Pakistan Economy - News & Updates - Archive

[Hasnain2009]

They were not happy in 2005 when we broke 30 year old record and posted GDP growth of 8.4%, but now they are happy bcoz our growth rate is below 2.5%!

 

[Neo]

IMF changes revenue target to 10.2 percent of GDP growth ​

KARACHI (May 10 2009): The International Monetary Fund (IMF) has removed the current revenue target slab of Rs 1.327 trillion after negotiations with the team of taxmen in Dubai, and linked it with 10.2 percent of annual GDP growth, Business Recorder learnt on Saturday.

A member of the delegation of the Federal Board of Revenue (FBR), who attended the meeting held with the representatives of IMF, said on phone that 10.2 percent of GDP growth has been set as revenue target for current fiscal year.

He said that IMF has suggested establishing a fair and efficient tax administration that would not impede investment or production incentives and would also raise enough revenues for development and poverty reduction programs. Several issues pertaining to overall macroeconomic constraints, present revenue administration, assessment of main taxes, sub-national taxation and political economy of intergovernmental reforms were also discussed.

He said that FBR had earlier fixed Rs 1.25 trillion, which later was revised by Rs 1.32 trillion, when the GDP growth was expected around 8 percent in the current fiscal year.

However, the official statistics, reconciled by the State Bank of Pakistan, have shown that the current GDP growth is not above 3 percent. The official said that it was a very intricate matter to achieve the target of Rs 1.3 trillion when the growth rate of GDP is less than the expectation.

He said that the only major source of revenue collection was petroleum development levy, being collected on sales of petroleum products. He said that FBR is still left with Rs 431 billion, which has to be collected in two months, and termed it as a formidable task to achieve. However, he was optimistic about crossing the Rs 1,200 billion mark, saying that if the department collected Rs 1.2 trillion in current fiscal year, the budgetary target, which is now linked with the GDP growth, would be achieved.

 

[Neo]

Erasing power sector debt ​

EDITORIAL (May 10 2009): The Asian Development Bank has signalled its readiness to extend a credit line of $500 million to $1 billion, sought by the Ministry of Water and Power to rid Pakistan Electric Power Company (Pepco) of the accumulated circular debt of around Rs 180 billion. The debt has badly affected the functioning of the entire power sector.

A news report quoting a Ministry of Water and Power source has said that Pakistan is seeking the ADB loan at LIBOR plus 150 to 200 basis points. If successful in obtaining the loan, the government will inject some of the capital to erase the entire power sector circular debt. The Ministry of Finance had opposed seeking the loan as it wished to generate the required capital by hedging the assets of the entities involved in the circular debt under the concept of REIT (Real Estate Investment Trust).

However, this would have taken at least one and a half to two years - a timeframe the government was not willing to allow, as it wanted the debt to be erased by June 30, 2009. When asked how the Pepco would repay the loan along with the mark-up, an official is reported to have said that the power tariff was being raised by around 4 percent, and the process of recoveries was also being expedited to improve financial health of the Discos.

A news report has meanwhile claimed that the monthly earning of Pepco stands at Rs 25 billion against an expenditure of around Rs 38 billion, representing a monthly deficit of Rs 13 billion. Controlling such a huge monthly deficit through pursuit of rigorous financial discipline and prudent practices can help Pepco to conserve financial resources.

A major cause of the accumulated circular debt was the steep increase in oil prices in 2008, to around $147 per barrel from around $50 per barrel. Although oil prices have since attained stability, the price surge has left behind the huge circular debt, which continues to destabilise the energy chain. The steep rise in oil prices and the subsequent negligence of the government to increase power tariff and POL prices had caused the Discos and OMCs to incur losses.

As one analyst has put it, this had generated a situation where receivables from the government to the OMCs came under control, but the losses sustained by power distributors rendered them incapable of paying their dues. As the dues of power distributors mounted, the receivables of IPPs too increased.

In order to ease pressure on themselves, the IPPs had to let their payables slide as well, which landed the OMC sector in grip of debt. The circular debt is thus a result of the "chain reaction." Unless power sector defaulters are made to pay the outstanding dues, Pepco cannot effectively run the power sector, as it has to purchase power from the IPPs, at rates that are believed to be exorbitant. The IPPs' threat last year to call the sovereign guarantee had forced Pepco and its allied companies to pay Rs 30 billion.

The IPPs generate power with sovereign guarantees given by the government regarding the purchase of power, and payment thereof by public sector companies, which purchase power from them for onward distribution to different types of consumers. Secondly, fuel companies have to supply fuel to the IPPs, but these have to be paid their dues on time to enable them to keep the fuel supply intact.

A major cause of the persisting energy crisis is that despite a huge surge in oil prices, the government remained reluctant to pass on the increase to the end consumers. This has resulted in the petroleum price differential between the government, the fuel supply companies and the IPPs. The petroleum differential claims after netting off have been settled through issuance of Term Finance Certificates worth Rs 85 billion to the banks.

However, due to persistent deficit the circular debt is piling up once again. This is one side of the picture. The other side is that as there has been a steep rise in the use of furnace oil for power generation in Pakistan, electricity has become prohibitively expensive.

If increased by another four percent, power tariff will make payment of electricity bills even more difficult for the consumers, particularly in Balochistan, Fata, Peshawar and Hyderabad, where the receivables are already the lowest, partly because of the tenuous security situation and partly because of the high level of poverty. Rationalisation of oil prices through removal of some of the non-essential taxes can therefore help the Discos augment their recoveries.

As Pakistan's external debt has already soared to over $50 billion, seeking a fresh credit line cannot be termed a rational response to the power sector's financial crunch. We believe that the Finance Ministry's proposal to generate the required capital by hedging assets of the entities involved in the circular debt with the banks under the concept of REIT was quite sound, which needs to be reconsidered to find a cost-effective way out of the power sector debt.

Going for a fast-track, six-month erasing of debt that has accumulated as a result of ill-considered policies over the years can produce many complications, including the burdening of power consumers further still.

There is a need to pursue a two-pronged strategy: start collecting the power bills in areas and regions, which have remained out of the bill collecting dragnet so far, with a possible concession of a lower tariff rate in keeping with the financial status of the province. Secondly, the government should undertake a comprehensive exercise to restructure the prevailing power tariff regime.

As energy fuels a country's economy, the government should order fast-track implementation of hydropower and coal projects, to keep the energy cost low. Instead of burdening the energy sector with more taxes, it should diversify levy of taxes to include sectors such as agriculture, real estate etc to make up the shortfall in tax collection.

Finance Ministry's proposal to go for REIT mechanism for Wapda/Pepco is attractive - why this is not utilised to settle the growing overdraft of Pakistan Railways? After all, the lands belonging to PR are all freehold and much more expensive than the land utilised for power and grid stations. Second, settling circular debt through TFCs does not address the tight liquidity conditions in the banking system. Injection of one billion dollars or Rs 80 billion from ADB takes care of this issue.

 

[Neo]

Pakistan grabs $50 million orders in sports goods​

KARACHI: Pakistan is all set to regain its soccer ball market from China and India as both its competitors could not meet the required standard of hand-stitched balls.

The country’s sports goods exhibitors who participated in recently-held Hong Kong Gifts and Premium Fair told Daily Times.

The sports goods manufacturers at the exhibition held from April 26-30 said they have received encouraging trade enquiries during the four days extravaganza, expressing the hope they could manage over $50 million orders. About 12 exhibitors from Pakistan had displayed their products in the fair.

“If the Pakistani government helps out in exploring markets especially the Latin America and Asia Pacific, we will be able export soccer balls worth $100 million well before next Football World Cup to be held in 2010,” a Sialkot-based manufacturer said.

He said that it’s a labour-intensive industry providing direct and indirect job opportunities to about 80,000 workers, while sub-contracting of work on piece rate is a common practice, resulting in more jobs for people. But the government’s non-interesting behavior towards this industry has not let it grow for a long time.

There are over 3,500 small and medium sized sports goods industrial units and some 60 well established industries functioning in Sialkot. The sports goods industry of Sialkot, producing quality goods mainly for foreign markets has over a century old history.

A major portion of the total production comes from cottage and small scale manufacturing units. However, some units have joint venture collaboration with foreign manufacturers, which benefit technical and marketing support to their foreign partners.

The Sialkot exporters appealed many times to federal and provincial governments to set up sports goods and surgical instruments cities to facilitate the SMEs.

The city was earning foreign exchange to the tune of $1 million annually and strengthening the national economy.

He said presently, Pakistan is competing with India, China and Japan in international markets. India has an advantage of cheap labour and raw material, whereas countries with semi-automatic mechanised units can produce low-cost and inexpensive sports gear such as metal rackets and cricket bats etc.

 

[Neo]

Used German power plants may help curb power shortage​

KARACHI: The chronic power crisis being faced by Pakistan for so many years may be permanently over if the government initiates serious negotiations with the German government to procure large power plants at very low rates.

The proposal has been given to the government of Pakistan through Pakistan’s Counsel General to Hong Kong Dr Ahmad Balal by EU Convener of Independent Power Producers Forum (IPPF) Normen S Kegler.

Kegler along with Secretary General IPPF Joel Laykin is scheduled to arrive in Pakistan on invitation by the Minister of Investment Salim Mandviwala during Pakistan Oil, Gas and Energy Exhibition 2009, and will hold high-level meetings with the government’s high-ups in Islamabad on the issue.

Kegler and Laykin are also working on providing easy options to solve Pakistan’s power crisis and setting up power plants utilising Thar coal, said Dr Balal.

He said that both the consultants have advised the government to go for options to acquire second-hand power plants with production capacity from 250 megawatts to 450 megawatts at extremely low prices.

Pakistan must discuss the potential of efficient power plants that would be out of commission by 2011 in Germany to meet energy shortages, the envoy said.

These plants would produce power for next 25 to 30 years with efficient electricity production performance, he added. The German government has planned to reduce carbon emissions and planned a gradual closure of old power plants.

 

[Neo]

WB to provide $520m soft loan to Pakistan by June end​

LAHORE: The World Bank (WB) will provide $520 million in soft loan to Pakistan by the end of June this year, a private TV channel reported. According to the channel, the loan being provided on a 0.75 mark-up would be in addition to the $300 million that had already been announced by the bank in the Friends of Pakistan forum. The channel quoted sources in the Economic Division as saying the bank would provide $120 million for the Punjab Education Programme, $100 million for the Sindh Education Programme and a further $100 million for higher education, by the end of June. The bank would provide $200 million to Pakistan in the fourth quarter of the current financial year under the Pakistan Safety Net.

 

[white_pawn]

IMF relaxes Pakistan’s budget deficit target ​

WASHINGTON: The International Monetary Fund announced on Monday a preliminary agreement to raise the budget deficit target Pakistan must meet to take advantage of international aid.
Following a meeting with Pakistani authorities in Dubai over the past week to discuss the IMF’s $7.6 billion standby agreement with the country, the IMF agreed to raise the deficit target for fiscal year 2009-2010 to 4.6 per cent of gross domestic product from 3.4 per cent.

‘The slowing economy, additional donor support and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009/10,’ the IMF said in a statement issued in Washington after its mission returned from the region.

Shaukat Tarin, the prime minister’s financial adviser, held two rounds of meetings with IMF and World Bank officials over the past two weeks.

President Asif Ali Zardari too met senior IMF and World Bank officials in Washington last week, discussing various measures to help stabilise economy.

President Zardari and his Afghan counterpart Hamid Karzai also held a joint meeting with the World Bank president and agreed to expedite efforts to promote electricity trade between South and Central Asian regions.

On Monday, the IMF noted that Pakistan remained on track to fulfil conditions under the IMF-sponsored programme.

‘While the external current account deficit has started to narrow and inflation has declined, the drop in the demand for exports and uncertainty regarding the prospects for workers’ remittances pose risks to the external outlook,’ it said, noting that the international assistance would enable the country to pursue counter-cyclical policies.

‘The authorities and the IMF team agreed the Tokyo package should be regarded as a bridge towards the stronger medium-term revenue effort,’ the fund said.

‘In this regard, it is crucial to reinforce efforts to increase the tax revenue-to-GDP ratio through tax policy and administration reforms.’

The IMF plans to complete discussions on the second review of Pakistan’s programme over the next few weeks.

DAWN.COM | Business | IMF relaxes Pakistan?s budget deficit target

 

[white_pawn]

Remittances soar by 19 per cent ​

KARACHI: Despite deep recession in the US and massive fall of oil income of the Middle Eastern countries and erosion of boom in the Gulf countries, remittances sent home by overseas Pakistanis grew up by over 19 per cent in the first 10 months of the current fiscal year.

Inflows from the Middle Eastern countries were amazing and registered a high growth of 34 per cent.

The State Bank reported on Monday that Pakistan received a total of 6.355 billion (double than the foreign direct investment so far received this year) as remittances which was over $1 billion or 19.5 per cent higher than the same period last year.

The remittances showed that Pakistanis living abroad were still on jobs and were sending dollars to their homeland.

The inflow from US slightly declined by $28 million during this period, but still highest remittances were coming from the US economy plagued by deep recession.

In the last 10 months, Pakistanis in US sent $1.435 billion helping the country to keep its vulnerable foreign exchange reserves intact.

The inflows from the Middle Eastern countries, including UAE and Gulf countries (Oman, Qatar, Kuwait and Bahrain) witnessed a substantial increase in remittances.

Oil exporting Arab countries were baldy hit by the enormous fall in oil prices as a consequence of recession in the biggest US economy along with other developed economies.

The fall of oil income forced the Arab governments to close down projects worth billions of dollars and it resulted in loss of thousands of jobs.

The impact of loss of jobs was reflected from the declining inflows from these countries during April, but the fall was not massive.

However, during these 10 months, the inflow from Saudi Arabia rose by $262 million to $1.264 billion, remittances from UAE increased by $459 million to $1.366 billion and from GCC by $201 million to $966 million.

The inflows were encouraging as these jumped by 34 per cent from the Middle Eastern countries which showed the depth and strength of economies.

The economy of Dubai plunged during a year due to global financial crisis and over 40 per cent employees have lost their jobs alone in Dubai.

Financial hardships in Dubai, Saudi Arabia and other UAE countries have not yet made their full impact on Pakistan.

Analysts said if recession persists for a longer period and if oil prices remain below $60 a barrel, Pakistanis might lose more jobs in the months to come and it might be a severe blow to the economy of Pakistan and foreign exchange reserves.


DAWN.COM | Business | Remittances soar by 19 per cent

 

[white_pawn]

Customs duty collection up 21pc in 10 months ​

KARACHI: Customs duty collections increased by 21 per cent to Rs39.873 billion during July-April of the current fiscal year against Rs33.041 billion collected during the same period of last year.

Though the dutiable imports recorded a fall of nine per cent during the period under review to Rs259.607 billion from Rs284.850 billion registered earlier, the Model Customs Collectorate of PaCCS collected higher duty at Rs39.873 billion.

It is interesting to note that the total imports increased by 16 per cent to Rs589.040 billion during July-April as against Rs509.276 billion same period last year.

The duty-free imports rose by 47 per cent to Rs329.432 billion from Rs224.427 billion as compared to same period last year. This shows that the customs authorities were left with lesser space to collect customs duty compared to last year.

In all Rs2,84,749 containers of import cargo were cleared by the customs during the current ten months thereby showing a fall of 13 per cent to 3,28,903 boxes disposed of in the same period last year.

Similarly, the number of Goods Declaration (GDs) processed and cleared by the customs declined by six per cent to 144,764 from 153,728 GDs of last fiscal.

There is a drastic fall in clearance of goods through Green Channel as the authorities put more items under appraisement and examination to check growing menace of mis-declaration and under invoicing, which had been causing huge revenue leakages.

According to official figures there was 20 per cent decline in clearance of goods through Green Channel to 44,294 GDs against 55,452 GDs cleared earlier.

Almost all the other taxes, including sales tax, advance income tax, regulatory duty and federal excise duty recorded rise during the period under review.

Official sources told Dawn that administrative measures taken by the customs to check rampant revenue leakages through mis-declaration and under invoicing at the MCC have produced some good results.

However, it is being strongly felt that if more stringent steps are taken it will help to weed out corrupt elements from the PaCCS, who collaborate with importers or customs agents to cause huge revenue loss.

It is further urged that under the current fast movement of merchandise across the globe a foolproof auto-clearance system could only keep pace with the inward and outward goods from the country.

Customs could further plug the leakages by taking pragmatic steps such as frequent changes in customs posts and keeping a close watch on system operators, who normally become a tool in revenue leakages.

DAWN.COM | Business | Customs duty collection up 21pc in 10 months

 

[Neo]

Remittances up 19pc as workers seen returning home ​

Tuesday, May 12, 2009

KARACHI: Remittances sent home by overseas Pakistanis jumped 19 per cent year-on-year in April 2009 as the worst prediction of the government officials started to come true with more expats coming back clutching on to their belongings after losing jobs abroad.

Last month remittances increased to $697.52 million as compared to $590.7 million received in the same month of 2008, reflecting what employment agencies call transfer of capital mostly from the Middle East.

“Labourers in cities like Dubai, which has been hit by a property slump, are coming back in large numbers,” says Zohair Ashir, CEO of Access Consulting. “That is what seems to be adding up to higher remittances.”

The figures released by State Bank of Pakistan (SBP) on Monday showed that total remittances in the past 10 months to April jumped 19 per cent to $6.35 billion. The remittances from UAE have gone up by 50 per cent year-on-year to $1.36 billion.

A record 23 per cent jump in remittances in March rang alarm bells in the government circles with Federal Minister for Overseas Pakistanis, Dr Farooq Sattar, fearing a tsunami of homeless expats heading back.

SBP has already cautioned the government against too much reliance on remittances to meet the current account deficit, citing the global economic slowdown that has caused tremendous job losses.

According to a 2004 report of the ministry of overseas Pakistanis, the number of expatriates is 4 million but Sattar said that has crossed well over 5 million now. While there are no figures available to ascertain the origin or the exact number of expatriates coming home, the recruiting consulting agencies say the flight could be from places beyond UAE.

Ashir of Access Consulting said stringent working permits in UAE and other Middle East states don’t allow workers to hang on for long. “Once your visa is taken away, there is no other option but to head home with all the belongings.”

But, he cautioned, there could even be an exodus from among the Pakistanis based in US. “Compared to six months ago, I have seen substantial increase is CVs sent by those seeking jobs in Pakistan.”

The sudden jump in remittances has coincided with a national crackdown on illegal money transfer networks called Hundi and Hawala. Some officials say the increase in remittances is in part reflection of more expats using the legal channel to send money to their families.

During July-April 2008-09, the highest amount of $1.4 billion was received from the US, the global powerhouse where hundreds of thousands of people have been sacked in past few months. Pakistan subscribed to a $7.6 billion IMF loan late last year to avert a balance of payment crisis, which was caused by a huge trade deficit and falling foreign inflows.

 

[Neo]

July-April 2008-09: Remittances rise to $6.355bn​

KARACHI: Remittances sent home by overseas Pakistanis continued to show a rising trend as an amount of $6.355 billion was received in the first ten months (July-April) of the current fiscal year 2008-09, showing an increase of $1.036 billion or 19.49 percent over the same period of the last fiscal year. The amount of $6.355 billion includes $0.45 million received through encashment and profit earned on Foreign Exchange Bearer Certificates (FEBCs) and Foreign Currency Bearer Certificates (FCBCs).

In April 2009, an amount of $697.52 million was sent home by overseas Pakistanis, up 18.08 percent or $106.81 million, when compared with $590.71 million received in the same month last year.

The inflow of remittances in the July-April, 2009 period from USA, UAE, Saudi Arabia, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $1,435.65 million, $1,366.79 million, $1,264.07 million, $996.02 million, $467.98 million and $196.53 million respectively as compared to $1,463.73 million, $907.52 million, $1001.71 million, $795.18 million, $379.03 million and $147.65 million respectively in the July?April, 2008 period. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during the first ten months of the current fiscal year 2008-09 amounted to $628.09 million as against $622.06 million in the same period last year.

The monthly average remittances for the period July-April 2008-09 comes out to $635.56 million as compared to $531.91 million during the same corresponding period of the last fiscal year, registering an increase of 19.49 percent.

During last month i.e. April 2009 remittances from UAE, Saudi Arabia, USA, GCC countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $156.64 million, $150.49 million, $144.18 million, $102.83 million, $61.55 million and $20.86 million respectively as compared to $113.90 million, $119.76 million, $151.39 million, $90.91 million, $44.18 million and $16.52 million in April 2008. Remittances received from Norway, Switzerland, Australia, Canada, Japan and other countries during April, 2009 amounted to $60.97 million, up from $54 million received in same month last year.

 

[Neo]

CPI-based inflation grows by 17.19 percent​

KARACHI: Inflationary pressures continued to recede as the headline inflation hit one-year low in month of April current fiscal.

Consumer Price Inflation (CPI) registered 17.19 percent growth in the period under review over the corresponding period of previous year, official figures indicated Monday. The growth in CPI was 19.07 percent in the preceding month of March.

The reduction in inflation was triggered by substantial drop in the food inflation, which impacted the overall inflation scenario positively during the month.

Analysts pointed out that decrease in inflation has been caused by falling food inflation particularly the wheat price. However they observed that although prices are expected to rationalise, the downward trend in the prices and increase in the electricity tariffs would partially offset the base effect.

They noted that food inflation could have been further brought down if the full impact of commodities prices in the international market had been passed on to domestic consumers.

During the July-April 2008-09, CPI grew 22.35 percent over the same months of last financial year. It also rose by 1.41 percent in April over the preceding month March of current fiscal.

The decreasing inflation has raised the hopes of interest rate cut by the central bank, which slashed the policy discount rate by 100 basis points in its monetary policy review during the month of April.

Analysts noted that further cut in the interest cut could come only if the core inflation also continued to decline in the coming months when central bank will go for its next policy rate by end of July in the next financial year. Core inflation fell by 17.7 percent in the months under review.

Food inflation rose 17.02 percent – non- perishable food items 16.22 percent and perishable food items 22.71 percent – house rent up 18.86 percent, fuel & lighting 26.68 percent, transport & communication 8.65 percent, education 23.04 percent and medicare 13.36 percent.

Sensitive Price Indicator (SPI) and Wholesale Price Index (WPI) are still hovering around 26.33 percent and 21.44 percent in first ten months of current fiscal.

 

[Neo]

Foreign mining venture seeks investment guarantees ​

Tuesday, May 12, 2009

ISLAMABAD: A joint venture of western mining giants has sought sovereign guarantees from Pakistan for protection of its estimated investment of over $5 billion in the resource-rich field of Reko Diq, having known deposits of around 4 billion tons of copper, it is learnt.

Tethyan Copper Company, a joint venture between Antofagasta of Chile and Barrick Gold Corporation of Canada, holds a 75 per cent interest in the exploration licence concerning Reko Diq field in the Chaghi hills of Balochistan while the remaining 25 per cent share is held by the Balochistan government.

Balochistan would earn billions of dollars in profits and royalty over the life of the mine, sources said, adding there was a need to set a good precedent so that the country could become an attractive place for investors in future.

“Negotiations are in progress among three parties including the federal government, the provincial government of Balochistan and Tethyan Company for reaching a mineral agreement to establish a framework for future investment,” said a high-level official of the Ministry of Petroleum when asked for comments.

In case an agreement is finalised, Tethyan is expected to invest around $5 billion till 2013. The agreement is proposed to be for 13 years and each year an investment of around $1 billion will be made, taking total investment to $13 billion.

When Director General Mineral, Ministry of Petroleum, was contacted for comments, he confirmed to The News that negotiations were under way to finalise a framework for future investment, which was expected to be finalised in a few months.

Under the Mining Act 1948, provinces give concession grants to the parties concerned. Reko Diq field holds large copper and gold reserves on the Tethyan belt in the remote and sparsely populated province of Balochistan.

At the end of 2008, combined deposits of resources at Reko Diq were estimated at over four billion tonnes. A feasibility study for the project was initiated in December 2007 and is expected to be completed in the second half of 2009. An additional 146,000 meters were drilled in 2008, which mainly related to infill drilling to upgrade the existing resources.

Costs incurred by Tethyan in 2008 amounted to $100 million, including expenditures on feasibility study and acquisition of additional surface rights. When Tethyan was contacted at its office in the federal capital for comments, a written reply was sent which states: “In our negotiations with the government, the sovereign guarantees that we are seeking are already being provided to foreign investors in Pakistan, particularly in the oil and gas sector.

“According to the terms of the agreement for the exploration licence of which the government of Balochistan is 25pc partner, TCC has made 100pc investment for exploration and feasibility of Reko Diq project.

“At present, negotiations are in progress with the government of Balochistan and the federal government for a mineral exploration agreement to establish a framework for future investment. We hope to conclude this agreement soon and are keen to make this a win-win deal for all the parties involved.”

 

[Neo]

LSM downslide continues as index falls by 7.67%​

KARACHI: Country’s industrial production fell 7.67 percent during the first nine months of current financial year, reinforcing fears of further layoffs in the industrial sector of the country.

The dismal performance also depicted the inability of the industrial sector to withstand against the global economic meltdown as well as the local factors confronting it in the form of infrastructure and power problems.

Analysts said that sector has witnessed already the major downsizing particularly textile, auto, electronics and other key sectors are the victims in the current deteriorating situation and feared that more downsizing is in the pipeline in the industries in view of no improvement in the current situation.

During the month of March, the negative growth was much higher in terms of percentage as it plunged by 20.67 percent over the same month of last year.

The poor performance of the industrial output was across the board in the months under review with the exception of few.

Industrialists having grave concerns about the situation said that falling industrial production is casting negative impact on the overall country’s economic scenario as it is the largest contributor in the revenue and employment generation. Food, textiles and apparel, and leather industries heavily dominate Pakistan’s manufacturing industry by over 50 percent. Other major segments in manufacturing include chemicals and pharmaceuticals (15.2 percent), basic metal industry (7.7 percent), nonmetallic mineral products (5.1 percent), machinery (4.6 percent), cement (4.4 percent) and automobiles (4.4 percent).

Though, analysts felt global financial crisis has adversely affected the industrial activities in the country in the shape of dampened demand for the exports particularly textile and clothing from Pakistan. However, they pointed out that it the domestic problems—infrastructure, power, law & order situation, high financing—which have devastated the local industry.

The fragile security situation has also been singled out as the major impediment in the precarious health of industrial sector as the foreign buyers are reluctant to visit the country, resultantly impacting the export-oriented industries negatively.

Petroleum sector was the worst performer and its overall production fell 9.19 percent in first nine months of current fiscal. Jet fuel declined 10.64 percent, kerosene oil 17.26 percent, high-speed diesel 5.08 percent, furnace oil 8.84 percent, LPG 22.49 percent and motor spirit 3.13.

In food sector, production of vegetable ghee declined by 8.17 percent, cooking oil 3.52 percent, wheat and grain milling 6.36 percent, beverages 3.76 percent. The production of starch and its production rose 5.87 percent.

Production of refrigerators dropped 10.25 percent, deep-freezers 17.75 percent, air-conditioners 49.89 percent, electric bulbs 29.19 percent, electric tubes 31.42 percent, fans 5.75 percent, motors 16.26 percent, electric meters 7.79 percent, switchgears 22.92 percent, transformers 18.11 percent, TV sets 38.81 percent and bicycles 30.42 percent.

 

[Neo]

Pakistan can let deficit grow to protect spending: IMF​

* Fund says discussions will continue over next few weeks to complete second review under loan programme​

WASHINGTON: The International Monetary Fund on Monday said Pakistan has room to raise its fiscal deficit to protect crucial spending as it makes progress in coping with the global economic crisis.

An IMF staff mission that met last week with Pakistani government and central bank officials in a second review of Pakistan’s progress under a 7.6-billion-dollar IMF emergency loan programme found the country “on track” with reforms, the multilateral institution said in a statement.

The discussions in Dubai focused on Pakistan’s fiscal programme and financing needs as the country struggles with macroeconomic troubles over the past two years that have been aggravated by the global financial and economic crisis.

“The slowing economy, additional donor support, and the need to protect priority expenditures call for a relaxation of the fiscal deficit target for 2009-2010,” the IMF mission leader, Adnan Mazari, said in the statement.

The IMF found that the Pakistani authorities had expressed “strong resolve” to strengthen the economy.

The IMF advised the central bank, the State Bank of Pakistan, to hold its key interest rate unchanged, at 14 percent, after slashing it by a percentage point on April 20.

“Given the persistence of inflation, the decision on any further cut in the SBP’s discount rate will await a significant decline in core inflation,” Mazari said.

The 23-month, 7.6-billion-dollar Stand-By Arrangement for Pakistan announced on November 24 was approved under the IMF’s fast-track Emergency Financing Mechanism procedures.

The IMF disbursed about 3.1 billion dollars of the loan on November 26, 2008, and a second payment of some 847 million dollars on April 1.

Discussion: The IMF said the staff and Pakistani authorities would continue discussions over the next few weeks to complete the second review under the loan programme. afp