KARACHI (November 14 2008): The State Bank of Pakistan on Thursday projected that the country will miss its Gross Domestic Products (GDP) target by 1.5 percent in FY09 and expected that the growth would be some 4 percent, the lowest in last six years. The country is witnessing over 6.5 percent GDP growth rate since FY03 and during FY08, the country's economy registered a growth of 5.8 percent.

The central bank in its detailed monetary policy statement presented the outlook of economy on Wednesday and said that poor law and order situation, besides structural weaknesses such as power shortages, etc, are responsible for slow economic growth during the current fiscal year.

"Although, growth during 2009 would be lower than the target of 5.5 percent and actual estimated growth of 5.8 percent in FY08, however economic growth would be maintained or even sacrificed depending on the evaluation of the trade-off between inflation and growth," the SBP said.

The SBP said that tight monetary policy is the only ingredient of the macroeconomic stabilisation programme and several changes in the fiscal, external, and financial sectors are required immediately in the medium term to put the economy back on track.

The central bank also projected that inflation is likely to decelerate during second half of FY09 following the positive impact of global commodity prices, which are declining. The SBP estimated some 14 percent YoY headline inflation from 25 percent in October 2008, while on average basis, inflation will be close to 21 percent for FY09; well above the 11 percent target for the year.

Import growth for FY09 is also expected to be around 2.0 percent and may even turn negative due to the declining oil prices in world market and slowdown in domestic demand due to a depreciated rupee.

However, the SBP has said that growth slowdown and recession in Pakistan's major trading partner countries, particularly US, EU, and Japan, is likely to have an adverse effect on our exports, which expected growth would be around 10 percent during FY09.

"As per projected imports and exports and assuming a continuation of existing trend in workers' remittances, the external current account deficit is estimated to stand between 6.2 to 6.8 percent of GDP," SBP said.

The SBP said that fiscal deficit will have to be cut considerably, even lower than the projected 4.7 percent of GDP target for FY09 with the government's commitment to eliminate reliance on borrowing from the SBP to finance fiscal deficit and the lower availability of external financing. The expected developments in the external and fiscal sectors will be reflected in a monetary growth of around 12 to 13 percent.

 

[Neo]

Qadirpur Gas Field will not be privatised at this stage: Prime Minister ​

ISLAMABAD (November 14 2008): Prime Minister Syed Yousuf Raza Gilani has said that Qadirpur gas-field will not be privatised at this stage and the parliament would be taken into confidence before the government decides to privatise the field. Speaking in the Senate here on Thursday, he said the government was not selling Qadirpur gas-field.

"The Senate will be taken into confidence before the gas field is privatised," the Prime Minister said in a policy statement. The policy statement came a day after the parliamentarians both from treasury and opposition benches expressed their reservations over the proposed sell off of Qadirpur gas-field.

Gilani also announced a grant of Rs 2 billion for construction of houses damaged by last month's earthquake in Balochistan. Pakistan Army has been tasked to carry out survey and compensation would be given to completely damaged, partially damaged and slightly damaged houses. He said the estimated cost of reconstruction of a house damaged by the earthquake had been estimated at Rs 378,000.

Gilani said that the elected government would not accept tough conditions set by the International Monetary Fund (IMF). The Prime Minister also offered to quit his office if anybody came out with a claim that he was in better position to solve the problems the country is facing.

He assured the house that Qadirpur gas-field's privatisation would be fully transparent. "The government is serious in deciding matters of national importance in the parliament," he said. The government, he said, can never take a step which is detrimental to the security and integrity of the country as the elected representatives have to go back to their constituencies for seeking vote in next elections.

The PPP and its coalition partners, he added, came into power after a hard struggle for democracy. "The government has not been gifted to us. We are here because of long struggle for democracy, therefore, the present democratic government will not take any decision, which will be harmful for the country, he added.

He said he was happy to note that the house has debated a number of issues and the unanimous resolution on national security in the joint in-camera session of the parliament was testimony to the fact that the present government held parliament in highest of esteem.

He said the government was constructing six thousand one-room houses to provide shelter to the affected people during winter when they cannot initiate construction activity. The affectees can either get the rooms being built or receive fifty thousand cash to build temporary shelter on their own for three months. The Prime Minister said there was no dearth of medicines and food stuff for the affected people but acknowledged the distribution system could be deficient.

Referring to the foreign exchange companies' issue, he said as a result of the measures taken by the government, the rupee-dollar parity has come down. He said an inquiry is underway and after its completion the Advisor on Interior would brief the House. The Prime Minister said in view of the economic difficulties of the country, the government was making strenuous efforts to diversify the economy by giving boost to agriculture.

He said it was because of this that the support price of wheat has been increased to Rs 950 per 40 kg and rice Rs 1500 per 40 kg. He held out an assurance that the government would lift every grain of wheat and rice if prices of these commodities fall down. He said the government was providing subsidy worth Rs 32 billion on fertilisers.

Syed Yousuf Raza Gilani said the ECNEC has approved construction of dams to increase water storage capacity while it will take some time to eliminate load shedding. He, however, pointed out that except Karachi, there was no load shedding in the country. The Prime Minister said the country was facing problems of terrorism and economic crisis which are inter-linked.

He invited the members to give their suggestions for resolution of these problems. He said the government would bring all issues before the parliament and it is responsibilities of the members to contribute towards their solution.

Gilani pointed out that several Ministers from the Senate have been included in the federal cabinet and it will ensure greater presence of Ministers in the House. He said there was a need to set healthy traditions and in this regard lauded PML-N Nawaz Sharif for going to the President to congratulate him on his election.

 

[Neo]

China agrees to provide $500 million, Tarin tells Senate ​

ISLAMABAD (November 14 2008): China has agreed to extend financial assistance of $500 million to Pakistan, said advisor to the Prime Minister on finance Shaukat Tarin while concluding debate on current economic situation in the Senate Thursday.

He said that the government was expecting $5 to 6 billion at the lowest interest rate from IMF next month. It may offer loan on four percent interest rate, he said, adding that IMF had attached no condition.

"The government has announced tough measures for reducing fiscal deficit, current account deficit and inflation in the budget. These targets set in the budget are tough. The IMF will not seek any other measure from Pakistan," he told the Senate.

The advisor defended the SBP move of increasing the discount rate. However, he said that parliament is the supreme institution and it can seek explanation from SBP about the raise. He clarified that this had nothing to do with proposed IMF package.

At the same time he said inflation was fatal for economy. Citing the cases of Argentina, Brazil and a number of other countries, he said that these countries showed negative growth for some years to contain inflation. "Inflation has touched 25 percent. The inflation will have to be reduced and the SBP move in that direction," he added. He said that high inflation could lead to hyperinflation and at that stage things would get out of control. By increasing the discount rate, we are trying to help the country in controlling the inflation within the limits specified in the budget 2008-09. "We need to undertake some difficult decisions to improve the economic situation," he said. He said that IMF was a reformed organisation and it has been improved from what it was in 1990s.

Tarin said that once inflation showed a declined and it reached at permissible level, the discount rate would be reduced. He hoped that plight of capital could be arrested once the government announced its economic plan.

He said Pakistan could not afford default on debt repayment. The countries, which had done in the past, have to struggle for long to get back to the track. Tarin accused the previous government for not taking actions on right time. Most of the corrective measures were delayed by the previous government owing to election year, he said.

Meanwhile, in a press release the finance ministry stated the Chinese assistance is a goodwill gesture from Beijing, which bears testimony to the brotherly relations between the two countries. The financial assistance of US $500 million is in addition to the same amount deposited by the Chinese government with the State Bank of Pakistan (SBP) in June 2008, the ministry clarified.

 

[Neo]

Japanese companies: Pakistan offers to establish special economic zone ​

ISLAMABAD (November 14 2008): Pakistan has offered setting up a special economic zone for Japanese business companies, Japanese Ambassador to Pakistan, Chihiro Atsumi was informed by Deputy Chairman Planning Commission, Salman Faruqui on Thursday. Faruqui said that Pakistan was already establishing such facility for China in Lahore and was willing to do so for Japan in the south of the country, probably in Karachi.

The Ambassador welcomed the proposal and stated that the Japanese business companies working in Pakistan had a very good perception about doing business in Pakistan and were willing to enhance their investment here. He said that Japan was providing assistance of $500 million for a number of development projects in Pakistan for the current year.

The Ambassador was briefed on a wide range of business and investment opportunities for the Japanese investors in Pakistan such as energy, agriculture, and infrastructure development projects. He was informed that Pakistan needed financial assistance for mega projects like Bhasha Dam and mass transit projects in the same fashion as Japan helped Pakistan in constructing Ghazi Brotha project and Indus Highway-both the projects were funded by Japan.

He expressed his special interest in assisting Pakistan in development work in FATA. He said that Japan was already providing financial assistance in education and health sectors in FATA and was willing to extend this co-operation in other areas as well.

Upon this, the Deputy Chairman informed the Ambassador that Japan could help in construction of dams in FATA as these projects would significantly alleviate poverty from the region by providing jobs to the local population. The Japanese Ambassador assured to consider the proposal.-PR

 

[Neo]

Pakistan to attend IITF 2008 as partner state ​

KARACHI (November 14 2008): Pakistan is participating as Farther Country in India International Trade Fair (IITF 2008) which is commencing from November 14, New Delhi. Pakistan Pavilion located in the International Hall will have a unique distinction in terms of size and variety of products which include Kitchenware, Textiles, Garments & Home Furnishings, interior & Home Décor.

Furniture, Healthcare & Cosmetics, home decoration items, plastic goods, artificial jewellery, cutlery, ceramics, marble and granites, leather goods, herbal cosmetics and toiletries, cooking ranges etc. There are 85 companies including SMEs and Women Entrepreneurs in Pakistan Pavilion measuring 1,100 sq mtrs which is the ever biggest participation of Pakistan in IITF organised by FPCCI on self-finance.-PR

 

[UnitedPak]

Chinese company ready to set up car manufacturing plant in Pakistan

ISLAMABAD, Nov 14 (APP): Chinese car manufacturers have expressed their willingness to establish an eight‑seater car manufacturing plant in Pakistan.

Cars produced in this plant would be sold on cheaper rates as compared to cars of other companies, King Ping, Chairman of Chinese Mini Car Manufacturing Company told Minister of State for Industries and Production, Ayatullah Durrani, during a meeting here on Friday.

King Ping is heading a Chinese manufacturing delegation to Pakistan.

“In the beginning we will bring one thousand cars to Pakistani market for introduction and after that we will start manufacturing here,” he said adding that the production capacity of the plant would be 1,000 cars per month.

On the occasion, the minister told the delegation that there was a great scope for investment in Gwadar as the government was providing complete security to the foreign investors.
Durrani assured the delegation that if they set up a car manufacturing plant in Gwadar, the government of Balochistan will provide complete securities and land on cheep rates to them.
He said that the government has also declared free tax zone to the industrial sector in Gwadar adding that the future of Gwadar was very bright as it would open new vistas for trade and economic activities in Pakistan.

He informed the delegation that many Chinese manufacturing companies were also in touch with the Pak‑Government to seek industrial plots in Gwadar.

He said that the government would provide all kinds of opportunities to the investors who invest in Pakistan and provide new technology.

Ms. Lucky Chow, Trade representative of Shihao Jiche, Mini Car Company and High officials of Ministry of Industries and Production also attended the meeting.

Associated Press Of Pakistan ( Pakistan's Premier NEWS Agency ) - Chinese company ready to set up car manufacturing plant in Pakistan

 

[Neo]

IMF to extend $7.6 bln loan to Pakistan: Tareen​

Saturday, November 15, 2008

KARACHI: The International Monetary Fund (IMF) will extend 7.6 billion dollars to Pakistan under a 23-month loan programme, said Adviser on Finance Shaukat Tareen on Saturday.

Addressing a press conference here at State Bank of Pakistan, the Adviser said the IMF will provide this loan under stand by credit limit at interest rate ranging between 3.51 and 4.51 per cent and its repayment will be made in five years beginning from 2011.

Governor SBP, Dr. Shamshad Akhtar was also present on the occasion.

Shaukat Tareen said IMF has not attached any new condition to the loan facility.

The IMF will release 4 billion dollars as the first tranche of the loan this year while the rest will be provided in the coming year.

However, he said the IMF will make its final decision regarding the loan programme after its board meeting.

The Finance Adviser expressed his inability to announce the exact date of receiving the loan but said it will happen during the current month.

He said the prime objective of receiving the IMF loan facility is to improve the position of SBP’s foreign exchange reserves.

The loan will not be utilized in the stock market and for this purpose a fund is being set up from the country’s own resources, he clarified.

He ruled out the reduction of SBP’s discount rate until the easing of the current high inflation rate.

The foreign rating agencies downgraded Pakistan’s credit rating due to the ongoing economic crisis in the country, he said, adding the government is doing its utmost to tackle this challenge.

The Adviser said the balance of payments has been badly affected due to the depleting foreign exchange reserves of the country which shrank by half in one year.

The rupee value declined by 21.8 per cent as oil and food prices galloped. The rate of inflation kept on rising, creating hardship for the people specially the poor.

He said the Government has decided to stop borrowing from SBP and added that the fiscal deficit will be brought down to 4.1 per cent from 7.4 per cent.

Shaukat Tareen said the Government supports SBP stance of tightening the monetary policy.

 

[Neo]

Pakistan to seek $20bn from IFIs to compensate for war on terror losses ​

Saturday, November 15, 2008

ISLAMABAD: Owing to being part of US led war against terrorism, Pakistan has estimated a loss of Rs2.080 trillion on its economy on account of exports, foreign investment, privatisation, industrial output and tax collection during the last five years from 2004-05 to 2008-09, an official document of Finance Ministry reveals on Friday.

Pakistan’s government for the first time made public the details of massive losses of Rs2.080 trillion borne by the country through its official document called draft of Poverty Reduction Strategy Paper (PRSP-II) here on Friday.

Pakistan will seek over $20 billion funding on the basis of PRSP-II document from the International Financial Institutions (IFIs) such as the IMF, WB, ADB, IDB as well as bilateral donors to compensate its losses in the next three to five years.

“Pakistan’s participation in the anti-terrorism campaign has led to massive unemployment in the affected regions. Frequent bombings, worsening law and order situation and displacement of the local population have taken a toll on the socio-economic fabric of the country,” stated the official document of PRSP-II.

According to details outlined in the PRSP states that the country had to face direct cost of US led war against terrorism in the range of Rs67.103 billion in fiscal year 2004-05 while indirect cost borne by the country stood at Rs192 billion, totalling the cost up to Rs259.103 billion in 2004-05.

The country’s total losses were Rs300 billion in FY 2005-06 in shape of direct losses to the tune of Rs78.060 billion and indirect losses of Rs222.720 billion. Pakistan faced total losses of Rs82.499 billion on account of direct losses while Rs278.400 billion as indirect losses in 2006-07.

Pakistan’s direct losses owing to become part of war against terrorism stood at Rs108.527 billion while indirect losses were Rs375.840 billion in FY 2007-08, totalling the amount of Rs484.367 billion.

The country’s losses stood at Rs677.793 billion in 2008-09 in shape of direct loss of Rs114.03 billion and indirect losses of Rs563.760 billion.

The PRSP-II document states that the anti-terrorist campaign, which began as a result of the unfortunate 9/11 event in the United States in 2001, over-strained Pakistan’s budget as allocation for law enforcement agencies had to be increased significantly which meant erosion of resources for development projects all over Pakistan, particularly in FATA and nearby NWFP areas in addition to human sufferings and resettlement costs.

Several development projects, started earlier in the affected areas are afflicted with delays which may ultimately result in large cost over-runs. Since the start of the anti-terrorism campaign, an overall sense of uncertainty has prevailed in the country, which has contributed to capital flight, as well as, slowed down domestic economic activity making foreign investors jittery.

It is apprehended that Foreign Direct Investment, which witnessed a steep rise over the past several years may be adversely affected by the on-going anti-terrorism campaign in FATA and other areas of NWFP. Pakistan’s participation in the international campaign has led to an excessive increase in the country’s credit risk, which has in turn made borrowing from the market extremely expensive.

Pakistan’s sovereign bonds have under-performed due to increased law and order concerns amongst other reasons including domestic political and economic instability.

The draft of PRSP-II has been envisaged on nine pillars that include macro-economic stability, protecting the poor and vulnerable, increasing productivity and value addition in agriculture, integrated energy development plan, making industry internationally competitive, human development for 21st century, removing infrastructure bottlenecks through public private partnership, capital finance for development, construction and housing industry and governance for a just and fair system.

 

[Neo]

Industry to face 7.5pc handicap against imported goods: economists ​

Saturday, November 15, 2008

LAHORE: The economists are dismayed by recent anti-industry increase in policy rates by the State Bank of Pakistan to control inflation that was already set to decline due to reduction in petroleum rates; electricity tariff, commodity and edible oil prices.

They said increase in policy rates to 15 per cent would provide market access to foreign products as the local manufacturers would be paying 7 to 10 per cent higher mark-up on their bank loans than the manufacturers in competing economies.

The local industry would be facing a handicap of at least 7.5 per cent against competitors that export similar products to Pakistan

They pointed out that in contrasting policy moves the State Bank of Pakistan has been reducing the cash reserve requirements of the commercial bank and has increased the policy rate to 15 per cent. The Reserve Bank of India (RBI) in contrast increased the cash reserve ratio of its commercial banks by half per cent to 7.5 per cent. It has kept the policy rates unchanged at 7.75 per cent. The trend in other economies they pointed out is in line with the policies pursued by RBI.

Differing with the State Bank of Pakistan’s monetary policy stance senior economist Naveed Anwar Khan FCA said it is not based on ground realities. He said that the inflation would have declined in next few weeks as the electricity rates are on decline, the rates of petroleum products are being further reduce; the price of edible oil is set to decrease appreciable.

The rates of rice this year are lower and the cotton prices are weak. The bank he added knew this reality and should have refrained from increasing the mark-up.

He said central banks the world over devise policies to boost local economy. They rarely act as regulators with the basic aim of controlling inflation only. He said now that the federal government has also assured not to borrow from the central bank the fear of inflationary pressures should have subsided.

Dubai based chartered accountant Faisal Qamar said that two per cent increase in interest rates would weaken the position of local manufacturers against imported products. He said the policy rates in competing economies are almost half compared with Pakistan. He said businessmen all over take working capital from the banks.

The local manufacturers, he added would start production with a handicap of at least 7.5 per cent against their competitors that export similar products to Pakistan. Higher import duty on finished products, he added is not a problem for the importers that under-invoice imports to compete with local manufacturers.

Canada based economists Asif Ali Shahid CPA suggested that the central bank should ensure low interest credit for the manufacturing sector and higher mark-up on consumers and services loans.

He said this would help the manufacturers in increasing production and would curb consumption as well. He said inflation would be tamed only if consumption is reduced.

 

[Neo]

Chinese car-maker may set up plant in Pakistan ​

Saturday, November 15, 2008

ISLAMABAD: Chinese car manufacturers have expressed their willingness to establish an eight-seater car manufacturing plant in Pakistan.

Cars produced in this plant would be sold on cheaper rates as compared to cars of other companies, King Ping, Chairman of Chinese Mini Car Manufacturing Company told the Minister of State for Industries and Production, Ayatullah Durrani, during a meeting here on Friday.

King Ping is heading a Chinese manufacturing delegation to Pakistan. “In the beginning we will bring one thousand cars to the Pakistani market for introduction and after that we will start manufacturing here,” he said adding that the production capacity of the plant would be 1,000 cars per month.

On the occasion, the minister told the delegation that there was a great scope for investment in Gwadar as the government was providing complete security to the foreign investors.

Durrani assured the delegation that if they set up a car manufacturing plant in Gwadar, the government of Balochistan will provide complete security and land at cheep rates to them. He said that the government has also declared free tax zone to the industrial sector in Gwadar adding that the future of Gwadar was very bright as it would open new vistas for trade and economic activities in Pakistan.

He informed the delegation that many Chinese manufacturing companies were also in touch with the Pak-Government to seek industrial plots in Gwadar. He said that the government would provide all kinds of opportunities to the investors who invest in Pakistan and provide new technology.

Lucky Chow, Trade representative of Shihao Jiche, Mini Car Company and High officials of the Ministry of Industries and Production also attended the meeting.