Pakistan Economy - News & Updates - Archive

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UAE company keen to set up coalbased power plant in Pakistan

ABU DHABI, Nov 25 (APP): Abu Dhabi National Energy Company on Tuesday showed its keenness to invest in Pakistan’s energy sector, particularly for setting up of a coal‑based power plant in the country, which has plenty of untapped coal reservoirs.The interest was shown by Vice President of the company Abdullah Khunji, who called on President Asif Ali Zardari here at the Emirates Palace today.
Abdullah Khunji during his meeting with the President had an in‑depth discussion on the prospects and opportunities of investment in Pakistan with focus on energy sector.

President Zardari welcomed the interest shown by the company for investment in Pakistan’s energy sector and said it will help boost the already existing cooperation, collaboration and joint ventures between the two counties in this vital field.
He assured the Vice President of Abu Dhabi National Energy Company that the government welcomes the foreign investors to Pakistan and will extend all possible assistance to the company in their endeavors to invest in Pakistan’s energy sector.
Abdullah Khunji later told Pakistani media that energy deficient Pakistan is a best market for investment in this sector and the company will soon enter the Pakistani market by launching and implementing its intended projects.

Foreign Minister Shah Mahmood Qureshi was also present in the meeting.

Chairman Emirates Investment Group Tariq Al Qasimi also called on President Zardari here at the Emirates Palace and discussed the global as well as the regional economic situation, with focus on the opportunities of potential of investment in Pakistan’s financial sector.

The President told the company’s Chairman that the government welcomes and encourages the foreign investment in diverse fields of economy including energy, agriculture, construction, infrastructure development and banking and financial services sectors.

Tariq Al Qasimi after the meeting told Pakistani media that their company already has its presence in Pakistan with investment in various projects and was exploring new avenues of investment in agriculture and banking sectors, as these sectors have vast potential of growth and development.

He said Pakistan and UAE maintain excellent business relations and the official visit of President Zardari and his interaction with various entrepreneurs will help further strengthen these ties.

Tariq Al Qasimi said the President has encouraged their company to expand its business and investment base in Pakistan for the benefit of two countries.

Minister for Foreign Affairs Makhdoom Shah Mahmood Qureshi, Advisor on Finance and Economic Affairs Shaukat Tarin, Pakistan’s Ambassador to UAE Khurshid Ahmad Junejo and Ambassador at large Javed Malik were present in the meeting.

 

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Pakistan needs $13.4 bln external financing: IMF ​

Tuesday, November 25, 2008

NEW YORK: Pakistan's gross external financing requirement for the 2008/09 (July-June) fiscal year is $13.4 billion, a senior International Monetary Fund (IMF) official said on Tuesday.

The IMF will provide $4.7 billion of that total, Juan Carlos di Tata, senior adviser in the IMF's Middle East and Central Asia Department, told a news conference.

The gross external financing requirement for the 2009/10 fiscal year is estimated at $12.2 billion, Tata said.

 

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IMF condition may jeopardise next tranche ​

Tuesday, November 25, 2008

ISLAMABAD: The most difficult condition attached by the IMF for its $7.6 billion loan for Pakistan will be achieving net zero borrowing from the central bank for the budgetary purposes in the current fiscal year, which may prove potential threat to jeopardize second or third tranche from the Fund, a senior official said on Monday.

All prior action taken by the PPP led government by increasing 2 per cent discount rates, cutting down expenditures and jacking up envisaged tax collection target helped Islamabad for moving towards the IMF loan under the Standby Arrangement (SBA).

Under the IMF’s prescription for the ailing economy of Pakistan, the government has accepted the Fund’s condition to increase discount rate by 2 per cent and reducing expenditures mainly on development side, which would result into slowing down the economic activities and massive unemployment would further aggravate miseries of more people living below the poverty line on short term basis till end June 2010.

The IMF viewed that the depreciation of rupee against dollar as well as higher inflationary pressure in the current fiscal would enable the tax authorities to increase revenues by Rs 110 billion from earlier envisaged target of Rs 1,250 billion to Rs 1,360 billion for 2008-09.

“The most difficult condition for the incumbent regime to comply will be achieving net zero borrowing from the central bank for budgetary purposes in the current fiscal year,” said the official sources who knew about attached conditionalities for obtaining the Fund’s loan here on Monday night.

The government has accepted that the net borrowing from the central bank for budgetary purposes will be brought to zero. It is simply impossible to achieve where there is Balance of Payment (BoP) deficit, said the official.

Pakistan will get $4.5 billion during the current fiscal year from the IMF, which will simply increase foreign currency reserves of the State Bank of Pakistan (SBP) and this money will not increase money supply.

The SBP has envisaged target to increase money supply growth by 15 per cent as against a nominal GDP growth of over 27 per cent. By definition, this level of growth in money supply is highly deflationary in its nature and this level of money supply will not be able to finance current level of economic activities.

The Net Foreign Assets (NFA) will continue to be negative and in order to achieve money supply target of the year, the Net Domestic Assets (NDA) has to increase in the range of Rs900 to Rs940 billion. During the last fiscal year, the NDA increased by Rs935 billion because Net Foreign Assets was negative to the extent of Rs300 billion. Pakistan had faced BoP deficit in the last financial year 2007-08.

After taking into account the private sector credit, which is not expected to increase more than Rs400 billion this year, there will be over Rs500 billion available for the government sector. With Rs500 billion, the central bank has to earmarked credit for public sector enterprises.

It is estimated that Rs200 to Rs300 billion net borrowing has to come from Treasury Bills (TBs) auctions in which the SBP failed to finance maturing TBs and as such the government and the central bank, the pressure will be increased massively.

There is no difference in money market this year and the SBP will be facing tremendous difficulties in raising cash from the market for the maturity of TBs this year to generate Rs200 to Rs300 billion from auctions. “It is the most difficult conditions to meet, which possessed potential to jeopardize second or third tranche from the IMF,” said the sources.

 

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Online monitoring of exchange firms by year-end: SBP official ​

Tuesday, November 25, 2008

KARACHI: All foreign exchange transactions will be monitored by State Bank of Pakistan (SBP) in real time once an online link is established with foreign exchange companies, SBP Exchange Policy Director Syed Samar Hasnain said on Monday.

Work on the system, which will help central bank ensure effective compliance of its guidelines, is expected to be completed by December 31, 2008, he told The News.

“In the first phase all exchange companies were required to link their branches with respective head offices,” he said, adding now work is underway to connect the head offices with the central bank.

Presently, foreign exchange firms submit weekly reports to SBP about their business transactions and only way to verify the record is through site inspections. The conduct of the central bank has come under scrutiny since a scam was unearthed a few weeks back in which an exchange company was found to be involved in carrying out undocumented transactions.

Hasnain says there is no way to check off-record dealings of either the companies or individuals. “State bank can take action only when violations are detected in the record keeping and reporting of firms registered with it.”

Central bank also does not have the mandate to conduct raids to curb the havala business that is used to make payments in another country without physical transfer of cash, he said. He recalled that foreign exchange companies were allowed in 2002 to deal in remittances sent home by overseas Pakistanis with an aim to introduce financial discipline and proper corporate culture in the business.

“We intended to provide an alternative of the havala channel, which is quick and cheap,” he said, adding that low-administrative expenditure allows exchange companies to offer that substitute.

About negative perceptions surrounding the foreign exchange companies, he said, these firms cannot be held responsible for depletion of country’s foreign currency reserves. “Exchange companies are not allowed to make payments against imports. They can only deal with individuals.”

Between Jan-Oct 2008, $1.5 billion were remitted to Pakistan through the exchange firms, he said, out of which one billion dollars were sold in inter-bank market. As a policy matter, exchange firms have to sell surplus foreign exchange stock to banks.

Referring to apprehensions pertaining to authenticity of foreign exchange companies, he said people using the channel should ensure that they are dealing with SBP registered companies. “They should also ask for computer generated receipts.” Nevertheless, he said hands of SBP are still tide when it comes to effectively manage the exchange companies as it can not impose monetary penalties against their misconduct.

“The overriding effect of Protection of Economic Reforms Act 1992 over Foreign Exchange Regulations Act 1947 should also be done away with,” he said, highlighting the anomaly in 1992 act which provides complete freedom to bring, hold, sell and transfer foreign exchange within or outside Pakistan.

 

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Rupee firms ​

Tuesday, November 25, 2008

KARACHI: The Pakistani rupee ended firmer on Monday on expectation the International Monetary Fund (IMF) will approve a $7.6 billion stand-by arrangement for the country, dealers said. IMF officials are due to meet in Washington on Monday to discuss a stand-by arrangement for Pakistan, according to the Fund’s Web site.

The rupee was quoted closing at 78.90/79.00 to the dollar compared with Saturday’s close of 79.06/16. “The rupee has been strengthening slowly for the past few days following the decision to enter an IMF programme,” said a currency dealer. The loan should help the rupee stabilise, at least in the short term, after a sharp depreciation this year as a balance of payments crisis developed, dealers said.

A first tranche from the IMF is expected to arrive by the end of the month. Government officials said it was likely to be between $3 billion and $3.5 billion.The rupee has lost 22 per cent against the dollar this year. Pakistan’s foreign exchange reserves fell $100 million to $6.64 billion in the week that ended on Nov 15, the central bank said last week.

 

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Fitch affirms ratings of 4 Pakistani banks ​

Tuesday, November 25, 2008

NEW YORK: Fitch Ratings affirmed the ratings of the following four Pakistani banks on Monday.

- MCB Bank Limited (MCB): Individual rating affirmed at ‘D’, Support affirmed at ‘5’;

- National Bank of Pakistan (NBP): Individual rating affirmed at ‘D’, Support affirmed at ‘5’;

- United Bank Limited (UBL): Individual rating affirmed at ‘D’, Support affirmed at ‘5’; and

- Habib Bank Limited (HBL): Individual rating affirmed at ‘D/E’, Support affirmed at ‘5’.

The Individual ratings of these banks reflect their modest balance sheet strength in an international context, and generally good profitability. The ratings also factor the very volatile operating environment in Pakistan, which poses significant challenges and risks. The agency expects the prevailing extremely weak economic conditions in Pakistan to affect the financial profile of these banks. Although their Individual ratings, at the low end of Fitch’s scale, substantially capture these risks, the agency also notes that their ratings may still face a downward bias, should the economic weakening cause significant deterioration to their financial profiles.

MCB has the strongest financial profile among Pakistani banks, as reflected by its adequate capitalization (equity/assets 11.1% at end-9M08), low net NPL/equity ratio (2.6% at end-9M08) and strong profitability (ROA of 3.6 per cent in 9M08). However, given the very weak domestic economy, MCB’s financial profile is also expected to come under pressure, with any significant weakening in either asset quality or capitalisation likely to exert downward pressure on the rating.

NBP, the largest bank in Pakistan, could see its rating face downward pressure should its already weak asset quality (gross NPL ratio of 11.5 per cent at end-9M08) deteriorate substantially; which is a possibility, given its broader exposure to the economy and to directed lending. While NBP is well capitalised (capital adequacy ratio (CAR) of 17.8 per cent at end-9M08) Fitch notes that a high capital buffer is necessary, given Pakistan’s very volatile operating environment and bleak economic outlook.

UBL’s gross NPL ratio has been steady, in the 6pc- 7pc range (gross NPL ratio of 6.5pc at end-9M08) since 2005. However given the bank’s sizable consumer lending portfolio (15pc of domestic loans at end-9M08) and rapid loan growth since 2004 (annual loan growth rate range: 20pc - 35pc), the downside risks on the rating could stem from both a deterioration in asset quality and any weakening in its capitalisation. UBL’s capitalization (CAR of 11.5pc at 9M08) is considered modest in light of its limited risk absorption capacity, amid a very challenging operating environment.

HBL’s Individual rating is already at a very low level given its generally weaker than peer, albeit improved, financial profile (9M08: gross NPL ratio of 6.9pc, equity/assets 8.8pc and ROA of 1.9pc). Fitch’s Support rating for all four banks is at ‘5’, the lowest on the agency’s scale.

 

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Govt cuts down HEC grant by Rs6.5bn in six months ​

Tuesday, November 25, 2008

ISLAMABAD: All ongoing projects of the Higher Education Commission (HEC), including up-gradation of existing universities as well as around 3,000 students studying abroad on scholarships, might be affected owing to severe financial crisis being faced by the country, as the government cut down its envisaged allocations by Rs6.5 billion in the last two quarters, it is learnt.

The Gilani government is forced to cut down its expenditure side and the easy way for moving ahead is to slash down development expenditures. The public sector development programme (PSDP) is likely to cut down by Rs100-150 billion in the current fiscal year in order to meet the IMF demand for curtailing ballooning expenditure side for meeting envisaged fiscal deficit target.

The PPP led government cut down Rs3 billion for the HEC during the last quarter (April-June) of the fiscal year 2007-08 and this trend continued to persist by cutting down Rs3.5 billion in the first quarter (July-Sept) period of the ongoing financial year 2008-09.

“Total deficit in funds grant went up to Rs 6.5 billion for the last two consecutive quarters and the situation has reached to the extent where contractors were planning to approach the higher judiciary for seeking compensations if their funds were not released immediately,” official sources told The News here on Monday.

Pakistan had made commitments to jack up allocation for the education sector up to 4 per cent of the GDP in years ahead but Islamabad is moving other way round under which allocation for education is decreasing in the GDP terms.

“The latest PRSP report of the finance ministry shows that the total spending on education was less than 2 per cent of the GDP in the last financial year,” sources said.There is strong feeling within the ranks of the government to provide all-out financial resources to the HEC which were meant for 3,000 students studying abroad on scholarships for doing their PhDs in their respective fields, said the official sources and added but there was also one view that the previous government launched HEC projects without well-thought-out strategy and these projects needed to be rationalised in order to avoid wastage of money.

But the official sources also pointed out that if the government cut down allocations for the universities then the students studying abroad on scholarship could not be utilised in the country on their return and Pakistan would loose an opportunity to transform its economy on knowledge-based foundation.

The government has allocated Rs18 billion for development projects in the HEC for the current fiscal year 2008-09 and Rs15 billion for current expenditures of the commission in order to meet non-development expenditures, including salaries of professors and other working staff in the institutions falling under the HEC.

“The government has not increased any amount for the HEC in the current fiscal year as it envisaged Rs18 billion allocations in FY2008-09 compared to the same amount of the previous fiscal year,” said the official sources.

When HEC executive-director Sohail Naqvi was asked about financial difficulties being faced by the commission, he told this scribe that the HEC has completed all procedural requirements by submitting cash plans to the finance ministry and they are waiting for release of the allocated funds in the ongoing quarter (Oct-Dec) period of the current fiscal year.

“We don’t know when the government will release the allocated amount but it should be done within a few days,” he said and added the higher education should be priority of the government. There were 397 development schemes under the PSDP head whereas throw forward touched new heights by touching Rs282.835 billion on June 30, 2007.

 

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Qadirpur gas field not to be privatised: Naveed ​

Tuesday, November 25, 2008

ISLAMABAD: Minister for Privatisation Syed Naveed Qamar on Monday said that the Qadirpur gas field would not be privatised at present.

The minister while talking to the Voice of America (VoA) said the privatisation programme is a policy of the government in which different aspect are to be kept in view. It is not one’s personal decision but there are so many aspects and factors, which are taken into consideration while making list of the assets to be privatised. He said the interest of the country is always supreme in such policies besides the potential of the subject unit, adding that, the performance of any public sector entity which can be improved by a change in the management or privatisation is taken into account for this purpose.

The factor of profitability of the entity is not instrumental in privatisation policy but, “in fact it carries immense importance as to what possible benefits would be achieved through privatisation for the progress and betterment of the economy”, he said.

Qamar said there are many units whose capacity and performance could significantly improve if they are privatised, adding that the performance depends on unit to unit. Responding to a question, he said, “I want to make it clear that at present we are not going to privatise Qadirpur gas field. There are many issues involved in it. Besides there is an acute shortage of gas in Pakistan”, he added. He said different options are under consideration in order to enhance the supply and production of gas in the country and a private sector company could help in achieving this.

 

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IDEAS 2008: Hotel room occupancy touches 90%​

KARACHI: The hotel occupancy rate has spiked to 90 percent thanks to the mega event “IDEAS 2008”, which has helped the hotel industry to regain its business suffering the after shocks of the horrific incident of Marriot Hotel bomb blast on 20 September 2008.

“IDEAS 2008 has proved to be a good omen for the industry as hotel industry is reaping the benefits of the event,” an official of Marriott Karachi told Daily Times.

“The room occupancy dropped to 25 to 30 percent after Marriott bomb blast on 20 September but the events like Expo Pakistan and this exhibition have played a key role for the industry to regain its position,” official added.

The exhibition, with the participation of 162 defence manufacturing organisations from 58 countries, started from Monday 24 November 2008.

The five-day IDEAS 2008 event aims at bringing together local and international arms manufacturers and buyers, and exploring possibilities for cooperation and joint ventures in the field of defence production.

Industry sources said that the hotels were booked before the five-day mega event commenced. The hotels were witnessing a sharp drop in the room occupancy from September as foreigners, especially from the European countries, postponed their visits following the law and order situation of the country.

“Hotel business relies heavily on the political and economic situation of the country and any act of terrorism or violence makes a direct impact on the hotel industry,” an official of another hotel commented.

Defence Export Promotion Organisation (DEPO) Director General, Major General Muhammad Farooq, while briefing the media about the positive impacts of the exhibition said, “this exhibition has benefited hotel industry the most, as almost all the hotels of the city were booked due to the event.”

 

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KESC to acquire 192 MW gas turbine power plant​

KARACHI: The Karachi Electric Supply Company (KESC) is acquiring a 192 MW gas turbine power plant and has signed an award of contracts with counterparts.

According to a Karachi Stock Exchange notice KSE/N-7705 dated November 24, the KESC has executed supply and services contracts for a new fast track gas engine power plant project with M/s GE Jenbacher Gmbh and Co OHG Achenseestrabe, Austria and M/s Orient Energy Systems, Pakistan respectively on November 22 in Dubai.

The project will generate approximately 192 MW at the Korangi Gas Turbine Power Stations (KGTPS) and Site Gas Turbine Power Stations (SGTPS).

Earlier, the utility took over commercial operations of the first phase of a 220 MW plant at the Korangi Thermal Power Station (KTPS) by linking two 28 MW power plants to KESC’s grid taking use of the non-functional KTPS plant transformer. This added a total of 96 MW to the KESC grid.

 

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Pakistan to add $1bn in reserves during December: official ​

ISLAMABAD: November 25, 2008: Pakistan would be able to avail $ 1 billion from other than the IMF donors including $ 500 million from World Bank and $ 450 million from Asian Development Bank, Aaj TV reported.

Finance Ministry would be able to add $ 1 billion in our reserves in addition to the IMF's $ 3.1 billion to be reaching here within next 24 hours, as transaction takes almost 48 hours to complete after Fund Board approval, says a Finance Ministry official on condition of anonymity.

 

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Acquisition of NIB right shares: Country receives $97.5 million from Temasek Singapore​

KARACHI (November 25 2008): Country has received some $97.5 million sent by "Temasek Singapore" for acquisition of NIB Bank's right shares under its plan to raise a paid-up capital of the bank up to Rs 40 billion, banking sources told Business Recorder on Monday.

They said that NIB Bank is going to launch Initial Public Offer (IPO) of right shares for the existing shareholders from November 27 to December 28, 2008. However, NIB's holding group Temasek Holding Company Singapore is expecting poor response from the small shareholders in the wake of current worst situation in stock market. Therefore, Temasek has sent some $97.5 million in advance for acquisition of the right shares, which received in interbank market, they added.

NIB Bank had announced on October 24 to issue right shares worth Rs 12 billion (approximately some $152 million), which would be offered to all existing shareholders at the ratio of 42.198 right shares for every 100 shares held at the close of business on November 19, 2008, and would be issued at a subscription price of Rs 10 per share.

The issuance of right shares was approved by the Board of Directors of NIB Bank during its 27th Board Meeting held on October 24, 2008. The basic aim of the move is to increase NIB's paid-up capital up to Rs 40 billion for the support and growth of business, besides making NIB top bank in terms of paid-up capital in the country.

Sources said that at present NIB's share's market price stood at Rs 8-9 per share, while in few cases it is also available at lower price than the market. It is excepted majority of small shareholders would not accept NIB's right shares offer due to the prevailing economic situation and it is most likely that NIB holding company, Temasek, would purchase 100 per cent of the right shares being issued, they said.

"Therefore, Temasek (the major shareholder of NIB) fulfilling its commitment has sent first tranche of some $97.5 million for the subscription of the right shares if are not subscribed by other shareholders," sources said.

Sources said remaining amount of some $55 million is expected to be received after the IPO, probably in January 2009. The purpose of the Right Issue is to bolster NIB's capital to meet the challenges and opportunities it likely face during the next few years, they added.

The Right Issue would also enable the bank to meet the SBP's current and future's capital targets. Sources said that NIB had already increased its capital base to Rs 18 billion in the third quarter of 2007 through a 555 per cent Right Issue to acquire PICIC and its subsidiaries.

It is to be mentioned here that Fullerton Financial Holdings owned NIB 63.15 percent shares of NIB, which is a 100 per cent subsidiary of Temasek Holdings of Singapore, an investment company with global investments of $134 billion in diverse companies in financial services, real estate, transportation and logistics, telecommunications, media, health care, education and technology.

 

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Punjab to adopt results-oriented approach: 19 MoUs inked with China, says Shahbaz​

LAHORE (November 25 2008): Punjab Chief Minister Mian Mohammad Shahbaz Sharif on Monday announced to adopt results oriented approach to materialise 19 MoUs signed in different fields including Agriculture, Livestock, Power, Information Technology, Transport Energy, etc, for joint venture during his recent visit to China, which he described as highly successful.

Addressing a news conference, here Shahbaz said that he is holding a 'debriefing session' on Wednesday (November 26) during which various committees would be formed that would pursue the MoUs signed with different Chinese companies/organisations for initiating joint ventures. He also said that 'Punjab-China Desk' is being established to promote Chinese investment. Pakistan Consul General in Shanghai Zafaruddin Mahmood will head this Desk.

Shahbaz said that during this visit, an MoU for co-operation on Chinese experience on BT Cotton was signed, besides three MoUs on power generation. He added that DG LDA who accompanied him along with other delegation members is currently in China to review the Chinese experience in transport sector so that public transport system in Punjab could also be improved taking advantage of Chinese experience.

 

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Hinopak to export buses from Pakistan​

KARACHI (November 25 2008): Hinopak Motors Limited is the trusted name of the truck and bus manufacturing industry of Pakistan and providing complete transportation solutions to the transporters of Pakistan. Hinopak is also Pakistan's first automobile company to export its buses to Middle East and African countries in early 90s'.

It is certainly proud to mention that, Hinopak buses once again have been selected by Hino distributors of Middle East and African countries. In this regard, recently a meeting has been organised by Hinopak Motors Limited with Hino distributors from Algeria, Jordan, Kuwait, Lebanon, Qatar, Saudi Arabia, and South Africa.

The objective of the meeting was to finalise the specifications of Hino buses as per the requirements of Hino distributors of Middle East and Africa. The participants of the meeting showed their full confidence on the capability of Hinopak and praised the quality workmanship of Hino bus bodies manufactured by Hinopak. We hope this export business will take us to the new horizon and will also support to enhance the image of Pakistan.-PR

 

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Special economic zone to be set up in Thar: Salman​

ISLAMABAD (November 25 2008): Deputy Chairman Planning Commission Salman Faruqui said on Monday that Pakistan, by harnessing its water and coal resources, would not only be able to meet its domestic need but also be able to export energy to India.

Addressing the inaugural session of two-day conference on "Interdependence between Energy Policy and other Sectoral Policies" organised by Saarc Energy Centre here, Farooqi said that the government is planning to set up special economic zone in Thar area so that in future surplus energy from Thar coal reserves might be used in the close vicinity without incurring transmission line losses.

In this regard, he said that government has already constituted the Thar Coal Board. Deputy chairman said that Pakistan is working on how to reduce dependence on imported fuel and to increase reliance on domestic resources like water and coal reserves. He said that last year 11 billion dollars were spent on import of oil, which was equal to 65 percent of the total export of Pakistan.

This was one of the major reasons that Pakistan had to go to IMF for financial assistance, he added. Salman Faruqui underlined the need for bringing together policy planners from the energy, environment, health and transportation sectors from all Saarc member states to deliberate and discuss recent developments in their respective countries.

He said that Saarc countries need sufficient energy, good health, pollution free environment and better transport system, and to address all these issues, appropriate integration and correlation was required at policy making level.-PR