Pakistan Economy - News & Updates - Archive

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SBP tight monetary policy holding back GDP growth: Salman ​

LAHORE (March 01 2009): Former finance minister, Dr Salman Shah, has said that this year Pakistan's GDP growth is expected to be less than 2 percent, lowest in 10 years, as irrationally high interest rates and tight monetary policy of the State Bank of Pakistan was holding back the growth.

He expressed these views at a discussion on economic decline and remedial measures, organised by Lahore Economic Journalists Association (Leja) here on Saturday. Later oath taking ceremony of newly elected Leja members was also held on this occasion. Salman said that the sensitive price index (SPI) had been on constant decline since October last year and hence there was no justification for the State Bank to keep discount rate at 15 percent, "which is slowing the economic growth".

He observed that in the backdrop of current inflation scenario, the Kibor should not be more than 2 percent, and the discount rate of the State Bank of Pakistan should be between 9 percent and 9.5 percent. "After accounting for three to five percent banking margins, the industry should get credit at 13 to 14 percent mark-up rate. Even this interest rate is high, but the productive sector would be able to grow. Unfortunately, the current interest rate has marginalised the manufacturing sector and no industry could grow when credit is available at 20 percent" he added.

He said that Pakistan's economy had been moving comfortably up to the middle of 2007-08 fiscal year, and the economic managers of previous regime knew that high oil prices would put pressure on foreign exchange reserves. "Hence, in order to meet the challenge, we had handed over a roadmap to the new government last year, in which it was suggested to offload small percentage of public sector companies, like National Bank, Kapco, etc in the London Stock Exchange in April 2009. At that time the stock market was at its peak of 15,800 points and the share prices of these companies were very high. Through such a step, the government would have obtained between $4 billion and $5 billion from these transactions," he said.

However, he regretted that the new government scrapped the idea of offloading these shares in the global market, without giving due consideration, or making any backup of generating cash flow. "Under these circumstances, oil price hike tapped a major chunk of foreign exchange reserves, which forced the government to know the doors of the International Monetary Fund (IMF) to boost its foreign exchange reserves, which had come to alarming level," he said.

He pointed out that even the IMF financial assistance could not put brakes on the deterioration of Pakistan's economy, as the present government's ill-conceived policies had stagnated the growth and consequently closure of industries was drying up government revenue.

The former finance minister was of the view that the option of offloading stocks was no longer feasible, as the stock market has lost $45 billion under this government. "Also, the rupee, that remained stable from 2002 to June 2008, had lost 29 percent of it value. These factors painted a bad picture for investors and hence lost confidence in the Pakistan's markets," he added.

In his opinion, journey of recovery from the prevailing situation was very hard, painful and long. He said he saw revival of industries not possible without promotion of domestic consumerism. "Exports are, of course, important and their success depends on competitiveness, which could only be achieved if the local industries attained economies of scale through promotion of domestic consumerism," he added.

According to him, more that 54 percent of Pakistan's population is under the age of 25. Every year about 4 million of them join workforce and Pakistan needs to grow at 9 to 10 percent annually in order to create jobs for them.

Shah stressed for uniformity and consistent economic policy and should reflect consensus of all political parties on the pattern of foreign policy where all parties, including the opposition, follow the same line. He said that the engineering, electronics and construction industries "are the sectors which can generate the required employment and economic activities".

 

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Task force on private sector development: six groups set up for recommendation to attract investment ​

ISLAMABAD (March 01 2009): Task Force on Private Sector Development constituted by deputy chairman, Planning Commission on Saturday formed six groups to prepare recommendations for attracting investment in different sectors. These recommendations will become benchmark for the next annual plan and budget 2009-10.

Sources revealed to the Business Recorder that these groups are expected to submit initial recommendations by the end of March. The major task of these six groups is to prepare recommendations for the improvement of Small firms, large firms, trade, technology, human resource development and macro economic indicators. The groups were formed on the conclusion of two-day meeting of the Task Force on Saturday in Planning Commission.

Shahid Javed Burki, former Finance Minister and Chairman Task Force headed the working sessions. The representatives of different economic ministries and private sector stakeholders gave presentations on the economic problems being faced by the country. The Task Force consists of a number of leading businessmen, including president of the Federation of the Chamber of Commerce and Industries, renowned economists, bankers, and the experts on private sector development.

Federal secretaries of key economic Ministries are ex-officio members. The preliminary report of the Task Force will be circulated for soliciting comments from the general public and for generating debate. The Report will be finalised after incorporating the concerns of the public and experts. The recommendations of the Task Force will form the basis of policy making, particularly the Annual Plan 2009-10 and the Medium-Term Economic Development Plan 2010-15.

 

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‘Billions’ lost as a result of power shortages: Zardari ​

Saturday, 28 Feb, 2009

ISLAMABAD, Feb 28: President Asif Ali Zardari on Saturday said the country had suffered losses worth ‘billions’ of rupees due to a drop in industrial production as a result of power shortages.

While holding a meeting with the Task Force on Private Sector Development (TFPSD, the president said had the country not reversed the 1990s energy policy of the Pakistan Peoples Party (PPP), the situation now would have been different and the country would have not only avoided economic losses but would have the potential to even export power.

The Task Force on Private Sector Development has been constituted by the Deputy Chairman, Planning Commission, Sardar Aseff Ahmad Ali and consists of a number of leading businessmen of the country, president of the federation of the chamber of commerce and industries, renowned economists, bankers, and the experts on private sector development. Federal secretaries of finance, agriculture, industries and production, commerce are ex-officio members.

Zardari told officials of the task force that half of the country’s population was below 17 years of age and that the manpower could be turned into a vehicle of growth by engaging them in fruitful economic development activities through appropriate policy framework.

'Unemployed youth with high expectations could also be potentially destabilising,' he warned.

He said the government was following a strategy for the development of private sector in the country that was directed to help the government define its strategic thrust and to address the constraints which restricted growth and competitiveness of the private sector. The policy, he said, was aimed at utilising untapped potential of the private sector.

The president said that in future the role of the public sector would be that of a catalyst for creating and maintaining a favorable business climate and developing skilled labour force. The private sector would have to assume greater importance in development in the current global environment.

A former finance minister and vice president of the World Bank, Shahid Javed Burki, who is the chairman of the task force, told the president the task force was pursuing an action plan for generating business opportunities for the private sector through enhancing its accessibility to undertake public sector services like water, energy, transport and communications. It would also be working towards trade promotion, industrial development, agro-based industry and increase in access to finances and to new financial instruments.

 

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Pakistan to get $840m 2nd IMF tranche in March: Tarin ​

ISLAMABAD (March 02, 2009): Advisor to Prime Minister on Finance and Economic Affairs Shaukat Tarin said on Monday that the International Monetary Fund (IMF) review meeting in Dubai has appreciated Pakistan’s home grown economic stabilization policies and the country would get second tranche of $840 million by the end of the current month.

He stated this at a news conference here at the Media Centre of the Press Information Department, which was also attended by Secretary Finance Dr.Waqar Masood Khan and Principal Information Officer (PIO) Shabbir Anwar.

Shaukat Tarin said that IMF under Standby Arrangements has approved $7.6 billion for Pakistan out of which the first tranche of $3.1 billion was received in November, 2008 while after the successful quarterly review meetings held in Dubai recently Pakistan would now get second tranche of $840 million.

He said that Pakistan would negotiate and lobby for enhancing IMF funding quota from 5 times to 8 in the IMF Executive board meeting to be held in April this year.

Shaukat Tarin while linking economic stability to political stability called upon all the political forces to play their role in the achievement of the objective for the socio-economic prosperity of the country.

He said when there would be political stability in the country huge investments in different sectors would come, generate economic activities and create job opportunities.

The Advisor to the Prime Minister on Finance however said that Pakistan’s political situation did not come under the discussion of IMF review meeting.

Shaukat Tarin said that Pakistan plans to attract investments of Pakistanis living abroad by giving them incentives in the country for their investments.

He added that due to government’s economic stabilization programme the macro economic indicators are improving and investors are bringing back their investments and capital in Pakistan.

Workers remittances are also increasing at the rate of 18 percent, he remarked.

Terming inflation the biggest enemy for the people, especially the poor he said efforts are being made to bring it down to 10 percent by end of the current fiscal year.

 

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Government planning to reduce mark-up in March: BoI​

KARACHI (March 01 2009): The Chairman of the Board of Investment (BOI), Saleem H Mandviwala, has said that the government is planning to reduce mark-up rates in March 2009. Speaking at a seminar on 'Public-Private Partnership' (PPP), organised jointly by Karachi Chamber of Commerce and Industry (KCCI) and the government of Pakistan, he said that the future interest rates were likely to be reduced by 12 percent by June 2009.

He said that the government has awarded a contract of garbage and solid waste management to a Chinese company. He said that on success of the waste management project, similar projects would be initiated in other cities of the country. The BOI chairman said that the government has also planned for technology transfer for development in agriculture sector from China, especially the seed development technology.

Referring to public-private partnership (PPP), he said that it was focussing more on infrastructure development due to scarcity of funds. Advisor to Chief Minister for provincial investment, Zubair Motiwala said that the government welcomed private sector to participate with pubic sector in different projects.

He said window of opportunities was available and only hurdle is negative attitude of bureaucrats. Member (Implementation and Monitoring) executive director, IMU, Planning Commission, Muhammad Zubair said that poverty challenges can only be met through sustainable partnerships between the public and private sectors. This would create a win-win situation for all, he added. He said that the government was encouraging PPP in major social sectors as well as on infrastructure.

 

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Tarin confident about interest rate cut ​

IMF condition for reducing discount rate if core inflation falls will be met​

Tuesday, March 03, 2009

ISLAMABAD: The International Monetary Fund has agreed to allow reduction in the State Bank of Pakistan’s discount rate that would lead to overall downward revision of interest rates by the banking and finance sector.

Top economic manager of the country on Monday said that the International Monetary Fund has agreed on discount rate cut in the next quarter’s monetary policy to be unveiled in April provided core inflation continues to decline.

“There still exists a four per cent gap between the discount rate, which stands at 15 percent, and core inflation which hovers at 19 per cent. However, if the decline in core inflation on monthly basis continues, then in April the government would reduce the discount rate accordingly,” said Adviser to Prime Minister on Finance Shaukat Tarin at a press briefing after holding talks with the IMF in Dubai.

“The Fund always pursues a policy to raise the discount rate under its programme, but Pakistan has managed to convince the IMF for a cut in the rate keeping in view the reduction in core inflation on monthly basis.”

In the month of June, he said, inflation would be brought to 10 per cent on month-on-month basis. The average inflation target has been revised to 20 per cent from 23 per cent, which the government would achieve by the end of current fiscal year in June.

Tarin said, “now we are looking at reducing interest rates which will help generate economic activities in the country.”

When asked about the impact of ongoing war against terrorism, he said that according to unconfirmed estimates annual cost of war hovers between $7 billion and $8 billion. “However, I have no confirmed estimates about the impact of the war on Pakistan’s economy.”

About the economic target revised in Dubai talks, the Adviser said that tax revenue target has been fixed at Rs1,300 billion, which was earlier set at Rs1,360 billion. However, he said that Rs1,300 billion target, “is still difficult to achieve keeping in view a massive slowdown in economic growth and little time to widen the tax base.”

In the last fiscal year, the tax to GDP target was 9.6 per cent which was fixed with the IMF at 10.2 per cent under $7.6 billion loan programme, but, “now both the IMF and Pakistan has revised the tax to GDP ratio to 10 per cent for the current fiscal. The tax to GDP ratio for the next fiscal has been agreed at 10.6 per cent.”

He said that GDP target, which was 5.6 per cent in the last fiscal, was fixed under the IMF programme at 3.4 per cent and now under the economic scenario of the world the growth target has been fixed at 2.5 per cent for the current fiscal.

To a question, he said that inflation target for next year has been agreed at single digit of 6 per cent. “This is to ensure the low inflationary environment which will be benefiting the country on long-term basis.”

The current account deficit target has now been revised to below 6 percent from 6.5 percent and for next fiscal, it has been agreed at 4 percent.

However, the country would attain the fiscal deficit target of 4.2 percent, as the government would collect ample non-tax revenue mainly through petroleum development levy on POL products. The fiscal deficit target for next year has been fixed at 3.3 percent.

To a question he said that heavy amount of $ 1.1 is due from USA against the expenditures which Pakistan has borne to carryout war against militants during May, 2008 to January 2009.

To a question, Tarin disclosed that Pakistan is all set to get second tranche of $ 840 million from International Monetary Fund (IMF) in current month under 23 month $ 7.6 billion bailout package that will furtherer strengthen the foreign reserves.

“We were expecting the $750 million, but now would receive $840 million because of the upward fluctuations in exchange rates against the special drawing rights (SDR).”

IMF under Standby Arrangements had accorded approval to US $ 7.6 billion for out of which Pakistan received first tranche of $3.1 billion in November, last year.

Pakistan would start negotiating and lobbying seeking enhancement of IMF funding quota from five times to eight in the IMF Executive board meeting to be held in April this year. In case the IMF increases Pakistan’s quota to 8 times then it would be having additional 4.5 billion dollars in foreign reserves under the Stand By Arrangement.

He argued that Ukraine and Iceland had been given the 8 times quota funding so Pakistan would follow the suit to this effect.

To a question about the impact on Pakistan’s economy in the wake ongoing political turmoil, Tarin said that economic and political stability goes hand in hand. However, the economic indicators are right on way to improvement. When asked if IMF has expressed its concern on political mess in Pakistan, he said that development in Punjab political scenario took place when all the issues were finalized with IMF. However, he said that IMF has no political agenda rather it has economic agenda.

The government is planning to allure investments of Pakistanis living abroad by giving them incentives in the country for their investments. About massive increase in sugar prices Tarin said since the sugarcane production has decreased.

Last year sugar growers could not get reasonable prices the bumper crop, which is why the price of the said commodity has increased to Rs 48 to Rs 50 per kg. He said that the government is going to import the sugar to meet the deficit. However, the government is to ensure the sale of sugar at utility stores at the cost of Rs 38 per kg.

 

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Govt transfers Rs250.58bn from FDP to provinces ​

Tuesday, March 03, 2009

ISLAMABAD: The federal government transferred Rs250.580 billion from the federal divisible pool (FDP) to the four federating units in the first half (July-Dec) of 2008-09 compared to Rs210.073 billion in the same period of previous fiscal year, indicating an increase of Rs40 billion.

According to the provincial government’s fiscal operation for July-Dec 2008-09 released by the finance ministry on Monday, total revenues including provincial share in the federal revenue, provincial taxes, non-tax revenues and federal loans and grants were at Rs326.448 billion against total expenditures of Rs294.367 billion.

The provinces obtained net loans worth Rs1.792 billion in the current fiscal year. Current grants from the federal government to provinces went up to Rs19.184 billion and development grants Rs8.181 billion. Interest payments to the federal government consumed Rs8.500 billion in the first half of the current fiscal year. Development expenditures in all four provinces were Rs49.401 billion. The biggest province Punjab’s total revenue was Rs159.769 billion and the provincial share in the federal revenue stood at Rs123.962 billion.

The share of provincial taxes was Rs10.197 billion while non-tax revenue brought Rs19.656 billion into the provincial kitty. Federal loans and grants for Punjab stood at Rs5.954 billion including loans (net) Rs3.063 billion, current grants Rs2.156 billion and development grants Rs735 million.

Total expenditures of Punjab stood at Rs148.925 billion out of which current expenditures ate up Rs120.249 billion. Out of current expenditures, interest payments to the federal government consumed Rs4.975 billion; other current expenditures Rs115.274 billion while development expenditures Rs28.676 billion. Sindh’s total revenue was Rs89.816 billion against expenditures of Rs94.033 billion in the first half of the current fiscal year 2008-09. The provincial share in the federal revenue was Rs76.722 billion in the first six months of the current fiscal year.

The provincial taxes collection was at Rs10.421 billion; non-tax revenue Rs1.769 billion and federal loans and grants Rs1.004 billion. Interestingly, the loans (net) in shape of federal loans remained negative at Rs3.768 billion, while current grants stood at Rs4.063 billion and development grants Rs709 million.

Total expenditures of Sindh stood at Rs94.033 billion out of which current expenditures were Rs83.079 billion. The interest payments to the federal government consumed Rs1.787 billion, other current expenditure Rs81.293 billion while development expenditures of Rs10.954 billion. Total revenue of NWFP stood at Rs44.035 billion against expenditures of Rs29.090 billion in the first half of the current fiscal year. The provincial share in the federal revenue stands at Rs31.364 billion.

The provincial taxes fetched Rs1.069 billion, non-tax revenue Rs2.309 billion and federal loans and grants Rs9.239 billion. Out of total expenditures of Rs29.090 billion, the current expenditures were at Rs23.455 billion.

The interest payments to the federal government consumed Rs1.338 billion and other current expenditures Rs22.117 billion. The development expenditures in NWFP stood at Rs5.635 billion. Balochistan’s total revenue was Rs32.728 billion against expenditures of Rs22.319 billion in July-Dec period of 2008-09. The provincial share in federal revenue stands at Rs18.532 billion. The provincial taxes fetched Rs280 million and non-tax revenue of Rs1.010 billion.

The federal loans and grants to Balochistan scaled up to Rs12.906 billion. Out of total expenditures of Rs22.319 billion, the current expenditures were Rs18.183 billion; interest payment to the federal government Rs401 million and other current expenditures Rs17.782 billion. The development expenditures of the PSDP stand at Rs4.136 billion.

 

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US Pak assistance bill may include one-time $5bn ​

Tuesday, March 03, 2009

WASHINGTON: US lawmakers will soon introduce a measure on expanding socio-economic assistance for Pakistan to $1.5 billion annually that is likely to include an additional one-time $5 billion in support of the democratic government’s efforts to pull the key South Asian country out of its economic troubles.

According to a prominent American newspaper on Monday the economic support initiative is part of the policy shift Washington is in the process of making in its relationship with the anti-terrorism ally in the region, considered critical to the US security interests.

The assistance will be geared towards enabling the elected government to combat violent extremism more comprehensively, particularly in its tribal border areas along Afghanistan, where thousands of US troops are batting a spreading Taliban insurgency.

“Two influential senators are expected to file legislation in the coming days that would triple non-military US aid to Pakistan to $1.5 billion a year and include $5 billion to stave off an imminent economic crisis,” The Christian Science Monitor reported.

The report came days after the Obama Administration held review consultations with Pakistani and Afghan officials on evolving future the US policy toward the militancy-hit border region.

Citing some of the pressing challenges facing the nuclear-armed country including its economic woes, the report said “the shift is part of an increasing awareness of Pakistan’s precarious position - and that more than military operations will be needed to build a stable state capable of beating back extremism in the long term.” Senator John Kerry, chairman of the influential Foreign Relations Committee and Ranking Republican member Senator Richard Lugar are lead supporters of the expected new legislation on Pakistan, to be known as Kerry-Lugar Act.

Kerry made a pitch for the much-needed additional $ 5 billion aid for Pakistan in the light of a new Atlantic Council report on US relations with Pakistan last week, cautioning that the time was running out.

The legislative measure mirrors a plan that Vice President Joseph Biden proposed last year when he was still a senator. Meanwhile, the Pakistani diplomats, led by Ambassador Husain Haqqani, have been meeting with leaders on the Capital Hill to underscore the importance of economic support for Pakistan.

Experts say the shift is admission that the former Bush administration’s over reliance on security aspects of the anti-terror fight did not work. Last week, the Pakistani Foreign Minister Shah Mehmood Qureshi, also highlighted the importance of a holistic approach to addressing the problem of extremism in the long-term perspective.

The Monitor also reported that the Pentagon is also on board with regard to latest efforts to aid the democratically elected Pakistani government as part of a comprehensive plan to stabilize the restive Pak-Afghan border region.

In this respect, the report refers to Pentagon officials who last week met with Pakistan army chief Gen Ashfaq Parvez Kayani. The Pentagon officials support, a more comprehensive relationship, with Pakistan, that also includes smarter and more effective military assistance, the report added.

Secretary of State Hillary Clinton also sounded a similar note when she met with top Pakistani and Afghan diplomats last week. Defense Secretary Robert Gates underlined the need for wide-ranging Pakistan support in an interview Sunday. “I will just say that I think that the key here is our being able to cooperate with and enable the Pakistanis to be able to deal with this problem on their own sovereign territory.”

I believe, based on my talks with the Pakistanis here in Washington this week, this past week, that, they have — they clearly now understand that what’s going on up there in that border area is as big a risk to the stability of Pakistan as it is a problem for us in Afghanistan.”

 

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Sindh govt to introduce fish in European market ​

Tuesday, March 03, 2009

KHAIRPUR: The Sindh government has determined to introduce Sindh fish in the European market. Provincial Minster for Fisheries Zahid Hussain Burgri said in the Khairpur circuit house the government has allocated Rs560 million for purchasing modern boats for Sindh fishermen with a view to promoting the fisheries department.

At the circuit house speaking at a public meeting he said the government has decided to focus on the fish market in Europe and other countries. He said there are 1,209 ponds of sweat water. The government has determined to provide 180 boats to the people of Bubak and construct 100 houses for them as they earn money and they promote the fisheries department.

He said at the zero point of Badin there was also a scheme of residential houses. He said positions of trainees of the Shaheed Benazir Bhutto Youth Programme will be regularized in different departments and in this regard he will move a motion in the Sindh assembly.

He said the government had restored services of a number of employees who had been sacked by the PML-N government. He said 350 vacant posts in the fisheries department will be filled. He said that PPP-led government inherited crises but it would resolve them. He said trainees who were getting training at Mando Dero, now will get training in Khairpur and he announced to provide relief to them.

 

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Consolidated budget deficit crosses Rs 250 billion in 1HFY09​

ISLAMABAD: The consolidated budget deficit of the federal and four provincial governments has reached Rs 250.5 billion during first half period of current fiscal year 2008-09.

Total revenues of the government stood at Rs 834.47 billion and the total expenditures were Rs 1.085 trillion during first half. The defence expenditures were Rs 147.78 billion during the first half.

The federal government has transferred Rs 250.58 billion to the four federating units Punjab, Sindh, NWFP and Balochistan as provincial share in federal revenues under interim National Finance Commission (NFC) Award, during first half of current fiscal year.

According to a report of Finance Ministry released on Monday, out of the total revenues during the first half, federal and provincial tax collection stood at Rs 577.99 billion. In non-tax revenues Rs 69.128 billion were collected from petroleum and gas sector that included Rs 28.839 billion as petroleum development surcharge and Rs 8.510 billion from gas development surcharge, discount rate on crude oil Rs 5.967 billion and royalty on oil and gas amounted to Rs 25.812 billion. Total non-tax revenues stood at Rs 256.48 billion during the July-December period of current fiscal year.

According to the details of the expenditures of the federal government during July-December period of current fiscal year, the government has spent a total sum of Rs 1.085 trillion that include, Rs 916.7 billion were the non-development expenditures. The details of the current expenditures (Non-Development) are: Rs 299.855 billion as interest on local and foreign loans, Rs 265.934 billion were spent on servicing of domestic debt and Rs 33.921 billion were spent on servicing of foreign debt. Total defence expenditures were Rs 147.7 billion, the development expenditure and net lending during the first half stood at Rs 132.979 billion.

The budget deficit during the first quarter July-December stood at Rs 250.56 billion that was financed through Rs 36.991 billion from external resources and Rs 213.577 billion from domestic resources. Total non-bank borrowing amounted to Rs 31.309 billion, bank borrowing at Rs 180.97 billion and privatisation proceeds were Rs 1.290 billion.

Punjab: The provincial revenues of government of Punjab amounted to Rs 159.769 billion against the expenditures of Rs 148.9 billion during the first half of current fiscal year, leaving a surplus of Rs 10.844 billion. Punjab received Rs 123.962 billion as revenue share from federal taxes as NFC Award share. Punjab received grants worth Rs 2.156 billion and loans Rs 3.063 billion from federal government. Development expenditures of the province amounted to Rs 28.676 billion and non-development expenditures were 120.249 billion.

Sindh: The total revenues of government of Sindh stood at Rs 89.916 billion and the total expenditures of the province remained Rs 94.033 billion during the first half of current fiscal year 2008-09 resulting in budget deficit of Rs 4.117 billion. Sindh received Rs 76.722 billion as NFC award share of the federal taxes from the federal government. Non-development expenditures of the provincial government stood at Rs 83.079 billion and development spending remained Rs 10.954 billion in said period.

NWFP: The total revenues amounted to Rs 44.035 billion and total expenditures of the province stood at Rs 29.090 billion during the first half leaving a budget surplus of Rs 14.945 billion. The NWFP government received Rs 31.364 billion as NFC Award shares from the federal government during the said period. Development expenditures were Rs 5.635 billion and non-development expenditures were Rs 23.455 billion.

Balochistan: The total revenues stood at Rs 32.728 billion and the total expenditures of the province remained at Rs 22.319 billion during the first half of the current fiscal year. The provincial government received a sum of Rs18.532 billion as NFC Award share from the federal government during the said period. Province received loans of Rs 1.078 billion, current grants at Rs 6.281 billion and Rs 5.547 billion as development grants.

 

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Pakistan had no industrial policy for last 30 years: Kaiser Bengali​

* Says state had to revert to its role as a protectionist and interventionist state to create environment for creation of capital assets​

ISLAMABAD: There had been no industrial policy for the last 30 years after the country was transformed from development state to a security state defined in a very narrow military perspective, senior economist, Dr Kaiser Bengali said.

He urged that the state had to revert to its role as a protectionist and interventionist state to create environment for the creation of capital assets.

Dr Bengali was peaking at a seminar on “re-locating the state: industrial policy for growth and poverty reduction” organised by Sustainable Development Policy Institute here Monday. Zubair Faisal Abbasi, research associate at SDPI presented the findings of his research study while Faisal Gorchani from SDPI conducted the proceedings and urged that the citizens of the country either force the state or help it to revert to its pre-1977 role and provide a context for economic change before its too late.

Dr Bengali said that during the last fiscal year the country collected Rs 1 trillion revenues while it spent Rs 1.16 trillion on defense, debt servicing and civil administration. About development history of Pakistan, he deplored that the state took a shift from being a development state to security state after 30 years of its existence in 1977 and whatever policies made thereafter were mostly bureaucratic exercises lacking political commitment to implement. He said that the GDP growth rate during Bhutto period was 4.5 percent, development expenditure was 21 percent and military growth rate was 2 percent of the GDP.

During Zia period, GDP growth rate reached to 6.7 percentage, development expenditure was 2.7 percent and defence budget growth rate at 9 percentage of the GDP. The past investment began to mature therefore the GDP growth during Zia era went so high, he added.

Bengali sought revival of Pakistan Industrial Development Corporation (PIDC) as the county had reached to a situation where private sector would not invest if state remains passive.

He suggested reducing costs of manufacturing, end to corruption, reduction in export duty, discouraging speculative business of land, besides developing an infrastructure to bring back the economic crises to its right track. Zubair Faisal Abbasi, in his presentation ‘importance of industrial policy for growth and poverty reduction, said that the public and private sector should not be taken as opposite forces rather they should cooperate under a well-coordinated industrial development design. He said the state should assume responsibilities of creating right kind of incentive structures to stop decline of manufacturing output in Pakistan. “We should move away from being neo-liberal and security state to a ‘developmental state’ while focusing on human capital formation and technological capability acquisition for increase in industrial development of Pakistan” he added.

He said history of Pakistan revealed that successful industrialisation could take place when the state became pro-poor and pro-growth. Failing in bringing the state back in he industrialisation strategies, Pakistan would fast de-industrialise with increasing poverty, growth erosion, and inequality. While giving examples of India and China, he argued that poverty had substantially been reduced in China and India with the help of industrial sector growth while the state had played a pivotal role in the development of both the public and private sector enterprises.

 

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Exports of pharma products surge 10%​

KARACHI: Exports of Pakistan’s pharmaceutical products has registered a 10 percent increase during the previous calendar year of 2008 mainly on account of better marketing approach by the local pharmaceutical companies and their sustained efforts to enhance the quality.

The export of Pakistani medicines to some 50 to 55 countries across the globe stands at $110 million as compared to $100 million achieved during the corresponding period of previous year.

Although total exports of 2007 stood at $125 million but the substantial amount was generated through the sales of medical equipments and tools, which are highly popular across the globe.

Ironically, Pakistani is ranked far below in the list of major medicine exporting countries, despite enhancing export goals as multifarious factors could be blamed for impediments hampering fast track progress of the pharmaceutical industry during several decades.

Former Chairman, Pakistan Pharmaceutical Manufacturer Association (PPMA) Dr Qaiser Waheed in response to a query of Daily Times claimed that over the years, Indian pharmaceutical companies, with full backing by the government, have managed to create a big demand of their products world over and consequently previous year their total annual export volumes stood around $7 billion.

The massive volume of exported medicine speaks the volume of quality of Indian products specially the raw material required for production of medicines. Citing instances of official support to the Indian pharmaceutical Industry, Dr Waheed said that the government has established a separate Pharma Excel Council with an aim to handle affairs of this sector and remove impediments that may hinder their smooth functioning. He claimed that owing to sincere and devoted endeavours of Pakistani pharma industry during last many years, the country has been able to enhance export volume of medicines to substantial level helping the country in the process to earn invaluable foreign currency. Earlier, export of the pharmaceutical products stood in disarray, due to which the country’s export volume remained stagnant for long period of time.

Currently bulks of medicines are exported to African countries, Central Asian States, Philippines, Vietnam, Myanmar and Sri Lanka. Citing major problems faced by the pharma industry, Dr Waheed said the potential of this sector was never recognised by the officials in Federal Health Ministry mainly on account of their lack of knowledge relating to the needs of this enormous sector.

Unlike all other industries in the country, which fall under the administrative control of the Ministry of Industry, affairs of the health industry is managed by the Federal Health Ministry which has squarely failed to promote this sector effectively. Suggesting measures for drastic progress of pharma sector, he said the government in consultation with the stakeholders should evolve a comprehensive policy for promotion of the pharma sector for at least five years period.

Such policy, after securing the legal cover, would remain unaffected even with the change of the government in centre or provinces, which would spell positive impact for the pharma industry. He demanded the government to remove all taxes on packaging material and raw material needed for manufacturing medicines as currently, heavy taxation is adding to the manufacturing cost of medicines and its packing process. tanveer sher

 

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US to move rapidly to stabilise Pakistani economy​

By Anwar Iqbal
Monday, 02 Mar, 2009

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US Senator John Kerry, designated head of the US Senate Foreign Relations Committee, talks with Pakistan's Foreign Minister Shah Mehmood Qureshi. -Reuters File Photo

WASHINGTON: Providing economic assistance to Pakistan is high on the priority list of the US administration and lawmakers are also considering a proposal to give a one-time assistance of $5 billion to help stabilise the Pakistani economy, diplomatic sources told Dawn.

The additional aid – according to these sources – will be attached to a package proposing an annual assistance of $1.5 billion for Pakistan over the next five years. The package can be extended for five more years with congressional approval.

The sources said that the Pakistan aid package can be introduced in Congress later this month.

Another bill to set up reconstruction opportunity zones along the Pak-Afghan border my also be introduced sometime this month.

Senator John Kerry, who co-sponsored the aid package, released a report last week proposing an immediate injection of about $5 billion into the Pakistani economy to prevent an imminent meltdown.

The report warned that ‘the Pakistan government has between 6 -12 months to put in place and implement security and economic policies or face the very real prospect of considerable domestic and political turbulence.’

Apparently, the Obama administration agrees with this assessment and wants to move rapidly to protect the Pakistani economy from a possible collapse. It is also working with the Pakistani government to bring political stability to the country.

The proposed $5 billion, however, will not go directly into the government of Pakistan funds. The money will be spent on projects supervised by the US Agency for International Development.

The supervision will ensure that the money is spent for the purpose it is given and will reduce the chances of corruption and misappropriation. But this will also increase the overhead expenses to 25 to 30 per cent, running into hundreds of millions.

The USAID is required to hire US contractors who then can hire Pakistani sub-contractors to work on the proposed projects.

The entire aid package, which may go up to $15 billion if extended for 10 years, will focus on the economy and social sectors.

The ROZ bill is likely to be adopted before the aid package. Once the bill is adopted, the US administration will work with the Pakistani and Afghan governments for designating the zones.

The government of Pakistan will then be required to announce an incentives package for the tribal areas.

The ROZs can be established in Fata and up to 100 miles into the Balochistan border area. ROZs can also be set up in the areas hit by the last earthquake,

Both the aid package and the ROZ bills were originally presented in the previous Congress, which completed its tenure before passing them. The new Congress had planned an early hearing on the two bills but both got delayed because of Congress’s heavy domestic agenda.

Although the new Congress has already approved the US economic stimulus plan, it is still working on the financial stability plan and the omnibus budget tax for 2009. Once the two plans are adopted, Congress is likely to take up the Pakistan aid package and the ROZ bills later this month.

 

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Circular debt swells to Rs 180 billion​

ISLAMABAD (March 03 2009): The circular debt rose from Rs 159 billion in January 2009 to Rs 180 billion by the end of February, belying the claims by the government that it was focusing on reducing the debt. However this is not a violation of the Letter of Intent (LoI) submitted to the International Monetary Fund. The public sector entities in petroleum and gas sectors are facing financial crunch due to rising circular debt.

Sources told Business Recorder that Oil and Gas Development Company Limited (OGDC) is owed Rs 48.254 billion, Sui Southern Gas Company (SSGC) Rs 24.670 billion, Sui Northern Gas Pipeline Limited (SNGPL) Rs 7.955 billion, Pakistan Petroleum Limited (PPL) Rs 9.332 billion, and Rs 5.400 billion is owed to Mari Gas Company Limited (MGCL).

PSO is the major fuel supplier that is facing circular debt problems. It is to recover Rs 84.2 billion including Rs 77.1 billion from different clients and Rs 7.088 as price differential claims (PDC) from the government on petroleum products. PSO is also to pay Rs 73.717 billion dues to oil refineries. The major clients of these public sector entities are the independent power producers (IPPs), Water and Power Development Authority (Wapda) and Pakistan Electric Power Company (Pepco). The government is set to clear the circular debt by June this year as per the LoI.

PSO is to receive Rs 8.354 billion from Pepco, Rs 44.3 billion from Hubco, Rs 21.210 billion from Kapco, and Rs 3.302 billion from PIA. PSO is to pay Rs 40.072 billion to Parco, Rs 10.845 billion to PRL, Rs 8.7 billion to NRL, Rs 13.2 billion to ARL and Rs 900 million to Bosicor.

Due to financial crunch, PSO is mainly depending on direct oil imports rather than on oil refineries which are keeping all funds as past payments. PSO is providing oil to Pakistan International Airlines (PIA) on cash payment, sources said.

They said that the two gas utilities--SNGPL and SSGC--are facing problems in paying dues to gas production companies followed by non-payment of dues from the power sector. These companies have approached the Petroleum Ministry for intervention to make payment by the power sector. In return, Petroleum Ministry has raised the issue with Finance Ministry. These utilities have served several notices for disconnection of gas supply to their clients but power sector has failed so far to make payment due to circular debt problems.

The government has planned to float term finance certificates (TFCs) of Rs 98 billion to help Pepco to retire circular debt. The government was to issue TFCs by the end of February but it is still awaited. The issuance of TFCs was supposed to clear 50 percent of the circular debt by the end of last month. The delay in issuance of TFCs is resulting in further accumulation of circular debt, sources added.

 

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Six-month consolidated budget deficit rises to Rs 250.5 billion​

ISLAMABAD (March 03 2009): The consolidated budget deficit of the federal and four provincial governments has accumulated to Rs 250.5 billion during first half (July-December) of 2008-09 fiscal year. According to a Fiscal Operations Report of Finance Ministry issued here on Monday?, total revenues of the government stood at Rs 834.47 billion and expenditures at Rs 1.085 trillion during first half of 2008-09.

Breakup of current expenditure shows that Defence expenditures stood at Rs 147.78 billion during the period under review. The federal government transferred Rs 250.58 billion to Punjab, Sindh, NWFP and Balochistan as provincial share in federal revenues under interim National Finance Commission (NFC) Award, during this period.

The summary of consolidated federal and provincial budgetary operations showed out of total revenues of federal and provincial tax collection stood at Rs 577.99 billion. In non-tax revenues Rs 69.128 billion were collected from petroleum and gas sector that include Rs 28.839 billion as petroleum development surcharge and Rs 8.510 from gas development surcharge, discount rate on crude oil Rs 5.967 billion and royalty on oil and gas stood at Rs 25.812 billion. Total non-tax revenues stood at Rs 256.48 billion during the July-December period of current fiscal year.

The details of the expenditures of the federal government during July-December period revealed that the government spent Rs 1.085 trillion, which included Rs 916.7 billion as non-development expenditures. The details of the current expenditures (Non-Development) in first half the government paid Rs 299.855 billion as interest on local and foreign loans, Rs 265.934 billion were spent on servicing of domestic debt and Rs 33.921 billion were spent on servicing of foreign debt. Total defence expenditures were Rs 147.7 billion, the development expenditure and net lending during the first half stood at Rs 132.979 billion.

The budget deficit stood at Rs 250.56 billion that was financed through Rs 36.991 billion from external resources and Rs 213.577 billion from domestic resources. Total non-bank borrowing amounted to Rs 31.309 billion, bank borrowing at Rs 180.97 billion and privatisation proceeds were Rs 1.290 billion.

Breakup showed that provincial revenues of Punjab amounted to Rs 159.769 billion against expenditures of Rs 148.9 billion during the first half of current fiscal leaving a surplus of Rs 10.844 billion. Punjab received Rs 123.962 billion as revenue share from federal taxes as NFC Award share. Punjab received grants worth Rs 2.156 billion and loan of Rs 3.063 billion from federal government. Development expenditures of the province stood at Rs 28.676 billion and non-development expenditures were 120.249 billion during this period.

Total revenues of Sindh Province stood at Rs 89.916 billion and total expenditures of the province remained at Rs 94.033 billion, resulting in budget deficit of Rs 4.117 billion. Sindh received Rs 76.722 billion as NFC award share of the federal taxes from the federal government. Non-development expenditures of the provincial government stood at Rs 83.079 billion and development spending remained at Rs 10.954 billion in said period.

Revenues of the NWFP amounted to Rs 44.035 billion and total expenditures of the province stood at Rs 29.090 billion during the first half leaving a budget surplus of Rs 14.945 billion. The NWFP government received Rs 31.364 billion as NFC Award shares from the federal government during the said period. Development expenditures were Rs 5.635 billion and non-development expenditures were Rs 23.455 billion.

Revenues of Balochistan stood at Rs 32.728 billion, whereas expenditures remained at Rs 22.319 billion, leaving a budget surplus of Rs 10.40 billion. The provincial government received a sum of Rs 18.532 billion as NFC Award share from the federal government during the period under review. Province received loans of Rs 1.078 billion, current grants at Rs 6.281 billion and Rs 5.547 billion as development grants.