Pakistan Economy - News & Updates - Archive

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Friends of Pakistan meeting on April 2: Govt to propose $30bn aid and investment package​

ISLAMABAD: The government will propose a 10-year $30 billion aid and investment package at the experts level meeting of Friends of Pakistan scheduled to be held on April 2 in Abu Dhabi.

Experts level meeting would finalise agenda for the ministerial level meeting, scheduled at Tokyo on April 17 to be presided over by President of Pakistan.

Representatives from 22 donor countries and international development institutions to participate in the experts level meeting, hosted by Pakistan while Japan, USA, UK, France, Germany, Italy, Canada, People’s Republic of China, Saudi Arabia, UAE, Turkey, EU (European Commission), Australia, Republic of Korea, Netherlands, Norway, Sweden, Spain, United Nations, World Bank, Asian Development Bank and Islamic Development.

Day One April 1, 2009: Dr Anwar Muhammad Gargash, UAE Minister of State for Foreign Affairs to be the chief guest at inaugural session of the meeting.

Salman Faruqui, co-chairman, Federal Minister and Secretary General to the President of Pakistan would brief the participants the about the development requirements of Pakistan.

Secretary, Planning Commission would brief the participants on Pakistan’s strategic perspective on the Friends of Pakistan-Clusters on development, security, energy and institution building.

Secretaries Finance and Economic Affairs Division to present Pakistan’s strategic perspective on the Tokyo Donors Conference and Trade and Finance.

Secretary Planning Commission to chair experts level discussion on FODP Clusters especially Development Cluster. Secretary Interior to brief the participants of FODP meeting proposals developed by the security cluster for enhancement of capacity of the Pakistan’s law enforcement agencies and forces to fight militancy and fight against terror.

Thursday April 2, 2009: Discussion on Clusters proposals to continues on second day.

Secretary, Water and Power and chairman WAPDA would present in the meeting proposals finalised by Energy Cluster.

Ambassador-at-Large Javed Malik would give presentation on Public Diplomacy. Presentation on institution building cluster to be given by Senator Sughra Imam, presentation on trade and finance to be delivered by secretaries Finance and EAD. At the conclusion of the meeting, agenda and report of the experts level meeting would be finalised.

Sardar Aseef Ahmed Ali, Deputy Chairman Planning Commission told reporters including $6 billion Basha Dam with two billion from other initiatives proposed package estimated at $30 billion for next 10 years.

However, excluding Basha Dam, aid ranging $22 billion have been proposed for the next 5 years, he added.

Some 25 percent of the $22 billion proposed aid package have been proposed as grants for poverty alleviation, human resource development and health as well as education sector uplift, being main components of the social sector, Sardar Aseef said.

Youth can be potential Bomb or Potential Opportunity, as human resource development is key to eliminate indulgence of youth in terrorist activities in Pakistan especially in FATA and other disadvantage areas of the country and this would help utilisation youth in the development of the country, he explained.

Mr Aseef was of the view that securitisation of remittances especially from Middle East is expected to make available $3.5 billion foreign exchange for reserves building purposes.

This would not only help for enhancing foreign exchange reserves to a comfortable level but would also help improve Pakistan’s credit rating and reduction in insurance premium.

 

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‘Govt to facilitate gems, jewellery sector’​

KARACHI: The government would continue to facilitate the gems and jewellery sector.

This was stated by Federal Minister for Industries and Production, Mian Manzoor Ahmad Wattoo on Tuesday. He said the government was striving to facilitate all developing export-oriented sectors to increase exports from the country.

He said gem and jewellery was among the sectors, which would perform its role in poverty alleviation, economic development and development of mining sector in the country.

While visiting the Gem Exchange and Gemstone Identification Laboratory of Pakistan Gems and Jewellery Development Company (PGJDC) in Quetta, the minister said Pakistan has huge potential of exporting gems and jewellery products. He said the government was fully committed to provide the needed resources to this sector to enable it for competition in the international market. Wattoo was briefed about PGJDC’s activities and efforts for the development of the gems and jewellery industry of Pakistan and especially its efforts to up-bring the gemstone sector in Quetta.

He visited the facility and showed a lot of interest in the facilities provided by the PGJDC at Gem Exchange and Gemstone Identification Laboratory. He said, “I am very impressed with the Gem Exchange and Gem Lab and the activities of PGJDC for the development of the gems and jewellery sector of Pakistan.”

He was informed that Indians were keen to move further in doing business with gemstone sector and traditional stone studded jewellery of the country. Chairman PGJDC, Mutiullah Sheikh said having learnt about the great amount of efforts that PGJDC was putting in for the development of the gems and jewellery industry, especially in the areas of improving lapidary skills, mining and technology upgradation of gemstones, Indians have planned to further enhance their business with Pakistan’s gem and stone sector.

He said the exports of this sector which have stagnated at very low levels, just around $45 million, have grown manifold and would help achieve the ambitious target of $22 billion overall export target of the country for 2008-09. The provision of complete zero-rating to the gems and jewellery sector would increase export of value added products by the Small and Medium Enterprises (SMEs), he added. The sector is enjoying zero rate customs duty and sale tax on imports of gold, silver, platinum, palladium, diamonds and gemstones.

The PGJDC led the delegation, which regularly send Pakistani delegations to different international gems and jewellery exhibitions, including IIJS Mumbai and Goa. Pakistani Gems and Jewellery sector’s 68-persons delegation visited India International Jewellery Show 2008 (IIJS Mumbai 2008), from August 7-11 2008, and explored a great demand for Pakistani gemstones, mineral specimen and traditional Pakistani stone studded jewellery in Indian market.

 

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US considering $2.8bn military aid to Pakistan​

WASHINGTON: US President Barack Obama plans to propose nearly $2.8 billion in military assistance for Pakistan in addition to the $1.5 billion a year civilian aid, it was revealed on Monday. The money will be spent over five years. The first $400 million will be allocated to the supplemental request for war fighting in fiscal year 2009. Another $700 million will be given in 2010 base budget. Then $575 million will be spent a year from 2011-2013. daily times monitor

 

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GDP growth rate to increase to four percent by 2010: Asian Development Bank Outlook 2009​

ASMA RAZAQ
ISLAMABAD (April 01 2009): Asian Development Bank (ADB) has projected Pakistans gross domestic product (GDP) growth rate in 2009 financial year to be 2.8 percent that would increase to four percent in 2010, said ADBs Country Director for Pakistan Rune Stroem here on Tuesday.

The GDP growth rate forecast by the ADB is not in sync with those agreed between the government of Pakistan and the International Monetary Fund (IMF) team in Dubai last month for 2009 fiscal year - 2.5 percent which will automatically have repercussions on ADB forecast of other macroeconomic indicators, including domestic revenue generation.

The ADB Country Director was talking to the media on the launching ceremony of "Asian Development Outlook 2009." He said that the ADB had projected Pakistans inflation rate for 2009 financial year at 20 percent. "This rate is 40 percent higher than the last years 12 percent. The inflation rate of Pakistan for 2010 is projected to be six percent that is 70 percent less than that in 2009," Stroem stated.

He said that the external debt and liabilities of Pakistan had increased by 58 percent of the GDP due to high fiscal and current account deficits as well as scarcity of non-debt creating inflows.

According to the ADB report, in Pakistan during 2008 financial year, a sharp deterioration in current account and escalating inflation led to a depletion of foreign exchange reserves. This, in turn, triggered a balance-of-payments crisis. The immediate threat to economic stability and the servicing of international debt obligations was overcome through a stabilisation programme backed by the International Monetary Fund.

During 2008 financial year (ended on 30 June 2008), the economic situation deteriorated significantly after five years of respectable growth that averaged around seven percent. Aggravated by unprecedented oil and food price shocks in 2008 financial year, though the economy started having problems attracting inflows, and its economic fundamentals worsened.

The resulting steep drawdown of reserves led policy makers to turn to the International Monetary Fund (IMF) for support for its stabilisation programme. The report states that growth dropped to 5.8 percent in 2008 financial year in Pakistan. Significant factors constraining growth have been the sharp decline in the growth of private investment resulting from political uncertainty, the worsening security situation, and the impact of high international oil prices and frequent power shortages.

The contribution of investment to growth fell to only 0.7 percentage points in 2008 financial year as compared to 2.7 percentage points in the preceding fiscal year. Yet the saving-investment gap (private sector deficit) widened, as a result of a decline in the saving-to-GDP ratio.

"The Asian Development Outlook 2009" states that subsidies on oil, food, fertiliser and power contributed to the budget deficit in Pakistan, but failed to contain inflation as food prices soared and the price of fuel was adjusted upward in the last four months of 2008 financial year.

The steep depreciation of the Pakistan rupee stoked inflation pressures. The consumer price index on a year-on-year basis climbed to 21.5 percent in June 2008 and to 25.3 percent in August-the highest in 30 years.

With declining international commodity prices and a slowing domestic economy, the year-on-year consumer price index fell to 20.5 percent and food inflation to 21.6 percent in January 2009 in Pakistan. Domestic inflation would have fallen by more had the Pakistan rupee not depreciated by 15.9 percent against the United States dollar in the first seven months of 2009 financial year.

According to the report, growth in 2009 financial year is estimated to slow to 2.8 percent due to the impact of the global slowdown, tight demand management policies, and the power deficit year. Growth in agriculture will improve with respect to that in the last fiscal, but will remain moderate on account of high input costs, including electricity, fertilisers and pesticides, and pest attacks. The sugarcane crop has been disappointing, and the cotton crop has been short of target. However, the wheat crop is projected to be very good on account of improved water availability and a 52 percent increase in the support price for farmers, announced in September 2008.

The report says that the energy shortages, the law and order situation and capacity and input constraints caused by higher import prices from the large depreciation of the Pakistan rupee, will lower industrial performance. Large-scale manufacturing shrank by 5.6 percent in the first five months of 2009 financial year.

The GDP growth is expected to improve to 4.0 percent in 2010 financial year. The expansion will come from greater stability in economic fundamentals, improved financial inflows resulting from gradual easing of global credit conditions that will help revive investment. The report maintains that the fiscal deficit is expected to decline in 2009 financial year, as the government removes or reduces subsidies, and rationalises development expenditure while in 2010 financial year, the fiscal deficit is projected to go down further to 3.4 percent of GDP as ongoing tax administration and policy reforms start to make themselves felt in greater generation of revenue and as expenditure is streamlined. The economy needs to develop infrastructure and invest in health and education. Deficit spending can be carried out judiciously, and it need not be inflationary because the economy is very far from full employment.

Inflation is projected to fall to an average of 6.0 percent in 2010 financial year. Imports would need to continue to compress significantly in the second half of 2009 financial year to improve the current account balance, especially as exports will be hit harder by recession in the main importing economies.

On these assumptions, the current account deficit is projected to go down to 6.0 percent of GDP in 2009 financial year. According to the report, the current account gap remains a major challenge in Pakistan that was exacerbated by the deterioration in the financial account in the seven months of 2009 financial year. The IMF will provide much-needed balance-of payments support over the next two years, but such support cannot indefinitely sustain a large external imbalance. This imbalance imposes a balance-of-payments constraint to sustainable growth in Pakistan:

The GDP growth rate of Pakistan for 2009 and 2010 is projected to be 2.8 percent and 4.0 percent respectively, while the GDP growth rate of India for 2009 and 2010 is projected to be 5.0 percent and 6.5 percent respectively. The average GDP growth rate of Pakistan for the last five years, (from 2004 financial to 2008 financial year) is recorded to be 6.9 percent while that of Indias is 8.5 percent.

The report says that the GDP and the sectoral growth are projected to slow down in 2009 financial year in Pakistan due to the global crisis, tighter demand management policies and energy deficit. Also the inflation is projected to remain high in the current fiscal due to reduction in subsidies, increase in wheat support price and the currency depreciation. "The Asian Development Outlook 2009" says that economic growth in developing Asia will slide to just 3.4 percent in 2009, down from 6.3 percent last year and 9.5 percent in 2007.

 

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Mangla hydel power units resume production​

LAHORE (April 01 2009): The closed Mangla hydel power generation units resumed production of 250 megawatt, much needed electricity after Indus River System Authority (Irsa) released 25,000 cusecs water from the Mangla Dam on Tuesday. Director General, Pakistan Electric Power Company (Pepco), Tahir Basharat Cheema told Business Recorder that load-shedding situation has improved with enhanced water releases from Tarbela and Mangla dams.

Since the hydel power stations are generating about 2000 to 2500 MW, the current shortfall in the supply and demand has come down to manageable 1500 MW, he added. Pepco had started six to eight-hour countrywide load shedding on 21st March after Tarbela Dam touched its dead level and water releases from Mangla Dam on river Jhelum were stopped which forced closing down of Mangla hydel power generating unit. Cheema said that addition of about 800 MW electricity to the national grid, load shedding hours would be reduced now, bringing great relief of the industrial, commercial and domestic consumers.

 

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Gilani sees three percent economic growth this fiscal​

ISLAMABAD (April 01 2009): Prime Minister, Syed Yousuf Raza Gilani has expressed the hope that country would achieve positive economic growth of around 3 per cent this year, saying he expects it to increase to 4 per cent by the next fiscal year. Speaking at the opening session of 24th annual general meeting and conference of Pakistan Institute of Development Economics (PIDE) held under the theme of Economic sustainability in a globalised world here on Tuesday.

Gilani said despite global recession Pakistan economy has been showing resilience under tough conditions. We are hopeful of positive economic growth of around 3 per cent this year and expect it to increase to 4 percent next year. Inflation will come down to single digit in the second half of this year, he said. Gilani maintained that the Cabinet has approved a 9-point agenda that provides the overall framework for mid-term development strategy. It covers macroeconomic stability, emphasises on agriculture as a leading sector with increasing industrial competitiveness, human resources development and good governance, he added.

Furthermore, he said that the government was striving for a stable macroeconomic environment in the country and had taken effective measures to improve economic condition of a common man. He added that the government was framing the economic policies that would lead to more sustainable and equitable economic growth, adding that several steps have been taken to this effect, including reversing of anti-agricultural bias which was a hallmark of the previous regimes economic policies.

We have provided incentives to farmers through higher agricultural prices and timely provision of inputs to boost agricultural output and it is already having a positive impact," he said.

To improve economic conditions of poor people, he said, the government for the first time launched in countrys history a major income support programme for vulnerable people. He mentioned Benazir Income Support Programme, under which Rs 34 billion had been earmarked for the year 2008-09. He said the programme would benefit 3.4 million poor families and with better targeting, the programme would be expanded to cater for seven million poor households.

The prime minister said significant short and mid term measures had been taken to overcome energy and water shortages through fast track energy projects and building of small dams. "We have launched a major effort to raise resources through the Friends of Pakistan Forum to build the Bhasha Dam and other major infrastructure projects," he said.

Moreover, he said that the government was giving highest priority to accelerate development in Balochistan, Fata and other backward regions. In addition, he said that the world has witnessed a global financial meltdown, which started in the USA and spread to other parts of the world, both developed and developing.

For Pakistan, he said this crisis came at a critical juncture when the new democratic government had just taken over. Our government inherited a very fragile economy. The unprecedented hike in oil and food prices created severe macroeconomic imbalances.

Poor economic management and inaction by the previous government further worsened the situation. If immediate action had not been taken the country would have faced default, he added. Being aware of the financial crunch, Gilani said he had given clear instructions to the Finance and Planning ministries not to cut allocations of education and health sectors despite budget pressure.

Deputy Chairman Planning Commission, Sardar Asif Ahmed Ali, said that Planning process must be for the people and by the people. In the past as a consequence of the military government the infrastructure has deteriorated. We have inherited food deficit and wastefulness, he said adding that the country needs serious change in input consumption, infrastructure, export, import and planning. Minister for Planning and Development Makhdoom Shahbudin also spoke on the occasion.

 

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Trade development and export promotion: TDAP, USAID agree to develop common agenda​

KARACHI (April 01 2009): Trade Development Authority of Pakistan (TDAP) and USAID will develop a common agenda for trade development and export promotion in line with the Governments decision, said a press release issued here on Tuesday. A USAID mission on Tuesday visited the TDAP Head Office to hold meeting with the Chief Executive TDAP, Syed Mohibullah Shah and Senior Officials.

During the meeting, the Chief Executive TDAP, highlighted TDAPs role and responsibilities as the premier trade development agency of Pakistan, which carries out various programmes and activities for broadening the export base of Pakistan and opening new opportunities for private sector development and employment generation.

Shah mentioned 12 TDAP projects approved by the government and invited investment and technology transfer as well as technical and other assistance from USAID for taking forward these projects.

USAID mission highlighted main features of their expanded programme of Economic Empowerment, which has been strongly supported by the recent statement from President Obama. A common agenda was identified in the meeting between the two sides. It was agreed that with increasing interaction between them in future, a larger agenda will be developed for implementation through this partnership that will help in opening new vistas for income generation, job creation and value addition in Pakistani exports.

The meeting decided that the heads of TDAP and USAID Project for Pakistan will hold monthly meetings to take forward the common agenda and ensure its smooth and timely implementation for trade and export promotion of value added exports, and widening scope of opportunities for private sector development in Pakistan.-PR

 

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Pakistan and China to cooperate in setting up automotive industry​

CHENGDU (April 01 2009): An automotive assembly plant would be set up in Punjab with the help of a Chinese company at a cost of 30 million dollars. Agreement to this effect was signed in Chinese city, Mianyang, between Commerce and Sourcing House (CASH) a Pakistani company registered in Hong Kong and Shenzhen and Mianyang Huarui Automotive Co Ltd.

The signing ceremony was attended by Masood Akhtar, who is theConsul General of Pakistan in Chengdu and Liu Dong, who is the Mayor of Mianyan. Chengdu is the sister city of Lahore. Mianyang is the second largest city in Sichuan province. Mianyang Huarui Automotive Co Ltd is a part of Brilliance Jinbei Automotive Group.

The plant will be established in an area of 51 acres. The proposed company will have the capacity to build 50,000 vehicles per annum. Both parties will hold 50 percent share of the proposed company. Based upon preliminary data gathered here, the assembled vehicles will consist of 1.5 to two ton single and dual cab trucks, jeeps, single/dual cab pick-ups and mini-vans.

 

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UK investment sought in dams, renewable energy sector​

ISLAMABAD (April 01 2009): Federal Minister for Water and Power Raja Pervez Ashraf on Tuesday urged the investors of United Kingdom to invest in mega water reservoirs including Bhasha dam. Speaking at a luncheon reception hosted by Alternative Energy Development Board (AEDB) in honour of the visiting Pakistan-Britain Investment Forum (PBTIF), Ashraf said that Pakistan had potential of 25000 MW thermal power generation.

He said the government was working to build large dams and Bhasha dam was one of them that would be completed in eight years. PBTIF may be a great help in this regard, the minister said. He said that Pakistan had 195 million metric tons reserves in Thar and the government was also working to exploit these reserves for power generation.

He also invited British businessmen to invest in Pakistans renewable energy sector. He said that Pakistan was offering attractive incentives to investors willing to exploit this environment-friendly but largely unexplored sector especially for power generation.

Pakistans renewable energy sector, the minister said, would be reaching a milestone with the inauguration of the first wind farm in Jhimpir in the second week of April. The farm has been set up by a Turkish firm M/s Zorlu Enerji. Besides, he said, there was vast scope of investment in other areas of energy sector. UK and Pakistan, he said have strong trade ties that are growing.

"UK is Pakistans most important trading partner within the EU because of trade volume and large Pakistani Diaspora living there," he added. UK is Pakistans 4th largest destination for exports. Pakistan exported goods to the UK worth US $1,030 million last year, while imports from UK valued at $769 million.

Pakistan, the minister said, had signed Free Trade Agreement (FTA) with China and is establishing China-specific industrial zones. He urged British investors to benefit from these special zones by setting up industry there and exporting their products duty-free to China. Raja Pervez Ashraf suggested that PBTIF and its counterpart body in Pakistan - Pakistan Britain Business Advisory Group should chalk out a joint plan for further strengthening bilateral trade relations.

British High Commissioner Robert Brinkley, speaking on the occasion, said: "UK would like to further strengthen its trade relations with Pakistan through increased interaction of businessmen and the government officials of the two countries.

Exchange of trade related information and business delegation between the two countries would provide an opportunity to identify areas of mutual interest." Chief Executive Officer AEDB Arif Alauddin hoped that PBTIF, through innovative thinking, dynamic and proactive approach would help improve bilateral commercial relationship. He further expected that British investment would lead to strong growth of different renewable energy sources including bio energy, geothermal energy, hydropower, wind and solar energy.

 

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$500m investment expected from UAE
Thursday, April 02, 2009
By our correspondent

KARACHI: FPCCI Pak-UAE Business Council Chairman Dr Mirza Ikhtiar Baig has said that investments worth $500 million are expected to come from UAE during the current year and a trade delegation from the emirate is also likely to visit Pakistan in November.

A delegation of FPCCI Pak-UAE Business Council comprising 35 members visited the UAE from March 24 to 27. The main purpose of the visit was to attract investment, specifically in the Coastal Refinery Oil Terminal, agriculture, textile city and alternative energy resources, Baig announced while speaking at a press conference on Wednesday. Listing the successful meetings the delegation had conducted, Baig said the National Bank of Dubai SANA Capital had shown interest in investing $200 million in the country whereas Bosicor, a sub-company of UAE’s Abraaj Group, also announced an investment of $10 million in projects of Khalifa Point Hub Coastal Refinery Oil Terminal.

Baig said Dubai Export Development Corporation CEO Saeed Al Awadi had promised to introduce an export insurance scheme in Pakistan under it 90 per cent protection would be provided to companies for their shipment money. Baig said no such export insurance was available in Pakistan and this would be a pioneer move by the UAE-based corporation.

He said an alternative energy company, Bin Din Group, had agreed to invest in the Thar coal project and produce 1,000 megawatts of energy and at the same time would provide employment to 90,000 labourers.

Similarly, another company Mazdar had announced to work on the carbon credit project in the country besides working for a scheme which would provide 15 per cent guaranteed return on alternative energy investments. Baig further said the Sharjah Chamber of Commerce and Industry had allotted a plot of 20,000 yards for the Pakistan Trade and Display Centre in Sharjah for which construction would commence soon under the public-private partnership scheme.

He further said Dubai Investment Bank had announced to open 60 branches in Pakistan. Meanwhile, Emirates Investment Group announced investments in livestock sector for importing 50 thousand superior quality breed cows. He also commented that an Abu Dhabi based company ALDAR had assigned a Pakistani company, Descon to construct the race tracks for the Formula One car race to be held in November this year.

Baig said the cement for the project was being exported from Pakistan whereas 20,000 Pakistani labours were also working on the construction project. He said UAE is the largest investor in Pakistan among Gulf states and during 2004-2008 had invested $3.74 billion. He said about 800,000 Pakistanis are employed in UAE who send remittances to the country to the tune of $1 billion annually.

$500m investment expected from UAE

 

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Economy suffered $6bn loss last fiscal: Hafeez Pasha ​

Thursday, April 02, 2009

ISLAMABAD: The head of high-profile Panel of Economists, Dr Hafeez A Pasha, said Wednesday that as per conservative estimates the economy was facing financial losses worth $6 billion for becoming part of the US-led war on terror.

Delivering AR Kemal Memorial Lecture, organised by the Pakistan Institute of Development Economics (PIDE) Dr Pasha said that the Obama administration had just announced $1.5 billion assistance per annum in order to compensate for the losses borne by Pakistan after joining the terror war. However, he said, the amount was much less than the conservative estimates of up to $6 billion during last fiscal year 2007-08.

He said that the government had failed to deliver on the promise of slashing current expenditures as element of charged expenditures of the ministries are not showing cut in their expenditures despite Prime Minister’s clear instructions where he himself cut down PM Secretariat expenditures by almost 40 per cent.

The government has not done much to decrease its current expenditures rather it has axed development expenditures by 40 per cent across the board without considering any important areas of the economy.

The non-salary expenditures, he said, went up to Rs100 billion, showing a growth by 22 per cent during the current fiscal year.

He also said that the government did not take required measures on tax side and if the FBR collected Rs1,200 billion against the target of Rs1,300bn, it would be an achievement. “Keeping in view tax slippages, the fiscal deficit target can go up to 5 per cent of the GDP,” he said and added that the IMF was quite lenient on Pakistan and breach of fiscal deficit target would not harm Islamabad in terms of getting the next tranche from the Fund.

He also said that the downside risks to the economy were the growing cost of mis governance, which needs to be improved.

He also said the Musharraf regime in its first three years from 1999-2002 successfully implemented macroeconomic stabilization program under the IMF programme but at the cost of poverty taking 7.5 million people in its clutches and 1.2 million persons got unemployed after the IMF programme. The country’s growth was also compromised.

Citing an example about the cost paid by the people of Pakistan, he said, “the operation was successful but the patient was need to die.”

He claimed that the panel of economist prepared homegrown stabilisation programme under the dispensation of the incumbent regime, which was taken by the IMF for granting $7.6 billion package to Pakistan under the Stand-By Arrangement (SBA).

Talking about differences between the strategy recommended by the panel of economist and the programme approved by the IMF, Dr Pasha said that the panel recommended continuing Research and Development support to textile sector while the IMF asked to implement free exchange rate regime.

Pakistan moved so fast on trade liberalization that it required to reverse some of the policies because it resulted into import led consumption to please the rich. We should retreat on trade liberalisation, said Pasha. The government should impose regulatory duty on non essential imports. The model recommended nine policies including both fiscal and monetary policies. The report also recommended the mobilisation of domestic resources rather than depending too much on external sources and foreign debt. “This will lead to debt un-sustainability,” he added.

Service sector tax and increase in excise duty and for the support of new emerging industries.

India has depreciated its currency by 28 percent, Indonesia by 31 percent to maintain competitiveness. This is a challenging task for Pakistan to maintain its competitiveness in the world market.

He further said that for the last two to three years when the fiscal space was good and there was enough room for developmental expenditure the government blindly approved every project without looking to the outcome and important of these projects.

“We also suggested that SBP should increase the interest rate by 2 percent and not more than that. We also recommend increasing the return on national savings. We also advise the government for the regulation of public sector imports, broad based regulatory duty and for export rebate,” said Pasha.

IMF condition of increase in the tax rate is not rational. “We should withdraw the exemptions and develop the provincial taxes,” he concluded.

 

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British keen to invest in Pakistan ​

Thursday, April 02, 2009

KARACHI: Chairman of Pakistan Britain Trade & Investment Forum and Vice Chairman of Standard Chartered Capital Markets Plc, Sir Tom Harris, has said that British investors are keen to invest in Pakistan, which is a potentially significant emerging market.

He said that a significant number of British companies plan to expand their project-based investments in Pakistan and look forward to support from the government and other trade bodies to make the investments useful for both countries.

He was speaking during a visit of a delegation of Pakistan Britain Trade & Investment Forum (PBTIF) to the Overseas Investors Chamber of Commerce & Industry (OICCI) on Wednesday, which discussed issues hampering foreign direct investment (FDI).

He appreciated the overall investment climate in Pakistan despite the current law and order situation. The financial sector along with investments in training and education were the two areas they found especially attractive.

The main concerns include current economic situation, energy crisis, law and order and availability of specialised capital/receptive financial markets. This visit was in reference to a memorandum of understanding (MoU) signed in 2008 between OICCI and PBTIF to enhance Pakistan’s image in the UK in order to bring further investment into the country.

The delegation included Sir Tom Harris, High Commissioner for Pakistan in the UK, Wajid Shamsul Hasan and Deputy High Commissioner, Karachi, Robert W. Gibson along with representatives of British companies.

While addressing the delegation, Farhat Ali, President OICCI said, “The chamber can play a significant role in increasing investment and economic growth despite the challenging times. The country has various positives to offer and sustained assistance from forums like PBTIF as well as the government can make the country an investment friendly destination.”

KSE visit: The delegation of the Pakistan British Trade & Investment Forum (PBTIF) visited the Karachi Stock Exchange (KSE) on Wednesday and held a meeting with Adnan Afridi, MD KSE and other officials.

They exchanged views on investment opportunities and areas of mutual interest for the two countries.

 

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KSE recovers 17% during Jan-Mar period amid sluggish activity in regional markets​

KARACHI: Karachi Stock Exchange (KSE) 100 Index witnessed a recovery of 17 percent in first quarter of 2009 at a time when the performance of regional markets remained sluggish. Moreover there were few stocks, which posted more than 70 percent returns, analyst Atif Zafar at JS Research said. Thanks to political stability and improving economic indicators, he said, Pakistan market posted handsome gain of 17 percent compared to MSCI EM Asia, MSCI World and MSCI EM return of 1.2, -11.3 and 0.5 percent, respectively. Though foreigners sold $238 million worth of shares during the period, local institutions and high net worth individuals provided support to the market. On the back of handsome earnings growth and attractive dividend yield, fertilizers and E&P outshined the market. Within these sectors, Fauji Fertilizer and Engro Chemicals on posted return of 91 percent each, while PPL and POL graced the market with 72 percent and 67 percent return, respectively. Amongst the individual scrips, Packages and Attock Petroleum were runaway leaders. Packages rose amid announcement of selling its stake in Tetra Pak for a consideration of $115 million while APL rallied at the back of lower risk of inventory losses. Amongst other sectors, banks despite concerns over NPLs and impairment on equity investments, posted handsome return. National Bank and Habib Bank outperformed the market with wider margin and posted return of 75 percent and 93 percent. Auto sector performed poorly as both the stocks, Pak Suzuki and Indus Motor under performed amid bleak near term future due to falling demand and rising cost pressures.

 

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Review of Economic Situation July-February 2008-09: Services sector to drive growth, fiscal & CAD targets would be met​

ISLAMABAD: Growth in the services sector would drive the GDP growth in 2008-09 while fiscal deficit target of 4.2 percent of GDP and current account deficit of 5.9 percent would be achieved, stated Review of Economic Situation July-February 2008-09 released by Ministry of Finance here on Wednesday.

Recent global financial crisis and extremely vulnerable security environment added risks to the economy.

Real Sector: The growth outlook is not free of risks as industrial production has been badly affected by acute energy shortages, deterioration in law and order situation, and constricted access to finance by risk averse banks. For the year 2008-09, given

domestic and international economic pressures especially high inflation and macroeconomic imbalances, the GDP growth has been envisaged at 2.5% on the back of positive outlook of the agriculture sector where all indications are pointing at good growth.

Agriculture: The agriculture has been facing acute irrigation water shortages and the water intensive crops sugarcane and maize fell short of the target and depicted negative growth of 18.5 percent and 7.5 percent in 2008-09. However, other two major crops cotton and rice have registered positive growth of 7.3 percent and 13.5 percent, respectively. Wheat, with its 12.7 percent weight in overall agriculture, is estimated to post 19.0 percent growth over the last year.

The livestock sector is growing at normal pace and thus the target of 3.2 percent will be achieved.

Manufacturing Sector: Large-scale manufacturing registered a negative growth of 5.35 percent in July-January 2008-09 against reasonable positive growth of 5.7 percent in the comparable period of last year.

Services sector: Improved prospects in transportation and storage sub-sectors on the back of relatively better production in major crops, strong contribution by finance and insurance sector and augmented administrative and defence related spending will provide support to adequate level of growth in the services sector.

Inflation: All price indices like CPI, WPI and SPI witnessed a clear downtrend in recent months. On current trends and barring any adverse shocks, it is expected that the average inflation for the year (2008-09) as measured by CPI will be close to 20 percent. The month of February witnessed fractional decline in the core inflation.

Monetary Policy: Net domestic assets (NDA) have increased by Rs 418.2 billion as compared with increase of Rs 541.7 billion in last year, thereby showing an increase of 10.4 percent in this period whereas, last year the growth in the comparable period was 17.6 percent. Net foreign assets (NFA) have recorded a contraction of Rs 283.5 billion against the contraction of Rs 232.3 billion in the comparable of last year.

Weighted average lending rate have witnessed slight decline from 15.5 percent in October 2008 to 15.3 percent in January 2009. The weighted average yields on 6 months T-bill has declined by almost 100 basis points to 13.0 percent in February 2009 as against 14 percent in November and December2008.

Capital Market: The market breached 7,000 points psychological barrier on March 31, 2009 in anticipation of political stability and restoration of judiciary. The positive reports like possible inclusion of KSE in MSCI Frontier Index, expected incentive driven petroleum policy and encouraging prospects on aid front are the supporting factors that are guiding the KSE in the positive direction.

Fiscal Policy: The stock of domestic debt grew by Rs 341 billion by end-January 2009. This strong growth in the domestic debt reflects non-realisation of privatization proceeds and reduced availability of net external financing due to increase in external debt repayments on maturing stock of foreign currency bonds.

Foreign direct investment (FDI) has reached $ 2794.4 million during July-February 2008-09 as against $2789 million in the comparable period of last year, thereby, depicting a marginal increase of 0.2 percent. If privatisation proceeds of $133 million received in the comparable period of last year is excluded, then FDI inflows witness an increase of 5.2 percent.

 

[Neo]

Kharif season: MINFA seeks $100m to cover urea shortfall​

ISLAMABAD: For the coming Kharif season 2009 (April to September) the Ministry of Food and Agriculture (MINFA) will seek $100 million from the Ministry of Finance for import of urea fertilizer, which is likely to fell short by about 0.369 million tonnes in the season.

The request for $100 million would be forward soon to the ministry of finance for approval, the officials maintained.

They said that the estimated availability of urea fertilizer for Kharif Season was 2.656 million tonnes while the estimated demand would be 3.025 million tonnes, showing a net shortfall of 0.369 million tonnes.

Similarly, the country is likely to confront a shortfall of SOP/MOP types of urea in the season. Total demand for SOP/MOP is expected to be 17,000 tonnes and the total estimated availability was 10,000 tonnes.

However the situation of DAP was quite comfortable with total availability of 0.628 million tonnes against the total demand of 0.560 million tonnes. About 68,000 tonnes surplus quantity of DAP would be available even after the Kharif Season 2009, the officials claimed. Same is the case with phosphatic products (TSP/MAP), the availability of which was expected to be 0.102 million tonnes against the demand of only 9000 tonnes, showing a surplus quantity of 93,000 tonnes.

Sources claimed that the Ministry of Finance had reportedly refused to make subsidy claims payment of around Rs 1 billion including Rs 370 million imports of DAP and other phosphate.

All types of urea fertilizers were basic component of inputs, on which the agriculture production depends. Shortage of fertilizer lead to failure of the government to achieve targets of various agriculture crops including wheat.

The availability fertilizer would help the government in achieving production targets to be set in the high-powered Federal Committee on Agriculture on April 9. Main crops of the season are cotton, sugarcane, rice, maize, mung, mash and chillies.

Last week, the National Assembly Standing Committee on Local Government and Rural Development decided to provide subsidies to farmers on basic inputs for increasing agriculture production. Chairman of the committee was of the view that Pakistan was an agriculture country and farmers should be given subsidy on pesticides and other basic inputs. Such incentive would increase agriculture production which ultimately meet requirements and also to enable the agriculture sector to export the products.