Pakistan Economy - News & Updates - Archive

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Cement exports increase by 52% during 9MFY09​

KARACHI: The cement export witnessed a growth of 52 percent in first nine months of the current fiscal year to reach 7.9 million tonnes, while total dispatches on yearly basis in 9MFY09 registered a decrease of 0.4 percent, to reach 21.8 million tonnes.

According to the data released by the All Pakistan Cement Manufacturers Association (APCMA) on Wednesday, local cement dispatches in first nine months fell by 17 percent to stand at 13.9 million tonnes, though of pace of growth has slowed down in recent months.

However, on monthly basis local dispatches went up to 1.7 million tonnes as winter season has worn off and local projects have gradually started to gain momentum.

Exports also climbed by an encouraging 10 percent on monthly basis to 1,032,000 in March. Based on estimates, exports have crossed the 1 million mark first time ever.

On the export front, depreciation of rupee has rendered Pakistani cement as a highly attractive option. The north has primarily contributed to the impressive increase in exports.

The exports primarily increased due the demand pouring in from Afghanistan that accounts for 28 percent of the exports (36 percent in FY08). “This is because the incremental exports have primarily been directed towards the cement thirsty UAE, the elaborate construction projects of which have yet to take a hit from the looming economic slowdown,” an analyst said.

”Uncertain political and economic conditions continue to hamper infrastructure as well as private sector development projects in the country causing local cement sales to face the brunt,” Analyst at Jahangir Siddiqque Research Syed Atif Zafar said.

He said that on the export front, demand from Middle East and African countries continued to drive exports, though there is a risk that global economic downturn may affect future export orders. As a result, share of exports in total sales has risen to 36 percent in the first nine months of FY09 as against 24 percent in the corresponding period of last year.

Exports are expected to register a decelerating growth, as the global economic slowdown deepens further reducing demand for housing and construction activities. The demand and supply gap in the international market is expected to narrow down further as other countries gear up with more capacity, thus reducing export demand, analysts said.

“Pressure is being exerted on local demand, primarily due to macro-economic slowdown, high interest rates, sky-high cement prices, which leaped by 65 percent during the said period. The local prices are currently hovering around an average retail price of Rs 355 per 50 kg bag (Rs 7,100 per tonne) and a retention price of Rs 255 per 50 kg bag (Rs 5,109 per tonne).

Studies have shown that cement demand is highly correlated with the growth rate of GDP. Recently, the ministry of finance has further revised the GDP growth target downward to 3.4 percent from 3.5 percent, which will further erode cement demand.

 

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FoP meeting expresses support for Pakistan​

ISLAMABAD: Strong support for Pakistan’s development was expressed at the expert level meeting of Friends of Pakistan (FoP), inaugurated by the Minister of State for Foreign Affairs of the UAE, Mohammad Anwar Gargash at Abu Dhabi.

The development financial package required from FoP is $30 billion including $21 billion as grants and credit while $9 billion in the mode of Public Private Partnership (PPP) and Direct Foreign Investment (***) spread over 10 years.

Pakistan sees the FoP process aimed at enhancing Pakistan’s capacity and strengths as Pakistan is determined to convert challenges into opportunities, stated Salman Faruqui, Secretary General to the President, while addressing the FoP meeting.

Faruqui is leading the Pakistani delegation as well as co-chairing the experts meeting of the FoP which has been hosted by the Government of the UAE in Abu Dhabi. The Experts of 19 member countries and international institutions are meeting to prepare for the FoP ministerial meeting that is being hosted by the Government of Japan in Tokyo on 17 April 2009.

 

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Govt to issue 100 licenses for oil, gas exploration ​

ISLAMABAD (April 02, 2009): The government on Thursday announced new petroleum policy for the year 2009, Aaj TV reported.

Addressing a press conference here, Advisor to Prime Minister for Petroleum & Natural Resources, Dr. Asim Husain said that over 100 licenses would be issued for oil and gas exploration in the country. He said the new liberal policy will attract local and foreign investors and the government will provide them with all facilities in this regard.

Dr. Asim said the policy aims at enhancing Pakistan’s energy security and meeting country’s requirements for a period of three to four years. He said the country is producing 67000 barrels of oil per day.

The advisor further said that 40 percent income tax would be levied on oil and gas sector.

 

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July-December EDL surge to $50.9 billion: review of Economic Situation released​

ISLAMABAD (April 02 2009): Pakistans external debt and liabilities (EDL) surged to $50.9 billion in the first six months of current fiscal year (July-December) from $46.3 billion in end-June 2008, reveals Review of Economic Situation, released here on Wednesday by the Finance Ministry.

The EDL has gone up to 31.2 percent of projected Gross Domestic Products (GDP) of current fiscal year that was 27.6 percent by end-June 2008. According to the review, foreign investment saw a decline of 34.2 percent in first eight months (July-February) from $2.873 billion to $1.89 billion. A negative growth of 5.4 percent was recorded in the Large Scale Manufacturing (LSM) during the period under review against a positive growth of 5.2 percent for the same period of last year.

The LSM is victims of energy shortage along with rising cost of doing business and deteriorating law and order situation in the country. The review said that LSM growth was hit hard by sharp reduction in demand from both domestic and external sectors.

The further demand compression in the export sector is estimated at 5 percent. The inflation surged to 23.5 percent with food inflation touching as high as 28.9 percent during the period. The non-food inflation was recorded 19.3 percent and core inflation 17.8 percent.

An increase of 4.3 and 0.5 percent was witnessed both in exports and imports respectively. The exports went up from $12.482 billion a year ago to $13.015 billion while imports increased to $21.878 billion from $21.776 billion during the said period. Trade and current accounts deficits recorded a marginal decline. The current account deficit declined to $7.5 billion from $8.6 billion of July-February last year.

The review said that Pakistan witnessed major disruption in its normal economic activities as the fallout of the war on terror spread into settled areas of Pakistan. The outlook for economic growth more pessimistic, imports demand shrivelled, tax collection declined and inflow of foreign investment and privatisation dampened.

Pakistan economy still faces pressure from higher inflation, driven by spike in food prices, the acute power shortage, bewildering stock market, a perceptible slowdown in the manufacturing and services sectors; lower than anticipated inflows and growing financing requirements.

 

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Three primary IMF targets achieved​

KARACHI (April 02 2009): Pakistan has successfully achieved three primary IMF targets, including limit of budgetary borrowing from the State Bank, net foreign assets (NFA), and net domestic assets (NDA), set for the quarter ending on March 31, sources said on Wednesday.

The federal government by retiring budgetary borrowing achieved International Monetary Funds (IMF) one of the primary conditions to cap its budgetary borrowing from the central bank at Rs 1,274 billion on March 31, 2009, they said, adding that "the State Bank of Pakistan (SBP) has also comfortably met IMF two major targets of NFA and NDA by the end of March".

The Fund had given several quarterly targets for constant payment of loan tranches. The first tranche of 3.1 billion dollars of the standby loan was received in November 2008, while the Fund board of directors on March 30 also approved payment of second tranche of 847 million dollars after reviewing the overall economic situation.

Achievement of the target for December 2008 helped to get the second tranche on time, and it was expected that 847 million dollars would be transferred to Pakistan by Thursday, sources said.

The federal government achieved the target of net budgetary borrowing by retiring over Rs 100 billion during last month. The IMF had given a target to reduce the government budgetary borrowing stocks at a level of Rs 1,274 billion by the end of March 2009. However, the federal government reduced its borrowing stocks to a satisfactory level before time, sources said.

"Net stocks of government budgetary borrowing from SBP decreased to Rs 1,270 billion on March 29, which was less than the target of Rs 1,274 billion for the third quarter of current fiscal year 2008-09", they said.

The SBP also achieved its targets of NFA and NDA set by IMF targets for the quarter ending on March 31. "We have achieved IMFs NFA and NDA targets comfortably" confirmed Wasimuddin, chief spokesman of SBP. The Fund had set the target of minimum 671 million dollars for NFA and Rs 1,412 billion for NDA, he said, adding that the central bank had met both targets successfully.

 

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$5.668 billion foreign loans received during nine months​

ISLAMABAD (April 02 2009): Pakistan has received total $5.668 billion foreign loans during the nine months of the current fiscal year, against the requirement of around 14 billion dollars, according to some ministers and International Monetary Fund (IMF) sources. IMF has a big share in the total foreign assistance received by Pakistan in the current fiscal year.

An amount of $3.947 billion has been released by IMF so far--$3.1 billion as first tranche of the standby arrangement in November 2008, and $847 million on March 31 as the second tranche-- out of $7.6 billion loan approved for Pakistan in November 2008.

The remaining $1.721 billion was received other donors and Asian Development Bank (ADB) which occupies the leading position with $700 million contribution. The said loan disbursement also includes $500 million budgetary support from China and $500 million from World Bank.

Sources said that "ADB has provided $700 million to Pakistan so far while Pakistan has requested an additional $500 million under Accelerating Economic Transformation Program before the month of June, 2009".

They said that ADB was to provide $200 million under Private Participation Development Program during March, which is still awaited. "For on-going projects, $300 million from ADB will be received soon," they added.

Sources in the Economic Affairs Division (EAD) told Business Recorder here on Wednesday that by the end of June 2009, Pakistan is expecting additional inflows of foreign assistance to the tune of $3.5 billion. They said, "The government had requested ADB to provide $2 billion for the current fiscal year whereas it agreed to provide $1.7 billion".

Pakistan has already decided to formally request $10 billion at a meeting of representatives of donors, to be hosted by Japan in Tokyo on April 17.

 

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Wheat sales: US revokes $48 million credit guarantee to Pakistan​

WASHINGTON (April 02 2009): The US Agriculture Department said on Tuesday it will extend more credit guarantees in fiscal 2009 for US farm exports to several regions, but cancelled a previously offered guarantee for wheat sales to Pakistan.

The USDA had announced on December 29 it would offer $48 million in credit guarantees for wheat export sales to Trading Corporation of Pakistan for fiscal 2009. The Commodity Credit Corps export credit guarantee program helps ensure credit is available to finance exports of US farm products to developing countries.

The raft of new announcements included:

-- $300 million to South Korea, bringing total credit guarantees to the country to $900 million for 2009;

-- $200 million to Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, $25 million of which was for cotton exports, bringing total credit guarantees to the region to $550 million for 2009;

-- $175 million to Argentina, Brazil, Chile, Colombia, Paraguay, Peru and Uruguay, bringing total credit guarantees to the South American region to $575 million for 2009;

-- $75 million to countries in the Caribbean region, bringing total credit guarantees to the region to $275 million for 2009;

-- $50 million for China and Hong Kong, bringing total credit guarantees to the region to $150 million for 2009;

-- $25 million to Mexico, bringing total credit guarantees to the region to $125 million for 2009;

-- $25 million to Jamaica.

The short-term guarantees are part of the USDAs GSM-102 program, which promotes sales of US farm goods by assuring lenders they will get paid even if a borrower defaults. Fiscal year 2009 began on October 1, 2008.

 

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Pakistan has potential for attracting foreign investment​

KARACHI (April 02 2009): Pakistan has great potential for alluring foreign investment in fields of oil, gas and coal exploration, alternative energy, education, IT, agriculture and financial sectors with business friendly regimes. However, incidents like Lahore should be combated with effective counter terrorism strategy to build investors confidence.

Speaking at a press conference at the British Deputy High Commission on Wednesday, Chairman Pakistan British Trade and Investment Forum (PBTIF) Sir Tom Harris described his visit to Pakistan as successful. He also represents Standard Chartered, said that his delegation will try to convince the British companies and investors to set aside the media reports on Pakistans law and order, and invest in all major sectors.

Delegations other members included British Deputy High Commissioner and Director Trade and Investment Pakistan, Robert W Gibson, Pakistans High Commissioner in UK, H. E Wajid Shamsul Hasan, besides Saira Ahmed from Pakistan High Commission, Zafar Iqbal Choudhry of Clyde & Co, Vince Harris of International Power, Rashid Iqbal of Media Integrated Learning Centre and Ikram Khan of Mediaworld.

Sir Harris reposed confidence on Pakistans return to political and economic situation under the civilian government, saying that the recent reforms and privatisation programme will help Pakistan achieve growth in access of six percent annually.

He said that PBTIF will make efforts to make Pakistani textile and other products accessible to the British consumers. He pointed out that trade between Pakistan and Britain stands at $2 billion at present, which should be increased with strengthening trade ties.

He pointed about delegations talks with President Zardari on quick resolution of commercial disputes, to which he gave a positive nod, saying the legal uncertainty is one of the impediments towards investment in Pakistan.

About the terror incidents in Pakistan, Sir Harris said that they are not only destabilising Pakistan but also disrupting the arrival of foreign investment. He also said that meeting of Friends of Pakistan is taking place in next three weeks in Japan to discuss new developments.

He said that about 54 branches of Standard Chartered Bank were opened last year in the country, while Barclay Bank has also set foot on Pakistan soil, showing that the foreign investors are still keen in business here. He also highlighted the objectives of the PBTIF.

 

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Pakistan has to sign international accords to get GSP status​

KARACHI (April 02 2009): Pakistan has to sign some international agreements to get Generalised System of Preferences (GSP) plus status and faculties for boosting its export to Germany and other European Union (EU) countries. The Consul General of Germany, Dr Christian Brecht said this while speaking at a meeting of Karachi Chamber of Commerce and Industry (KCCI) held on Wednesday.

Furthermore, the consul general said, I as consul general agree with KCCI that two-way rates should be increased. He said that a German company, Cash and Carry, is already engaged in business activities in Pakistan, while another company, working on a wind power project at Jhumpir, will start functioning soon, which will produce a total of 50 MW electricity, the project is likely to be inaugurated by Prime Minister of Pakistan.

He said that Pakistan-German business forum could play a major role in boosting two-way trade, as at present two-way trade has reached $2 billion, which can be increased to $5 billion in the next three years with little efforts.

Although, Dr Christian Brecht said that international economic crisis has also adversely hit German economy, political uncertainty in Pakistan and failure of foreign media to present a better perception of Pakistan have damaged the image of the country, therefore, in these conditions it is very difficult for German Chamber of Commerce (GCC) to advise business community to visit Pakistan. The consul general was of the view that Pakistan should concentrate of development of agriculture sector besides industries. Replying a question about anti-dumping duty, Dr Christian said that the issue is under consideration. Speaking on the occasion President KCCI, Anjum Nisar emphasised the need for increasing export of non-traditional items to Germany.

 

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ADBs forecast for countrys GDP growth​

(April 02 2009): The Asian Development Banks GDP growth forecast for financial year 2008-09 for Pakistan is 2.8 percent. As ADB, like other multilaterals, does not have the requisite manpower to undertake independent calculation of key macroeconomic variables it is forced to rely on government data.

What is surprising about the growth figure for the current year released by the ADB is that it is not identical to the one that was agreed in negotiations between the International Monetary Fund (IMF) team and the government of Pakistan last month during the quarterly review of the IMF programme in Dubai where a 2.5 percent growth rate was forecast.

This rate is lower by one percentage point from that which was agreed in the third week of November 2008 prior to the approval of the 7.6 billion dollar stand-by arrangement with the Fund. This is reflected in the Letter of Intent (LoI) which notes that real GDP growth would slow further to 3-3.5 percent in 2008-09 in response to the tightening of macroeconomic policies and a deceleration of growth in Pakistans trading partners.

This lack of synchronicity in data between international donor agencies is difficult to justify because multilaterals routinely refer to harmonisation amongst themselves to ensure that there is no duplication of effort. GDP, by definition, includes only the formal economy. However, as is evident, Pakistan has a large parallel informal economy whose output is not a component of the GDP for the simple reason that there is no documentation available that would make this possible.

The difference between ADB and the IMF/government of Pakistans growth forecast of 0.3 percent therefore cannot be explained away by arguing that ADB has included the informal economy in its calculations as it is, without doubt, much larger. Thus one can only conclude that the ADB growth rate forecast is dated and needs revision as of the day it was announced by the ADB.

The same cannot be said about ADBs inflation forecast as the rate of 20 percent is identical to the one forecast by the government of Pakistan in the LoI. Critics of ADBs forecast capacity may well argue that if this rate is not achieved by the end of the current fiscal year the Bank can always argue that failure to achieve the target was due to other factors.

That one such factor is patently evident to all is the energy crisis that continues to act as a serious impediment to the countrys growth rate. Until and unless the government can meet the severe energy shortfall in the coming weeks and months, productivity would remain hostage to the energy crunch. To ensure that this is achieved, the government needs to devise an energy policy that is driven by gas exploration, as the country has proven gas reserves, and not oil driven, as our oil credentials have still to be proved.

The ADB report does refer correctly to the energy crunch as well as the law and order problems as mitigating circumstances to the achievement of macroeconomic stability. It is therefore urgently required that the government takes effective measures to provide large dosage to deal with the ailing economy effectively.

Be that as it may the ADB report failed to highlight one major reason for high inflation of kitchen items: the cartelisation of various sub-sectors including wheat, sugar and cement and the failure of successive Pakistani administrations to strengthen the Competition Commission of Pakistan to deal with these cartels appropriately and efficiently. An indigenous home-grown plan, much touted by our government, needs to include measures to deal with this issue.

 

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Pakistan needs up to $50b in aid: Report ​

NEW YORK: Pakistan must be central to U.S. policy on Afghanistan and needs up to $50 billion over the next five years to avoid an economic meltdown that risks turning the country over to Islamic extremists, said a report released.

The report by a think tank with close ties to the Obama administration said Washington must also act to strengthen civilian government in Pakistan and persuade Islamabad to stop using militant groups as an instrument of foreign policy.

The Asia Society, whose chairman was Richard Holbrooke until he was appointed U.S. special envoy on Afghanistan and Pakistan in January, convened a task force to compile the report: "Back from the Brink? A Strategy for Stabilizing Afghanistan-Pakistan."

The report, made public on Thursday, was provided to President Barack Obama's administration before he unveiled his strategy on Afghanistan last week. It closely mirrors Obama's policy, while focusing more on politics than military issues. The report said the global economic crisis risked further weakening Pakistan's civilian government, which has little control over tribal areas that have become safe havens for al Qaeda, and which struggles to match the sway of the military.

"Perhaps the most urgent priority is to prevent economic collapse, which could undermine state authority even in major urban areas in the next few months," the report said.

 

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US Senate okays $4bn increase in aid to Pakistan​

* Pentagon seeks $3bn in military aid over next five years
* Money will be used to train and equip Pakistan Army​

WASHINGTON: The US Senate voted on Wednesday to boost aid to Pakistan by $4 billion next year.

As the US lawmakers continued work on a $3.5 trillion budget blueprint for the upcoming fiscal year, Senator John Kerry, a Democrat, won adoption of a $4 billion increase next year in aid to Pakistan, a key ally in the war on terror.

Earlier, the Associated Press had reported that the Obama administration plans to seek as much as $3 billion over the next five years to train and equip Pakistan’s military and is considering sending 10,000 more troops to battle the Taliban in Afghanistan.

In outlining the spending programme publicly for the first time, defence officials told the Senate Armed Services Committee it is critical to train and equip the Pakistanis so they have the skills and will to fight.

With the administration’s backing, their bill would provide $1.5 billion next year, linked to Pakistan’s counterterror and democracy-building efforts, officials said.

Defence and other administration officials spoke about the spending plans on condition of anonymity because the specific budget requests have not been released.

Also on Wednesday, senators questioned Gen David Petraeus, who heads the US Central Command, and Undersecretary Michele Flournoy over the possible deployment of 10,000 more troops to Afghanistan.

Petraeus said he had forwarded the proposed increase to the Pentagon. That plan could mean stationing almost 80,000 American forces in the country by next year. Currently 38,000 US troops are in Afghanistan.

Lawmakers asked why the extra brigade and headquarters unit requested by Gen David McKiernan had not yet been approved by President Barack Obama.

Flournoy said Obama is aware of the request, but was told he does not have to consider it until late this year because the additional troops will not be needed until next year. agencies

 

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No need of IMF if FoDP help Pakistan: Tareen​

ISLAMABAD: If Pakistan succeeds in getting sufficient assistance from Friends of Democratic Pakistan (FoDP), there would be no need to approach IMF for $4.5 billion additional loan, said adviser to Prime Minister on Finance, Shaukat Tareen here on Thursday.

He hinted that Kerry-Lugar Bill would be passed in April and said that $1.5 billion US assistance would be given to Pakistan soon. Terming war against terrorism as Pakistan’s own war, the Adviser said that United States would start aid payment soon to upgrade Pakistan’s security apparatus for effectively countering the terrorism.

Talking to reporters here after addressing the 24th annual general meeting and conference organised by Pakistan Society of development Economics, he said Pakistan is expected to get special aid package from FODP to revamp health, education and to alleviate poverty besides budgetary support.

He also said that inflation would come down to single digit by July-August giving space to revise interest rates. Earlier, speaking at the conference, he said that real estate and other untaxed sectors as well as all individuals net earning over Rs 0.2 million have to be taxed to increase tax-to-GDP ratio and ensure sufficient allocations for making social sector more efficient.

He said that about 60 percent tax contribution was made by the manufacturing sector and 40 percent come from imports. Both the sources of revenue have been suffering. He pointed out that agriculture sector contributes about 23 percent to the GDP, whereas its contribution to revenue is zero. To a question about taxing the agricultural income, adviser said the sector was not in good shape for the last four decades and before imposing tax on it, measures would be needed to increase farmers’ income.

“The problem is that in view of trade deficit, current account deficit and fiscal deficit, many governments of developing countries cannot invest desired amount of resources in human capital,” he added.

Pakistan lags behind in social sector as compared with other countries of the region, he said, adding that in these circumstances it is not possible to tackle the problems of illiteracy and health.

In Pakistan, he said, macroeconomic development and stability has benefited only a small portion of population, and majority of the urban and rural poor have become economically poorer because of the failure of the system.

If the government cares for the poor and disadvantaged sections of society, it should increase income tax and reduce tax on consumption, he said, adding that income tax is a direct tax on income and those who make more money pay more tax. “But when rate of sales tax is increased or more items of daily use are brought under sales tax net, the prices will shoot up squeezing the purchasing power of common man drastically,” he added.

He lamented that country’s economic managers when not in corridors of power speak for the common man, but once they are in power they impose taxes on consumption, which adversely impacts the poor masses.

 

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Pak-US collaboration for $24 million energy project​

ISLAMABAD: A joint statement of collaboration was signed between the United States government and the Ministry of Finance, Economic Affairs Revenue and Statistics, government of Pakistan.

The signing marked the announcement of the United States Agency for International Development’s (USAID) 3-year, $24 million Energy Efficiency and Capacity Building project, according to a US Embassy announcement made on Thursday. Energy conservation efforts are expanding in Pakistan, resulting in promotion of energy audits for commercial enterprises, consumer awareness campaigns to highlight the importance of efficiency in household appliances, introduction of low-energy applications in new building construction, and a renewed attention to power losses between transformers and household connections. Recurring power shortages have made energy conservation increasingly important. Some estimates indicate that 1,500 megawatts per year could be saved with an effective national campaign. The Energy Efficiency and Capacity Building project will implement improved demand-side management practices in Pakistan’s distribution companies, energy efficiency programmes; support Energy Service Companies working with Pakistani industries, and increase awareness of energy efficient practices among business and residential users. The project will also support the improvement of human resource management for the energy sector through coordinated training programmes and energy partnerships.

 

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Bosicor unfolds $500m projects​

KARACHI: Bosicor Pakistan Limited has announced investing $500 million in the oil industry over the next two years as part of its expansion plan to be the leading market player of the country.

In a press conference held on Thursday, the group’s Chairman Amir Abassciy revealed the investment projects of refinery unit, oil storage and petrochemical plants to be completed within the next couple of years.

Briefing the investment plans, the company’s top brass said the group will invest on its oil-refining unit with the principal units that would be completed by June 2010. The 43 percent under-construction project will increase the generation capacity up to 115,000 barrels per day. It aims to produce 5.5 million metric tonnes of various petroleum products from the new plant that not only help the country’s demand but will also export internationally standard products to the world.

The group will build up the crude oil storage tank with the capacity of 144,000 metric tonnes by the next year.

Besides, Bosicor will invest million dollars on the construction aromatic complex that will be made capable to generate 17,100 barrels per day.