Pakistan Economy - News & Updates - Archive

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Pakistan to get more EU help ​

Wednesday, March 25, 2009

ISLAMABAD: European Commissions Director for Asia and DG External Relations, James Moran has said that EU countries would do more to mitigate adverse effects of financial crisis on Pakistan.

“The economic and financial crisis being faced by Pakistan can’t be ignored and EU and its members would like to do more to mitigate its adverse effects,” Moran said during the second meeting of the EC-Pakistan Joint Economic Commission (JEC) held in Brussels. According to a press statement by Embassy of Pakistan in Brussels, received on Tuesday, the meeting was co-chaired by Secretary Economic Affairs Division, Farrukh Qayyum while James Moran led the EU side.

Pakistan’s Ambassador to EU, Shafkat Saeed and senior officials on both sides participated in the deliberations. The JEC noted that Pakistan was an important recipient of EC economic assistance to the tune of Euro 200 million for the period 2007-2010. By next year the same would be raised further to Euro 72 million on annualised basis. This assistance is in addition to Euro 50 million under EC Global Food Assistance to Pakistan.

In his opening remarks, Farrukh Qayyum urged the development partners in the EU to consider programme based financing on short and medium term basis. He also briefed the joint commission on recent political developments in the country and noted that these positive developments would have profound effect on governance and would strengthen the democratic institutions.

Moran said as democracy dividend the EU was committed to support and strengthen these institutions in any form and shape including training and capacity building of legislature and judicial reforms.

JEC addressed a wide range of issues including political and economic developments in Pakistan, bilateral trade and future cooperation in the fields of customs cooperation, higher education, science and technology, environment and energy policy.

Three working groups on governance, human rights and migration, trade and cooperation (including development assistance) submitted their recommendations to the joint commission. The joint commission discussed progress in electoral reforms in Pakistan in the context of recommendations put forward by an EU Election Observation Mission following the February 2008 preliminary elections.

In the field of human rights, issues related to women’s and children’s rights, media freedom and protection of minorities were discussed. Representatives from Pakistan briefed the European Commission on a number of legislative and administrative measures taken in this context.

The Joint Commission reviewed bilateral trade and acknowledged EU’s importance to Pakistan for trade ad Pakistan’s largest trading partner. The trade relationship was worth Euro 7.2 billion in 2007 and is growing. The meeting discussed suitable measures for further increasing Pakistan’s market access to the EU, including Pakistan’s request to negotiate a Free Trade Agreement. The joint commission also discussed regulatory issues, including intellectual property rights and competition.

The joint commission expressed satisfaction that the Civil Aviation Agreement between EU and Pakistan was signed in February and also noted with appreciation that the anti-dumping duty on bed linen. It was also noted that recent approval of EU 100 million by the European Investment Bank’s (EIB) Management Board to Pakistan would send positive signals to other international financial institutions besides bringing synergy into similar engagements especially during the forthcoming meeting of Friends of Pakistan to be held on April 17, in Tokyo. The JEC meeting was also preceded by Regional Economic Coordination Conference on Afghanistan preparatory meeting organised by the EU and attended by regional and donor countries and international organisations. Pakistan will host the next RECCA meeting while the first was held in India in 2006.

 

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Packages to issue right shares worth $50m to IFC​

KARACHI: Packages Limited will issue preference shares of $50 million to International Finance Corporation at a subscription price of Rs 190 per share, the company said on Tuesday. In a letter it sent to the Karachi Stock Exchange, the company said the sale of shares to IFC represented approximately 20 percent of the company's shares on a fully diluted basis immediately following the investment. The preference dividend rate is agreed at 10 percent per annum in Pak rupees and is cumulative and deferrable up to year 2013, according to the letter. Thereafter it shall be paid each year till IFC exercises its right to convert the preference shares into common shares of the company. The company may, if offered by IFC, buyback the IFC convertible preference shares in cash instead of converting them into common shares.

 

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SBP has taken several initiatives to boost SME financing: Salim Raza​

KARACHI: Syed Salim Raza, State Bank of Pakistan governor said on Tuesday that the central bank had taken a number of initiatives for the promotion of SME financing in the country. Addressing a press conference at the launching of a Pilot Programme for Training and Development of SMEs in Pakistan under the aegis of Standard Chartered Bank and International Finance Corporation of the World Bank at Lahore Chamber of Commerce and Industry, he stressed the need for enhancing access of credit to small and medium enterprises, especially the small entities.

He urged commercial banks to increase financing to SMEs, enabling them to play their due role in the economic development of the country.

“If SMEs are broadly bifurcated into ‘M’ and ‘S’ categories, we find that entities under ‘M’ have had easy access to finance as compared to [sic] those under ‘S’,” he said and added the synopsis of SME finance also reflected that out of total SME portfolio of Rs 383 billion, only 38.3 percent was being channeled to entities having less than 20 employees.

“This depicts that the focus of financial institutions has been on medium entities,” he said and added the primary reason for this skewed distribution was the unorganised way of doing business of small entities.

Referring to major hurdles in the way of development of SMEs in Pakistan, Raza said that major issues faced by SMEs were lack of skilled labor, outdated technology, weak governance, lack of management hierarchy, absence of book keeping, taxation issues coupled with limited access to formal sources of finance.

He said the State Bank had allowed commercial banks to lend up to Rs 3 million to SMEs without collaterals and was encouraging them not only to introduce cash-flow based methodologies instead of relying on the tradition collateral-based lending, but also to come up with innovative products and cost-effective delivery channels to increase outreach to small enterprises.

He said the State Bank was also working for capacity-building of banks through launch of SME Finance Grass Root Cluster Training Programme for credit officers based in SME Clusters in Lahore, Sialkot, Gujranwala, Rawalpindi, Peshawar, Quetta and Karachi. Similarly, the central bank was also working on devising a Credit Guarantee Fund for Small and Rural Enterprises with the help of DFID, UK, he said.

Highlighting the importance of SMEs, he said globally SMEs had helped to achieve diversified economic growth, employment generation, reduction in income inequalities and poverty alleviation in developed and the emerging economies like USA, Japan, Malaysia, Thailand and South Korea. He said that focus on SMEs could help achieve the Millennium Development Goals of the UNO of ending poverty & hunger, universal education and gender equality in developing countries like Pakistan. He said the Pilot Programme, launched jointly by SCB and IFC, was a landmark attempt to develop the capacities of smaller entities. It would be helpful in developing innovative products such as hybrid financing models combining consumer and micro finance models, Raza said and added that it would encourage other banks to focus on this area.

 

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ADB loan re-lending to power sector: ECC refuses to change policy​

ISLAMABAD (March 25 2009): The Economic Co-ordination Committee (ECC) of the Cabinet has refused to change the on-lending policy for the Ministry of Water and Power, which intended to on-lend Asian Development Bank (ADB) loan at 12 percent, rather than at prevalent rate of 17 percent, sources close to Ministrys Additional Secretary, Zarar Aslam, told Business Recorder here on Tuesday.

Sources said: "Power Transmission Enhancement Project was approved by Executive Committee of the National Economic Council (Ecnec) on February 6, 2008, and an agreement was signed between GoP (borrower) and ADB on May 20, 2008 to seek financing for a Power Transmission Enhancement Investment Program (Ordinary Operations, tranche-II) as described in the schedule I (description of the project) of loan agreement.

Keeping in view the Ecnec decision, ADB agreed to lend to the GoP from ADB ordinary capital resources $220 million against Loan No 2396 - PK. The terms and conditions of the loan agreement envisaged payment of interest on the principal amount withdrawn and outstanding for each interest period equal to the sum of Libor and 0.60 percent as provided in section 3.02 of the loan regulations, less a credit of 0.40 percent as provided in section 3.03 of the loan regulations. The borrower will pay commitment charges at the rate of 0.15 percent per annum. The loan has a term of 20 years, including a grace period of three years, as provided in schedule 2 of the loan agreement.

Article 3.01 of the loan and project agreement provides that the "borrower shall re-lend the proceeds of the loan in rupee to National Transmission and Dispatch Company (NTDC) under an on-lending agreement upon terms and conditions satisfactory to ADB. The foreign exchange risk will be borne by the borrower.

The Ministry was of the view that since the ECC had already approved re-lending to NTDC at the interest rate of 12.0 percent per annum, in ADB loan No 2289-Pak, tranche-I for ordinary operation, ADBs loan No 2396-Pak, for tranche-II (ordinary operation) should also be approved on the same terms and conditions.

Sources said that when the issue came under discussion in the ECC meeting, most of the members opposed the proposal, which was consequently rejected. "The ECC did not accept the proposal, and directed that its earlier decision of March 3, 2009 regarding re-lending rates be followed," sources added.

Earlier, the ECC had decided that re-lending rates for the federal government entities, DFIs, autonomous bodies and corporations would be 17 percent, including exchange risk component. The Economic Affairs Division (EAD) had made following recommendations to the ECC in its meeting on March 3, 2009.

Old re-lending formula was "GoPs foreign borrowing cost (of last 28 years)+ ERC (weighted average yield of PIBs for 15, 20, 30 years, US Treasury rates)+ administrative charges) ie 4.5 percent +( 14.7 percent -3.0 percent)+ 0.75 percent = 16.96 percent or 17 percent.

Revised re-lending formula was " GoPs average foreign borrowing cost (of last 28 years)+ ERC (5 years moving weighted average yield of PIBs for 15, 20, 30 years-US Treasury rates + administrative charges) ie 4.5 percent +(11.56 percent-4.74 percent)+ 0.75 percent = 12.7 percent or 12 percent.

In the default cases of recovery of re-lent loans, late fee on the due instalment( principal + interest) @ 1 percent during the first year of default, 2 percent during second year of default, 3 percent during 3rd year of default be charged.

Sources said that the Ministry of Water and Power has been demanding since long that Pepco and NTDC should be provided re-lent loans on lower rate than other corporations or it should be allowed to take loans from the market on negotiated terms and conditions. This demand of the Ministry has not been met so far, sources added.

 

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Top economic managers for shelving IPI project​

ISLAMABAD (March 25 2009): Pakistans top economic managers are reported to have suggested to the government to shelve the multibillion-dollar Iran-Pakistan-India (IPI) gas pipeline project, and instead explore domestic resources to meet the energy requirements, official sources told Business Recorder. The Bush-time White House had strongly resisted the IPI, and had exerted considerable pressure on both India and Pakistan to abandon the project.

The Bush administration was, instead, supporting the purchase of energy from the energy-rich Central Asian Republics, contiguous to Afghanistan, to the energy starved South Asian nations. However, geopolitical considerations, as well as continuing security issues in Afghanistan, continue to militate against that deal from materialising. It is not yet clear how the Obama White House views the IPI.

"Alternative options for exploring domestic resources, such as coal, wind, water, etc, should be considered instead of making heavy investment in this project," sources quoted Advisor to Prime Minister on Finance Shaukat Tarin as saying in the Economic Co-ordination Committee (ECC) meeting on March 19. He said that IPI project should be contrasted with the comparative advantages of projects that could be initiated with coal, hydel and/or wind resources, sources said.

The ECC meeting was told that the Iranian government had asked Pakistan that the Gas Sale Purchase Agreement (GSPA) for the supply of one billion cubic feet daily of natural gas should be signed during the current year, ending on March 20, 2009. Iran had also warned that after the passage of the deadline of March 20, 2009, it would be free to sell gas to other buyers. Rise in gas price by 10 percent was also anticipated, sources added.

Both Pakistan and Iran negotiated the agreement and, after thorough deliberations, Iranian side finally offered gas price which resulted in a crude oil parity of 80 percent--a small discount to the price of Iranian gas being sold to Turkey--,sources said.

They said that when the IPI proposal came under consideration in the meting, the ECC discussed its advantages and disadvantages in detail along with project cost. It was said that the gas would be used for power generation only, to replace use of furnace oil, and would be available in five years. Some ECC members were of the view that even though the cost of Iranian gas was high, this could be offset by a firm supply of gas in the future to the country through the pipeline.

"Apprehensions were also raised with regard to termination of the contract after construction of the pipeline, uncertainty of arbitration forum, further increase in gas price on a billion dollar investment and Pakistans recourse," sources quoted Petroleum Ministrys technical personnel as commenting on the project.

However, another opinion was that the imported gas remained the cheapest mode of meeting energy requirements. After discussion, it was felt in the ECC that as approval of such a vital project did not fall in its jurisdiction, it suggested that it should be placed before the Cabinet.

According to the summary moved to ECC, a copy of which was made available to this newspaper, the Petroleum Ministry had recommended purchasing gas specifically for power generation that would be supplied to power generation units through the public sector gas utility companies under the administrative control of Petroleum Ministry.

A separate tariff had been recommended for those industrial consumers who would use imported gas. Petroleum Ministry has been proposed to be the administrative ministry in this regard. The project envisages import of one billion cubic feet daily (bcfd) of natural gas, which is nearly 25 percent of Pakistans current gas production.

The project will take at least 4 years to complete, and be able to generate 5,000 megawatts (mw) power. According to an analysis, imported Iranian gas would result in annual saving of $1 billion over import of furnace oil, (at crude oil price of $50 per barrel).

Similarly, there would be an annual saving of $735 million, if equivalent quantity of LNG would be imported. The saving will increase in line with the hike in global crude oil price. The IPI project would have immense economic benefits for the people of Pakistan. It is pertinent to note that President Asif Ali Zardari also reportedly stated at a meeting last week that the new parliament of Iran must decide about gas price regarding the IPI gas pipeline project.

 

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425 megawatts Nandipur power project: $150 million credit deal signed with foreign banks consortium​

BEIJING (March 25 2009): A foreign banks consortium, comprising BNP Paribas, HSBC Bank plc, the Export-Import Bank of China, has signed a Sinosure buyer credit facility agreement of 150.151 million dollar with Northern Power Generation Company Limited for construction of 425 MW combined cycle power project at Nandipur, Finance Director of the company Ijaz A. Babar told APP.

The CIC France is also a part of consortium through a participation agreement with BNP Paribas, France, he said. Northern Power Generation Company Limited (NPGCL) is the biggest thermal generation company operating under the overall management of the Pakistan Electric Power Company (Pepco).

The agreement was signed with the consortium, comprising worlds top class banks like The Export-Import Bank of China, BNP-Paribas, France, HSBC Bank plc, Paris branch, and CIC France on Thursday, he said. NPGCL is constructing a 425 MW combined cycle power plant at Nandipur, near Gujranwala with the EPC cost of 329 million dollars.

The main EPC contractor is a leading Chinese company, Dongfang Electric Corporation Limited, with sub-contractor G.E. France. The credit facility is covered by China Export and Credit Insurance Corporation. Ijaz Babar said that earlier, a foreign banks consortium, consisting of BNP-Paribas, France, HSBC Bank plc, Paris branch, and CIC France had signed a Euro 68.97 million Coface Buyer Credit Facility Agreement on October 3, last year for the project.

BNP-Paribas, by signing both the credit facilities, has now also fulfilled its commitment as initial mandated lead arranger made for the project with the government of Pakistan, Ijaz said. Appreciating the financial deal, Ijaz said that in spite of the fact that the world was passing through grave economic crisis, these banks had fulfilled their commitment, which exhibited confidence they had on strong fundamentals of Pakistans economy.

Ijaz said that the agreement would help in a long way in improving the financing arrangements for the other projects in the pipeline by Wapda/Pepcos corporatised entities namely 425 MW Chichoki Mallian;

700-800 MW Guddu power project; and 969MW Nelum Jehlum hydropower project with due support from Chinese and European banks. Chief Executive Officer Muhammad Rafiq Butt and Finance Director Ijaz A. Babar signed on behalf of Northern Power Generation Company, whereas Chief Executive Officer Francois Cristofari and head of Export Finance (Middle East/Africa) Gerard Lagouarde, signed on behalf of BNP Paribas (China) Limited.

Amongst other signatories to the agreement was Deputy General Manager of the Export-Import Bank of China Zhu Li and Director of Middle East and South Asia of HSBC Bank plc Simon Lee. First Vice-President Jacques Vincent especially visited to sign the participation agreement with BNP Paribas.

The signing ceremony, held last week, was attended by Deputy head of Pakistan mission Abdul Salik Khan, Minister (Economic) Sardar Aminullah Khan and Commercial Counsellor Naeem Khan.

Abdul Salik Khan, expressing his views, said that financial close of such an important project at this point reflected a confidence of financial institutions on the strong economic indicators and policies of present government of Pakistan, and congratulated all the participants for this success. Signing ceremony was followed by a dinner, hosted by head of Export Finance, BNP Paribas (China) Limited Antoine Gustin.

 

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MSCI Barra to include Pakistan in frontier index ​

KARACHI (March 25 2009): Index provider MSCI Barra said on Tuesday it will include Pakistan in its frontier market index as of the close of May 29. Pakistan was removed from the MSCI Emerging Markets Index at the end of December.

 

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Wrtsil to deliver another major power plant to Pakistan​

HELSINKI (March 25 2009): Wrtsil company received another major order from Pakistan, by Liberty Power Tech Ltd, an independent power producer (IPP). The contract value is about euro 137 million. Total gross power output of the plant is 200 MWe, located near Faisalabad, Punjab, it is due to be commissioned in December 2010, and would supply electricity to the countrys national grid.

This order follows three other IPP projects signed by Wrtsil in 2007 and 2008. Including last four orders, total generating capacity delivered by Wrtsil to Pakistan, will exceed 1700 MWe.

Liberty Power Tech combined cycle solution is EPC (engineering, procurement and construction) order and comprises 11 Wrtsil 18V46 generating sets. In addition to equipment supply, Wrtsil will erect, test, commission plant, and provide local construction supervision.

An O&M contract to operate and maintain it is under negotiation between Wrtsil and the customer. "The need for power generation and energy production is growing rapidly in Pakistan. With Wrtsils support and advisory services, we have been able to arrange financing for power plant project," said Ashraf Mukaty, Sponsor-Director of Liberty Power Tech Ltd.

It will have notably high overall efficiency of 45 percent for lifetime of plant when running on heavy fuel oil at site conditions. This level of efficiency on low-cost fuel oil will enable generating costs to be very competitive.

"We look forward to serving Liberty Power Tech throughout its lifecycle. It endorses reputation of Wrtsil equipment and service capability we are able to provide," said Nomi Ahmad, Regional Director, Middle East, Wrtsil Power Plants. Liberty Power Tech signed Power Purchase Agreement with National Transmission & Despatch Company, and Implementation Agreement with Pakistan Government under 2002 Energy Policy.

 

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Pakistans need for more foreign assistance​

EDITORIAL (March 25 2009): An exclusive Business Recorder report reveals that the government is considering requesting Kuwait to extend credit facility for oil imports on deferred payment from 60 to 360 days. The rationale for this request is evident: the massive circular debt is disabling the capacity of the country to import crude to meet our energy needs.

Considering that the trade deficit is also expected to worsen with Pakistans major trading partners cancelling their orders due to the global recession it is a foregone conclusion that our foreign exchange reserves position would also deteriorate in months to come. In this context any reprieve from our major importers in terms of deferred payment is likely to be welcomed.

Be that as it may, till end of last year the present government had not succeeded in generating the amount of foreign assistance it required to reverse the macroeconomic crisis it faced. That the scale of this crisis required immediate action is acknowledged in the Letter of Intent (LoI) submitted by the government to the Board of the International Monetary Fund on November 20, 2008: CPI 12-month inflation rose to 25 percent in October 2008.

The external current account deficit widened to about 14 billion dollars or 8.5 percent of GDP in 2007/08. Fiscal deficit is estimated to have risen to 7.4 percent of GDP. Liquidity problems have emerged. Financial market indicators have deteriorated. These disturbing indicators led to the approval of a 7.6 billion dollar stand-by arrangement (SBA) which was considered inadequate to meet the countrys needs at the time.

However, the government fully expected to generate its remaining requirements from multilateral donors as well as from Friends of Pakistan. While the multilaterals have extended assistance to Pakistan as promised and China has extended 500 million dollars for support yet the Friends of Pakistan have proved disappointing, in spite of hectic diplomatic efforts launched by the government and spearheaded by President Asif Ali Zardari himself.

It was argued late last year that putting the country on the IMF programme, which would be strictly monitored by the Fund staff to ensure that Pakistan was striving to meet clearly stipulated targets, would strengthen the friends confidence in our economy and thereby trigger further assistance from Friends of Pakistan.

That this has not happened to-date may partly be a reflection of the needs of our friends to mobilise their resources to meet their own needs that are apparent as a consequence of the global recession. In addition, it is being argued that governance continues to be perceived to be poor in this country even with the advent of a democratic dispensation - a fact that is militating against additional support for Pakistan at the present moment in time.

The Japanese government is to host the next Friends of Pakistan meeting in April and the Pakistani government in general, including the Advisor to the Prime Minister on Finance Shaukat Tarin, is hopeful that it would be able to generate 6 to 7 billion dollars worth of assistance money that is urgently required.

Analysts are sceptical that the government would succeed in these efforts in spite of being on the IMF programme for nearly four months. In this context it is hoped that the government does formulate an indigenous plan on an emergent basis that is based exclusively on generating resources domestically to meet domestic needs. This would require slashing expenditure and increasing revenue generation capacity.

 

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Pakistan to Seek $10 Billion From Friendly Nations ​

By Khaleeq Ahmed and Khalid Qayum

March 25 (Bloomberg) -- Pakistan will seek $10 billion over the next three years from the “Friends of Democratic Pakistan” group, which was established in September to help the nation stabilize its economy, a spokesman said.

“We have identified priority projects for which we want funds from member countries,” Foreign Ministry Spokesman Abdul Basit said by telephone from Islamabad today. The projects will help reduce poverty, meet security challenges and boost human resource development, health and education, he said.

President Asif Ali Zardari will head a meeting of the U.S.- led, 25-member group scheduled to be held on April 17 in Tokyo. Pakistani officials and representatives of member countries will meet in Abu Dhabi, a state of the United Arab Emirates, on April 1 and 2 to “fine tune” the details of projects, Basit said.

Pakistan needs financial support to revive an economy hurt by political instability and the fight against Taliban militants in the tribal areas bordering Afghanistan. South Asia’s second- biggest economy averted defaulting on its debt in November after it received the $3.1 billion first installment of the $7.6 billion bailout by the International Monetary Fund.

“This is the time Pakistan could actually get this amount,” said Suleman Akhtar, an economist at Foundation Securities Ltd. in Karachi. “The world seems to understand the situation Pakistan is going through politically, economically and strategically.”

The funds will be sought in the form of aid, Finance Adviser Shaukat Tarin said by telephone from Islamabad today. Pakistan will receive its second installment of $840 million from the IMF loan on March 30, he said.

Member Countries

Pakistani foreign ministry officials briefed the envoys of member countries in Islamabad yesterday about the proposed development projects, Basit said.

Pakistan revised its economic growth target in February for the fiscal year ending June 30 to 2.5 percent, from a previous estimate of 3.4 percent. The economy expanded an average 6.8 percent in the past five years. Inflation is forecast by the central bank to average 20 percent this fiscal year.

The countries in the group “recognize the need for building strategic partnerships with the government of Pakistan to promote economic development and financial stability, address its energy needs, build institutions and bring peace and stability to the region,” according to a statement on the Web site of the foreign ministry.

The group includes Australia, Canada, China, France, Germany, Italy, Japan, Saudi Arabia, the United Arab Emirates, the U.K., the U.S, the World Bank and the Asian Development Bank.

 

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Govt perusing TAPI, other gas projects seriously

ISLAMABAD: Adviser to prime minister on Petroleum and Natural Resources, Dr Asim Hussain on Wednesday said the upcoming steering committee meeting on Turkmenistan-Afghanistan- Pakistan-India (TAPI) project would produce positive outcome in the negotiations on the project. He declared that this project would help promote political goodwill in the region. He highlighted that Pakistan was vigorously pursuing the TAPI gas pipeline projects and other gas import projects to meet the growing energy demands of the country. staff report

Daily Times - Leading News Resource of Pakistan

 

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WB to resume $500m programme loan today ​

Thursday, March 26, 2009

ISLAMABAD: The World Bank is all set to resume programme loan worth $500 million for Pakistan on Thursday under the Poverty Reduction and Economic Support Operation (PRESO) after a pause of almost one and a half years.

An official document exclusively available with The News comprising details of proposed PRESO reveals that Pakistan has agreed to the WB withdrawal of power subsidies, automatic fuel price adjustments, reduction in carry forward of development spending and strengthening of public debt management as well as expanding targeted subsidy to 40 million or 25 per cent population living below the poverty line.

The WB had suspended its programme loan for Pakistan during last fiscal year 2007-08 when Musharraf-Aziz government was unable to control political upheaval after March 9, 2007 and took crucial decisions on the economic front.

However, the document states the PRESO proposed the government to introduce an automatic fuel price adjustment mechanism, which is likely to provide benefits to consumers during the current period of low crude prices.

Interestingly, the WB assessment observes “electricity tariff increases are unlikely to have any direct adverse impact on poor people.” It further states “fortunately, the recent decline in international commodity prices makes reduction in domestic food and fuel prices more likely than increases, which allays the earlier mentioned concerns. The proposed PRESO action on fuel is expected to benefit all households.”

The WB will provide Special Drawing Rights (SDR) of 321.3 million (equivalent to $500 million) on standard IDA terms with a 35-year maturity and 10-year grace period.

The WB executive board is scheduled to take up the issue of $500 million loan in shape of single tranche policy development credit under PRESO for Pakistan on Thursday when it will meet in Washington.

When contacted, Secretary Finance Salman Siddiq also confirmed on Wednesday night that the WB board will take up approval of PRESO for Pakistan on Thursday. Under this proposed loan agreement, Pakistan will undertake actions for regaining and maintaining macroeconomic stability through increased tax revenue mobilization, adjustment of fuel prices and power tariffs, improved efficiency of public spending, and strengthened government debt management, enhancing competitiveness through reduced barriers to business entry and exit, and strengthened financial sector, protecting the poor and vulnerable through improved targeting of safety nets and cash transfer programmes, and strengthened statistical systems.

“Improved access to social safety nets for the poorest 25 per cent of the population will be achieved during the next three year period,” the document states. The PRESO aims to support the implementation of Pakistan’s recently adopted Second Poverty Reduction Strategy Paper (PRSP-II. The reform programme supported by PRESO is built on three pillars focusing on: (i) regaining and maintaining macroeconomic stability; (ii) enhancing competitiveness; and (iii) protecting the poor and vulnerable. The specific reforms to be supported in each area are detailed in the government and the State Bank of Pakistan’s letter of development policy. PRESO will focus on actions that are critical for economic stabilization and promotion of competitiveness, protection of the poor and vulnerable, as well as for achievement of the set outcome goals.

The immediate task at hand for the authorities will be to re-stabilize the economy and narrow macroeconomic imbalances.

The sharp increase in economic imbalances in 2007-08 was largely caused by government overspending-in particular on fuel and power subsidies-and under-forecasted domestic interest payments. Therefore, in addition to ensuring that energy subsidies remain within the limits of the budgeted amounts, it will be essential to reinstitute automatic price adjustment mechanisms for both fuel and power to avoid similar problems in the future.

“Bringing the power tariff to the cost recovery level will also be essential for putting the power sector on financially sustainable footing and attracting foreign investors to the sector,” the PRESO document states.

In addition, the document states, the proposed programme will support reforms to improve the efficiency and prioritization of public spending. The government’s development programme portfolio has expanded to an unmanageable level with about 2,000 different schemes, a large annual throw forward and little sense o f prioritization of activities. “Efficient cash management is also lacking, and public procurement remains relatively non-transparent,” the document pointed out.

In the current environment, it is imperative to raise the efficiency of public spending. Further, the government’s debt management needs urgent attention. PRESO is proposed to support reforms in all these areas. A stable financial sector is also essential for development. The global financial crisis and the needed macroeconomic adjustment can be expected to put strain on the financial sector, threatening its stability. Thus, the proposed reform programme will support measures to improve the stability of the system. The reform programme would support the efforts of the authorities to improve the targeting of the existing social safety net system, and in particular the targeting of the Benazir Income Support Programme.

The programme is also proposed to support statistical reform to enhance the reliability of economic and social data.

 

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US, Pakistan discuss ROZ bill ​

Thursday, March 26, 2009

ISLAMABAD: US Ambassador to Pakistan Anne W Patterson on Wednesday called on the Minister of State for Investment and Chairman Board of Investment, Saleem H Mandviwalla and discussed implementation and other important aspects of the bill related to the Reconstruction Opportunity Zones (ROZs) for NWFP.

According to a press release issued by the Ministry of Investment, the US Ambassador informed the minister that this measure has been introduced in the US Congress to launch a preferential trade programme through establishment of ROZs in Pakistan and Afghanistan.

This would give the people in impoverished areas a new economic hope and help curb violent extremism. The US ambassador and the minister expressed satisfaction over the steps taken by the NWFP government for restoration of peace in Swat, it added.

The minister assured the ambassador that the federal government would fully support the region’s socio-economic welfare and early rehabilitation of internally displaced persons in the valley.

Referring to the Reconstruction Opportunity Zones, the minister said the passage of this bill would expedite socio-economic development in FATA. However, the minister of state also urged upon the US government to build and liaison directly with the people and business community in the province of NWFP for expediting their financial support.

He further said that economic development of people will be vital in rooting out the menace of extremism in the region through a holistic approach, including other components as well, the press release added.

 

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Pakistan pursuing TAPI pipeline project: adviser ​

Thursday, March 26, 2009

ISLAMABAD: Adviser to Prime Minister on Petroleum and Natural Resources Dr Asim Hussain on Wednesday said that Pakistan was vigorously pursuing the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project and other gas import projects to meet the growing energy demand of the country.

He was talking to Sapar Berdiniyazo, Ambassador of Turkmenistan in Pakistan, who called on him here at his office.

Referring to the economic and political significance of the TAPI gas pipeline project for the entire region, the adviser stressed the need for its early implementation, saying that it would help strengthen and expand economic and trade relations among regional countries. The adviser said that upcoming steering committee meeting on TAPI project would produce positive outcome and declared that the project would help promote political goodwill in the region.

The ambassador said that beyond the TAPI gas pipeline project, Turkmenistan desires to further deepen bilateral relations in different fields.

 

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Metro aims to expand business in Pakistan ​

Thursday, March 26, 2009

KARACHI: Metro has been successfully operating in Pakistan with its four centres despite tough economic conditions in the last six months and “now with our first centre in Karachi we aim to open many more outlets in the financial hub of Pakistan,” said James Scott, Regional Operating Officer Asia Pacific, Metro Cash and Carry.

He was talking to The News on the sidelines of the opening ceremony of its first Metro Cash and Carry wholesale centre here on Wednesday. He said: “We are already operating four centres in Pakistan, we have been successfully coping with the economic slowdown in the world economy, especially in the last six months. Our total investment in existing five centres is almost 100 million euros (Rs11.8 billion) with each centre 20 million euros (Rs2.3 billion). We are satisfied with our performance.

When asked why two weekly wholesale bazaars have been shut down recently in the vicinity of new Metro centre, he said “we are inaugurating this centre today and these bazaars have already been shut down so there is no possible connection between the two events, and we are open to all sorts of competition.”

Metro is already running four wholesale centres in Pakistan, two in Lahore, one in Islamabad and one in Faisalabad. It exclusively caters to professional customers like hotels, restaurants and small retailers like Kiryana stores.

Scott said: “We only deal with professional customers and do not sell products to private customers (in retail).”

Giovanni Soranzo, MD Metro Cash and Carry, Pakistan, said “with the population of over 170 million people and more than a million residents in eight cities, Pakistan is a very attractive and important market for our company, adding that we see a vast prospect for our business, and will continue to invest in Pakistan to grow in coming years.

Along with expansion, we aspire to contribute to economic growth of the country.” He said the average capital investment for this new Metro Cash and Carry outlet is Rs2 billion.