Pakistan Economy - News & Updates

[Neo]

Enough is enough​

ARTICLE (June 13 2009): Pakistan's industrial development understandably was based on a hurried assumption to get as many industrial units and as soon as possible. The objective was also to meet the requirements of employment for the increasing population. This ease of entry was to have many repercussions for not only the industrial sector but also the agriculture sector.

Look at the industrial ecology in terms of what has happened to the irrigation sector. Irrigation canals have been used as sinks by the industrial sector. In one such case distributary's 6-R of the lower Chenab irrigation system has been very adversely affected in as much as the pollution has taken a very heavy toll of life of the villagers that use its water for drinking.

Most of the villagers that have taken that water for the purpose stated have died and none of them had gone beyond the age of 35 years. Will of God is the most that one hears from the poor villagers. Yesterday's friends are no longer living in that vicinity.

At Lahore some school students carried out a study as to what goes into the canal that flows through Lahore and they found out that as many as 164 factories were throwing the factory polluted waste material into the canal. The pollution was so much that the people of the surrounding areas were subjected to subsoil water becoming polluted. In and around Lahore when there was a strong protest they started throwing this wastewater in to artificially created wells.

This surfaced another problem as this led to subsoil water becoming polluted. There is no cure for the water once it gets polluted. No wonder then there is pandemics of all kinds that crop up. People, poor people, lose their bread earners and they go back to poverty with one stroke of some one else's faults. In this case the rich and the powerful.

In Karachi when some children of poor people died while playing at a site where toxic materials were thrown and where chemical fuels were dumped the owner was called and he made a considerable amount of noise. His game of golf had been interrupted and he took exception to this act. He was not moved by the fact that three children had died because of the toxic material that his factory had dumped outside without any precautions.

So how good is industrialisation? Karachi, where 15 to 20% of Pakistan's industry is located, has been the worst offender. All its waste matter eventually ends in the Arabian Sea. The ocean can be a sink only for such period of time as it has a correction system that takes care of non-metal pollution. The end result of all this is that our marine fisheries have been adversely affected. The only nations that have successfully cleaned the ocean were led by Singapore and they have done wonders with their bay area.

Pakistan has not focused on any of the critical issues that lead to pollution. The real impediments have never been worked out. The real impediments were never technology but fashionable products that demand much more for very little gain. There has never been any real work and the seriously funny aspect is that there is no awareness in the public as to what is happening to their lives.

One way to allow consumers to make choice is to allow truthful labelling to come in and this could be a boon for the consumer. No one in Pakistan, and least of all the environment machinery that has been created, has any ability or authority to correct serious environmental issues. They have been holding dinner parties at Rawal Lake.

Is that what has been created for the rich and in the process there has been massive misallocation of resources. There are numerous examples that can be given. The environment ministry has no clue as to what they can do. Their record on biotechnology of the ministry on safety factors is also not enviable. There has to be an improvement of knowledge otherwise Pakistan will be left behind by millions of miles.

Pakistan, thanks to the polices of the 1960's, has had some pace in industrialisation and since then the sector has moved ahead and what was done and acceptable in that decade is no longer so. There is no question of seeking eco-efficiency for instance. The world seeks a different kind of ball game now that we have joined their comity.

The life cycle assessment, now required to be done, has never been taken note of and I dare say that the ministry itself is not aware of the situation that has been created. It is ironic that the ministry is itself responsible for the debacle of the low mountains of Islamabad and the fact that all that the CDA does is to keep on levelling natural contours and live under the apprehension that life is all about concrete, cement and hard technology.

The country's environment system has suffered and will continue to suffer unless and until the matters are so taken up as to indicate that the high levels of sustainability are achieved. Pakistan's industrial system is full of erroneous interventions. The essentials have been lost. Pakistan has to do its bit. Needless to say that the unholy alliance of the revenue patwari with all and sundry has to be viewed with a lot of suspicion and that suspicion grows if the powerful are involved.

The first step has to be to lessen the harmful effects. The second would be to improve on the outcome of the possible impacts. Chemical unsustainability has to go. So how does one get into a habit of doing well by doing well? What constitutes well? The lament of the past as to over grazing by the farmers is now well past and the new acquisitions have to be questioned. The take-make- waste model has to go.

Pakistan's bureaucracy has a blind spot and that has to be removed. With Musharraf reforms it seems highly unlikely that that sort of thing will happen. When idiots come to the fore and they have an idea of their own invincibility matters generally get out of hand. The last regime not only lived in an ivory tower but what they created around them was a world in which social toxins increased.

This kind of act cannot be allowed and we know that the market is a handmaiden of a few in this country. The mafia is very strong. It can purchase any and every one. They have their methods. The scale tragedy is huge. Take the case of Pakistan and the inability to handle such vast areas. The scale factor is mind-boggling.

We have never garnered this country's population towards a decent implementation of life awareness cycles. Let us, therefore, not play the blame game for the weaknesses are in us. Industry must respond as also the common people. We need healing and not mending and the difference is known to all of us. Resolve the issues because they are getting more complex with time. Take care of the earth just as you have taken care of yourself.

 

[Hasnain2009]

Economy shows negative growthin dollar terms​

* Experts point at fudging figures​

KARACHI: Pakistan’s economy has shown negative growth in dollar terms owing to the depreciation of rupee against the greenback and experts have said that the Gross Domestic Product (GDP) growth figures were fudged.

The GDP grew by 2 percent during the current fiscal year, claims the government. This growth rate was achieved by revising the previous year’s GDP growth rate from 5.8 percent to 4.1 percents. Economists say that this revision has been done very late. “Normally the figures are revised within three to four months,” says Dr Shahid Hassan, a renowned economist. “This is clear evidence of fudging: either the growth rate of 5.2 percent was fudged or the revised rate is fudged,” he added.

Regarding the performance of the economy, he says: “This performance can be summed up in one word—disastrous.” Shaukat Tareen, the advisor to the PM on finance, had admitted during May this year that the 2.37 percent GDP growth estimate for current fiscal year worked out by the Federal Bureau of Statistics and endorsed by National Accounts Committee was fudged as they had not included the largest ever negative growth witnessed by the large-scale manufacturing. The government released the Economic Survey of Pakistan on Thursday, which did not mention the contraction of economy in dollar terms. Nor did it say anything about the “methodology” according to which the growth rate of 2 percent was achieved.

The GDP growth declined to 2 percent in the current fiscal year from an average of 7 percent in the past six years. “This would have come in even lower, at 0.4 percent, had officials not revised the GDP numbers for the previous fiscal year,” says Sayem Ali, Country Economist at the Standard Chartered Bank. The economy shrank to $161 billion in FY09 from $165 billion in FY08, reflecting the 18.4 percent decline in the value of the Pakistani rupee (PKR) in the last 12 months.
However, with GDP growth at three percent and inflation at nine percent the economy is expected to grow in dollar terms for the next fiscal year as the rupee is expected to remain in the band of Rs 84 to Rs 86 a dollar, which is five percent depreciation only. The saving grace for the economy has been the positive performance of the agricultural sector which expanded by 4.7 percent on account of bumper wheat and rice crops. Higher support prices and water availability have helped to improve farm output and support more than 2.2 million workers involved in the rural economy.

Regarding the medium-term future of the economy, Ali says that persistently high inflation, tough measures taken under the IMF programme, and the rising security-related expenditure are weighing heavily on the economy. The economy is slowing to a near-halt, he says. “Pakistan’ economy is slipping into recession,” he says. “The policy fous needs to shift from stabilisation to growth in order to avoid this situation.” The government went to the IMF for a $7.6 billion loan in November 2008 as it faced a balance-of-payments crisis and quick depletion of foreign exchange reserves. The subsequent build-up of forex reserves and a stable rupee have helped to bring down inflation and allow the government to meet its external debt obligations. saad khan

GDP reduced to $161bn from $165!
That mean we acheived -2% fall in our GDP!
GO Musharraf GO!

 

[Hyde]

GDP reduced to $161bn from $165!
That mean we acheived -2% fall in our GDP!
GO Musharraf GO!

The GDP increased 2% in Rupees but the Dollars value decreased by 20% i think so in when all money converted into Dollars...... The GDP was in negative figures

 

[TopCat]

The GDP increased 2% in Rupees but the Dollars value decreased by 20% i think so in when all money converted into Dollars...... The GDP was in negative figures

Why everybody is so worried about GDP in dollar term? Does any Pakistani go to market with dollar to buy their food? If not then forget dollar. In Rupee terms GDP grown so count on it.

 

[muse]

Politics of poverty
Shahzad Chaudhry


In the days leading up to the next fiscal year’s budget, what has been keeping the mandarins of the finance ministry engaged has been another matter — how poor are Pakistanis?

By all accounts, and some verified numerical processes of none other than the World Bank, the poverty rate for 2007-8 had been determined at 17 percent. This would have been a six percent reduction in poverty over the 2006-7 performance of the economy when the poverty figure came down from thirties to around 23 percent.

Implicit in the fidelity of these figures of poverty was the acknowledgement that the Pakistani economy had indeed done extremely well during the Aziz years. One is forced to differentiate between the Musharraf and the Aziz years, simply because the wheels began to turn better and smoother from 2004 onwards till grinding to a halt in 2008-9, after the advent of ‘real’ democracy. Give the devil his due. They — the Musharraf-Aziz duo — at least did better on the economy — 2005-6 produced the best ever GDP growth — in budgetary terms it was a stellar performance.

Immediately after the February 2008 elections, and particularly in the last two months of that financial year, the global pricing regime in commodities went through a tsunami, which actually gathered pace in the second half of 2008, assuming astronomical proportions and robbing central banks of their hard-earned dollars; all this happened under the watch of the democratic government of the PPP. The country’s foreign exchange reserves shrank from the healthiest ever number of around $17 billion just before the 2008 elections to as low as $3 billion just within a year. That is when Pakistan had to return to IMF care.

At the current $11 billion reserve mark, certain stability in macro-economic indicators can be claimed, but the loss of rupee value will perhaps remain irrecoverable. Rupee depreciation coupled with quadrupled commodity prices spurred inflation — at its worst, it stood at 30 percent; it now hovers around 20 percent.

This is the background to the poverty issue. What really lies behind this arithmetic of poverty actually has an eye to the future. In a year’s time, when the 2010-11 budget is to be presented, they will be reviewing the 2009-10 performance and finalising numbers for the year gone by. It is then that today’s handiwork will become crucial. With the global economy still not out of the woods, trade sufficiently depressed, capital restricted, Pakistan’s economy on teeters with an on-going insurgency draining resources, the prognosis doesn’t seem good.

Per capita GDP in real terms, which has slid back already, is likely to go further back; and the IMF terms of engagement will keep the economy on a drip-feed while it tries to wrestle with macro-economic sustainability. Such an environment will only add more numbers to real poverty, adding to the poverty rate in a year’s time.

This is where the differential between the 2008-09 and 2009-10 poverty figures will begin to give expression to the performance perception; and this reality haunts the current political leadership. As an interim, the ministry of finance has asked for a review of poverty figures in the last quarter of the previous fiscal year to look for higher final figures in poverty for the year under review, so that the differential with the likely numbers for 2009-10 does not look too dismal.

Same has been the case with the review of annualised GDP numbers for 2007-8, which are now revised from the earlier reported 5.5 percent to 4.1 percent. That doesn’t make 2 percent look as bad in comparison. This to me is probably the first time ever that a government is trying to make the country’s economic performance look poorer.

Is there a way out? The 2009-10 Budget does not reflect that. Budgets in Pakistan have, for some reason, always been characterised as Houdini’s acts; this one is a lot more — as they say in aviation terms — on a wing and a prayer. Dependence on donors’ pledges is so pervasive that most television channels now need to run a line asking the nation to pray for the success of the prayer on which the Budget is premised!

We need to take a leaf from Shaukat Aziz’s book: the man knew how to make a quick buck (no pun intended). It took the Sri Lankans thirty years to reach a figure of $1 billion in the export of tea — their prime and most valued produce. Compare that to the contemporary financial system and you might just raise the figure in a couple of days.

In modern economic parlance, this is termed the miracle of globalised service economies. If not for that, Singapore would not be the richest country in Asia in per capita GDP terms; Hong Kong would not be the financial hub that it is — when China reacquired Hong Kong from Britain, Hong Kong’s reserves were higher than those of mainland China in dollar terms; and the City of London, a separate entity within the London metropolis, would not be the hub of Europe’s financial system.

Shaukat Aziz, a banker, knew the value of rotating capital; money in rotation generates wealth, and in turn makes all those coming into contact richer. This opens avenues of investment enabling the shares to reach the wider population. Shaukat Aziz understood this well, and that is why Pakistan’s services produced this overpowering wave of economic activity; this was what attracted capital from abroad as well as from within.

By depressing the services sector over the last year-and-a-half, and by a strange quirk of logic assuming it to be an exclusive process by instead focusing on production alone, the economy has been robbed of support to the services sector, which is 52 percent of the economy in GDP terms. Production is key to the sustainability of the economic core, and must therefore be given its due importance, but do not forget to generate wealth — that is what people wait for and are hoping to realise soon.

Whether Keynesian postulates support so, I do not know; but what I do know is that well being is not only having the right amount of wheat and rice in your home, it also, and more so, is reflected in what you drive and what you wear and possess. The 21st century definitions of well being have undergone a sea change, and our economic policies need to reflect that. Sadly, it is not so.

Look at India. For years, a 3 percent growth economy, sticking to Nehru’s puritan socio-economic values. The only thing missing was that they did not call each other ‘comrade’. It was only when the “world went flat”, to borrow Thomas Friedman, and services ended up being routed to India, mostly back-office work — ‘outsourcing’ they called it — and Bangalore became the world’s intellectual back-shop, and money grew, and well-being began to be sensed, that the Mittals returned, the Ambanis became relevant, and the Tatas found rejuvenation.

Sentiment is what drives economies. For a long time, they have been calling it the ‘feel-good factor’. And what will take you there is capital and its rotation — not hoarding money. Produce and production are good sustaining economic values, but it is services that will get you there quicker. We need to re-learn our economics better. That is how the rest of the world made it; with better sense we could too. It has been done before, remember.

The writer is a security and defence analyst. He can be contacted at shahzad.a.chaudhry@gmail.com

 

[Hasnain2009]

Why everybody is so worried about GDP in dollar term? Does any Pakistani go to market with dollar to buy their food? If not then forget dollar. In Rupee terms GDP grown so count on it.

It matters, dollar is loosing its strength in international market, but pakistan's currency is losing its value with more speed, bcoz of inflation, and our imports were above $40bn in 2007-2008, that means if u import good "A" @ $1, and 1USD = 60PKR, then u would sell it in pakistan @ 60PKR, but if ur curreny lose its value, $1 = 80PK, then u would get the same thing @ 80PKR!


THat means $40bn = PKR2400bn($1=60PKR)
THat means $40bn = PKR3200bn($1=80PKR)

This is the difference,

And our external debt is near $50bn,

$50bn = PKR3000bn($1=60PKR)
$50bn = PKR4000bn($1=80PKR)

THat means pakistani tax payers would have to pay 1000billion rupees extra only on debt bcoz of depreciation of currency!


Happy??

 

[white_pawn]

Budget 2009-10​

Dawn Editorial

The budget for the next financial year must stimulate growth, repair the broken economy, mitigate the pain being felt by the poor and revive public trust in the government’s capability to ferry the country through the present tough times. The budget speech delivered by State Minister Hina Rabbani Khar on Saturday evening pledges to address all these challenges as well as meet public expectations. The government has promised to boost the economy, create new jobs and protect existing ones, alleviate poverty, bring down price inflation, curtail unproductive expenditure, raise tax revenues and provide relief to the poor.

The outgoing fiscal 2008-09 has been painful for the people as price inflation soared, power and gas bills swelled, real incomes shrank, and healthcare and education expenditures rose. It has also been very difficult for the manufacturing sector: industrial output dropped substantially, not least because of the domestic and global demand contraction, energy shortages, security concerns and expensive credit. Millions lost jobs and an even larger number is waiting to be fired unless the economic conditions improve soon.

The year has not been easy for the government, which took over at a time when foreign inflows were drying up, oil prices were shooting through the roof and the global economy receding into a decline not seen in 80 years. After initial inaction, the government had to work hard to stabilise the economy and improve the deteriorating balance-of-payments situation. While seeking to stabilise the economy, it had to face public ire for cutting energy and food subsidies and curtailing funds for development. It, however, should be commended for taking politically tough decisions on which the previous government under Gen Pervez Musharraf had dithered. Having stabilised the economy over the last two quarters, it is essential that the government now concentrates on growth.

Apparently, the budget for the next fiscal is headed in this direction. If rising unemployment and poverty are to be tackled on a sustainable basis, the country must grow, and fast. Several fiscal and tax incentives have been proposed for the rejuvenation of industry and agriculture, the two most vital sectors of the economy. Besides setting up a fund to boost exports, the budget contains proposals for a quicker revival of the construction, auto and elecommunication sectors.

These sectors are expected to lead the economic recovery during the next year, just as they did for several years in the period 2003-07. The public sector investment in the social and economic infrastructure — particularly in water and power, irrigation, roads, education and health — under the Public Sector Development Programme should also help kick-start economic growth. Thus it should not be a problem for the government to achieve the target of 3.3 per cent GDP growth.

But successful revitalisation of growth hinges on two variables: foreign assistance and collection of targeted tax revenue. The government is expecting Rs138bn in foreign assistance and another Rs170bn from the Friends of Pakistan Group.

The tax revenue target of over Rs1.5tr may also be too ambitious even if the economy were to recover. Although the government has doubled capital value tax on real estate transactions and withholding tax on imports and pledged to extend the scope of tax on several services, it will find it difficult to meet the tax target, especially in the light of the dismal performance of collectors during the outgoing year. Some of the impact of the increase in existing taxes would be offset by tax incentives given to the car and telecom sectors.

It is unfortunate that the rulers have again failed to tax the rich agriculturists. Any shortfall in tax collection or foreign assistance targets could force the government to borrow more from domestic sources or cut development spending at the cost of economic recovery. Additionally, rising oil prices continue to pose a serious risk to efforts aimed at curbing inflation and bridging the current account deficit. But, as they say, we should begin the new year on a positive note.

 

[white_pawn]

Pakistan asks IMF for $4bn to plug budget deficit​

By Mubarak Zeb Khan
Sunday, 14 Jun, 2009

ISLAMABAD: Pre-empting possible delays in external flows, Pakistan has asked the International Monetary Fund (IMF) for a $4 billion stand-by loan to finance the yawning budget gap in the year 2009-10 in case multilateral donors fail to release the pledged amount to Islamabad.

‘This facility is insurance, which can be used in case the assistance from the multilateral donors or friendly countries delayed or does not arrive,’ Adviser to Prime Minister on Finance and Revenue Shaukat Tarin told newsmen in the post-budget press conference here on Sunday.

He said that this facility would be finalized in the next IMF board meeting. This funding will not be used to build up reserves, but to financing the budget deficit, he added.

The government estimated a budget deficit of 4.9 per cent of GDP next year, which is higher than the 4.6 per cent agreed with the IMF. Analysts estimated the deficit is likely to be between five per cent and 5.5 per cent by the end of next year. This will be mostly funded through the $5 billion pledges made in the Tokyo meeting last April.

Pakistan received $4.8 billion from Asian Development Bank, World Bank, Islamic Development Bank and other friendly countries including Saudi Arabia during the current fiscal year. ‘A similar amount of $4 billion is expected next year from these sources,’ Mr Tarin claimed.

‘You can not say multilateral donors will not provide loan next year. Friends of Pakistan also committed $5.2 billion for two years (over $2.6 billion per year),’ he said. Of these $1 billion each would come from USA and Japan and the rest from other countries.

He said that there is no pressure on government money. He said that administrative measures would be taken to improve the revenue collection in the next year; more than Rs66 billion would be raised under revenue measures taken in the budget.

The carbon tax would help the government raise more than Rs134 billion in the next year. ‘The carbon tax is aimed to reduce consumption of the petroleum’ the adviser said.

With an increase in oil prices, the component of carbon tax would also increase, which would be passed on to end consumer fueling further inflation.

Mr Tarin said that phasing out electricity subsidies were meant to improve the efficiency of power producing companies. He agreed with a questioner that this would directly raise electricity rates. However, he would not disclose the exact per centage increase in power tariff.

With the phasing out of electricity subsidies and carbon tax, inflation is likely to rise. However, Mr Tarin claimed the government would bring down inflation to 9.5 per cent next year from an expected 12.5 per cent during the current fiscal year.

He said that the NFC will be reconstituted within next 90 days. ‘I can not head NFC as I am not an elected person,’ he said. The pay and pension committee would give proper recommendation to raise the salary of government employees in line with market salaries. He said the government would make further adjustments in salaries of employees in December.

He said with Pakistan’s economy stabilizing and inflation settling at single digit, important measures will be in place under an innovative roadmap to revive the economy on sustainable grounds, but with a human face, hiking allocations in health and education sectors and alleviating poverty in a transparent manner.

He said administrative expenditures would be sliced down by Rs120 billion to cut the budgetary deficit.

He said non productive subsidies are being done away with this year. Foreign exchange reserves stood at $11.30 billion while GDP valued was valued at Rs14.82 trillion.

Responding to a query about the entitlement of 15 pc adhoc relief with regard to regular, contract and daily wage employees of the government and semi-government corporations, the advisor said that all those who were getting their salaries from the national exchequer will be entitled to adhoc relief.

 

[white_pawn]

Farm sector registers stronger than expected growth​

By Khawar Ghumman
Friday, 12 Jun, 2009

ISLAMABAD: Agriculture is the only sector registering a growth rate of 4.7 per cent during last year against a target of 3.5 per cent, National Economic Survey 2008-09 revealed.

The performance of agriculture sector has been stronger than expected during 2008-09. During 2007-08 the sector grew at a dismal rate of 1.1 per cent, it said.

Agriculture sector’s promising growth of 4.7 per cent was largely attributed to the bumper wheat, rice and maize crops, which have been estimated at 23.42 million tons, 6.9 million tons and 4 million tons, respectively, despite the fact these corps received less water than required.

Major crops accounted for 33.4 per cent of agricultural value addition and registered stellar growth of 7.7 per cent as against negative 6.4 per cent last year. Minor crops contributing 12 per cent to overall agriculture grew by 3.6 per cent as against 10.9 per cent last year.

Similarly, the performance of livestock, the single largest contributor to overall agriculture (51.8 per cent) grew by 3.7 per cent in 2008-09 as against 4.2 per cent last year. The fisheries sub-sector performed positively at 2.3 per cent though the previous year’s growth stood at 9.2pc.

However, forestry, which had been experiencing negative growth since 2003-04, this year too, has posted negative growth of 15.7 per cent in a row.

During the current fiscal year the availability of water for Kharif for the crops such as rice, sugarcane and cotton has been 0.3 per cent less than the normal supplies and 5.5 per cent less than last year’s Kharif.

The water availability during Rabi season for major crops (such as wheat) is estimated at 24.9 MAF, which is 31.6 per cent less than the normal availability and 10.7 per cent less than last year’s Rabi season.

The domestic production of fertilizers, an important part of agriculture sector, during the first nine months (July - March 2008-09) of the current fiscal year was up by 3.6 percent as compared with corresponding period last year.

On the other hand, the import of fertiliser decreased by 51 per cent. The availability of fertiliser also decreased by 11.9 per cent during the same period last year.

Agricultural loans amounting to Rs151.9 billion were disbursed during July-March 2008-09 as against Rs138.6 billion during the corresponding period last year, thereby registering an increase of 9.6 per cent.

 

[Neo]

$4 billion IMF aid to be sought if FoDP's pledges delayed​

ISLAMABAD (June 15 2009): The Advisor to Prime Minister on Finance, Shaukat Tarin, said on Sunday that in case of any delay in receipts of pledges from Friends of Democratic Pakistan (FODP) Pakistan has lined up commitment of $4 billion from the International Monetary Fund (IMF).

Addressing the post-budget news conference here, he said that FODP forum has been requested to give money for social sectors so that the growth-oriented policy could be pursued and implemented in true spirit through financial resources available with the country. He said that the World Bank, the Asian Development Bank, and Islamic Development Bank (IDB) would give $4.80 billion in the next two years. An assistance of $5.80 billion is expected from FODP forum in the same period.

"After achieving targets of economic stabilisation plan, the economy is poised to go for sustainable, equitable and job creating growth. The current account deficit and fiscal deficit are well under control.

The budget 2009-10 is focused on agriculture and manufacturing with agenda of enhancing productivity level through improvements to human capital base and physical infrastructure and ensure availability of cost effective energy in the country.

Shaukat said that during 2008-09 the response of this government was phasing out of the subsidies and sustaining the budgetary resources. He said that the expenditures were rationalised through a process of prioritisation of government development schemes to reduce budget deficit.

He said in this regard development expenditures were reduced and went down by Rs 120 billion. He added that SBP followed a tight monetary policy to reduce the aggregate demand and to bring down inflation. There were adjustments in petroleum prices and electricity prices to reduce burden on the budget, he added.

He said that net borrowing from SBP as of October was Rs 252 billion to Rs 258 billion. "By March it had been reduced to Rs 58 billion, which means we have started paying back to the SBP rather taking from it".

He said that import of non-essential items was curtailed by tariff adjustments to reduce the trade and current account deficits. He said that fiscal deficit has remained on target which means it has come down from 7.6 percent in 2007-08 to 4.3 percent in 2008-09. He said that current account deficit has been reduced from 8.5 percent to 5.3 percent of GDP, again a reduction of 3.2 percent in one year.

"Our tax and duty measures in Budget for Fiscal Year 2009-10 would revolve around providing protection to the poor and vulnerable against the current economic downturn by providing cash transfers and skill development, reviving manufacturing and industry, especially export-oriented industry, to raise their productive levels, broadening the tax base, instead of overburdening the existing taxpayers, and restraining unnecessary imports to improve the Balance of Payments position."

Tarin told a questioner that budgetary deficit will be around 3.4 percent during next fiscal year. Non-productive subsidies are being done away with this year, he said, adding that foreign exchange reserves stood at $11.30 billion while Gross Domestic Product valued Rs 14.82 trillion.

Responding to a query about entitlement of 15 percent ad hoc relief with regard to regular, contract and daily wage employees of the government and semi-government corporations, the Advisor said that all those who were getting their salaries from the national exchequer will be entitled to ad hoc relief. He said that levying carbon surcharge on POL products is a permanent feature and to help cut demand. "This will remain intact," he reiterated.

He said that the government would soon complete the National Finance Commission (NFC) Award within the next three months. This will help fair distribution of national resources between Centre and provinces. Tarin said that there was no jugglery of figures in the budget. "The Federal Budget 2009-10 is an open document. We have placed all our budget documents in the media cell of Ministry of Finance to maintain transparency," he added.

The government would pass on to the consumers impact in case oil prices increase along with rates of carbon surcharge on POL products. Although the government has imposed carbon surcharge on CNG, it would remain 35 percent cheaper than POL products and the aim of the government is to ensure use of gas resources wisely.

"Earlier, the CNG price was 58 percent of the POL products prices and now we have raised it from 58 percent of POL products prices to 65 percent of the POL products prices," he said.

The government would collect Rs 134 billion from carbon surcharge on POL products and carbon surcharge on CNG imposed in the budget 2009-10. Rs 122 billion would be collected from carbon surcharge on POL products and Rs 12 billion from carbon surcharge on CNG in next fiscal year 2009-10. Carbon surcharge on POL products will be Rs 8 per litre on high speed diesel oil (HSDO), Rs 10 per litre on motor spirit (petrol), Rs 6 per litre on kerosene oil, Rs 3 per litre on light diesel oil, and Rs 6 per kg on CNG.

He said that out of $1.5 billion Kerry Lugar Bill aid to be received from United States, $1 billion or Rs 80 billion would be spent in terrorism affected 25 percent districts of NWFP, Balochistan and Punjab during 2009-10.

He said NFC issue has been discussed in the special Cabinet meeting and Prime Minister would soon re-constitute Commission to hold detailed negotiations with provinces. Issue of arrears of Net Hydel Profits of NWFP against Wapda would also be discussed during NFC Award negotiations.

He said that power tariff increase would be made in case it was necessary, in gradual manner but not in one go. He hinted that the government would not pass on to the consumers the inefficiencies of public sector entities that are wasting Rs 150 to Rs 200 billion due to their inefficiencies. The government would reduce the line losses of distribution companies to keep the power tariff at reasonable level.

He clarified that Rs 19.4 billion that has been indicated income from privatisation in 2009-10 would mainly come from $700 million remaining PTCL privatisation proceeds that were held up due to the dispute over assets in provinces. He said that the issue has been resolved with the provinces and Etisalat will release to Pakistan the remaining privatisation proceeds soon.

 

[Neo]

12.7 percent drop in CFS investment​

KARACHI (June 15 2009): Investment under CFS at the Karachi share market declined by 12.7 percent to Rs 68 million on Friday. The CFS rate, however, increased to 50 percent as compared to 31.02 percent of previous week. The top 5 scrips by CFS investment were Engro, POL, NBP, Lucky and MCB, contributing 94 percent of the total investment.

 

[Neo]

Export investment support fund of Rs 40 billion to replace R&D facility: subsidies slashed by Rs 16.3 billion​

ISLAMABAD (June 14 2009): The government has slashed subsidies to Rs 13.2 billion (1.9 percent of GDP) in 2009-10 from Rs 29.5 billion (2.4 percent of GDP) in 2008-09 as per the agreement with the International Monetary Fund (IMF). However, the amount of subsidy for import of wheat, reimbursement of losses for cotton operation to Trading Corporation of Pakistan (TCP), sale of Atta and Ramzan package has been increased.

The amount of subsidy to oil refineries/OMCs/others has been reduced to Rs 15 billion from Rs 140 billion in the 2008-09 budget estimates and Rs 70 billion in the revised allocation for 2008-09. At the same time, the facility of Research and Development (R&D) for the textile sector has been completely withdrawn. The government had allocated Rs 4 billion for this sector in 2008-09 as is being shown in the revised figures. Three percent mark-up subsidy to spinning sector has also been reduced to Rs 500 million from Rs 810 million earmarked in the revised estimates for 2008-09.

In order to help the textile and other export industry - Rs 40 billion export investment fund is proposed to be established. Around Rs 27 billion will go to Pakistan main export earner - cotton and textiles - and Rs 13 billion for other export sectors to boost export earnings.

However, motorcycle industry will continue to enjoy a subsidy of Rs 25 million. According to budget documents, there will be no subsidy for import of phosphatic and pottasic fertiliser, DAP fertiliser, but import of urea and tractors under Benazir Tractors Scheme (BTS) will be subsidised.

The Water and Power Development Authority (Wapda) will get Rs 62.9 billion in the budget as General Sales Tax (GST), GoP's share for agriculture tubewells, Wapda tubewells (Balochistan), inter-Discos tariff differential. The government has also allocated Rs 3 billion to pay interest on TFCs and Rs 1 billion for Fata. Last year, the government did not earmark any amount for this purpose. The government will pay Rs 3.8 billion to KESC as GST, differential agriculture tubewells in Balochistan, tariff differential and payable to PSO and PGCL.

TCP will get Rs 25.5 billion as subsidy for import of wheat against Rs 20 billion fixed in the outgoing fiscal year however, subsidy for sugar import has been reduced to Rs 4 billion against Rs 6.3 billion in 2008-09. TCP will also get Rs 500 million for cotton operations against Rs 300 million in 2008-09. The documents further reveal that subsidy for ghee package (USC) has been slashed to Rs 1 billion as compared to Rs 1.5 billion for the outgoing fiscal year, but the subsidised amount for sale of pulses will remain the same at Rs 500 million. The amount for sale of Atta has been increased to Rs 1.2 billion against Rs 500 million of 2008-09. A sum of Rs 1.5 billion has also been earmarked for the Ramazan package against Rs 200 million allocated in the budget 2008-09 and revised allocation of Rs 1.3 billion.

Subsidy for misc/export of wheat has been slashed to Rs 320 million from Rs 672 million actual allocation and revised target of Rs 286 million in 2008-09. However, Passco will get Rs 2 billion subsidy for paddy operation. In 2008-09, the government did not earmark any subsidy for this purpose.

FFC Jordan will get Rs 210 million as subsidy in 2009-10 against Rs 231 million allocated in the 2008-09. Subsidy for sale of wheat in Fata has been increased to Rs 216 million from Rs 195 million whereas the amount for sale of wheat, salt and sugar in Gilgit Agency has been enhanced to Rs 264 million from Rs 606 million.

Subsidy for terephthalic acid has been reduced to zero percent from Rs 2000 billion in the revised estimates of 2008-09. No subsidy has been earmarked for Pakistan Dairy Development Company. In 2008-09, the government extended Rs 81 million to this company. The amount of subsidy for Soprest/GIK will remain at the level of Rs 78 million.

 

[Neo]

Annual Plan envisages 3.3 percent GDP growth: agriculture sector to contribute 3.8 percent, services 3.9 percent​

ISLAMABAD (June 14 2009): The government on Saturday launched the Annual Plan as a component of the 2009-10 budget that envisages a 3.3 percent GDP growth rate with major contributions from agriculture (3.8 percent), manufacturing (1.8 percent), and services sector (3.9 percent). The Annual Plan mainly focuses on the strategy to ensure economic recovery consistent with stabilisation of the economy, maintaining the growth momentum of agriculture sector, and revival of the industrial sector.

The Plan also emphasises achieving the Millennium Development Goals (MDGs) and reducing poverty through a comprehensive social protection system with an exit strategy. It would facilitate balanced development by reducing regional disparities and ensuring rehabilitation and reconstruction of conflict zones.

The strategic thrust of the Annual Plan 2009-10 has been derived from the nine-point economic agenda of the government which envisages supporting critical infrastructure gaps in water, power and transport sectors with the objective of enhancing competitiveness in the economy.

The agriculture sector is projected to grow by 3.8 percent, to be contributed by growth rates in major crops (3.5 percent), livestock (4 percent), fisheries (2.4 percent), and forestry (1 percent). Extra efforts would be needed to increase the agriculture output, given the high production base of 2008-09, attributed to good harvest of wheat, rice and cotton. The prospects for economic growth in 2009-10 focus on the revival of the manufacturing sector growth rate, which has been targeted at 1.8 percent during 2009-10.

The large-scale manufacturing is targeted to grow by 1 percent. This should be viewed in the backdrop of 7.7 percent negative growth recorded in 2008-09. Based on the growth in agriculture and manufacturing combined with the expected contraction in imports by 5 percent, the services sector is likely to grow by 3.9 percent, with wholesale and retail trade growing by 3.3 percent and finance and insurance by 3 percent.

Total investment is projected in the vicinity of 20 percent of GDP in 2009-10. National savings as a ratio of GDP is projected at 14.7 percent, implying that almost 74 percent of investment will be financed through national savings. This will leave 26 percent of investment to be financed from foreign savings, which will be 5.3 percent of GDP.

The main thrust of fiscal policy during 2009-10 would be to keep the fiscal deficit within sustainable limits by furthering reforms in the tax system, broadening the tax base, improving tax compliance and minimising tax evasion. The monetary expansion for the year 2009-10 will be in line with the projected GDP growth of 3.3 percent and CPI inflation of 9 percent.

The target rate of inflation for 2009-10 is set at 9 percent as against expected 20 percent in 2008-09. CPI Inflation would remain sensitive to growth in money supply, increase in utility prices, fluctuation in international oil and commodity prices and, above all, to inflationary expectations.

On account of the global economic slowdown and due to domestic energy and law and order situation, exports (fob) for 2009-10 are projected at $18.3 billion, against $18.6 billion estimated for 2008-09. Imports during 2009-10 are estimated to decrease by 5.6 percent to $28.9 billion from $30.7 billion in 2008-09. As a result, the trade balance is projected to be in deficit by $10.7 billion in 2009-10.

 

[Neo]

BUDGET 2009-10: Rs 2.48 trillion outlay envisages 85 percent raise in development expenditure​

ISLAMABAD (June 14 2009): The Minister of State for Finance and Economic Affairs, Hina Rabbani Khar, on Saturday unveiled the Federal Budget for 2009-10, according to which total outlay for the next fiscal year will be Rs 2.482 trillion, which is 23.5 percent higher than the budget estimates of 2008-09.

Rs 646 billion allocated for PSDP Rs 722.7 billion gap to be financed with Rs 264.9 billion foreign loan and Rs 457 billion domestic borrowing Rs 660 billion to go to debt servicing Rs 175 billion administrative expense

-- Reckons IMF conditionalities

-- Targets 4.9 percent fiscal deficit

-- Shows relatively moderate burden of new taxes

-- Seeks industry's revival

The consolidated budget of the federal and provincial governments has been estimated at Rs 2.897 trillion, whereas total resources are estimated at Rs 2.174.9 trillion, with a consolidated budget deficit of Rs 722.7 billion, or 4.9 percent of GDP, which is 1.5 percent higher than what was agreed in the Letter of Intent (LoI) agreed with the International Monetary Fund (IMF) in March 2009.

This deficit will be financed by Rs 264.9 billion foreign and Rs 457.6 billion domestic loans. Analysts are of the view that the government may have agreed with the IMF team to slash the development program by the end of the year to meet the agreed target of budget deficit or may later renegotiate the target based on global economic performance.

Total resource availability during 2009-10 has been estimated at Rs 2.318 trillion, against Rs 1.836 trillion in the budget estimates of 2008-09. According to official budget documents, net revenue receipts for 2009-10 have been estimated at Rs 1.372 trillion, indicating an increase of 23.3 percent over the budget estimates of 2008-09.

The provincial share in federal revenue receipts is estimated at Rs 655 billion during 2009-10, which is 15.3 percent higher than the budget estimates for 2008-09. The capital receipts (net) for 2009-10 have been estimated at Rs 191 billion, against Rs 221 billion budget estimates of 2008-09.

The external receipts in 2009-10 are estimated at Rs 510 billion, which shows an increase of 70 percent over the budget estimates of 2008-09. The overall expenditure during 2009-10 has been estimated at Rs 2482 billion, of which the current expenditure is Rs 1699 billion, and development expenditure at Rs 803 billion.

Current expenditure shows an increase of 3.5 percent over the revised estimates of 2008-09, while development expenditure will increase by 68.1 percent in 2009-10 over the revised estimates of 2008-09. The share of current expenditure in total budgetary outlay for 2009-10 is 68.5 percent, as compared to 79 percent in the revised estimates for 2008-09.

The expenditure on General Public Services (inclusive of debt servicing transfer payments and superannuation allowance) is estimated at Rs 1189 billion, which is 70 percent of the current expenditure. The size of Public Sector Development Program (PSDP) for 2009-10 is Rs 646 billion, while for other development expenditures an amount of Rs 157 billion has been allocated.

The PSDP shows an increase of 54 percent over the revised estimates 2008-09, which were mercilessly slashed during the current year to meet the budget deficit target agreed with the IMF. The provinces have been allocated an amount of Rs 200 billion for budget estimates 2009-10 in their PSDP.

An amount of Rs 25 billion has been allocated for Earthquake Reconstruction and Rehabilitation Authority (Erra) in the PSDP 2009-10. However, there are no foreign loans expected for this purpose in 2009-10. The budget for fiscal year 2008-09 was estimated a total of 31250 million rupees but the revised estimates gave a zero figure. It is not clear whether this is indicative of the donors' backing out of their commitments.

 

[Neo]

Economists term budget good under difficult conditions​

LAHORE (June 15 2009): Despite disagreements on several matters of governance and implementation, some well-known economists have described the Federal Budget 2009-10 as good under the present abnormal and insurgency conditions of Pakistan.

A former Secretary Planning Commission of Pakistan who wished not to be named said: "what do you expect when the country is fighting the most deadly international war against terrorism and insurgency that has displaced 3.5 million people, the highest number of people anywhere in the world?

He said the government has to increase defence budget to crush the insurgency and restore writ of the government, make huge allocations to look after the 3.5 million internally displaced persons (IPDs), improve the law and order situation and restore confidence of the local and foreign investors in the political and economic stability of the country.

He termed it as "a good budget in extraordinary circumstances under difficult conditions at a critical juncture of Pakistan's history. Another entrepreneur and former senior vice president of Lahore Chamber of Commerce and Industry Sohail Lashari described the budget as "ambitious with difficult targets to achieve".

Talking to Business Recorder Lashari said though the budget proposals do not indicate any unusual policy direction or vision of the present government, yet everything depends on the mechanism and good governance to achieve the budgetary targets for the FY 2009-10.

Lashari said it is a pity that the government does not envisage any steps to utilise 20,000 MW electricity generation capacity of present hydel and thermal power plants to overcome the on-going load shedding that has crippled our industrial and agriculture sectors. "The government should have cleared the accumulated debt of the IPPs and done with the circular debts to make the country self-sufficient in electricity", he added.

Prominent agronomist Hamid Malhi said: "it is the agriculture sector that has given social and food security to the country and has registered 4.7 percent growth during FY 2008-09. "Instead of going to International Monetary Fund (IMF) and Friends of Pakistan for seeking loans, the government should streamline its agriculture sector which has the potential to solve all economic problems and mitigate poverty in the country.

He said: "we have large surplus quantities of wheat and rice worth $4.5 billion that could be exported to meet the foreign exchange needs of the country". "We must strive for self-reliance and exploit our own resources to put everyone on work either in the agriculture fields or factories", he opined.