Pakistan Economy - News & Updates - Archive

[Neo]

Exports unlikely to reach $18 billion mark ​

ISLAMABAD (May 30 2009): Pakistan's exports are unlikely to touch $18 billion mark--nearly 19 percent lower than the target--by the end of the current fiscal year (2008-09) due to government policies and international recession. The government has fixed $22.1 billion export target for the current fiscal year, a gross overestimation. Actual exports till the end of April 2009 were 12.5 percent less than in the same period of last year.

According to official documents, the government had achieved 79.3 percent of total export target during ten months of 2007-08, but during the same period of the current fiscal year 66.8 percent of the target has been achieved. Commerce Ministry's top foreign trade officials have been engaged in several foreign tours during the last ten months with little positive outcome, in terms of higher exports, to show for the expenses they incurred.

Analysts say that for the country to recover from the decline in industrial output a focused approach must be undertaken by the government that should seek to provide incentives to the export sector and credit at affordable rates, coupled with uninterrupted energy supply. Or, in other words, monetary and fiscal policies are required to strengthen the export sector.

Pakistan's trade deficit crossed $14 billion during ten months (July-April) of the current fiscal year due to negative growth in exports and a decline in imports. A couple of months ago, Commerce Ministry officials were happy when growth in exports was about ten percent, but now it seems that exports have nose-dived.

Reduced imports have shrunk the trade balance to some extent during the first ten months of the current fiscal year but declining trend in exports and a gradual increase in crude oil prices in the international market indicates that this trend is not long-lasting and the government has to revisit its trade policy.

The government increased regulatory duty on dozens of non-essential items, but the result of this decision was not as encouraging as was expected as it resulted in increased smuggling of such items from Afghanistan. A former commerce minister, Humayun Akhtar, stated that exports rose dramatically during his tenure--from $7.8 billion to $20 billion--for which the entire economic team and exporters had played a pivotal role.

Talking to Business Recorder, he said that Pakistan must demand free trade agreement (FTA) from the European Union (EU) and the US to boost its exports. He further questioned as to how exports could improve when exporters were grappling with issues like load shedding, non-availability of capital and absence of tax incentives to the exporters.

Exports also declined because of external factors, notably global recession that has negatively impacted on the growth rate, employment and poverty levels in the country. At a recently held trade advisory council meeting under the auspices of Commerce Ministry, most of the industrialists, exporters and other trade bodies stressed upon the government to provide incentives to industry or else more and more units would close down.

Executive Directors of International Monetary Fund (IMF) commended the authorities for the progress achieved under the stabilisation program. They observed that fiscal consolidation and improved coherence between fiscal and monetary policies had helped to tackle the roots of large imbalances, while structural reforms had progressed broadly as envisaged. As a result, the exchange rate broadly stabilised; inflation had come down; and foreign reserves had strengthened. It is now up to the government to support the industry in general and exporters in particular in the forthcoming budget, so state analysts.

 

[Neo]

Foreign investors withdrew $22.327 million from KSE during May ​

KARACHI (May 30 2009): Foreign investors withdrew $22.327 million from Pakistan's equity market during May 2009. The outflow of foreign investment started from 2008 due to weakening economic indicators, Mohammad Sohail, a leading analyst and CEO of Topline Securities said. The downgrade rating and exclusion of Pakistan Index from MSCI EM Index was also negative for foreign investors and they preferred to withdraw their investment from the equity market, he added.

He said that the imposition of price floor at the share market was also a major reason that shattered foreign investors' confidence and they opted to offload their holdings in the local bourses. He said that the global recession also forced the foreign investors to withdraw their investments abroad and invest at home.

The prevailing political uncertainty and law and order situation in the country also invited foreign selling at the equity market, he noted. According to the National Clearing Company of Pakistan Limited (NCCPL) data the outflow of foreign portfolio investment continued as the offshore investors withdrew $644.974 million from January 1, 2008 till date. The previous month recorded an outflow of $12.216 million of this mode of investment.

The situation slightly improved during the previous week ended May 22 with a fresh inflow of $1.634 million however; once again the offshore investors remained net sellers of $4.107 million this week ended May 29.

The week started on a negative note as an outflow of $1,921,105 was witnessed on Monday. This trend continued as offshore investors withdrew another $3,343,741 on Tuesday. On Wednesday, the situation improved with a fresh inflow of $1,184,458; however, the foreign investors remained net sellers of $2,273,724 on Thursday. On Friday, the offshore investors once again remained net buyers of $2,246,902.

 

[Neo]

'Branding culture a must for economic turnaround' ​

LAHORE (May 30 2009): Both the public and private sectors would have to workout methodology to promote branding culture in Pakistan to wear off the intensity of economic meltdown being observed by the leading economies of the world. This was the upshot of speeches delivered at a seminar on 'Successful Branding' organised by LCCI Standing Committee on e-media and Marketing.

The objective of the seminar was to educate the participants about the importance of creating a unique brand identity for Pakistani Brands. Speaking on the occasion the Provincial Minister for Excise and Taxation Mujtaba Shujaur Rehman said that despite the fact that Pakistan has all resources in abundance and quality-wise its goods are 'best of the best' in the entire world but it has so far failed to get its share in the world economy only because of poor brand management in Pakistan.

The present government understands that branding is one of the tools that helps highlight the soft image of any country besides giving required boost to its exports, he said. The Lahore Chamber of Commerce and Industry (LCCI) President Mian Muzaffar Ali said that all over the world, the branded products are considered to be better than that of non-branded ones.

He said that branding is key to success it not only increases sales at local levels but earns much needed foreign exchange by winning due place in the global market. He said that the value of the brand is determined by the amount of premium it generates for the product and the manufacturer. This is the outcome of a combination of increased sales and increased price.

The Convenor LCCI Standing Committee e-media and Marketing Mohammad Usman stressed the need for development of brand mechanism on scientific lines. He said Pakistani products such as textiles, leather, surgical and exports goods have no parallel in the entire world but very little branded products, which have won consumers' confidence locally and globally. He reiterated the resolve that the LCCI would continue to conduct such seminars to update its members on latest techniques of marketing through various activities so that they could enhance their productivity and profitability and contribute towards the economic growth of Pakistan.

 

[sohailbutt]

KESC to inject 1,500 to 1,600 megawatts in its system in three years​

Karachi Electric Supply Company (KESC) is going to add some 1500 to 1600 MW electricity in its system during next three years, as the new management after taking over the utility has started investing in the company. This was stated by Naveed Ismail, Chief Executive Officer of KESC, in an exclusive interview with Business Recorder.

He said that the company had already added almost 450 MW in the system and another 150 MW would be available by the end of June while the two gas turbines with generation capacity of 90 MW each would be functional in July and September this year.

According to the CEO, the 560 MW dual-fired combined cycle plant at Bin Qasim plant would be completed in four phases, with the first GT expected to be operational within two years (May 2011), and the second and third GTs to be commissioned in June and July 2011, respectively while the steam turbine would be commissioned by January 2012.

He said that after rectification of lines' faults, the required gas supply from Sui Southern Gas Company (SSGC) has been restored that increased power generation by the gas-based units of the company, he added.

Rejecting the allegation that the current drastic reduction in the load shedding was due to the presence of high officials of the federal government including President Zardari in the city, he said the generations was improved after the investment of at least $87 million since the take over of the company by the present management.

After the maintenance work, the unit-1 of Bin Qasim Thermal Power Plant (BQTPP) has started generating at least 200 MW while the electricity generation of other gas-based units of BQTPP has increased to a maximum level of 180 to 200 MW each, he added.

"I am looking forward to almost double the generating capacity of Bin Qasim's gas-based plants with using efficient technology," he added. "No utility wants to resort to load shedding as it causes losses of billions of dollars to itself," the CEO said adding that the allegation of saving money through cutting the power generation of oil-based units was unfounded.

To a query he said that the barge-mounted engines, which were demanded by the government from Turkey, had nothing to do with the power situation of the city as it was demanded by Wapda. Only the routine supply from Wapda to KESC will continue and no additional megawatts was supposed for Karachi after installation of these engine, he added. He said that the new management had started investing in the company as a legal shareholder after signing the formal agreement with the government in April 2009, and the investment would be over $102 million by June 2009.

To a question he said that due to unresolved issue of circular debt, the company was neither receiving it receivables nor being able to pay the dues it owed to different institutions like Wapda, SSGC, etc. "We have not disconnected the power supply to the pumping stations of Karachi Water and Sewerage Board (KW&SB) to avoid inconvenience to the people as a result of water shortage," he said adding that the Water Board was yet to pay over Rs 7 billion dues of KESC.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Six new plants to provide 1,132 megawatts in Gepco area soon​

The Chief Executive of Gujranwala Electricity Power Company (Gepco), Muhammad Ashraf Zahid, has said that six power generation projects were being initiated for generating 1132 megawatt electricity in Gujranwala region.

Addressing members of Sialkot Chamber of Commerce and Industry (SCCI) here on Friday he said that Sahuwala power station (with oil) would generate 150 megawatt power; Eminabad Gulf rental power station (oil) 62 megawatt; Hub Power (oil) (an IPP) 225 megawatt; Tapal rental power house Kamoki (oil) 70 megawatt; Nandipur power station (genco) (oil/gas) 425 megawatt; and Gulistan energy GRW (oil) (IPP) would produce 200 megawatt electricity.

He said that Sahuwala power project and Eminabad Gulf power stations would be completed by December 2009, Hub Power--Narowal and Tapal--rental power would be accomplished by March 2010; and Nandipur and Gulistan power stations would be completed in March 2011 and June 2011 respectively.

He said that regular functioning of Sahiwal and Narowal power projects would help and would be much supportive in reducing the power crisis being faced by the industrial sector of this export-oriented city and hub of cottage industry.

The Gepco Chief Executive said: "We are making great efforts for providing better and improved electricity service to the consumers in Gujranwala division. We can get rid of electricity load shedding if we control our unneeded consumption and adopting some precautionary measures for saving electricity."

In his address of welcome, SCCI President Hassan Ali Bhatti said that unscheduled load shedding was creating adverse effect on industrial sector of Sialkot. He said that Sialkot is an export-oriented city and is producing exportable products, but electricity load shedding is hindering the continuity of productivity. As a result, the exporters community has been facing financial constraints, he added.

He urged the Gepco authorities that electricity load shedding duration should be curtailed to three hours from nine hours to protect the industrial sector of Sialkot. Bhatti said that load shedding scheduled should be revised and the new schedule should be prepared on the blueprint of Faisalabad to facilitate the business community of Sialkot.

Business Recorder [Pakistan's First Financial Daily]

 

[sohailbutt]

Gadani ship breaking hit by suspension of oxygen gas supply​

GADANI: The suspension of oxygen gas supply by the DOC Company has severely hit the ship breaking industry here, throwing thousands of workers out of employment, while as many as 78 scrap ships worth billions of rupees are waiting at the docks for necessary dismantling.

Additional collector customs, Ali Sher told Geo News that about 5.75 lacs tons of scrap ships standing anchored at the docks, but for lack of supply of oxygen gas, Gadani workers were under-employed, as they were compelled doing only those works, which could be done manually.

Gadani labour leaders have demanded immediate restoration of the supply of oxygen gas, saving the labourers from wages loss and facing starvation.

Gadani ship breaking hit by suspension of oxygen gas supply - GEO.tv

 

[sohailbutt]

Bidders may offer $150m to $200m for RBS​

KARACHI: Bidders are likely to offer between $150 million (Rs 12 billion) and $200 million (Rs 16 billion) for the acquisition of businesses of Royal Bank of Scotland (RBS), banking sources and market players told Daily Times here on Friday.

Sources further said that MCB Bank and Habib Bank are likely to withdraw from the race for acquiring the foreign bank. Spokesman for MCB Bank said his bank was very much in the race for the acquisition and that there had been no intention of withdrawing. Calls made at the Habib Bank were not answered.

“Bids were to be presented to the seller on June 5,” a banking source said. Due diligence by the prospective buyers was to continue till May 29, but more time was obtained by the bidders for due diligence.

Orascom group, who is running leading companies in Pakistan including Mobilink, has also entered into the race.

However, the spokesman for State Bank of Pakistan, Syed Wasimuddin, said the central bank had given on Friday the approval to Orascom to conduct due diligence of RBS.

After the approval granted to Orascom for due diligence it is likely that the date for bidding would be extended further because it might not be possible for Orascom to complete due diligence in only six to seven days. It is pertinent to mention here that the other three bidders spent about one month in due diligence.

“Jahangir Siddiqui group and Orascom are the major contenders for RBS,” a market source said. “These groups may offer between $150 million and $200 million,” he added.

RBS is being eyed by bidders as “a medium-sized bank with a decent branch network, an excellent depositors’ base, and a highly skilled workforce”.

RBS Pakistan had announced in February that it was exploring new ownership for the retail, commercial, GBM and GTS businesses in Pakistan. It said there had been several reasons why this decision had been made.

The annual report of RBS Pakistan for 2008 said it had been decided by the new management of RBS plc to revisit its global footprints in various countries to decide about the future world wide strategic presence to ensure optimum capital rationing. Based on the results of a strategic review conducted for all the locations, RBS Plc had announced its intention to explore new ownership for its businesses in fifteen countries including Pakistan.

MCB Bank and HBL had expressed their interest in RBS on April 13 while JS Bank joined the race on April 14.

Daily Times - Leading News Resource of Pakistan

 

[white_pawn]

Japan increases investment by $130 million ​

KARACHI (May 31 2009): Japanese Consul General in Karachi, Akinori Wada, has said that even today Japan considered Pakistan as the potential country with market of 170 million people and has increased its investment here by US 130 million dollars. Addressing members of Site Association of Industry (SAI) here on Friday.

He recalled that a few days back a very important meeting was held between Pakistani and Japanese businessmen in Tokyo where important reports were submitted to both the governments. Those reports had suggested proposals for expanding mutual trade and investment, he added.

Inviting attention of the participants towards the declining trend of imports from Japan, he said those had declined by more than 20 percent since 2005 and the exports from Japan had increased by 30 percent during the same period.

He said in his opinion the reasons behind this could be firstly because of the changing attitude of Japanese business community to go for a higher value added and profitable values of merchandise, adding the other reason could be due to more competition from China in respect of textile, home-made textile and clothing.

The Consul General apprised SAI members that Pak-Japan relations, multi-dimensional in nature and character, had grown rapidly over the years in different fields and diverse sectors. Major sectors of investment of Japanese joint venture projects are automobiles; include motorcycle and related sectors. Other sector include leasing, investment bank and power projects.-PR

Business Recorder [Pakistan's First Financial Daily]

 

[white_pawn]

Pakistan's budget deficit for nine months at 3.0 percent of GDP ​

KARACHI (May 31 2009): Pakistan's budget deficit for the first nine months of 2008-09 (July-March) fiscal year was 3.0 percent of gross domestic product(GDP), according to data posted on the Finance Ministry's Web site on Saturday. The deficit for fiscal year 2008-09 was targeted at 4.3 percent of GDP.

"We are on track for achieving full year target for budget deficit," said Asif Qureshi, head of research at Invisor Securities Ltd. The budget for the coming fiscal year is expected to be unveiled on June 13. It will be closely scrutinised by the International Monetary Fund, which granted Pakistan a $7.6 billion emergency standby facility in November, 2008 to stave off a balance of payments crisis.

Business Recorder [Pakistan's First Financial Daily]

 

[white_pawn]

UK urged to grant direct access to markets for Pakistani exporters​

RECORDER REPORT
MULTAN (May 31 2009): Former President of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Mian Tanvir Ahmed Sheikh, has asked the British government to give direct access to Pakistan exporters to British markets so that they could easily introduce their products to bring economic prosperity and improvement.

Exchanging views with British Trade officers/Deputy Director Trade investment, Ahmed Arif and Trade Information officer, Waqar-ullah here on Saturday, Tanvir Sheikh said that Pakistan was incurring huge losses in the war against terror while this war was in the benefit of the whole world.

Furthermore, he said that world should help Pakistan in boosting up its trade to compensate it. He said that it would be our responsibility to maintain the quality and demand of the buyers.

He urged the British trade officials to provide equal facilities to Pakistan just as it is offering for Indonesia Bangladesh and India, however, expressing his optimism he said that the trade relations between Pakistan and the United Kingdom would grow further in coming days as Pakistan is on the priority list of the United Kingdom (UK) for having enormous potential and opportunities.

Moreover, President, MCCI, Anis Ahmed Sheikh also threw lights on the matters relating to expansion of bilateral trade, investment and economic co-operation, especially, investment climate in Pakistan in the wake of global economic crisis. The Deputy Director, UK Trade and Investment, said that UK is seriously working on further strengthening the business relations between the two countries, adding that Pakistan has a huge potential for foreign investment with rich human resource.

He said that global recession could be tackled with collective approach and there is a need that both the UK and Pakistani businessmen should work hand-in-hand to fight it out once for all. He said that Pakistan was keen to have British investment that could provide transfer of technology and help it become a knowledge-based economy.

He said nurturing relations with the UK is a corner stone of Pakistan foreign policy as Pakistan views the UK as a key industrialised country with sound opportunities for trade and investment because it is an important member of the G-8 and the EU, and a partner in the Commonwealth.

The presence of around one million Pakistanis in Britain gives added strength to the traditional relationship. Above all, the UK is Pakistan's largest trading partner within the EU and the second largest foreign investor. The perception that the investors are shying away from Pakistan is no longer there.

The concessions provided by a business friendly environment to them are so enormously attractive that investors are willing to take certain amount of risk. Therefore, UK investors should bring more and more investments into Pakistan. The MCCI President also stressed the need to further widening of bilateral economic bonds.

 

[white_pawn]

July-March development expenditure declines, defence surges ​

ZAHEER ABBASI
ISLAMABAD (May 31 2009): The development expenditure declined by 25.30 percent whereas defence expenditure surged by 14.29 percent during July-March 2008-09 over the same period of last year, the finance ministry figures revealed on Saturday.

Official figures of fiscal operation for the third quarter released by the ministry show that the development expenditure and net lending of Rs 224.207 billion during the first nine months of the current fiscal year was 25.30 percent less compared to Rs 329.775 billion for the same period of last year. Cut in development expenditure seems to have helped the government curtail fiscal deficit to 3 percent of the GDP during the period under review.

Analysis of the data showed that Rs 224.207 billion defence expenditure during July-March 2008-09 is 14.29 percent higher as compared to Rs 196.162 billion for the same period of last year. The government collected Rs 74.645 billion through development surcharge on petroleum products, Rs 10.494 billion through development surcharge on gas and Rs 23.676 billion by retaining discount on crude oil.

The budget deficit during the said period was Rs 405.2 billion, 3 percent of the GDP, is less than 5 percent for the same period of last year. The fiscal deficit of Rs 405.200 billion was met through Rs 83.983 billion from external sources and Rs 321.217 billion from domestic.

In terms of debt repayments, the other major expenditure, the government spent Rs 442.76 which included Rs 395 billion for domestic debt and Rs 47 billion for foreign debt ie 3.3 percent of GDP as against Rs 354 billion or 3.5 percent of GDP in the last fiscal year. The size of the GDP in nine months of this fiscal year was counted at Rs 13.38 trillion compared to Rs 9.97 trillion for the same period of last year.

The data showed that federal tax collection during July-March 2007-08 was recorded at Rs 849.199 billion which included Rs 307.580 billion direct taxes, Rs 3.260 billion taxes on property, Rs 404.497 billion from taxes on goods and services, Rs 83.360 billion from excise duty and Rs 321.137 billion from sale tax.

Rupees 105.391 billion tax collection came from international trade, Rs 28.471 billion from others, Rs 7.826 billion from stamp duties and Rs 5.660 billion from tax on motor vehicles and Rs 14.985 through other taxes.

The non-tax revenue included Rs 452.216 billion which included Rs 033 million from profit of post department/PTA, Rs 16.276 billion from interest (PSEs and other), Rs 40 billion from dividends, Rs 135.263 billion from SBP profit, Rs 39.659 billion from defence, Rs 5.288 billion from citizenship, naturalisation and passport fee, Rs 74.645.

Business Recorder [Pakistan's First Financial Daily]

 

[white_pawn]

Romanian envoy meets FPCCI president ​

KARACHI (May 31 2009): The Ambassador of the Republic of Romania to Pakistan, Emilian Ion, called on the FPCCI President Sultan Ahmed Chawla at the Federation House on Saturday morning. He told the gathering that Romania imports almost 40 percent of its total textile needs from Pakistan, and Pakistani businessmen could further increase this volume if they explore the markets of his country.

The Romanian ambassador invited the FPCCI to send businessmen's delegation to Romania. The FPCCI chief accepted the offer and told him that a delegation of Pakistani businessmen would visit Romania in late September or early October this year.

The FPCCI chief Sultan Chawla said there existed very cordial relations between Pakistan and Romania, but the bilateral trade between both countries, which stood at $130 million last year, did not reflect these relations. Chawla told the Romanian envoy that Pakistan had huge coal reserves of 1.8 billion tones, and wanted to exploit these reserves for power generation.

He urged the Romanian envoy to help tap the coal reserves, in which Romania had ample mining expertise. The FPCCI chief also suggested the setting up of joint ventures, which could make use of Pakistani manpower and Romanian know-how.

A businessman at the meeting suggested that Romania could transfer one of its surplus ball-bearing manufacturing plants and set it up in Pakistan, as such many plants had become surplus in Romania after its membership in the European Union. The Romanian Ambassador, Emilian Ion thanked the FPCCI office bearers, and said he was pleasantly surprised and happy to see such affinity for Romania among Pakistani businessmen.-PR

Business Recorder [Pakistan's First Financial Daily]

 

[Neo]

Budget deficit reaches Rs405.2bn in 9 months ​

Sunday, May 31, 2009

ISLAMABAD: Budget deficit during the first nine months of current fiscal 2008-09 has touched Rs405.200 billion.

According to a summary of the consolidated federal and provincial budgetary operations during July-March period of 2008-09 released from the finance ministry, budget deficit has been registered at 405.2 billion, which was financed during the period under review through borrowing from external and domestic resources.

The country borrowed Rs83.983 billion from external resources and Rs321.217 billion from domestic sources. However, for the country’s defence, the government spent Rs224.207 billion.

Pakistan managed to get external monetary inflows amounting to Rs264.113 billion and repaid Rs180.130 billion as external debt and interest on debt, meaning that net external inflows of Rs83.983 billion have arrived.

However, expenditures under the head of debt servicing for domestic loans surged to Rs395.030 billion and Rs47.732 billion under the head of foreign debt servicing.

Total development expenditures have been registered at Rs216 billion under Public Sector Development Programme (PSDP) 2008-09. Development expenditures include Rs106.8 billion from the federal government and Rs109.179 billion from provincial governments.

Total share of four federating units in federal revenue in the first nine months of the current fiscal stood at Rs381.030 billion, out of which Punjab got its share of Rs191.336 billion, while Sindh received Rs116.3553 billion, NWFP Rs47.657 billion and Balochistan Rs25.684 billion.

Punjab is the only province which is running a deficit of Rs14.273 billion, as its expenditures have surged to Rs264.577 billion against revenue of Rs20.304 billion collected in July-March.

However, the Sindh government, according to the summary, is not in deficit, rather it is in surplus of Rs1.933 billion as its expenditures have been registered at Rs140.363 billion against total revenue that stood at Rs142.296 billion during the period under review.

NWFP government went in surplus with Rs25.365 billion during July-March period as it managed to go for total expenditure only to the tune of Rs56.584 billion against revenue of Rs81.949 billion.

However, the poor province was not given profit from hydro electricity in the first two quarters, but in the 3rd quarter it has been given Rs2 billion under the head of Net Hydel Profit.

The Balochistan government is not facing a deficit, rather like other federating units barring Punjab, is enjoying a surplus of Rs8.924 billion with expenditures at Rs38.230 billion and total Revenue at Rs47.154 billion.

 

[Neo]

Rice exports have crossed $1.8bn: REAP chairman ​

Sunday, May 31, 2009

KARACHI: Rice Exporters Association of Pakistan (REAP) Chairman Abdul Rahim Janoo has said that total rice exports from Pakistan have crossed $1.8 billion for the period July 1, 2008 to May 30, 2009.

He hoped that in the remaining one month of the current fiscal year rice exports would cross $2 billion. “This has become possible due to the business-friendly policies of the government. If this trend continues, we will achieve our Vision 2012 target in which we have planned to cross the $4 billion mark in rice exports,” he said.

Praising REAP members he said they had achieved the target despite the global financial meltdown and depressed international markets. In the last fiscal year 2007-08, Pakistan exported 3.5 million tons of rice valuing more than $2.2 billion, making the country the third largest rice exporter in the world.

He said REAP had sent trade delegations with the help of Trade Development Authority of Pakistan (TDAP) to Saudi Arabia and South Africa, which received a lot of orders. Two more delegations would visit Qatar and EU countries in June to explore new rice markets and to promote Pakistani rice, which had the best quality in the world, he informed.

REAP has also planned that in July and August it would send delegations to Kuwait, Iran, Senegal and Zambia, which are also big markets of rice.

 

[Neo]

Purchasing power falls more than 50 per cent ​

Sunday, May 31, 2009

ISLAMABAD: The earnings of ordinary fixed-income Pakistanis, especially pensioners, have reduced in real terms to half due to falling purchasing power of the rupee and skyrocketing inflation during 2008-09.

This indicates that now, consumers can buy 50 per cent less with the same amount what they could a year back.

Yet the PPP-led government is ‘sleeping on the wheel’ and the consumers have been left to the mercy of multinational companies, unjust profiteers and big cartels having political backing. Every body knows about this ‘open secret’ of involvement of some politicians and government machinery’s high ups in criminal trade distorting the economy.

Depreciating rupee and record high inflation are the monsters that also contributed in raising Pakistan’s external debt burden, debt servicing and loan repayments.

This has badly confused the government’s economic policymakers and confronted them with the dilemma of balancing financial accounts. Roughly, one rupee against US dollar, contributes to debt burden by more than Rs47 billion.

During the fiscal year under review, Pakistani rupee depreciated by one third or 20 rupees against US dollar and other major currencies. This indicates that during the last one year, external debt burden mounted by about a trillion rupees due to reduced rupee value.

Average ten months (July-April 2008-09) inflation stood at 22.35 per cent against corresponding period of the last fiscal. For each one per cent increase in inflation, more and more people fall into poverty as the poor are highly sensitive to price changes in food, particularly staple food items, economists believe.

The government is claiming that in 2009-10, inflation would come down to single digit. Independent economists believe that the decline would not be due to government efforts but because of base effect. When the Federal Bureau of Statistics (FBS) would compare the prices with the 2008-09 high prices, it would show reduced inflation. This is just the game of numbers, and in real terms prices would be still high.

A person getting Rs10,000 per month a year back was meeting day-to-day food and necessities no has in real terms less than 5,000 rupees and due to double digit inflation and currency depreciation it is hard to meet food and necessities.

The sugar, cement, fertilizers and various other cartels are fleecing the common man and earning unjust profit of billion of rupees.

The Competition Commission of Pakistan (CCP) has proved to be toothless watchdog against violators.

The Bretton Woods Institutions for the last few years have been advising Pakistan to depreciate the rupee, to rein in the runaway trade deficit. Though during the period under review, the Pakistani rupee depreciated by 33 percent, yet that neither helped in slowing down imports growth, nor in increasing exports but pushed prices of essential commodities up.

Pakistan’s traditional exports are inelastic, therefore devaluation gives no big boost, because there is a small quantum of value added exports and major requirement is based on export of raw material.

Devaluation also makes imports costlier contributing to inflation. At the moment the government seems to be helpless to rein in the spiralling inflation and save rupee from free fall.

For the outgoing fiscal, the exports target was $21.1 billion while during July-April 2008-09, volume of the country’s exports stood at $14.76 billion which is 3.03 per cent less than what was recorded in corresponding period of the last fiscal ($15.22 billion).

Though devaluation helps increase revenue collection and savings in repatriation of profits and royalties by existing foreign investors, bringing illegal foreign exchange leakages into official channels and putting an end to gold smuggling.

Inflow of foreign capital can be improved by devaluation only, if prices do not rise. But in Pakistani case, it jacked up prices and further stimulated inflation.

In short run, the obvious consequences of devaluation is worsening balance of payment position due to which, Pakistan had to go again to International Monetary Fund (IMF) for $7.6 billion loan under the standby arrangement program. Besides, it also raised burden of Pakistan ‘s foreign debt and debt service liability and foreign loans repayment. Upset the cost-price relationships in economy, lead to galloping inflation, and stall many ongoing projects due to cost overrun.