Pakistan Economy - News & Updates - Archive

[Neo]

Bids for Winder Dam called: WAPDA​

LAHORE: The Water and Power Development Authority (WAPDA) has called the bids for the construction of Winder Dam in Balochistan, which would be opened on July 24, 2008.

According to an official statement Thursday, WAPDA member (Water), Syed Raghib Abbas Shah while presiding over a meeting said special attention to be paid to enhance the pace of work on the projects as country was in dire need of more and more water as well as hydropower generation.

He asked the Project Directors to rehash the implementation plans in league with the construction firms and consultants and get the work done as envisaged in the schedules.

Quantity, quality and financial control should be the keys in execution of the projects, he added.

Reviewing the progress, it was noted with satisfaction that a number of water and hydropower projects are presently at the advance stages of their completion.

The meeting was informed that the Mangla Dam Raising Project is nearing completion, likewise, the second power house of Satpara Dam was expected to be commissioned in September this year, while the project, in totality, was likely to be completed by the first quarter of the year 2009. The meeting was briefed that the detailed engineering designs and tender documents of Hingol and Naulang dams would be finalised upto December this year. In addition, the detailed engineering design of Nai Gaj Dam would also be completed in February 2009.

Daily Times - Leading News Resource of Pakistan

 

[Owais]

Saudi Arabia defers $5.9bn payment for oil sales to Pakistan


LONDON (updated on: July 12, 2008, 19:30 PST): Saudi Arabia has agreed in principle to defer payment for crude oil sales to Pakistan, expected to be worth about $5.9 billion at current rates, during July-June financial year 2008-09.

"There is an agreement in principle to defer oil payments. The modalities are being worked out," Finance Minister Naveed Qamar said. He did not discuss the time frame for deferred payments but a Petroleum Ministry official in Islamabad told the Financial Times that the agreement involved deferring the payment until at least June next year.

Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan or about 40m barrels a year which at 147 dollars a barrel comes to about 5.88bn dollars. Pakistan imports a total of 202,000 b/d or approximately 73.7m barrels a year. Half of that comes from Saudi Arabia.

brecorder.com

 

[Owais]

Only foreign companies to operate coal power projects


KARACHI (July 12 2008): The Federal government has decided to sign agreements only with foreign-based companies to establish at least 1000MW coal-fired power plants at Thar coal field and other sites in the province, including Sondha Jherruk Thatta, Lakhra, Dadu, and Badin and has annulled all agreements made with local companies.

Sources told Business Recorder on Friday that this decision was take at a high level meeting chaired by the Federal Minister for Water and Power, Raja Parvez Ashraf. They said that the issue surfaced when a committee established for reviewing the progress found that the local companies, which had signed agreements with the government, have failed to give a feasibility report in this connection, owing to lack of financial resources.

They said the local companies were not be able to invest at least Rs 200 billion to establish 1000MW power generating plant in a short time of three to five years. Therefore, it was decided to sign agreements only with foreign-based companies, which are capable to make the project feasible by the deadline, they added.

To overcome the worsening power crisis in the country in general and Karachi in particular, the Federal government has planned to generate at least 6000MW within three to five years, and ultimately achieving the target of generating 20,000 MW through coal by 2030, the sources said.

They said that the existing capacity of power generation in the coal sector was only 160MW, which is expected to increase to around 20,000 MW by 2030. To a question, they said that foreign firms have expressed concern over the law and order situation in the country, "but we have assured them to provide full security arrangements in Pakistan."

They said the cheapest electricity would be produced from coal and termed it as the best option to overcome the energy crisis in Pakistan. They said that, "although 185 billion tons of coal reserves have been confirmed at Thar, no progress has been made by the private sector to convert this abundance for power generation.

When asked, they said the agreements would be signed with equal equity participation where power companies would invest to establish plants and the government would provide land and coal.

It may be mentioned here that a Chinese company M/s Sinocoal, International Engineering Group (SCIEG), which conducted the technical part of the feasibility study by M/s Shenhua on Thar coal, has recently expressed interest in designing the coal mines. The company suggested that Pakistan should review the whole policy on coal, including mining, production as well as its import and export.

Business Recorder [Pakistan's First Financial Daily]

 

[Owais]

Textile exporters, industrialists go on strike: protest has left over one million workers jobless

FAISALABAD (July 12 2008): Over one million industrial workers were rendered jobless, when hundreds of textile units including hosiery, printing, dying & processing factories and sizing industries in and around Faisalabad went on strike for an indefinite period on Friday.

These textile units are observing shutdown to protest gas & electricity tariff increase and discontinuation of Research and Development (R&D) Facility to exporters. Ten chambers of commerce and industry from Punjab, Sindh and the NWFP have endorsed the strike call given by the Joint Action Committee of industrialists and textile exporters. Addressing a press conference on behalf of the chambers, Lahore Chamber of Commerce and Industry President Muhammad Ali Mian said that the strike would be extended to the whole of the country in case the government refused to give any relief to business community as well as textile industry, which is the backbone of the country's economy.

He announced that LCCI, KCCI and other chambers would start protest by hoisting black flags on their buildings from Saturday, July 12. If the government failed to provide comprehensive relief package till July 15, all industrial units of Lahore would also join the strike from July 18, he added.

Khawaja Asem Khurshid, Chairman of Joint Action Committee, Mian Muhammad Idress, Mian Javed Iqbal, ex-presidents of FCCI, Muhammad Javed Aslam, Chairman, Pakistan Hosiery Manufacturers Association, North Zone and other leading businessmen addressed the meeting and rejected 31 percent gas price increase and demanded total withdrawal of this 31 percent hike and restoration of R&D facility at the earliest without discrimination.

After an emergency meeting, Pakistan Textile Exporters Association (PTEA) members have decided to reject the 31 percent gas price hike announced in the recent budget. A resolution passed in the meeting stated:

Textile exporters have rejected the 31 percent hike in gas prices. We cannot survive with 31 percent increase in gas rate. We also demand Research and Development Support Facility across the board without discrimination.

Members pointed out that R&D facility was not a subsidy but a compensation of duties and taxes paid by exporters and industry in the chain of production. There should be one rate of R&D without any discrimination. The meeting rejected volume-based R&D saying it will wipe out small and medium exporters and will create monopoly of a few exporters.

Regarding increase in gas price, the members were of the view that prices of Pakistani goods have escalated and we are being thrown out of international market for being uncompetitive with intermittent raises in rates of utilities such as gas, petroleum and electricity. The cost of doing business was increasing day by day and the foreign buyers finding the prices too high and were diverting their purchase orders to India, China and Bangladesh.

The members said that if remedial measures were not taken, the economy of the country would suffer badly. Textile sector is the biggest foreign exchange earner with 60 percent of total forex earnings and was contributing 9 percent to GDP. The closure of textile units would also cause huge losses to the exchequer, they said and added that the workforce rendered jobless would endanger industrial peace in the country.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Inflation surges by 21.53 per cent ​

Saturday, July 12, 2008

ISLAMABAD: Politically-sensitive spiralling food prices and weakening rupee pushed up inflation to an all-time high of 21.53 per cent in June 2008, after a 2.10 per cent rise in consumer prices over May 2008.

Last year in June, CPI inflation stood at 7 per cent. Twelve-month (July-June 2007-08) average inflation also went up to 12 per cent against 7.77 per cent recorded last fiscal, which is about 550 basis points above the set target of 6.5 per cent for fiscal year 2007-08.

According to data released by the Federal Bureau of Statistics (FBS), in June 2008, prices of food and beverages rose by 32.05 per cent; house rent 12.39 per cent; fuel and lighting 11.38 per cent; transport and communications 24.91 per cent; clearing laundry and personnel appearances 17.74 per cent; medicare 14.16 per cent and household furniture and equipment 10.43 per cent over June 2007.

During July-June 2007-08, average food inflation stood at 17.64 per cent and non-food at 7.89 per cent against 10.28 per cent and 6.01 per cent respectively in the previous fiscal year.

PPP-led coalition government like previous one has fully failed in controlling inflation especially food inflation. Inflationary pressure is also building up for another increase in fuel prices if crude oil prices head further. Besides, the present government gradually withdrawing subsidies on gas, electricity and petroleum till December 2008 could further push up inflation. Dwindling rupee value is also making imports costlier, another contributing factor for inflation.

For controlling rising inflation and its impact on the declining expected growth require coordinated efforts by the State Bank of Pakistan (SBP) and the federal government.

Mounting inflationary pressure on the economy has also scaled up prospect of the central bank raising discount rates. It is interesting to note that the imported inflation (as a result of escalating crude oil prices that kissing records) was also a source of cost push inflation, caused by substantial hike in the cost of important goods or services where no suitable alternative is available.

Economic experts say that a weakening rupee has contributed to a rise in the cost of living. Inflation dangers pose a headache for the SBP. Sensing sliding rupee impact on economy and general prices, the central bank few days back also took some decision to control the rupee form freefall and certainly it showed encouraging results.

For each one per cent increase in inflation, more and more people fall into poverty indicating that inflation was hitting poor consumers of the country harder than the more affluent ones. Specifically, the poor are highly sensitive to the price changes in food, particularly staple food items, economists believe. Concerns over rising food prices are surmounting because such increase can undermine the gains from poverty reduction and human development that the country has experienced for the last five years or so. Households struggling to meet the minimum standards of living might have no choice but to cut down their expenditures on health and children’s education, Rising inflation is also making it more difficult for pensioners and low income masses living on their very nominal income a month in. Up to now, the price inflation was the ‘fun’ kind, as it went into stocks, bonds, housing - now inflation is showing up in the “not fun” category, namely food and stuff you have to buy just to stay alive, independent economist say.

It is interesting to note that high inflation trend in food has been noticed since the start of the last fiscal 2006.

Food inflation stood at double-digit, averaging more than 10 per cent during fiscal year 2006-07. As during July 2006, it stood at 7.44 per cent; August 11.08 per cent; September 11.26 per cent; October 10.54 per cent; November 8.07 per cent; December 12.71 per cent; January 2007, 8.70 per cent; February 9.99 per cent; March 10.74 per cent; April 9.41 per cent; May 11.31 per cent and during June 2007, it stood at 9.68 per cent.

Likewise, at the start of the new financial year 2007-08, it kept the same trajectory and during July 2007, food inflation stood at 8.47 per cent; August 8.62 per cent; September 12.97 per cent; October 14.67 per cent; November 12.47 per cent; December 12.21 per cent; January, 2008 it stood at 18.25 per cent; February 16.05 per cent; March 20.61 per cent; April 25.5 per cent; May 28.48 per cent and now during the month under review (June 2008), it stood at 32.05 per cent.

Despite their adverse impact on the low-income group, no effective steps are being taken by the government to reverse the trend.

The government seems to be indifferent to the plight of the poor and the lower middle class who find it increasingly difficult to make both ends meet with soaring prices of foodstuff and medical expenses.

While, main concern is that in the basket of Wholesale Price Index (WPI), fuel, lighting and lubricants expenses up by 48.56 per cent, building materials 38.24 per cent, food 30.16 per cent, raw materials 22.12 per cent and manufacturers price increased by 12.17 per cent in June 2008 over corresponding month of the last fiscal.

Inflation surges by 21.53 per cent

 

[Neo]

SPI rises by record 28.9pc ​

Saturday, July 12, 2008

ISLAMABAD: The helpless masses have been caught between the devil and the deep sea as there was no relief from the government’s side which could support them in minimising their financial and social problems caused by the spiralling inflation.

The Sensitive Price Index (SPI) inflation rose to an all-time high of 28.99 per cent during the week ended on July 10 over the same period last year, owing to the relentless surge in prices of 32 essential commodities.

The SPI data released by the Federal Bureau of Statistics on Friday showed that 32 essential commodities, majority of them kitchen items including vegetables, wheat flour, eggs, milk and pulses, were becoming costly with the passage of each day.

Price of tomato during the week under review increased by Rs5 per kg as it was being sold at Rs22.07 against Rs17.88 on July 3, onion increased from Rs15.26 last week to Rs17 this week, sugar from Rs29.94 to Rs31.79, farm eggs from Rs52.45 to Rs53.93 and kerosene from Rs61.42 to Rs62.87 per litre.

PULSES: With over Rs2 increase in a week, masoor pulse (washed) is being sold at Rs114.82 per kg against Rs112.63 last week. The price of gram pulse (washed) was recorded at Rs60.56 against Rs60.11 last week, moong (washed) at Rs55.13 from Rs53.49, maash pulse (washed) at Rs73.03 from Rs72.95.

RICE: Price of per kg basmati rice (broken) increased to Rs54.03 from Rs53.49, Irri rice to Rs48.46 from Rs48.12 while the price of per kg wheat went up from Rs20.47 to Rs20.78 and wheat flour to Rs23.90 from Rs23.76.

With this increase in the prices of essential commodities, the dearness for low-income group families earning Rs3,000 and Rs3,001 to Rs5,000 was recorded at 32.12 and 31.31 per cent respectively. The increase in dearness was recorded at 29.17 per cent for families bracketed in the category earning Rs5,001 to Rs12,000 and 26.71 per cent for families earning a monthly income of over Rs12,000 following a 0.70 per cent increase in inflation during the week under review.

The trend of weekly SPI during the last 10 weeks as compared to the previous as well as corresponding week of last year, showed a continuing increase, escalating the difference from 23.71 per cent on April 24 to 28.99 per cent on July 10.

The SPI bulletin, based on the data of 53 items collected from 17 urban centers showed an increase in prices of 32 essential commodities, decline in 3, while the prices of 18 commodities remained stable but dearer compared to last year.

SPI rises by record 28.9pc

 

[Neo]

Govt borrowing increases broad money supply by 13pc ​

Saturday, July 12, 2008

KARACHI: Government’s excessive reliance on borrowing from the State Bank of Pakistan (SBP) to meet its budgetary expenditures increased broad money supply, which grew by 13.29 per cent and continued to exert inflationary pressure on the economy.

Latest statistics of the SBP showed that from July 1, 2007 to June 28, 2008 money supply increased to Rs540.094 billion with a growth of 13.29 per cent against the target of 13.8 per cent for the fiscal year 2007-08. Compared to this, money supply was recorded at Rs658.250 billion with a growth of 19.32 per cent during July 1, 2006 to June 30, 2007, when total currency in circulation was Rs4.065 trillion.

An analyst said that this drop in M2 expansion was due to negative growth in net foreign assets of the banking system, due to a decline in net inflow of foreign investment which stood at minus Rs308.190 billion as compared to Rs274.551 billion during fiscal year 2006-07. At the same time a massive growth was witnessed in net domestic assets of the banking system which surged to Rs848.284 billion against Rs383.699 billion of last fiscal year, which was the major source behind the increase in money supply.

In the net term, the government borrowed Rs633.173 billion from the central bank in order to meet its budgetary expenditures. However, during this period it retired Rs171.893 billion of scheduled banks. For commodity operations, the government made use of Rs28.969 billion and it borrowed Rs597 million for other purposes.

However, during the aforesaid period, overall credit to non government sector increased to Rs470.683 billion against Rs385.705 billion of the last fiscal year, whereas credit to the private sector swelled to Rs414.643 billion from Rs365.718 billion last year. Credit to the public sector enterprises also augmented to Rs55.878 billion compared to Rs19.942 billion last year.

Govt borrowing increases broad money supply by 13pc

 

[Neo]

Pakistan plans Investment conferences​

ISLAMABAD, July 11: Pakistan is finalising arrangements to hold two international investment conferences in Jeddah and Riyadh soon to attract investment from Saudi Arabia.

Minister for Finance Syed Naveed Qamar told Saudi Ambassador to Pakistan Ali Awadh Asseri, who called on him on Friday, that Islamabad’s planned investment conferences in the kingdom were at an advanced stage, which would enable and apprise investors of privatisation and investment opportunities in Pakistan.

These conferences would also help identify areas of investment in the kingdom for Pakistani business groups.

The finance minister, who is also minister for privatisation and investment, said that the leadership on both sides were getting closer and “our government intended to further strengthen and deepen our brotherly relations by accelerating the existing economic interaction by associating the Saudi investors in the privatisation programme of Pakistan.”

Pakistan had strong bonds in every sphere of life with the Kingdom of Saudi Arabia, he added.

Saudi envoy Ali Awadh Asseri said that the kingdom and the people of Saudi Arabia believed that the united, prosperous and stable Pakistan was in the interest of the region.

He assured that all out efforts would be made to promote the existing links and translate them into strong economic relations to benefit both the people and the countries.

Pakistan has promising investment environment and the Saudi investors were keen to invest in Pakistan and to broaden the existing economic interaction, he said.

The envoy also discussed other matters of mutual interests and assured that the Kingdom of Saudi Arabia would continue to support Pakistan for economic stability.

In another meeting, Syed Naveed Qamar asked Auditor General of Pakistan Tanvir Ali Agha to further streamline the accounting procedures through public accounts committees (PACs) to bring in transparency, efficiency and effectiveness.

The finance minister said that the rules and regulations pertaining to the audit would be made more effective and the procedures of the PACs would be changed to this extent that the delays and backlogs could be overcome.

During the meeting, the departments and organisations identified for the purpose include National Accountability Bureau, Higher Education Commission, Privatisation Commission, Trading Corporation of Pakistan, various local governments and other departments.

Pakistan plans Investment conferences -DAWN - Business; July 12, 2008

 

[Neo]

NCEL to launch Mini Gold, Palm Oil future contracts​

KARACHI: The National Commodity Exchange Limited (NCEL) will launch mini gold future contracts and palm oil future contracts by mid August 2008, Asim Jang, managing director, NCEL said Friday.

Asim said the NCEL has completed marketing mechanism and appointment of brokers for future trading of 10 grams gold to facilitate retail customers.

He said the future contracts would be made under Rs 20,000 on weekly basis and the retailers could take part in the trade through their accounts opened with the brokers.

He informed the gold traded would be 24 karate standard and for this purpose NCEL has already made arrangements with a gold refinery in Switzerland.

Asim said the NCEL also made delivery arrangements for the retail customers to their points besides providing guarantee of purity of the product by marking specific serial numbers on each contract.

He said for the convenience of retailers of 10-gram mini gold future contracts, NCEL has made payments arrangements on a day or intra day basis for them.

He said kilo gold future contracts on three to four months basis are already steadily going on the NCEL floor.

Similarly the future contracts for palm oil would be of three months term. He said ghee mills and importers would be main beneficiaries. The future limit would be 25 metric tonne.

“This will save the importers from financial loss as prices in the international market and landing cost usually differ before or after the maturity of import contract”, he added.

He said NCEL has around 3,000 brokers out of which 40 are active brokers and taking part in these two future contracts.

He said the rules and regulations had been prepared by the exchange and sent to Securities and Exchange Commission of Pakistan (SECP) for regulatory approval. He said NCEL would hold seminars in different cities for the awareness of stakeholders, traders and customers in this regard.

The National Commodity Exchange Ltd was incorporated in April 2002 and authorised by the SECP in May 2002. Its paid-up capital is Rs 40 million (post ZBT) and its authorised capital is Rs 50 million.

The NCEL would be the first adequately integrated electronic exchange proficient of handling financial futures and the first to provide liquidity to growers, exporters, importers and intermediaries.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Committee formed to tackle economic issues​

ISLAMABAD: In a move to accelerate the economy of the country, Prime Minister Syed Yousuf Raza Gilani Friday constituted an eight-member ‘Economic Monitoring Committee’ to tackle the day-to-day issues of the national economy.

Finance Minister, Syed Naveed Qamar will head the committee, with deputy chairman Planning Commission, Salman Farooqui to be its vice chairman. Other members of the committee include special assistant to the Prime Minister on Economic Affairs, Hina Rabbani Khar and the secretaries Finance, Economic Affairs, Commerce, Water and Power and Petroleum and Natural Resources. The committee would monitor the economic pace and would also suggest the measures to improve the economic situation of the country.

Meanwhile, Prime Minister Gilani has said Pakistan offers attractive opportunities of investment in various sectors of economy, with incentive based policies and enabling environment.

Talking to a delegation of Credit Suisse, which was led by Kai Nargolwala, chief executive officer Asia Pacific, who called on him at the PM Secretariat, premier said the government was following pro-investor policies and its privatisation policy was favourable for investors. The Prime Minister congratulated the company for opening a subsidiary in Karachi and said that with the privatisation of public sector entities being actively pursued in Pakistan, the financial advisory of Credit Suisse would be welcomed.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Curbs likely on import of non-essential items​

ISLAMABAD (July 11 2008): The government is considering restricting import of non-essential items to control soaring trade gap which would contribute substantially to cross budget deficit over 4.7 percent of GDP. Independent economic analysts expect that current account deficit would exceed 8 percent of GDP ($13 billion in FY08) exceeding $1 billion a month mainly because of trade deficit which has crossed $20 billion in 2007-08.

-- This step is said to be aimed at controlling soaring trade gap

"The government had projected 6.5 percent growth in balance of payments which has crossed 40 percent due to massive increase in imports," analysts added. International Financial Institutions (IFIs) have also warned Pakistani authorities that next two to three months are very crucial for the country, taking into account forward liabilities, net reserves below $8 billion, which are less than three months' imports or six months' balance of payment support.

"Most crucial test for the authorities in the next two to three months would be the implementation of regular fuel price adjustment. Controlling the subsidy bill and runaway imports are absolutely crucial at this critical juncture," said Deutsche Bank in its report on Asian economies.

Official sources said that the government may impose regulatory duty to discourage import of unnecessary items especially mobile phones and vehicles as import of these two items takes away $2 billion annually.

The country's forex reserves remain under server pressure as imports demand is yet to taper off, while inflows are said not to be sufficient enough to prevent further depletion.

Official sources confirmed that the US defence-related grant inflows could well accelerate to $1 billion. Saudi Arabia is also expected to provide crucial balance of payment support through an oil credit facility which could be worth over $4 billion. World Bank budget support worth over $1 billion during the course of the year and another $1 billion was being expected from the Asian Development Bank.

The sources said that timing of these inflows was, however, not clear and the multilateral flows in particular would likely to be linked to steps to ensure fiscal sustainability, in particular hikes in fuel prices and energy tariff.

The sources said that the government has to further increase diesel prices by 40 percent and petrol prices 10 percent to keep the budget estimates as per plan. "If the government does not increase oil prices for one fortnight its impact on the budget is Rs 20 billion," the sources elaborated.

Unfortunately, political leadership remains distracted by intra-coalition tension and the security situation and may not be ready to implement some of the requisite measures.

Official sources said if political uncertainty prevailed, the government would be compelled to approach the IMF, which means the country would again be dictated by the US. Official sources said that the Federal Board of Revenue could not achieve 25 percent growth in revenue as was projected in the federal budget 2008-09 due to political uncertainty.

Official sources cited an example of Benazir Bhutto who in mid 90s in her capacity as Premier asked the then CBR Chairman Javeed Talat as to why revenue target was not being achieved. He said, Madam Prime Minister, you give me political stability, I will give you the target achieved."

The country was facing the same situation these days and FBR would not be able to meet the target if political uncertainty existed.

Official sources said the Planning Commission would have to review its development programme and should seek funds for only prioritised schemes rather than making irrational demands.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

US to provide food assistance: Patterson​

ISLAMABAD (July 11 2008): United States is sensitive to the existing wheat shortage in Pakistan and would provide necessary food assistance to meet her requirements, however, the quantity of soft white wheat would be discussed by the concerned authorities of both the countries, said US envoy to Pakistan Anne W Patterson in a meeting with the Finance Minister Syed Naveed Qamar here on Thursday.

Apart from discussing co-operation in food and agriculture sectors, the US envoy underlined its government steadfastness to provide security and economic assistance to Pakistan. The minister apprised the Ambassador of Pakistan's budget implementation plan in various social and economic sectors, which now is ready for execution through relevant government agencies.

Finance Minister stressed that the entire process of any possible wheat shipment from US to Pakistan has to be transparent. Its distribution in Pakistan is likely to focus the population in less developed areas of Balochistan and NWFP. Both the sides agreed to start economic dialogue during next month to strengthen bilateral economic co-operation in all possible fields of mutual interest that finally would form significant part of the agenda of Prime Minister's forthcoming visit to US.

Finance Minister said Pakistan's latest privatisation initiatives, which now are getting processed through Cabinet Committee on Privatisation for a fast track implementation focus on enhanced domestic and foreign investment in years to come.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Pakistan's Foreign exchange reserves down over $4 billion in fiscal year 2008​

KARACHI (July 11 2008): The country's foreign reserves have shown a sharp decline of over four billion dollars during the last fiscal year due to the rising imports and current account deficit. At the beginning of the last fiscal year, the country's foreign reserves were sufficient for six months, while at present they have been enough for less than four months.

During the first quarter (July-September) of the last fiscal year, the country's foreign reserves started increasing rapidly and reached the historical level of 16.38 billion dollars in the first week of November 2008.

However, the rising current account deficit and import bill, followed by the increasing oil prices in the world market, greatly impaired the country's foreign reserves. A more severe decline occurred after the imposition of the state emergency, in the first week of November 2007.

A rapid decline of about 5 billion dollars in the foreign reserves was witnessed after the imposition of the state of emergency, as it stood at 16.37 billion dollars on November 3, 2007 as compared to 11.28 billion dollars on June 28, 2008. Since the imposition of the emergency on November 3, 2007, huge outflows have been registered from the Special Convertible Rupee Account (SCRA), analysts said.

They said the rising import bill and current account deficit are some of the main reasons of the decline in the foreign reserves, besides insufficient increase in exports. The oil price in the world market has touched a new peak of 142 dollars per barrel, which led to spending of more amounts on the import of oil, they said.

"Pakistan has been compelled to pay huge amount on oil import, due to the soaring oil prices in the world market, and the government did not increase oil prices in the local market as a measure of relief for the masses," the analyst added.

The State Bank of Pakistan's (SBP) statistics show that overall foreign reserves have registered a 27 percent decrease during the last fiscal year. The country's overall foreign reserves stood at 11.2845 billion dollars as on June 28, 2008, down from 15.6137 billion dollars as on June 30, 2007, depicting a dip of 4.23292 billion dollars during the fiscal 2008.

The statistics revealed that huge depletion was witnessed in the SBP reserves, which have been calculated at 4.703 billion dollars to 8.625 billion dollars on June 28, 2008, they were at 13.328 billion dollars on June 30, 2008.

The reserves, however, held by the banks have shown a strong position and despite the decline in the SBP reserves the banks' foreign exchange reserves have gone up by 373.8 million dollars.

The reserves held by banks reached 2.6591 billion dollars during the week ended June 28, 2008, which previously stood at 2.2853 billion dollars on June 30, 2007. "After the imposition of emergency rule, foreign investors have withdrawn some 400 million dollars from the stock market," an economist said.

Overall, an outflow of 4.682 billion dollars had been witnessed in the portfolio investment against the inflows of 4.449 billion dollars during the fiscal 2008, he added.

Although huge inflows of remittances have been registered during the first half of the current fiscal year, yet not a single privatisation transaction has taken place during the current fiscal year. Increasing payments are leading to the decline of foreign reserves.

It may be mentioned here that during the fiscal 2006-07, the reserves had surged by 19 percent to 15.6137 billion dollars benchmark as compared to 13.1369 billion dollars during the fiscal 2005-06.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Textile exporters, industrialists go on strike: protest has left over one million workers jobless​

FAISALABAD (July 12 2008): Over one million industrial workers were rendered jobless, when hundreds of textile units including hosiery, printing, dying & processing factories and sizing industries in and around Faisalabad went on strike for an indefinite period on Friday.

These textile units are observing shutdown to protest gas & electricity tariff increase and discontinuation of Research and Development (R&D) Facility to exporters. Ten chambers of commerce and industry from Punjab, Sindh and the NWFP have endorsed the strike call given by the Joint Action Committee of industrialists and textile exporters. Addressing a press conference on behalf of the chambers, Lahore Chamber of Commerce and Industry President Muhammad Ali Mian said that the strike would be extended to the whole of the country in case the government refused to give any relief to business community as well as textile industry, which is the backbone of the country's economy.

He announced that LCCI, KCCI and other chambers would start protest by hoisting black flags on their buildings from Saturday, July 12. If the government failed to provide comprehensive relief package till July 15, all industrial units of Lahore would also join the strike from July 18, he added.

Khawaja Asem Khurshid, Chairman of Joint Action Committee, Mian Muhammad Idress, Mian Javed Iqbal, ex-presidents of FCCI, Muhammad Javed Aslam, Chairman, Pakistan Hosiery Manufacturers Association, North Zone and other leading businessmen addressed the meeting and rejected 31 percent gas price increase and demanded total withdrawal of this 31 percent hike and restoration of R&D facility at the earliest without discrimination.

After an emergency meeting, Pakistan Textile Exporters Association (PTEA) members have decided to reject the 31 percent gas price hike announced in the recent budget. A resolution passed in the meeting stated:

Textile exporters have rejected the 31 percent hike in gas prices. We cannot survive with 31 percent increase in gas rate. We also demand Research and Development Support Facility across the board without discrimination.

Members pointed out that R&D facility was not a subsidy but a compensation of duties and taxes paid by exporters and industry in the chain of production. There should be one rate of R&D without any discrimination. The meeting rejected volume-based R&D saying it will wipe out small and medium exporters and will create monopoly of a few exporters.

Regarding increase in gas price, the members were of the view that prices of Pakistani goods have escalated and we are being thrown out of international market for being uncompetitive with intermittent raises in rates of utilities such as gas, petroleum and electricity. The cost of doing business was increasing day by day and the foreign buyers finding the prices too high and were diverting their purchase orders to India, China and Bangladesh.

The members said that if remedial measures were not taken, the economy of the country would suffer badly. Textile sector is the biggest foreign exchange earner with 60 percent of total forex earnings and was contributing 9 percent to GDP. The closure of textile units would also cause huge losses to the exchequer, they said and added that the workforce rendered jobless would endanger industrial peace in the country.

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Pakistan seeks UAE help to overcome energy crisis​

DUBAI (July 11 2008): Pakistan has sought assistance from the United Arab Emirates (UAE) to overcome ongoing energy crisis in the country and for the development of airline industry. Prime Minister Syed Yusuf Raza Gilani, who called on the UAE's Vice-President and Prime Minister Sheikh Mohammad bin Rashid Al-Maktoum here on Wednesday night, asked him for co-operation in various fields of infrastructure development.

-- Sheikh Al-Maktoum assured all out support to Prime Minister Gilani

The Prime Minister said Pakistan also sought UAE's expertise in port sector, particularly for the functioning of Gwadar Port. Sheikh Al-Maktoum assured all out support to Prime Minister Gilani, and said the UAE would encourage its private sector to make further investments in Pakistan in various fields, particularly the energy and real estate sectors.

The meeting also attended by Pakistan Peoples Party Co-Chairman Asif Ali Zardari, Federal Ministers Sherry Rehman, Syed Khurshid Ahmad Shah and Qamar-uz-Zaman Kaira, also discussed Pakistan's role in war against terrorism and the increased economic co-operation between Pakistan and the UAE. Prime Minister Gilani urged the international community to extend support to Pakistan, which was playing the role of a frontline state in the war against terrorism.

He said the new democratic government in Pakistan was following the three-pronged strategy to deal with the menace of terrorism and extremism.

The strategy comprises dialogue with the non-militants and those who lay down their arms, besides increased development activities with focus on the socio-economic uplift of the people of areas along the border, he added.

The Prime Minister said the use of force would be the last option in case of violation of agreements from the other side. He said after his election as Prime Minister, his first meetings were with US President George W. Bush and Afghan President Hamid Karzai, who were major partners in this global war.

The Prime Minister said a stable Afghanistan was in the interest of Pakistan as well as for the region and the world.

Gilani said Pakistan needed increased trade and not aid from the world to help tackle issues of socio-economic development, poverty, and joblessness, which were root causes of terrorism and extremism. He also referred to the presence of three million Afghan refugees on Pakistani soil, and said it was also one of the causes of

Difficulties in checking illegal cross-border movement along Pak-Afghan border. The Prime Minister invited Sheikh Mohammad to visit Pakistan, which he accepted, and said he considered Pakistan his second home.

Sheikh Mohammad appreciated Pakistan's role in war against terror and its credible intelligence sharing to curb terrorism and extremism posing threat to the world peace. The UAE Prime Minister also lauded the positive role of Pakistan expatriates in the socio-economic development of UAE.

Sheikh Mohammad apprised Prime Minister Gilani of his new charity project, "Dubai Care," under which five million Muslim students from across the Ummah, including Pakistan would get free education.

Business Recorder [Pakistan's First Financial Daily]