Pakistan Economy - News & Updates - Archive

[Neo]

Pakistan may need $40-$50 billion to avoid economic collapse: report ​

NEW YORK (April 03 2009): US policy on Afghanistan must focus on Pakistan, strengthening civilian government and ending the use of militant groups as an instrument of foreign policy, according to a report by a think tank with close ties to the Obama administration.

The Asia Society, whose chairman was Richard Holbrooke until he was appointed US special envoy on Afghanistan and Pakistan in January, convened a task force of former government officials and academics to compile the report titled "Back from the Brink? A Strategy for Stabilising Afghanistan-Pakistan."

The report, made public on Thursday, was provided to President Barack Obamas administration before he unveiled his new strategy on Afghanistan last week. Task force co-chair Barnett Rubin said the United States and its allies had for too long focused on Afghanistan while allowing problems to fester in Pakistan, where the weak civilian government has little control over tribal areas that have become safe havens for al Qaeda. "The regional center of gravity of the problem is not in Afghanistan," Rubin said. The report argues that there are no al Qaeda bases in Afghanistan, but many in Pakistan where a variety of other militant groups have long thrived on covert backing from the military and intelligence apparatus.

"Because it faces India, which it sees as an enemy ... Pakistan has adopted formally the use of Jihadi groups as instruments of their foreign policy," Rubin said at a panel discussion in New York on the report.

"One of the aims of our regional diplomacy should be to use all the resources we can to encourage, cajole, force, persuade Pakistan to change its policy away from using those Jihadis." Essential to that would be meeting Pakistans legitimate security concerns, the report said, and easing tensions with India. Relations between the nuclear-armed rivals were strained further by Novembers attacks in Mumbai, which India says were conducted with the involvement of Pakistani state agencies.

RISK OF ECONOMIC COLLAPSE The economic crisis risked further weakening Pakistans government, the report said. "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."

It cited estimates that halting the economic decline in Pakistan might require a five-year package of $40 billion to $50 billion, a sum that dwarfs Pakistans existing $7.6 billion International Monetary Fund bailout. It urged Washington to work through the United Nations to mobilise donors to find the money. The report mirrors much of Obamas policy, while focusing more on politics than military issues.

British diplomat Paddy Ashdown, who was turned down by President Hamid Karzai as a UN envoy to Afghanistan last year, told the panel that resolving the problems of Pakistan might require a fundamental change of approach because help from Western powers would never be welcome. Drawing parallels to a Saudi initiative to reach out to the Taliban in Afghanistan, Ashdown said it might be time to consider "Islamicising" the approach to helping Pakistan regain control of all of its territory.

 

[sohailbutt]

Pakistan economic indicators - April 3​

====== DAILY INDICATORS ======

THURSDAY PREVIOUS

Floating Interbank Rate (Rs/$) 80.50/80.58 80.52/80.60

Rupee/US $ (kerb market) 80.40/80.70 80.40/80.60

Karachi 100-share index 7,191.09 6,931.90

Gold (Karachi) Rs/10 gm 24,175 24,260

======CENTRAL BANK AUCTIONS======

Treasury Bills Auction Results:

Cut-off Yield (pct) at auction on: Mar 25 Mar 11

Three-months bills 11.7367 11.6908

Six-month bills 11,8970 11.7845

12-months bills 11,9522 11,8518

Pakistan Investment Bond (PIB) Auction Results:

Cut-off Yield (pct) at auction on: Feb 18 (2009) Aug 29

(2008)

11.25 pct coupon, three-Year PIB 13.9530 13.6973

11.50 pct coupon, five-Year PIB 14.3692 B/Rejected

11.75 pct coupon, seven-year PIB 14.7973 14.3398

12.00 pct coupon, 10-Year PIB 14.9444 14.5493

12.50 pct coupon, 15-Year PIB 15.4995 14.7500

13.00 pct coupon, 20-Year PIB 15.8998 No

B/Received

13.75 Pct coupon, 30-Year PIB 16.4496 14.9384

======WEEKLY INDICATORS======

Week ending Mar 21 Mar 14

Total liquid frx reserves $10.257 bln $10.161 bln

Forex held by central bank $ 6.791 bln $ 6.690 bln

Forex held by other banks $ 3.466 bln $ 3.471 bln

======MONTHLY INDICATORS======

LAST PVS Consumer

price index Feb 191.90 190.09 Change mth/mth

(pct) Feb -0.59 -0.42 Change Yr/Yr (pct)

Feb 21.07 20.52 Wholesale price index Feb

194.19 192.91 Change mth/mth (pct) Feb n/a

n/a Change Yr/Yr (pct) Feb 15.03 15.69

Trade Balance Feb $-857 mln $-1.17 bln

Exports Feb $ 1.26 bln $ 1.36 bln

Imports Feb $ 2.12 bln $ 2.53 bln

======ANNUAL INDICATORS======

FISCAL YEAR 2007/08 2006/07

Population (millions) **160.9 156.77

Per capita income **$1085 $925

External debt (billion dlr) **45.0 $40.5

Total F.Debt as pct of GDP **24.7 27.1

Domestic debt (billion rupees) **3,020 2,610

Total domestic debt as pct of GDP **30.3 30.0

Gross domestic product growth **5.8 pct 6.8 pct

Manufacturing sector growth **5.4 pct 8.2 pct

Services sector growth **8.2 pct 9.6 pct

Agricultural sector growth **1.5 pct 3.7 pct

Commodity Producing sector growth **3.2 pct 6.0 pct

Average consumer price inflation 12 pct 7.77 pct

Fiscal deficit (pct of GDP) **7.0 pct 4.3 pct

Trade balance (FBS July-June) $-20.74 bln $-13.56 bln

Exports $19.22 bln $16.98 bln

Imports $39.96 bln $30.54 bln

Current a/c balance $-14.016 bln $-6.878 bln

* = revised

** = provisional

SBP= State (central) Bank of Pakistan

FBS= Federal Bureau of Statistics

.:: SAMAA - Pakistan economic indicators - April 3

 

[Neo]

Karachi bourse re-emerges as best regional market ​

Credit goes to excellent corporate earnings, political stability, improving economic indicators and reduction in risk​

Saturday, April 04, 2009
By Salman Siddiqui

KARACHI: After witnessing hue and cry in 2008, the Karachi stock market turned again as the best performing regional market as it surged by 17 per cent in the first quarter of calendar year 2009.

“Thanks to political stability and improving economic indicators, the Pakistani market posted a handsome gain of 17 per cent as compared to MSCI EM Asia, MSCI World and MSCI EM returns of 1.2 per cent, minus 11.3 per cent and 0.5 per cent respectively,” noted Atif Zafar at JS Research.

In the quarter to March 31, the leading benchmark KSE 100-share index made a notable recovery of 17 per cent or around 1,000 points and closed at 6,860 points on March 31 compared to the pre-opening level of 5,865 points on January 1. During the quarter, overall market capitalisation recovered Rs200 billion and stood at Rs2,057 billion.

As a matter of record, the calendar year 2008 saw erosion of the sharp gains of the last four years for many reasons as the benchmark index crashed by over 58 per cent to a four-year low of December 2004. In the same year, Rs2,471 billion evaporated from the overall market capitalisation.

Prior to 2008, the KSE had been declared best performing market of the region and the world time and again. For the first time in its small history, the KSE was declared ‘best performing stock market of the world’ in 2002, according to KSE documents.

International magazine Business Week said in 2006 that it (KSE) was well into its fourth year of being one of the best performing markets. Similarly, US newspaper USA Today also labelled the KSE one of the best performing bourses in the world in the same year, according to the KSE documents available with The News.

Noman Abid & Company Assistant Vice President Saqib Hussain observed that the reason behind the fast recovery of the local market in the January-March quarter was its ‘no or little’ linkage with the recent world economic recession.

He said the issues that affected the market were internal and more of a local nature such as liquidity crunch and circular debt. Secondly, there was no huge foreign investment made in local bourses compared to other regional markets.

Moreover, a big part of total foreign investment in bourses was contributed by European countries and not by the US. Saqib Hussain explained that the financial crisis in Europe was the result of the US recession and Europe sustained the slowdown to some extent. Therefore, European investors were not withdrawing their portfolio investment in panic like US investors did.

He mentioned that Franklin Toplink, formed after the merger of two UK companies (one based in UK and the other in Singapore), held the biggest foreign portfolio investment in Pakistan and it never tried to cut short its massive holdings.

However, the foreigners sold $238 million worth of shares during the January-March 2009 quarter, while local institutions and high net worth individuals provided support to the market, Zafar of JS Research said.

Saqib Hussain was of the view that excellent corporate earnings helped the market achieve the status of being the best performing market in the region and in the world again. The launch of Initial Public Offerings (IPOs), new foreign investment in different sectors and expected resumption of privatisation process would help the market perform as the best in future, he hoped.

“On the back of handsome earnings growth and attractive dividend yields, fertiliser and exploration & production stocks outshined the market,” Zafar pointed out.

Stockbroker Aqeel Karim Dhedhi gave credit of re-emergence of the KSE as the best performing market to correcting economic indicators and an unprecedented fall in risk from 6,000 points to 1,500 points. The risk is evaluated by world’s leading assessment companies and ratings agencies. It is measured on the basis of ability of any country to pay back the amount at the time of maturity of bonds that the country had launched in the world markets.

“Pakistan had launched euro bonds and Sukuk in world markets including Middle Eastern countries and when the country’s foreign exchange reserves slipped below $7 billion in November last year, our risk shot up to 6,000 points from 1,000 points,” Dhedhi said.

He hoped that this risk would soon come down to the previous level of 1,000 points from 1,500 points at present and a further reduction in the risk would encourage international investors to flock back to Pakistan.

 

[Neo]

Per capita income to fall in current fiscal: official ​

Govt prefers stabilisation over growth, says Tarin​

Saturday, April 04, 2009

ISLAMABAD: Whole Pakistani nation of 170 million will become poor during the current fiscal, as per capita income will fall owing to a slump in GDP growth and 30 per cent depreciation of the rupee against the dollar, a senior government official said on Friday.

The government has revised downward its annual Gross Domestic Product (GDP) growth target to 2.5 per cent from initial over 5 per cent for 2008-09.

The revised target of 2.5 per cent agreed with the IMF depends on the performance of agriculture sector, especially wheat production.

According to official estimates, the GDP growth rate target of 2.5 per cent will be missed owing to wheat production growing in the range of 22 to 23 million tons, showing a subdued growth compared to the previous fiscal year.

Pakistan is unlikely to achieve its revised downward Gross Domestic Product (GDP) target of 2.5 per cent, raising fears that it will trigger a negative growth in terms of real per capita income for the current financial year. Pakistan also witnessed unprecedented depreciation of rupee by 30 per cent falling from average Rs60 to Rs80 against one dollar within few months period.

Quoting the rule of thumb, the official says, if the rate of depreciation is greater than the growth in nominal GDP, the real per capita income in dollar terms is bound to decline.

“If the depreciation is 30 per cent while the GDP growth in nominal terms is 25 per cent, the per capita income in real terms will decline by 5 per cent,” he added.

When Advisor to Prime Minister on Finance, Shaukat Tarin was contacted for comments on Friday night, he said that the government compromised growth of this year in order to achieve macroeconomic stabilisation with lower inflation.

When inflation will ease the discount rates will also be reduced, which will give jumpstart to manufacturing sector to grow on much faster pace. “We are sticking to GDP growth rate of 2.5 per cent and lets us see what happens by the end of the day,” he added.

He conceded that if the real GDP declined to below 1.9 per cent the per capita income would also show negative growth. But the incumbent wanted to achieve stabilization then stimulus can be given to achieve higher growth in years ahead, he concluded.

However, the sources said that the per capita income that rose from $410 to $1085 from 1999 to 2007-08 would be put on reverse path if the GDP growth declined to below 1.9 per cent of the GDP for the ongoing financial year 2008-09.

The country is registering a population growth of 1.9 per cent per annum and in case of GDP growth registering below 1.9 per cent, paving the way for achieving a negative per capita income growth in the current financial year.

Economist Intelligence Unit released in March estimate Pakistan’s GDP to grow by one per cent for the fiscal year 2008-09. It also states that the IMF funding has averted balance of payment crisis in short term but a range of domestic factors and worsening international environment will make it difficult to improve most of the economic indicators.

The independent economists say that the per capita income does not show well being of the whole populations but it is considered as important benchmark to determine the health of any economy of any part of the world.

 

[Neo]

Pakistan seeks $1bn for Balochistan, FATA ​

Saturday, April 04, 2009

ISLAMABAD: Pakistan will float an idea before the Friends of Democratic Pakistan in Tokyo meeting on April 17 for establishing a $1 billion Trust Fund for development in Balochistan and FATA, Adviser to the Prime Minister on Finance Shaukat Tarin told media here on Friday.

He said that two sessions of FODP would be held in Tokyo. In the morning session, $30 billion project funds for five to 10 years would be discussed at length. In addition to it, political and security issues with regard to ongoing war on terror would also be brought under discussion in detail.

In the evening session, Pakistan would seek $4-$6 billion for budgetary support in the next two years. He explained that $1 billion Trust Fund would be part of the $4-$6 billion budgetary support.

He said that Pakistan would seek 50 per cent grants in the budgetary support; otherwise it will have to move the IMF again for an additional $4.5 billion.

“Pakistan, which has entered into an IMF programme worth $7.6 billion, is still facing a financing gap of $4 to $6 billion in the next two years for which it needs support.”

Tarin said that the World Bank would coordinate for $1 billion Trust Fund, which will be utilised for development of Balochistan and FATA areas. The fund will also be spent on development of settled areas other than non-settled areas.

To a question, Tarin said that he has written a letter recently to Saudi Arabia seeking oil facility. “About remittances securitisation, Pakistan is in touch with Saudi Arabia and the Middle East,” he added.

 

[Neo]

PIA likely to go private: Tarin ​

Saturday, April 04, 2009

KARACHI: Shaukat Tarin, Advisor to Prime Minister on Finance on Friday said that government is considering the privatisation of Pakistan International Airlines (PIA).

PIA has accumulated financial losses of Rs72 billion in last few years though its balance sheet improved in the last quarter of 2008, he said.

“We will give it a final review after the results of first (Jan-Mar 2009) quarter,” he added.

PIA has made some improvement in the last quarter of the year 2008 and government would analyse the first quarter results in next months in April before taking any decision on PIA.

He was talking to journalists at the 3rd Pakistan Corporate Philanthropy Awards to public listed companies at the local hotel. The award distribution ceremony was organised by Pakistan Centre for Philanthropy (PCP).

When asked that why government is not reviewing the petroleum prices, he said, “It is being expected that world oil prices may surge again. We will definitely reduce prices when it is feasible and we do not want to change petroleum prices again and again to make a mess out of it.”

He also said that government would soon make a policy board and pass the bill from National Assembly for the improving the efficiency of Federal Board of Revenue (FBR), which will comprise of 60 per cent members from private sector and 40 per cent from public sector.

Board of Investment (BoI) will also be revamped and a different section will be made for overseas Pakistanis. “Our meeting is scheduled with World Bank in mid April, however, government would not go to IMF if it gets $4 to $6 billion from Friends of Democratic Pakistan,” he said.

He stated that despite low ranking in the human development index, Pakistan is among the top philanthropic nations and corporate philanthropy is a shinning example of giving for public good. From 2000, philanthropic contributions by the corporate entities have increased from Rs228 million to Rs1.67 billion in 2007.

Pakistan Petroleum Limited got the first award in the five top corporate entities based on their volume of donations. Oil and Gas Development Company Limited, Pakistan Services Limited, Nestle Pakistan Ltd and Jahangir Siddiqui and Services Limited received second, third, fourth and fifth awards respectively out of the list of the 25 public listed companies.

Similarly, Karam Ceramics got the first award in the second category of volume of donations as a percentage of profit before tax. Pakistan Services Limited, Shield Corporation Limited, Bestway cement Ltd and Gulistan Spinning Mills Ltd received the second, third, fourth and fifth awards respectively.

Certificates of recognition were also awarded to the top 25 companies in both categories.

Shamsh Kassim-Lakha, Chairman PCP Board of Directors informed the participants about the corporate philanthropy report and Give2Pakistan: Philanthropy Portal which was launched on the occasion.

 

[Neo]

British companies to invest in power ​

Saturday, April 04, 2009

ISLAMABAD: British High Commissioner to Pakistan, Robert Brinkley, said here on Friday that British companies, in a joint venture with Pakistani companies, would invest in the power sector to help Pakistan overcome energy crisis.

He was talking to a delegation of Rawalpindi Chamber of Commerce and Industry (RCCI), which met him at his office under the leadership of its President Syed Asad Haider Mashhadi.

Other members of the delegation included ICCI Vice President Imtiaz Chaudhry, former president Abdul Rauf Chaudhry and Shakeel Ahmed Khan.

The meeting was held in a very cordial atmosphere in which matters relating to bilateral interest were discussed, said the RCCI press release.

Robert Brinkley said that representatives of British entrepreneurs would visit Pakistan in the next few days to discuss the modalities of joint ventures.

Mashhadi expressed deep concern over US drone attacks on Pakistan’s territory, saying that these attacks were badly affecting the country’s economy.

He said that the UK was enjoying good terms with both Pakistan as well as the US and could play a role in making the Americans realise that these attacks would not serve the purpose.

He said that the US should understand the ground realties and review its policy.

Mashhadi said that RCCI intends to organise a single country exhibition in UK in collaboration with the Ministry of Commerce and Pakistani High Commission in London.

“Five top companies from every chamber would participate in the exhibition, which would not only introduce Pakistani products in UK but would also help in developing a soft image of Pakistan there,” Mashadi added.

 

[Neo]

‘Circular debt threatens manufacturing sector’ ​

Saturday, April 04, 2009

LAHORE: Industrialists have appealed to the government to take notice of circular debt being created in the manufacturing sector, which may cause a total collapse of the entire chain of suppliers, producers and vendors if corrective measures are not taken.

Elaborating their point of view, they cited the government’s own experience in the power sector, where circular debt had a devastating impact on all institutions trapped under it.

They said WAPDA (now PEPCO) has been deprived of payments worth Rs190 billion mainly from KESC and FATA. WAPDA in turn withheld payments of IPPs. They said the IPPs that used to get fuel from PSO or gas distribution companies did not pay them their dues.

This has weakened the financial flow of fuel suppliers. Many IPPs had to bear the salaries of their workforce without producing any electricity. The country suffered from a chronic fuel shortage as PSO lacked finances to import the commodity.

They said ultimately the government had to arrange Rs80 billion bank loans to clear IPPs’ dues. Despite this laudable government effort, all the institutions affected by circular debt have considerably weakened.

Leading exporter M I Khurram said that the private sector has remained under immense pressure during the past two years due to high cost of doing business and has now finally come under the debt trap. He said this happened after the exhaustion of all resources and past savings of the production chain players. He said spinners, for instance, owe money to banks and suppliers of inputs other than cotton.

He said neither spinners nor any other manufacturer enjoy the benefit of withholding utility bills so that they are updated on their electricity and gas bills. However, they have gradually extended the duration of payment to private sector suppliers from the normal 15 days to 45 days and then 90 days.

He said now they are finding it difficult to make payments to their suppliers even after three months of receiving supplies. He said spinners in fact, are finding it hard to recover their dues in time from yarn buyers. He said most of the spinners have defaulted on their bank loans and are seeking rescheduling.

Pakistan Hosiery Manufacturers Association Vice Chairman Adil Butt said that the attitude of banks has further complicated the situation. He said banks are now tightening the screw on exporters and manufacturers.

Butt added that normal working capital credit lines are being denied. He said a dilemma for manufacturers is that they circulate credit they take from financial institutions by paying back their suppliers and then wait for cash flows from sales or exports to pay back to banks. He said when banks stop or squeeze credit it is impossible for manufacturers to make payment to their suppliers, who in turn withhold supplies disrupting the entire manufacturing process.

Senior economist Naveed Anwar Khan, FCA, said that banks should give some weight to the previous history of manufacturers they have been dealing with for decades. He said one wrong move by any of the stakeholders is likely to result in the crumbling of the entire industry along with financial institutions.

He said manufacturers get badly hurt if there is the slightest of disturbance in their cash flows, whether it is from banks or from buyers. He said it is in the national interest to facilitate the productive sector and provide them with ample breathing space till interest rates come down to a manageable level.

 

[Neo]

Pakistan one of fastest growing in telecom: UN ​

Saturday, April 04, 2009

ISLAMABAD: As the number of Pakistani cell phone users reaches 91,008,042, the United Nations (UN) has rated Pakistan one of the fastest growing country across the globe in the telecommunications sector.

The Pakistan Telecommunication Authority (PTA) says that the tele-density in Pakistan is 56.50 per cent while Pakistan generated 763 million text messages during 2008/09 and stood fourth for SMS traffic in Asia Pacific.

According to the recently released UN report, more than 60 per cent of the world’s citizens have access to mobile phones; that is 4.1 billion cellular subscribers across the world.

The report adds that mobile phones help developing countries to improve their economy. That is a well established fact by now. However, a more relevant question is how the governments can either support this growth or cause it to slowdown.

Of course, political stability and lack of security is the overriding factor above all for the economy.

 

[Neo]

‘Germany to help Pakistan in achieving MDGs’​

ISLAMABAD: Visiting German Minister for Economic Cooperation and Development, Heidemaire Wiegoreak Zeul said here on Friday that her country would extend all possible help to Pakistan achieve its Millennium Development Goals (MDGs) and combat confronting energy crisis.

A Euro 80 million financial assistance agreement was also signed by Secretary Economic Affairs Division (EAD) Farrukh Qayyum and Uweohis Senior Vice President KFW German on behalf of their respective countries.

“I am visiting Pakistan to vet the financial needs of the country to be discussed in Friend of Democratic Pakistan’(FODP) conference in Tokyo on April 17,” German Minister for Economic Cooperation and Development, Heidemaire Wiegoreak Zeul said while addressing a joint press conference with Adviser to the Prime Minister on Finance and Economic Affairs Shaukat Tareen.

Speaking on the occasion Shaukat Tareen said that Germany was a strong supporter of Pakistan in the political and economic arena. He added that Germany, over a period, has given Pakistan financial and technical assistance in the fields of education, healthcare, skill development and development projects.

“Now Germany is very closely working with Pakistan in developing projects in the provinces including the NWFP and providing technical as well as financial assistance to the country for providing education, health care, infrastructure development and capacity building.” he remarked. “We are greatful that Germany is also helping us in developing water and energy resources,” Shaukat Tareen added.

He added that Pakistan was also looking towards Germany’s help at the FODP meeting to be held on April 17 in Japan, adding that Germany has assured that it would assist Pakistan in four areas of health, education, poverty alleviation and infrastructure development.

Speaking on the occasion, the German Economic Minister said that her country has committed finances for the hydro power dam Keyl Khwar located in NWFP on river Indus at Dasu. She added that out of Euro 97 million, the last tranche of 20 million Euro was signed here today for the project.

The visiting minister said that she was specifically here to show friendship and cooperation with Pakistan. She added that this support was important for Pakistan’s development to stabilise the country and the region. The German’s minister said that FATA needed development and her country would cooperate Pakistan in this regard.

 

[Neo]

Pakistan may have room for rate cuts in future: IMF​

WASHINGTON (April 04 2009): Pakistans monetary policy stance is appropriate, but there may be scope for interest rate reductions if inflation declines further, the International Monetary Fund said on Friday. In a statement summarising its consultation with Pakistan. The IMF said the country had met performance criteria and benchmarks spelled out under a stabilisation program, but stressed that it needed more outside help and said an upcoming donor meeting would be important.

Pakistan plans to ask its allies for up to $30 billion in aid over the next 10 years at a conference in Japan this month. It received a $7.6 billion IMF loan in November to stave off a balance of payments crisis. The IMFs directors said monetary policy was appropriate and "agreed that interest rates should be kept on hold for the time being in order to avoid financial pressures and to further consolidate disinflation."

However, they also saw "some scope for lowering interest rates in the future, provided that inflation further declines and international reserves continue to strengthen." The IMF board also stressed the need to avoid central bank financing for the government. The funds staff said the rupee currency may be slightly overvalued. The IMF said Pakistans banks had weathered the financial crisis well thus far "but should be monitored carefully." Non-performing loans rose to 9.1 percent of total loans in December from 7.7 percent in June.

 

[Neo]

SBP lowers GDP growth forecast to 2.5-3.5pc ​

KARACHI (April 04, 2009): The State Bank of Pakistan (SBP) cut its gross domestic product (GDP) growth forecast for the 2008/09 fiscal year to 2.5-3.5 percent from an earlier target of 3.5-4.5 percent, a move analysts blamed on political turmoil and lower local industrial output. The original target was 5.5 percent. Pakistan posted growth of 5.8 percent in the 2007/08 (July-June) fiscal year.

"The economy is likely to expand between 2.5 percent to 3.5 percent," the State Bank said in a report on the second quarter that ended on Dec. 31.

The State Bank also said inflation would slow sharply in the final quarter of this fiscal year.

The State Bank lowered its inflation target for this fiscal year to between 19.5 percent and 20.5 percent from an earlier forecast of between 20 percent and 22 percent.

It had originally forecast inflation at an average of 11 percent for this fiscal year but it had to revise that following a surge in international oil and commodities prices last year.

Inflation was 12 percent in the previous fiscal year.

The SBP said in the report it expected a current account deficit this year of between 5.8 percent and 6.2 percent, compared with 6.2 percent to 6.8 percent expected earlier.

At the beginning of this fiscal year, authorities expected a current account deficit of 7.2 percent. Last year it ballooned to 8.4 percent.

LOWERING INTEREST RATE

Pakistan's interest rates, among the highest in Asia, are expected to ease.

"The realisation of the expected sustained fall in domestic inflation, and an increase in foreign exchange reserves would allow for easing of monetary policy," the bank said.

Monetary policy for the last quarter of this fiscal year, ending on June 30, is due to be reviewed this month and most analysts expect an interest rate cut.

The State Bank kept its discount rate unchanged at 15 percent in January after raising it by 500 basis points in 2008.

The International Monetary Fund (IMF) said on Friday Pakistan's monetary stance was appropriate, but there may be scope for interest rate reductions if inflation declined further.

Pakistan agreed in November to an IMF emergency loan package of $7.6 billion to avert a balance of payments crisis.

It got a first tranche of $3.1 billion that month and a second tranche of $848 million this week. Pakistan also got a $500 million interest-free World Bank loan this week.

"The need for greater external assistance for Pakistan is underscored by the fact that the sources of domestic financing are either not available or remain risky due to its vulnerable external account position," the SBP said.

 

[Neo]

Around $4-6 billion pledges from Tokyo moot likely: Tarin​

ISLAMABAD (April 04 2009): Pakistan is expecting around $4 billion to $6 billion pledges from the participant states of Tokyo donors conference for two years budgetary support, said Advisor to Prime Minister on Finance, Shaukat Tarin here on Friday.

Talking to media at the Ministry of Finance, Tarin said Pakistan is also hoping to get $1.8 billion from the World Bank, $1.4 billion from the Asian Development Bank, $1 billion from Islamic Development Bank and $350 million from the DFID during the current fiscal year. Tarin said that Pakistan Development Forum (PDF) meeting would be held in May to consider assistance for Pakistan.

He said that Pakistan would give two plans - one with two years view and the other with 10 years programme to help support bringing it out of the prevailing economic mess. "We are looking for about 50 percent grants in both the plans. We could have loan from anywhere what precisely we are looking from these forums to help Pakistan in the form of grant, the advisor said, adding that Pakistan was fighting a war concerning the world.

The advisor said Pakistan would also seek $1 billion for Balochistan and NWFP Trust from donors. He said that the Trust would evolve district-wise short-term plans to provide basic amenities to the people of Balochistan and NWFP. Tarin said the Pakistan would float the idea of the Trust Fund to its friends in the upcoming meeting and would strive to ensure financial support to alleviate the problems of the people of Balochistan and NWFP.

To a question, the advisor said some four areas have been identified and Friends of Pakistan would be asked on April 17 to lend financial assistance for poverty reduction projects, improvement in health and education sectors as well as security and setting up of a Trust for NWFP and Balochistan with initial at least $1 billion funding. He said that the two meetings of the donors are scheduled for April 17 back-to-back, one in the morning to consider projects while the other in the evening that would pledge two years budgetary support for Pakistan.

 

[Neo]

Pak-German talks on funding eight hydropower projects​

ISLAMABAD (April 04 2009): Pakistan and Germany on Friday discussed the possibilities of funding eight ongoing and new hydropower projects worth billions of dollars, official sources told Business Recorder on Friday. These projects came under consideration at a meeting between visiting German Minister for Economic Co-operation and Development Heidemaire Wiegoreak Zeul and Prime Ministers Advisor on Finance Shaukat Tarin.

The German Minister is visiting Pakistan to assess Pakistans financial needs to be discussed at the Friend of Democratic Pakistan (FoDP) conference in Tokyo on April 17. Pakistan and Germany also inked 80 million-Euro financial assistance agreement.

Replying to a question, Tarin said that an establishment of a trust fund for development of social and infrastructure in Balochistan and NWFP would also be discussed in the second session of the donors conference in Tokyo. The agreement was signed by EAD Secretary Farrukh Qayyum and President of KfW German Uweohis on behalf of their respective countries in the presence of media.

THE FOLLOWING ARE THE WATER SECTOR PROJECTS, WHICH WERE DISCUSSED: Spat Gah hydropower project, Palas hydropower project, Kurram Tangi Dam, Basho hydropower project, Harpo hydropower project, Lawi hydropower project, Naigaj hydropower project and Hingol hydropower project.

Speaking at the occasion, the German Minister said that her country would extend all possible help to Pakistan to achieve its Millennium Development Goals (MDGs) and combat confronting energy crisis. Shaukat Tarin appreciated Germanys role in supporting Pakistans stance in the boards of international financial institutions, including the World Bank and International Monetary Fund (IMF).

"Germany over a period of time has given Pakistan financial and technical assistance in the fields of education, healthcare, skill development and development projects," he added. He was of the view that now Germany was very closely working with Pakistan in developing projects in the provinces, including the NWFP, and providing technical as well as financial assistance to the country for providing education, healthcare, infrastructure development and capacity building.

Tarin, who will be visiting Japan, for the FoPD, told the journalists that Germany had assured that it would assist Pakistan in the four areas - health, education, poverty alleviation and infrastructure development. The German Economic Minister stated that her country had committed finances for a hydropower dam, Keyal Khwar hydropower project located in NWFP on river Indus at Dasu. The project would generate 130 MW power.

The sources said that KfW had offered to finance the project implementation under loan. The KfW indicated availability of 97 million Euros for the project against project cost of 179.9 million Euros. The loan agreement, amounting to 77.080 million Euros, was signed between the KfW and government of Pakistan on November 11, 2008.

A further amount of 20 million Euros was also offered by the KfW, which was signed on Friday. The German Minister was of the view that out of 97 million Euros, the last tranche of 20 million Euros was signed here on Friday for the project.

She said that Germany was part of Friends of Democratic Pakistan (FoDP) and she had come here for the assessment of the situation and development needs to be discussed at Tokyo in April 17 and then again at the end of April during the annual meeting of the World Bank and IMF. She added that this support was important for Pakistans development to stabilise the country and the region.

The Germans Economic Minister said that the Fata needed development and her country would cooperate with Pakistan. Answering another question, she reiterated her countrys support for the people of Pakistan, and added that there should be no doubt about Germanys commitment.

"We do not write things on paper, when we make a commitment we fulfil it," she added. In reply to another question, the German Minister said that she would also meet civil society for consultations because Germany gave importance to civil society. She was of the view that people of Fata needed development to deal with militancy because development would give them hope for a better future.

 

[Neo]

US plans $3 billion military boost for Pakistan: New York Times​

WASHINGTON (April 04 2009): The US Defence Department has a three billion dollar plan to train and equip Pakistans military over the next five years, US media reported Friday. The funds would pay for helicopters, night-vision goggles and other equipment and counterinsurgency training for Pakistans special operations forces and Frontier Corps paramilitary troops, the New York Times said.

It quoted Pentagon officials as saying up to 500 million dollars could come from a yearly emergency war budget that President Barack Obamas administration is to present to Congress next week. But with some legislators expressing concern over the Pakistan Counterinsurgency Capability Fund, the top US military officer acknowledged that the United States had not mandated enough accountability for the funds.

"There hasnt been an audit trail, and there havent been accountability measures put in place, and there needs to be for all the funds," Admiral Mike Mullen, the chairman of the Joint Chiefs of Staff, told the Timess editorial board. "So were going to do that. For this counterinsurgency money, which is important, it is critical that it goes for exactly that and nowhere else."

Mullen said the Pakistani military must change its focus from fighting arch-foe India to combating militants and insurgents within its borders. "Thats not going to change overnight," he said. Mullen said insurgents operating in safe havens in Pakistan were preparing attacks against Afghanistan and Pakistan. "The Taliban, in particular, are going both ways now," he said.

"They are coming toward Islamabad and they are actually going toward Kabul. Im completely convinced that the vast majority of the leaders in Pakistan understand the seriousness of the threat." With insurgents in Afghanistan led and backed by hard-line militants in tribal areas over the border in Pakistan, the United States has warned Islamabad that in return for economic and military aid it must crack down on Islamist groups.

Mullen said last month that aid to Pakistan needed to be linked to concrete action but expressed confidence that the countrys military grasped the nature of the threat within its borders. He said the Pakistani military leadership, including chief of staff General Ashfaq Kayani, understood that the militants posed a threat to Pakistan itself.

"I have great confidence in General Kayani and in the Pakistani military," said Mullen, who holds frequent talks with his Pakistani counterpart. Despite the deployment of more than 100,000 troops, Pakistan has been unable to stop a wave of attacks by Taliban and al Qaeda-linked militants that have killed 1,700 since July 2007.