A Pakistani delegation led by finance minister Abdul Hafeez Shaikh is in Washington to assess the economic impact of the floods and to discuss ways in which the IMF could help in the recovery. Islamabad is reported to have requested the fund to relax the conditions of the loan to give it some fiscal space to fight the economic consequences of the floods and to immediately release the stalled loan instalment to offset pressure on the rupee. The ongoing talks, officials and analysts say, are also important for another IMF credit facility, which Pakistan desperately needs to avert pressure on its foreign exchange stocks and currency because of huge reduction in foreign investment and painfully slow disbursement of bilateral assistance pledged at the Tokyo conference in April last year. Pakistan aimed to ensure fiscal austerity, stay within fiscal targets and reform public sector corporations to set the stage for economic growth, he said. Analysts believe that the fund’s help as well as the decision of the World Bank and the Asian Development Bank to redirect their nearly $3 billion assistance for reconstruction of flood-affected areas will only provide a short-term respite for the economy. “It will ease pressure on the rupee, cover the expected expansion in trade gap, boost the investor confidence and reduce the government’s borrowing needs for budgetary support in the near term. But the government will need to obtain another IMF facility to put the economy back on the road of sustainable growth,” said Sayem. More importantly, he said, the government will have to implement tax reforms to increase its revenues. “It must cut its wasteful expenditure, including subsidies (of almost Rs200 billion) to public sector organisations (like Pakistan Railways, PIA and Pakistan Steel Mill) and improve its tax revenues by imposing wealth tax – which generates almost 3-4 per cent of their gross domestic product (GDP) in the developed economies – on finances, savings, property, etc of the wealthy people for sustainable economic growth,” he insisted.
The latest information provided by the State Bank showed that the banking spread has sharply increased to 7.6 per cent in July, which was 16-month high. Higher banking spread means banks get more while depositors get less return on their deposits. The State Bank has increased the discount rate by 0.5 per cent to 13 per cent which suddenly increased the return on banks’ investments. Banks have been making heavy investments on government papers on which the return also increased after enhancement of policy interest rate. Banking industry has been showing strong performance in the country despite severe global financial crisis. Further, the banks are no more dependent on borrowing by the corporate sector or overall private sector. The government has practically replaced the private sector and borrowed record money from the commercial banks last year giving them risk free easy income. In the fiscal 2009-10, the five big banks earned over 90 per cent of entire banking profits. The half year results (Jan-July-2010) also shows that these five big banks earned over 80 per cent of the banking profits.
The official said the government had allocated about Rs280 billion for repayment of foreign loans and interest during the current year, including a payment of about Rs102 billion to the IMF in two phases. The estimates comprised Rs77 billion for servicing of foreign debts, Rs175 billion repayment of loans and Rs27 billion of short-term credits.The government has assured the IMF that despite delays in increasing electricity tariff because of the flood situation, the agreed increase of about 25 per cent would be passed on to consumers during the year.
Despite poor economic scenario, banks kept improving their profits during the first half of this calendar year as they earned a net profit of Rs35.5 billion. The private sector did not play a key role for banks’ profits; it was the banks’ investment mostly in government papers which yielded profit for them.
In this regard, the KESC has moved two petitions, which would come up for hearing on Sept 2 amid stiff resistance from consumers and other stakeholders. Sources said the KESC sought a 19 paisas per unit increase on account of its rising operation and management (O&M) expenses while an increase of 11 paisas per unit was sought on the pretext of an increase in fuel cost.
Tuesday, August 31, 2010
The massive NPLs not only curtailed the profits of banks but it also changed the banking approach towards the private sector. Under pressure banks do not want more NPLs so they kept investing in government papers as first priority and kept the private sector on second priority.Mohammad Imran, a research analyst, said the banks’ changed approach is a serious dent to economic growth as many new sectors could emerge while many needs money to expand their operations. Analysts said the slow pace of NPLs growth gave hope that banks might consider to change their priority for lending in future but it is possible only when the government slashes interest rates on its papers.
“The car prices may be raised by up to Rs50,000 a unit to offset the impact of a rising yen and protect our margins,” a director of one of the country’s three Japanese car assemblers told Dawn on Monday. The yen has gained almost 10 per cent against the rupee to rise to Rs1.0037 in three months and 46 per cent in two years making imports from Japan dearer. “The imported CKD kits are almost 35 per cent of the total cost of a car. So you can imagine the impact of the 10 per cent increase in the import costs on our prices and margins,” the executive said. “We are in a fix because the government wants us to reduce our car prices at a time when imports are becoming costlier, prices of raw materials are going up and our capacity utilisation is down to 55 per cent,” the assembler lamented. It may be noted that Suzuki operated on less that 50 per cent of its installed capacity of 150,000 units during the last financial year, while Honda with a capacity of 40,000 units could roll out only 13,500 units. Dewan worked at only 12.18 per cent of its 10,000 cars’ capacity. Only Indus Motor could utilise above 77 per cent of its installed capacity of 65,000 units.
As many as 1,015 people had lost their lives and around 1,000 people got severely injuries in the recent floods in Khyber Pakhtunkhwa. Some 3.8 million people are affected and 1.5 million rendered homeless. Over 220,000 houses, 6,000 shops, 1,300 water supply schemes, 700 educational facilities, 100 health facilities, 149 government sector buildings and 2,000km roads have been reported damaged. More than 650 transformers, 500 electric poles and five grid stations in different parts of the province have also been destroyed.
For the last couple of years the foreign investment has been falling amid fear of further degradation of law and order and poor performance of economy. The outflow also fell during the last couple of years. The State Bank reported that the repatriation of foreign exchange in 2007-08 was $921.4 million, which shrank to $764 million in 2008-09 and $775.6 million in 2009-10. The foreign investment has been largely limited to few sectors, including oil and gas exploration, telecommunications and financial business. Except the oil and gas exploration, the other two sectors witnessed sharp decline in the FID during the fiscal 2010 ended in June 30. A couple of years before, the rising repatriation of foreign exchange was concerning but now the falling figure is a cause for worry, which means the country has no place for the FDI,” said Abid.
The 6-month t-bills attracted Rs4.797 billion, while the 12-month paper attracted Rs12.465 in the auction. Bankers said there was a possibility that auction targets to sell t-bills could be revised upward since the government was in dire need of borrowing. Since the government is bound to remain within a limit while borrowing directly from the State Bank under the IMF agreement signed in 2008.
However, the sources said that the most serious issue was the failure of the government to eliminate subsidy on electricity from July 1, 2010 as was committed with the international donors. Sources said that the IMF would be given assurances that the reformed GST on services would be implemented in the VAT mode from October 1, 2010.
Minister for Textile Industry, Rana Farooq Saeed Khan is pursuing the readymade garments exporters for the Prime Minister Relief Fund despite the fact that garment exporters are already facing numerous problems because State Bank of Pakistan (SBP) has already withheld three percent Research and Development (R &D) fund. According to the sources, the future of readymade garments sector is in doldrums due to apathy of the Ministry of Textile Industry and the ill-fated garments manufacturers/exporters are not sure about their survival anymore. They said gravity of the situation could be judged from the fact that the number of readymade garments units has dropped drastically to 67 in 2010 comparing with about 150 in 2008 in Lahore... According to these circles, the gruesome situation in the value added industry has put viability of bigwigs at stake after eliminating a large number of small and medium level garments units.
They said that more than 1.6 million acres of agricultural lands had been badly affected by the super floods in the province [OLD FIGURE], out of which the cotton crop was on 437,885 acres, sugarcane on 117,611 acres and rice on 845,503 acres.
"This loss is the most serious setback for the farming community because most of the small farmers have lost considerable number of livestock too as they had limited facility for their animals", he added. Among the major cash crops the ministry's report highlighted that the largest loss of Rs 71.4 billion has been occurred by the cotton crop. He said that cotton was sown over 3.1 hectares in the current Kharif season out of which the floods have destroyed crops at 0.51 million hectares, as a result the production is expected to decline by almost 15 percent to 11.7 million bales as against the targeted cotton production of 14 million bales in 2010.
Pakistan Railways is likely to send thousands of its employees of 102 passenger trains to surplus pool after their closure. PR has announced to close 102 passenger trains because of financial losses and is also planning to send its employees to surplus pool or ask them to get early retirement, sources said.
Industrialists and economists on Wednesday expressed deep concerns over increase in electricity tariff of 26 paisa per unit, and termed it "an irrational decision", especially for industrial sector that is already facing enormous problems. They were of the opinion that higher cost of power would increase the overall cost of production for industries, thus becoming locally produced goods out of reach of general public.
“The car prices may be raised by up to Rs50,000 a unit to offset the impact of a rising yen and protect our margins,” a director of one of the country’s three Japanese car assemblers told Dawn on Monday. The yen has gained almost 10 per cent against the rupee to rise to Rs1.0037 in three months and 46 per cent in two years making imports from Japan dearer. “The imported CKD kits are almost 35 per cent of the total cost of a car. So you can imagine the impact of the 10 per cent increase in the import costs on our prices and margins,” the executive said. “We are in a fix because the government wants us to reduce our car prices at a time when imports are becoming costlier, prices of raw materials are going up and our capacity utilisation is down to 55 per cent,” the assembler lamented. It may be noted that Suzuki operated on less that 50 per cent of its installed capacity of 150,000 units during the last financial year, while Honda with a capacity of 40,000 units could roll out only 13,500 units. Dewan worked at only 12.18 per cent of its 10,000 cars’ capacity. Only Indus Motor could utilise above 77 per cent of its installed capacity of 65,000 units.
As many as 1,015 people had lost their lives and around 1,000 people got severely injuries in the recent floods in Khyber Pakhtunkhwa. Some 3.8 million people are affected and 1.5 million rendered homeless. Over 220,000 houses, 6,000 shops, 1,300 water supply schemes, 700 educational facilities, 100 health facilities, 149 government sector buildings and 2,000km roads have been reported damaged. More than 650 transformers, 500 electric poles and five grid stations in different parts of the province have also been destroyed.
For the last couple of years the foreign investment has been falling amid fear of further degradation of law and order and poor performance of economy. The outflow also fell during the last couple of years. The State Bank reported that the repatriation of foreign exchange in 2007-08 was $921.4 million, which shrank to $764 million in 2008-09 and $775.6 million in 2009-10. The foreign investment has been largely limited to few sectors, including oil and gas exploration, telecommunications and financial business. Except the oil and gas exploration, the other two sectors witnessed sharp decline in the FID during the fiscal 2010 ended in June 30. A couple of years before, the rising repatriation of foreign exchange was concerning but now the falling figure is a cause for worry, which means the country has no place for the FDI,” said Abid.
The 6-month t-bills attracted Rs4.797 billion, while the 12-month paper attracted Rs12.465 in the auction. Bankers said there was a possibility that auction targets to sell t-bills could be revised upward since the government was in dire need of borrowing. Since the government is bound to remain within a limit while borrowing directly from the State Bank under the IMF agreement signed in 2008.
However, the sources said that the most serious issue was the failure of the government to eliminate subsidy on electricity from July 1, 2010 as was committed with the international donors. Sources said that the IMF would be given assurances that the reformed GST on services would be implemented in the VAT mode from October 1, 2010.
Minister for Textile Industry, Rana Farooq Saeed Khan is pursuing the readymade garments exporters for the Prime Minister Relief Fund despite the fact that garment exporters are already facing numerous problems because State Bank of Pakistan (SBP) has already withheld three percent Research and Development (R &D) fund. According to the sources, the future of readymade garments sector is in doldrums due to apathy of the Ministry of Textile Industry and the ill-fated garments manufacturers/exporters are not sure about their survival anymore. They said gravity of the situation could be judged from the fact that the number of readymade garments units has dropped drastically to 67 in 2010 comparing with about 150 in 2008 in Lahore... According to these circles, the gruesome situation in the value added industry has put viability of bigwigs at stake after eliminating a large number of small and medium level garments units.
They said that more than 1.6 million acres of agricultural lands had been badly affected by the super floods in the province [OLD FIGURE], out of which the cotton crop was on 437,885 acres, sugarcane on 117,611 acres and rice on 845,503 acres.
"This loss is the most serious setback for the farming community because most of the small farmers have lost considerable number of livestock too as they had limited facility for their animals", he added. Among the major cash crops the ministry's report highlighted that the largest loss of Rs 71.4 billion has been occurred by the cotton crop. He said that cotton was sown over 3.1 hectares in the current Kharif season out of which the floods have destroyed crops at 0.51 million hectares, as a result the production is expected to decline by almost 15 percent to 11.7 million bales as against the targeted cotton production of 14 million bales in 2010.
Pakistan Railways is likely to send thousands of its employees of 102 passenger trains to surplus pool after their closure. PR has announced to close 102 passenger trains because of financial losses and is also planning to send its employees to surplus pool or ask them to get early retirement, sources said.
Industrialists and economists on Wednesday expressed deep concerns over increase in electricity tariff of 26 paisa per unit, and termed it "an irrational decision", especially for industrial sector that is already facing enormous problems. They were of the opinion that higher cost of power would increase the overall cost of production for industries, thus becoming locally produced goods out of reach of general public.
Tuesday, August 17, 2010
Foreign Direct Investment (FDI) to the country stood at $98.5 million during the month of July. According to the data released by the State Bank of Pakistan, FDI inflows during the first month of the current fiscal year are down by 46 per cent as compared to the same month in the preceding year.
“The primary aim is to deliver on the commitment of tax reforms by buying more time and secondly it will leave no time for the last meeting before the end of $11.3 billion programme in December,” said a key government official on condition of anonymity. “Pakistan does not want to avail of the last tranche of $1.2 billion due to better position of foreign exchange reserves,” the official added. The IMF loan cannot be used for budgetary support and the money can only be spent on import bills.
“The primary aim is to deliver on the commitment of tax reforms by buying more time and secondly it will leave no time for the last meeting before the end of $11.3 billion programme in December,” said a key government official on condition of anonymity. “Pakistan does not want to avail of the last tranche of $1.2 billion due to better position of foreign exchange reserves,” the official added. The IMF loan cannot be used for budgetary support and the money can only be spent on import bills.
Thursday, August 12, 2010
The profit after tax of Oil and Gas Development Company (OGDC) has increased to Rs 59.177 billion in the financial year ended June 30, 2010 (FY10) as compared to Rs 55.539 billion earned in FY09. The company's earning per share increased to Rs 13.76 in the period under review against Rs 12.91 in the same period a year back. The board of directors of the company in its meeting held on Thursday at Islamabad approved final cash dividend for the year at Rs 1.50 per share, ie 15 percent.
Chief Co-ordinator of CM Ramzan Package, Haji Muhammad Nawaz has said the Punjab government earmarked Rs 2 billion to provide subsidised food items to the people during Ramazan. He further said that now it was the responsibility of the concerned departments and officials to make joint efforts so that people could get benefits out of this public welfare programme.
"Pakistan is the third largest cotton producing country but its share of $3.90 billion is just one percent of global garments trade of $361 billion and its ranking in exports of garments and apparel is 12th in the world," said Bilal Mulla, former Chairman PRGMEA in a chat with Business Recorder ."Pakistan can increase its exports manifold if the government ensures level playing field to entrepreneurs and improves infrastructure," he added. Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has urged the government to give consideration to the following recommendations to enhance exports of value added textiles: (i) ensure availability of yarn to domestic value added garments and apparel industry; (ii) minimum export of basic raw material such raw-cotton and yarn; (iii) building of proper infrastructure; (iv) consistency in policies with regard to exports and garments trade; (v) uninterrupted supply of gas, water and power; (vi) skilled manpower; (vii) market access to EU and USA GSP Plus; (viii) law and order; (ix) low interest rate; and (x) easy visa regime for developed countries for Pakistani exporters. Responding to a question, he said that the government must take PRGMEA on board before finalisation of new Industrial Policy.
Pakistan, Asia's third-largest wheat producer, harvested 23.80 million tonnes of wheat in the 2009/10 crop, as well as a carryover stock of 4.22 million tonnes, and was expected to export this year after a ban on exports last year. Pakistan, the world's fourth biggest cotton producer, has also seen that commodity hit hard, with up to 2 million bales of destroyed, industry officials said, out of an expected crop of 14 million bales in the 2010/11 season. Pakistan, which produced about 12.7 million 170 kg bales last year, often has to turn to imports to feed its textile sector, which accounts for about 60 percent of its exports. The country imported about 2 million bales in the 2009/10 financial year that ended in June.
The country has suffered a loss of about Rs250 billion in the agricultural and livestock sectors and the flood recovery costs may run into billions of dollars, local experts and a UN spokesman said on Thursday. The Minister for Food and Agriculture, Nazar Mohammad Gondal, said: “It is difficult to give an exact figure, but I agree that the loss of agriculture and livestock runs into billions of rupees.” Over 100,000 cows, buffaloes, goats, sheep, horses, camels and donkeys have been lost and 3,000 fish farms and 2,000 poultry farms destroyed across the country. “According to an estimate, the loss of cotton crop is of about Rs155 billion,” Mr Saleem said. In Punjab alone, a cotton growing area of about one million acres had been affected and crops worth Rs86 billion destroyed, he said. “The whole agricultural belt that includes Jhang, Bhakkar, Rajanpur, Rahimyar Khan and Layyah has been inundated.” Sindh has lost standing crops worth Rs95 billion over 100,000 acres. Cotton and rice are the major crops destroyed by the floods. In Khyber Pakhtunkhwa, over 325,000 acres have been submerged and crops worth Rs29.6 billion destroyed. Mr Mughal said over one million tons of wheat stock kept in houses had been swept away.
“NDMA’s distribution of relief goods is not equitable and the province has received aid not commensurate with the losses it has suffered. The United Nations and other donor agencies say that 95 per cent of the damage has taken place in Khyber Pakhtunkhwa, while the NDMA is sending relief goods to areas where magnitude of devastation is comparatively small,” Mian Iftikhar told Dawn on Thursday.
The report is another blow to the BISP, as according to the government’s own survey 60 per cent beneficiaries of the programme’s cash transfers in 16 districts were not very poor. International donors have already objected to the distribution of billions of rupees through selection of people by elected politicians. During the last financial year ended June 30, the BISP Secretariat could only disburse Rs40 billion among the poor despite an allocation of Rs70 billion due to capacity constraints.
According to the IMF assessment, Pakistan’s dependence on getting Rs42 billion or $500 million external financing by floating a Euro Bond was risky, so the maximum sure-fire budget financing was only for 3.5 per cent deficit. The IMF was of the view that because of Greece debt crisis, international investors would be wary of investing in Pakistan’s bond.
The government has announced that during the current financial year, the gap between its income and expenditure would remain at Rs685 billion, or 4 per cent of the total size of the economy. It has estimated that it needs to borrow Rs186 billion from external sources and Rs499 billion from domestic sources to plug the gap. The deficit target too was pegged on the assumption that the provinces would generate upwards of Rs167 billion. The government also missed last year’s budget deficit target by a wide margin. The IMF concern was that after failing to get external financing, the government would resort to state bank borrowing which was inflationary in nature. The IMF conveyed to the authorities that their performance was not up to the mark and that they have to deliver on promises before a meeting of the Executive Board of the Fund for the approval of the next tranche. So far, Pakistan has received $8.7 billion in loans out of the agreed upon $11.3 billion. The Fund would closely monitor the receipts and expenditures for the months of July and August and the implementation plans for levying the reformed GST.
A top government official told The Express Tribune on Tuesday that the finance ministry has proposed Rs280 billion for the federal PSDP for 2010-11. The final figure for the federal PSDP for this fiscal year (2009- 10) is Rs300 billion compared to initial estimates of Rs446 billion. There is always a significant gap between the money allocated for development schemes and that actually spent.
The National Economic Council (NEC) approved a development budget of Rs663 billion for the financial year 2010-11 on Friday. The growth rate during the current fiscal would be 4.1 percent while growth rate target for the next financial year had been fixed at 4.5 percent, he indicated. He informed that the federal PSDP volume for the current year was projected at Rs300 billion but only Rs235 billion could be released. With an increase of 25 per cent, Rs280 billion had been allocated for federal budget for the next fiscal year, he added. Likewise the provincial PSDP budget was projected at Rs294 billion for the current financial year but only Rs245 billion could be released, he pointed out.
Hafeez Sheikh said that out of total Rs663 billion more than half of it, Rs373 billion, will be spent by the provinces. The provinces’ current fiscal year budget was Rs294 billion but they only got Rs245 billion, he added. The Public Sector Development Programme (PSDP) would get Rs280 billion while the Earthquake Reconstruction and Rehabilitation Authority (ERRA) would be given Rs10 billion during fiscal year 2011 out of the development budget, he added. For the current financial year the government had announced Rs646 billion for development but the actual expenditure would be Rs490 billion, showing a cut of almost one-fourth of the total allocations. Hafeez Sheikh said that the federal government allocated Rs446 billion for the current PSDP but due to scarcity of resources only Rs235 billion could be spent, showing a massive cut of almost half of the total allocation. For the coming financial year Rs280 billion have been allocated for PSDP, which is Rs166 billion less than this year’s development budget but still more than the actual amount spent this year. The government has allocated Rs136 billion for infrastructure sector, Rs134 billion for social sector and Rs10 billion for the production sector out of Rs280 billion PSDP budget. For the next financial year the education budget would be Rs5.2 billion, which is even less than the revised budget of the current financial year. Similarly, the Higher Education Commission (HEC) is expected to get Rs2.7 billion less than the current financial year as its budget has been fixed at Rs15.8 billion. The healthcare sector would get Rs18.2 billion, which is again less than the current fiscal year’s development budget.
According to the budget-in-brief document, the government has allocated Rs442.2 billion for defence, which is 16 per cent of the total federal budget. Foreign loans repayment, servicing of domestic debt and foreign debt will take up another Rs873 billion, amounting to almost one-third of the federal budget of Rs2.76 trillion. Servicing of the domestic debt has been allocated Rs621.8 billion, which is almost equal to the overall development budget of the next fiscal year. During this financial year the government spent Rs595 billion on servicing of the domestic debt. Interest on external debt is expected to cost the government Rs76.7 billion as compared to Rs70.7 billion on servicing of the external debt for this fiscal year. Repayments of foreign loans have been allocated Rs174.4 billion.
However, the allocation in PSDP 2010-11 for provinces will likely be enhanced to Rs320 billion, a major hike of 60 per cent in comparison to last year’s allocation of Rs200 billion.
Chief Co-ordinator of CM Ramzan Package, Haji Muhammad Nawaz has said the Punjab government earmarked Rs 2 billion to provide subsidised food items to the people during Ramazan. He further said that now it was the responsibility of the concerned departments and officials to make joint efforts so that people could get benefits out of this public welfare programme.
"Pakistan is the third largest cotton producing country but its share of $3.90 billion is just one percent of global garments trade of $361 billion and its ranking in exports of garments and apparel is 12th in the world," said Bilal Mulla, former Chairman PRGMEA in a chat with Business Recorder ."Pakistan can increase its exports manifold if the government ensures level playing field to entrepreneurs and improves infrastructure," he added. Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA) has urged the government to give consideration to the following recommendations to enhance exports of value added textiles: (i) ensure availability of yarn to domestic value added garments and apparel industry; (ii) minimum export of basic raw material such raw-cotton and yarn; (iii) building of proper infrastructure; (iv) consistency in policies with regard to exports and garments trade; (v) uninterrupted supply of gas, water and power; (vi) skilled manpower; (vii) market access to EU and USA GSP Plus; (viii) law and order; (ix) low interest rate; and (x) easy visa regime for developed countries for Pakistani exporters. Responding to a question, he said that the government must take PRGMEA on board before finalisation of new Industrial Policy.
Pakistan, Asia's third-largest wheat producer, harvested 23.80 million tonnes of wheat in the 2009/10 crop, as well as a carryover stock of 4.22 million tonnes, and was expected to export this year after a ban on exports last year. Pakistan, the world's fourth biggest cotton producer, has also seen that commodity hit hard, with up to 2 million bales of destroyed, industry officials said, out of an expected crop of 14 million bales in the 2010/11 season. Pakistan, which produced about 12.7 million 170 kg bales last year, often has to turn to imports to feed its textile sector, which accounts for about 60 percent of its exports. The country imported about 2 million bales in the 2009/10 financial year that ended in June.
The country has suffered a loss of about Rs250 billion in the agricultural and livestock sectors and the flood recovery costs may run into billions of dollars, local experts and a UN spokesman said on Thursday. The Minister for Food and Agriculture, Nazar Mohammad Gondal, said: “It is difficult to give an exact figure, but I agree that the loss of agriculture and livestock runs into billions of rupees.” Over 100,000 cows, buffaloes, goats, sheep, horses, camels and donkeys have been lost and 3,000 fish farms and 2,000 poultry farms destroyed across the country. “According to an estimate, the loss of cotton crop is of about Rs155 billion,” Mr Saleem said. In Punjab alone, a cotton growing area of about one million acres had been affected and crops worth Rs86 billion destroyed, he said. “The whole agricultural belt that includes Jhang, Bhakkar, Rajanpur, Rahimyar Khan and Layyah has been inundated.” Sindh has lost standing crops worth Rs95 billion over 100,000 acres. Cotton and rice are the major crops destroyed by the floods. In Khyber Pakhtunkhwa, over 325,000 acres have been submerged and crops worth Rs29.6 billion destroyed. Mr Mughal said over one million tons of wheat stock kept in houses had been swept away.
“NDMA’s distribution of relief goods is not equitable and the province has received aid not commensurate with the losses it has suffered. The United Nations and other donor agencies say that 95 per cent of the damage has taken place in Khyber Pakhtunkhwa, while the NDMA is sending relief goods to areas where magnitude of devastation is comparatively small,” Mian Iftikhar told Dawn on Thursday.
The report is another blow to the BISP, as according to the government’s own survey 60 per cent beneficiaries of the programme’s cash transfers in 16 districts were not very poor. International donors have already objected to the distribution of billions of rupees through selection of people by elected politicians. During the last financial year ended June 30, the BISP Secretariat could only disburse Rs40 billion among the poor despite an allocation of Rs70 billion due to capacity constraints.
According to the IMF assessment, Pakistan’s dependence on getting Rs42 billion or $500 million external financing by floating a Euro Bond was risky, so the maximum sure-fire budget financing was only for 3.5 per cent deficit. The IMF was of the view that because of Greece debt crisis, international investors would be wary of investing in Pakistan’s bond.
The government has announced that during the current financial year, the gap between its income and expenditure would remain at Rs685 billion, or 4 per cent of the total size of the economy. It has estimated that it needs to borrow Rs186 billion from external sources and Rs499 billion from domestic sources to plug the gap. The deficit target too was pegged on the assumption that the provinces would generate upwards of Rs167 billion. The government also missed last year’s budget deficit target by a wide margin. The IMF concern was that after failing to get external financing, the government would resort to state bank borrowing which was inflationary in nature. The IMF conveyed to the authorities that their performance was not up to the mark and that they have to deliver on promises before a meeting of the Executive Board of the Fund for the approval of the next tranche. So far, Pakistan has received $8.7 billion in loans out of the agreed upon $11.3 billion. The Fund would closely monitor the receipts and expenditures for the months of July and August and the implementation plans for levying the reformed GST.
A top government official told The Express Tribune on Tuesday that the finance ministry has proposed Rs280 billion for the federal PSDP for 2010-11. The final figure for the federal PSDP for this fiscal year (2009- 10) is Rs300 billion compared to initial estimates of Rs446 billion. There is always a significant gap between the money allocated for development schemes and that actually spent.
The National Economic Council (NEC) approved a development budget of Rs663 billion for the financial year 2010-11 on Friday. The growth rate during the current fiscal would be 4.1 percent while growth rate target for the next financial year had been fixed at 4.5 percent, he indicated. He informed that the federal PSDP volume for the current year was projected at Rs300 billion but only Rs235 billion could be released. With an increase of 25 per cent, Rs280 billion had been allocated for federal budget for the next fiscal year, he added. Likewise the provincial PSDP budget was projected at Rs294 billion for the current financial year but only Rs245 billion could be released, he pointed out.
Hafeez Sheikh said that out of total Rs663 billion more than half of it, Rs373 billion, will be spent by the provinces. The provinces’ current fiscal year budget was Rs294 billion but they only got Rs245 billion, he added. The Public Sector Development Programme (PSDP) would get Rs280 billion while the Earthquake Reconstruction and Rehabilitation Authority (ERRA) would be given Rs10 billion during fiscal year 2011 out of the development budget, he added. For the current financial year the government had announced Rs646 billion for development but the actual expenditure would be Rs490 billion, showing a cut of almost one-fourth of the total allocations. Hafeez Sheikh said that the federal government allocated Rs446 billion for the current PSDP but due to scarcity of resources only Rs235 billion could be spent, showing a massive cut of almost half of the total allocation. For the coming financial year Rs280 billion have been allocated for PSDP, which is Rs166 billion less than this year’s development budget but still more than the actual amount spent this year. The government has allocated Rs136 billion for infrastructure sector, Rs134 billion for social sector and Rs10 billion for the production sector out of Rs280 billion PSDP budget. For the next financial year the education budget would be Rs5.2 billion, which is even less than the revised budget of the current financial year. Similarly, the Higher Education Commission (HEC) is expected to get Rs2.7 billion less than the current financial year as its budget has been fixed at Rs15.8 billion. The healthcare sector would get Rs18.2 billion, which is again less than the current fiscal year’s development budget.
According to the budget-in-brief document, the government has allocated Rs442.2 billion for defence, which is 16 per cent of the total federal budget. Foreign loans repayment, servicing of domestic debt and foreign debt will take up another Rs873 billion, amounting to almost one-third of the federal budget of Rs2.76 trillion. Servicing of the domestic debt has been allocated Rs621.8 billion, which is almost equal to the overall development budget of the next fiscal year. During this financial year the government spent Rs595 billion on servicing of the domestic debt. Interest on external debt is expected to cost the government Rs76.7 billion as compared to Rs70.7 billion on servicing of the external debt for this fiscal year. Repayments of foreign loans have been allocated Rs174.4 billion.
However, the allocation in PSDP 2010-11 for provinces will likely be enhanced to Rs320 billion, a major hike of 60 per cent in comparison to last year’s allocation of Rs200 billion.
Last year, the rates of sugar and flour were fixed at Rs47 and Rs30 a kilo, respectively, following intervention by the federal and Sindh governments. Sugar at present sells at Rs70-72 a kilo and flour at Rs36-38 per kg. The Sindh government, however, has launched a scheme under which a 10kg bag of flour is offered for Rs100, i.e. Rs20 per kg though only at especially set up stalls. Last year, a similar scheme offered flour for Rs10 per kg. Four millers have offered only Re1 per kg discount on their products at retail level in Ramazan.
Car sales have fallen 31.6 per cent in July as prices rose after the government increased the General Sales Tax (GST) to 17 per cent. Sales decreased to 9,796 units in July compared with the 14,320 units sold in June, according to data released by Pakistan Automotive Manufacturers Association (Pama) on Wednesday. The government in the federal budget increased GST to 17 per cent, a rise of one per cent. “The trend is the same every year,” commented Topline Securities analyst, Furqan Punjani. “Dealers do pre-buying in June ahead of the annual budget which tends to announce measures that increase the car prices,” said Punjani. This inflates the car sales figure in June and deflates the numbers in July, he pointed out. Pama data also revealed that 4,053 trucks and buses, 121,647 cars and 71,607 tractors were manufactured in the outgoing financial year that ended on June 30. During the last year, total car sales amounted to 123,957 units while 71,512 tractors and 4,277 trucks and buses were also sold. Manufacturing of motorcycles and three-wheelers stood at 736,861 units during previous financial year while sales in the same category amounted to 737,768 units.
Overseas Pakistanis sent home remittances worth $791.19 million in July, the first month of fiscal 2010-11, showing an increase of $46.34 million or 6.22 per cent over the same period of last year. In July 2009, remittances stood around $744.85 million. The inflow of remittances in July 2010 from Saudi Arabia, UAE, US, Gulf Cooperation Council (GCC) countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $194.94 million, $177.03 million, $143.87 million, $101.25 million, $85.57 million and $23.84 million respectively. Last year, the country had received the highest-ever amount of $8.906 billion in remittances compared with $7.811 billion received in FY09.
According to a map of the affected districts compiled by the United States Agency for International Development, the agricultural and industrial heartland of Punjab and Sindh has thus far been spared the worst of the flooding. While the impact of the flooding on Sindh has yet to be fully estimated, some analysts feel that reports of impending calamity overstate the potential damage. Production at most major oil and gas fields has either continued uninterrupted or been restored fully. Most private power plants, including Kot Addu Power Company’s plant, have managed to remain unaffected. While some publicly-owned plants have been affected, the impact of those has yet to be fully felt. Most of the major cotton-producing areas remain safe from the flooding, which is expected to inoculate the textile sector from the most severe of the impact from the flood. There has, however, been significant damage in several agricultural districts. As much as 1.5 million acres of agricultural land has been inundated by the flooding. This is likely to depress farmer incomes in the region and will likely have a spill-over effect on the rest of the economy. Nevertheless, most major highways are fully operational, which has led some observers to believe that food shortages should not become a major problem. Analysts expect the government to try to raise as much as Rs150 billion to deal with the crisis. This is likely to increase the budget deficit from the projected 4.1 per cent to closer to 6 per cent of GDP. While this is likely to constrain private sector borrowing even further than it already is – and may also impact inflation – it is also like to temporarily boost domestic demand even as private sector demand falls due to the economic afflictions of the flood victims. The cement sector in particular is expected to be boosted by any future government spending on infrastructure.
Lucky Cement Limited declared a lower-than-expected net profit of Rs3.1 billion, down 31 per cent on yearly basis. The profit has dropped solely because of lower prices of cement in both local and export markets during fiscal year 2010, said IGI Securities analyst Sana Abdullah.
Floods in Pakistan have destroyed about 500,000 tonnes of wheat, meaning a smaller surplus for the country this year, and also hit sugar and cotton supplies, agriculture officials said on Thursday. Flooding, which began two weeks ago on heavy rains, has also destroyed up to two million bales of cotton, industry officials said. Pakistan's output of refined sugar could also fall by 500,000 tonnes because of damage to the crop from the floods, a farmer association said. Pakistan, Asia's third-largest wheat producer, harvested 23.80 million tonnes of wheat in the 2009/10 crop.
According to PTA, Pakistan's leather exports from last few years are continuously decreasing. In 2008-09 the sector faced a sharp decline of 28 percent in leather goods export, while on the other hand Indian exports of the same commodity witnessed a 26 percent increase in the first six months of 2009. PTA Secretary General, Faheem Ahmed while talking to Business Recorder said that during fiscal year 2007-08, the country's export of leather goods stood at $1.15 billion, during 2008-09 at $943 million and during 2009-10 Pakistan's leather goods exports witnessed a further decline to $860 million. He said that the declining trend in the exports of leather products is alarming. These garments face stiff competition from Chinese and Indian products, he added. As per Federal Bureau of Statistics report, Pakistan's second biggest export-earning segment, leather and leather goods, witnessed an 18 percent fall during July-June 2009-10, as against the same period last year. During 2009-10 the country's leather exports went down by about 7.57 percent, leather garments exports declined by 12.53 percent, exports of leather gloves fell by 37 percent and exports of other leather-based goods slumped by about 31.60 percent.
The Finance Ministry is reportedly in conflict with the Ministry of Water and Power in seeking a concessional loan from the World Bank to keep the electricity tariff increases at a minimum for the low-income groups, sources close to the Secretary Economic Affairs Division told Business Recorder on Wednesday. The Finance Division, sources said, is of the view that the Ministry of Water and Power's proposal/request to the EAD to seek World Bank assistance to keep tariff increases at a minimum would not be in line with the GoP policy to eliminate subsidies.
The country witnessed a trade deficit of $1.451 billion in the first month (July) of current fiscal year against $1.171 billion in the same month of last year showing a surge of about 24 percent. Exports have shown about 22 percent (exact 21.83 percent) growth in July and reached $1.788 billion as compared to $1.4676 billion in the corresponding month of the previous financial year. However, imports depicted a growth of 22.7 percent to $3.2388 billion from $2.64 billion in July last year. Trade figures show exports have declined by 1.73 percent in July as compared to June 2009-10 when exports earned $1.8194 billion. Imports indicated 0.45 percent growth in July as compared to June. Trade deficit indicated 3.28 percent increase... The country's exports fetched $19.382 billion in 2009-10 as compared to $17.688 billion the year before, showing an increase of 9.58 percent despite an economic slowdown across the world. Sources said a number of measures are being proposed in the Trade Policy to encourage exporters who were deprived of announced incentives in Trade Policy 2009-10.
Car sales have fallen 31.6 per cent in July as prices rose after the government increased the General Sales Tax (GST) to 17 per cent. Sales decreased to 9,796 units in July compared with the 14,320 units sold in June, according to data released by Pakistan Automotive Manufacturers Association (Pama) on Wednesday. The government in the federal budget increased GST to 17 per cent, a rise of one per cent. “The trend is the same every year,” commented Topline Securities analyst, Furqan Punjani. “Dealers do pre-buying in June ahead of the annual budget which tends to announce measures that increase the car prices,” said Punjani. This inflates the car sales figure in June and deflates the numbers in July, he pointed out. Pama data also revealed that 4,053 trucks and buses, 121,647 cars and 71,607 tractors were manufactured in the outgoing financial year that ended on June 30. During the last year, total car sales amounted to 123,957 units while 71,512 tractors and 4,277 trucks and buses were also sold. Manufacturing of motorcycles and three-wheelers stood at 736,861 units during previous financial year while sales in the same category amounted to 737,768 units.
Overseas Pakistanis sent home remittances worth $791.19 million in July, the first month of fiscal 2010-11, showing an increase of $46.34 million or 6.22 per cent over the same period of last year. In July 2009, remittances stood around $744.85 million. The inflow of remittances in July 2010 from Saudi Arabia, UAE, US, Gulf Cooperation Council (GCC) countries (including Bahrain, Kuwait, Qatar and Oman), UK and EU countries amounted to $194.94 million, $177.03 million, $143.87 million, $101.25 million, $85.57 million and $23.84 million respectively. Last year, the country had received the highest-ever amount of $8.906 billion in remittances compared with $7.811 billion received in FY09.
According to a map of the affected districts compiled by the United States Agency for International Development, the agricultural and industrial heartland of Punjab and Sindh has thus far been spared the worst of the flooding. While the impact of the flooding on Sindh has yet to be fully estimated, some analysts feel that reports of impending calamity overstate the potential damage. Production at most major oil and gas fields has either continued uninterrupted or been restored fully. Most private power plants, including Kot Addu Power Company’s plant, have managed to remain unaffected. While some publicly-owned plants have been affected, the impact of those has yet to be fully felt. Most of the major cotton-producing areas remain safe from the flooding, which is expected to inoculate the textile sector from the most severe of the impact from the flood. There has, however, been significant damage in several agricultural districts. As much as 1.5 million acres of agricultural land has been inundated by the flooding. This is likely to depress farmer incomes in the region and will likely have a spill-over effect on the rest of the economy. Nevertheless, most major highways are fully operational, which has led some observers to believe that food shortages should not become a major problem. Analysts expect the government to try to raise as much as Rs150 billion to deal with the crisis. This is likely to increase the budget deficit from the projected 4.1 per cent to closer to 6 per cent of GDP. While this is likely to constrain private sector borrowing even further than it already is – and may also impact inflation – it is also like to temporarily boost domestic demand even as private sector demand falls due to the economic afflictions of the flood victims. The cement sector in particular is expected to be boosted by any future government spending on infrastructure.
Lucky Cement Limited declared a lower-than-expected net profit of Rs3.1 billion, down 31 per cent on yearly basis. The profit has dropped solely because of lower prices of cement in both local and export markets during fiscal year 2010, said IGI Securities analyst Sana Abdullah.
Floods in Pakistan have destroyed about 500,000 tonnes of wheat, meaning a smaller surplus for the country this year, and also hit sugar and cotton supplies, agriculture officials said on Thursday. Flooding, which began two weeks ago on heavy rains, has also destroyed up to two million bales of cotton, industry officials said. Pakistan's output of refined sugar could also fall by 500,000 tonnes because of damage to the crop from the floods, a farmer association said. Pakistan, Asia's third-largest wheat producer, harvested 23.80 million tonnes of wheat in the 2009/10 crop.
According to PTA, Pakistan's leather exports from last few years are continuously decreasing. In 2008-09 the sector faced a sharp decline of 28 percent in leather goods export, while on the other hand Indian exports of the same commodity witnessed a 26 percent increase in the first six months of 2009. PTA Secretary General, Faheem Ahmed while talking to Business Recorder said that during fiscal year 2007-08, the country's export of leather goods stood at $1.15 billion, during 2008-09 at $943 million and during 2009-10 Pakistan's leather goods exports witnessed a further decline to $860 million. He said that the declining trend in the exports of leather products is alarming. These garments face stiff competition from Chinese and Indian products, he added. As per Federal Bureau of Statistics report, Pakistan's second biggest export-earning segment, leather and leather goods, witnessed an 18 percent fall during July-June 2009-10, as against the same period last year. During 2009-10 the country's leather exports went down by about 7.57 percent, leather garments exports declined by 12.53 percent, exports of leather gloves fell by 37 percent and exports of other leather-based goods slumped by about 31.60 percent.
The Finance Ministry is reportedly in conflict with the Ministry of Water and Power in seeking a concessional loan from the World Bank to keep the electricity tariff increases at a minimum for the low-income groups, sources close to the Secretary Economic Affairs Division told Business Recorder on Wednesday. The Finance Division, sources said, is of the view that the Ministry of Water and Power's proposal/request to the EAD to seek World Bank assistance to keep tariff increases at a minimum would not be in line with the GoP policy to eliminate subsidies.
The country witnessed a trade deficit of $1.451 billion in the first month (July) of current fiscal year against $1.171 billion in the same month of last year showing a surge of about 24 percent. Exports have shown about 22 percent (exact 21.83 percent) growth in July and reached $1.788 billion as compared to $1.4676 billion in the corresponding month of the previous financial year. However, imports depicted a growth of 22.7 percent to $3.2388 billion from $2.64 billion in July last year. Trade figures show exports have declined by 1.73 percent in July as compared to June 2009-10 when exports earned $1.8194 billion. Imports indicated 0.45 percent growth in July as compared to June. Trade deficit indicated 3.28 percent increase... The country's exports fetched $19.382 billion in 2009-10 as compared to $17.688 billion the year before, showing an increase of 9.58 percent despite an economic slowdown across the world. Sources said a number of measures are being proposed in the Trade Policy to encourage exporters who were deprived of announced incentives in Trade Policy 2009-10.
Tuesday, August 10, 2010
In terms of public spending on education, Pakistan remains among the lowest as compared with the rest of South Asia and other low-income countries, it said. Islamabad spends only 1.6 percent of the GDP on education, while South Asian average spending remains around 2.2 percent of the GDP and other low-income countries spent 3.4 percent... Chronic child malnutrition is around 40 percent and high levels of out-of-pocket expenditures for health services hamper access of the poor to basic services, it said.
The PSDP allocation for Balochistan for this fiscal year stood at Rs42.5 billion. Prime Minister Yousuf Raza Gilani has allocated additional Rs3 billion for the development of the province, the sources said.
The profit of Pakistan Tobacco Company (PTC) plunged by 41 percent to Rs1.196 billion for the half-year ended on June 30 against Rs2.034 billion last year, primarily because of higher cost of production, a company statement said on Monday. The company announced an earning per share (EPS) of Rs4.68 for the half-year against Rs7.96 during the corresponding period last year.
India will produce a bumper crop of sugar and cotton in 2010/11 and part of the surplus is likely to be absorbed by Pakistan, where floods have ravaged both the crops in the main growing areas, industry experts said.
Pakistan’s share of $3.90 billion per annum is just one percent of the global garments trade of $361 billion and it stands at 12th position in garment and apparel exports,” Mulla quoted the data of the World Trade Organisation (WTO). He said Pakistan’s exports suffered because of the basic raw material, cotton and yarn exports in huge quantity. Bangladesh did not produce a single kilogram of raw cotton, but export readymade garments of $10.920 billion, which is three percent of the global share.“Bangladesh entered in the garments business in mid 90s and increased its exports due to better infrastructure, law and order situation, low rate of wages, efficient labour and government support, besides it enjoyed generalised system of preferences (GSP) plus regime being a lease developed country,” he said. The problems being faced by the Pakistani value-added sector included unavailability of yarn and proper infrastructure, shortage in utilities supply, inefficient labour, high labour cost, poor law and order situation and unannounced holidays, besides restricted access to foreign markets, he added.
A high level meeting, chaired by Governor Khyber-Pakhtunkhwa, Owais Ahmed Ghani Monday unanimously approved Rs 15 billion Fata Annual Development Programme (ADP) for year 2010-11. The meeting, held at Governor's House was attended by Fata Parliamentarians besides secretaries and directors of Fata Secretariat.
All Pakistan Textile Mills Association (Aptma) Punjab has welcomed the Sui Northern Gas Company Ltd (SNGPL) decision for revising gas holiday schedule for textile industry, curtailing it to two days from earlier proposed five days.
The PSM was in profit from July 2000 to June 2008 (8 years). The accumulated profit was Rs 9.40 billion, as per audited accounts for the year ending June 2008. The balance sheet for year 2008-09 showed Rs 29 billion profit and the total equity was wiped out in a matter of one year. Sources said that when Mueen Aftab Shaikh assumed charge of PSM on May 28, 2008, PSM had Rs 11 billion cash in banks, Rs 10 billion inventory of raw material, work in process and finished goods stock. He was sacked on August 18, 2009 by the Prime Minister on corruption charges, and FIA was asked to investigate the production of PSM, which dropped from 82 percent to 30 percent from June 2008 to August 2009 due to shortage of raw material. The financial liability by August 2009 was Rs 25 billion and inventory was almost exhausted. This implies that cash deprivation during the tenure of Mueen was Rs 40 billion.
The profit after tax of Hub Power Company (Hubco) has increased to Rs 5.556 billion in the financial year ended June 30, 2010 (FY10) as compared to Rs 3.780 billion earned the corresponding period on FY09. The company's earning per share increased to Rs 4.80 in the period under review against Rs 3.27 in the same period last year.
According to the WB Country Partnership Strategy, Pakistan's medium-term outlook hinges on a significant increase in tax revenues: by 2-3 percentage points of GDP by 2012/13. To meet this target, the authorities have committed comprehensive reforms in tax policy and administration. This includes quick implementation of a broad based value-added taxation (VAT) of goods and services, which the authorities plan to roll out in October 2010. However, the process is somewhat complicated as the Constitution assigns taxation of services to the provinces.
Many financial challenges lie ahead for the government. It is likely to face a swell in security-related expenditures that ballooned from Rs378 billion to Rs442 billion last fiscal year. Debt servicing is another area to be closely scrutinized as it too enlarged to Rs873 billion, up by Rs69 billion against the projected target. There is also uncertainty about getting foreign assistance of Rs186 billion this financial year. Figures for last fiscal year are hardly encouraging. Against the budget estimate of Rs377 billion, only Rs177 billion had been received from external resources, according to the SBP report. This also included around Rs93 billion provided by IMF as bridge financing for funds pledged by the friends of Pakistan. Collecting Rs1.667 trillion in federal tax revenue is a rather ambitious target in the existing environment. Federal Board of Revenue (FBR) has already indicated that the target is on the higher side by Rs70 billion to Rs100 billion... The redeeming factors during past fiscal year encompassed 2.0 per cent reduction in current account deficit owing to robust growth in remittances (more than $8.0 billion) and decline in trade deficit as exports surged. However, will these positive developments persist in the current financial year?... The financial market correctly interpreted an upward trend in inflation and did not enthusiastically participate in Pakistan Investment Bonds auction last month. The regime had to scrap bids for it. The government’s borrowing spree from the domestic market continues as reflected by the fact that it borrowed over Rs217 billion from the inter-bank market through T-bills during the first week of current fiscal year.
When I talked to her party’s economist Qaiser Bengali, who has also worked on the issue of interest rates and growth at Social Policy and Development Centre (SPDC), he said that the SBP decision to raise the interest rate to control the surging inflation was a right decision to check rising prices. He thinks that low interest rates are misused by the speculators for hoarding the commodities... Former State Bank Governor Dr. Ishrat Husain, who had pulled down interest rate from around 21 per cent to 12 per cent during the initial years of Musharraf era, also backed the recent SBP move to inch up the interest rates. Like a true professional he said that he could bring down the interest rate because inflation rate was hovering around 4-5 per cent... But the business community feels that every little bit counts in these bad times. While the big boys may swim out of the economic deluge, the small and medium entrepreneurs who are already facing serious economic crunch may sink. One sign of Small and Medium Enterprises (SMEs) drowning is that most of them have started defaulting on their loans to the banks. In turn the medium and small banks which had gone all out for the SMEs in better economic times - in the first half of this decade - are now in serious trouble.
Shortage of funds also remains a big hurdle in timely completion of dams. The government could release only 38 per cent of funds, allocated in two years, for 13 power projects. The government allocated Rs67.6 billion and Rs139.3 billion for these projects respectively during the last two fiscal years. Delay in building six other small dams in Khyber Pakhtoonkhwa, has not only let the flood wreak havoc, but the chance of storing water for future needs has also been missed. The delayed- projects, if completed on time this year, could have contributed in restricting floods in the area. These dams are: Palai Dam in Charsadda, Karak Dam and Lowaghar Dam in Karak, Dar Malik Dam in Kohat, Khyber Bara Dam in Haripur and Jabba Dam in Nowshera district.
The provincial governments had reservations about collection of VAT on services. The provinces wanted to collect the aforesaid tax on services themselves, under the new arrangement agreed between the federal and provincial governments. However, the centre is of the view that the provinces lack the required experience and expertise for the job, due to which it could be done in a much better manner by the Federal Board of Revenue (FBR). It is hoped that the matter would be amicably resolved between the federal and provincial governments soon. VAT was to be introduced by the government, at the time of the announcement of the federal budget, 2010-11. However, things did not go according to plan due to strong opposition from the trade and industry as well as the provincial governments. Now, the government is to introduce it this October by renaming it as reformed general sales tax (GST). Since the government is under strong pressure from the IMF to deliver on the issue, it seems to have no option but to go ahead with the introduction of the reformed GST.
The PSDP allocation for Balochistan for this fiscal year stood at Rs42.5 billion. Prime Minister Yousuf Raza Gilani has allocated additional Rs3 billion for the development of the province, the sources said.
The profit of Pakistan Tobacco Company (PTC) plunged by 41 percent to Rs1.196 billion for the half-year ended on June 30 against Rs2.034 billion last year, primarily because of higher cost of production, a company statement said on Monday. The company announced an earning per share (EPS) of Rs4.68 for the half-year against Rs7.96 during the corresponding period last year.
India will produce a bumper crop of sugar and cotton in 2010/11 and part of the surplus is likely to be absorbed by Pakistan, where floods have ravaged both the crops in the main growing areas, industry experts said.
Pakistan’s share of $3.90 billion per annum is just one percent of the global garments trade of $361 billion and it stands at 12th position in garment and apparel exports,” Mulla quoted the data of the World Trade Organisation (WTO). He said Pakistan’s exports suffered because of the basic raw material, cotton and yarn exports in huge quantity. Bangladesh did not produce a single kilogram of raw cotton, but export readymade garments of $10.920 billion, which is three percent of the global share.“Bangladesh entered in the garments business in mid 90s and increased its exports due to better infrastructure, law and order situation, low rate of wages, efficient labour and government support, besides it enjoyed generalised system of preferences (GSP) plus regime being a lease developed country,” he said. The problems being faced by the Pakistani value-added sector included unavailability of yarn and proper infrastructure, shortage in utilities supply, inefficient labour, high labour cost, poor law and order situation and unannounced holidays, besides restricted access to foreign markets, he added.
A high level meeting, chaired by Governor Khyber-Pakhtunkhwa, Owais Ahmed Ghani Monday unanimously approved Rs 15 billion Fata Annual Development Programme (ADP) for year 2010-11. The meeting, held at Governor's House was attended by Fata Parliamentarians besides secretaries and directors of Fata Secretariat.
All Pakistan Textile Mills Association (Aptma) Punjab has welcomed the Sui Northern Gas Company Ltd (SNGPL) decision for revising gas holiday schedule for textile industry, curtailing it to two days from earlier proposed five days.
The PSM was in profit from July 2000 to June 2008 (8 years). The accumulated profit was Rs 9.40 billion, as per audited accounts for the year ending June 2008. The balance sheet for year 2008-09 showed Rs 29 billion profit and the total equity was wiped out in a matter of one year. Sources said that when Mueen Aftab Shaikh assumed charge of PSM on May 28, 2008, PSM had Rs 11 billion cash in banks, Rs 10 billion inventory of raw material, work in process and finished goods stock. He was sacked on August 18, 2009 by the Prime Minister on corruption charges, and FIA was asked to investigate the production of PSM, which dropped from 82 percent to 30 percent from June 2008 to August 2009 due to shortage of raw material. The financial liability by August 2009 was Rs 25 billion and inventory was almost exhausted. This implies that cash deprivation during the tenure of Mueen was Rs 40 billion.
The profit after tax of Hub Power Company (Hubco) has increased to Rs 5.556 billion in the financial year ended June 30, 2010 (FY10) as compared to Rs 3.780 billion earned the corresponding period on FY09. The company's earning per share increased to Rs 4.80 in the period under review against Rs 3.27 in the same period last year.
According to the WB Country Partnership Strategy, Pakistan's medium-term outlook hinges on a significant increase in tax revenues: by 2-3 percentage points of GDP by 2012/13. To meet this target, the authorities have committed comprehensive reforms in tax policy and administration. This includes quick implementation of a broad based value-added taxation (VAT) of goods and services, which the authorities plan to roll out in October 2010. However, the process is somewhat complicated as the Constitution assigns taxation of services to the provinces.
Many financial challenges lie ahead for the government. It is likely to face a swell in security-related expenditures that ballooned from Rs378 billion to Rs442 billion last fiscal year. Debt servicing is another area to be closely scrutinized as it too enlarged to Rs873 billion, up by Rs69 billion against the projected target. There is also uncertainty about getting foreign assistance of Rs186 billion this financial year. Figures for last fiscal year are hardly encouraging. Against the budget estimate of Rs377 billion, only Rs177 billion had been received from external resources, according to the SBP report. This also included around Rs93 billion provided by IMF as bridge financing for funds pledged by the friends of Pakistan. Collecting Rs1.667 trillion in federal tax revenue is a rather ambitious target in the existing environment. Federal Board of Revenue (FBR) has already indicated that the target is on the higher side by Rs70 billion to Rs100 billion... The redeeming factors during past fiscal year encompassed 2.0 per cent reduction in current account deficit owing to robust growth in remittances (more than $8.0 billion) and decline in trade deficit as exports surged. However, will these positive developments persist in the current financial year?... The financial market correctly interpreted an upward trend in inflation and did not enthusiastically participate in Pakistan Investment Bonds auction last month. The regime had to scrap bids for it. The government’s borrowing spree from the domestic market continues as reflected by the fact that it borrowed over Rs217 billion from the inter-bank market through T-bills during the first week of current fiscal year.
When I talked to her party’s economist Qaiser Bengali, who has also worked on the issue of interest rates and growth at Social Policy and Development Centre (SPDC), he said that the SBP decision to raise the interest rate to control the surging inflation was a right decision to check rising prices. He thinks that low interest rates are misused by the speculators for hoarding the commodities... Former State Bank Governor Dr. Ishrat Husain, who had pulled down interest rate from around 21 per cent to 12 per cent during the initial years of Musharraf era, also backed the recent SBP move to inch up the interest rates. Like a true professional he said that he could bring down the interest rate because inflation rate was hovering around 4-5 per cent... But the business community feels that every little bit counts in these bad times. While the big boys may swim out of the economic deluge, the small and medium entrepreneurs who are already facing serious economic crunch may sink. One sign of Small and Medium Enterprises (SMEs) drowning is that most of them have started defaulting on their loans to the banks. In turn the medium and small banks which had gone all out for the SMEs in better economic times - in the first half of this decade - are now in serious trouble.
Shortage of funds also remains a big hurdle in timely completion of dams. The government could release only 38 per cent of funds, allocated in two years, for 13 power projects. The government allocated Rs67.6 billion and Rs139.3 billion for these projects respectively during the last two fiscal years. Delay in building six other small dams in Khyber Pakhtoonkhwa, has not only let the flood wreak havoc, but the chance of storing water for future needs has also been missed. The delayed- projects, if completed on time this year, could have contributed in restricting floods in the area. These dams are: Palai Dam in Charsadda, Karak Dam and Lowaghar Dam in Karak, Dar Malik Dam in Kohat, Khyber Bara Dam in Haripur and Jabba Dam in Nowshera district.
The provincial governments had reservations about collection of VAT on services. The provinces wanted to collect the aforesaid tax on services themselves, under the new arrangement agreed between the federal and provincial governments. However, the centre is of the view that the provinces lack the required experience and expertise for the job, due to which it could be done in a much better manner by the Federal Board of Revenue (FBR). It is hoped that the matter would be amicably resolved between the federal and provincial governments soon. VAT was to be introduced by the government, at the time of the announcement of the federal budget, 2010-11. However, things did not go according to plan due to strong opposition from the trade and industry as well as the provincial governments. Now, the government is to introduce it this October by renaming it as reformed general sales tax (GST). Since the government is under strong pressure from the IMF to deliver on the issue, it seems to have no option but to go ahead with the introduction of the reformed GST.
Saturday, August 7, 2010
Pakistan, Asia's third-largest wheat producer, harvested 23.80 million tonnes of wheat from the 2009/10 crop and, along with a carryover of 4.22 million tonnes, and has a stock of more than 28 million tonnes of wheat. Annual demand is around 23 million tonnes... Pakistan's poor storage capacity has been a factor in the decision to export excess wheat. Some 78,000 tonnes of the grain had been either destroyed or damaged in recent monsoon rains in Punjab
The conditions for food security are inadequate in 61 percent districts (80 out of 131districts ) of Pakistan. This is a sharp increase from 2003, when conditions for food security were inadequate in 45 percent districts (54 out of 120 districts) of Pakistan. In terms of population almost half of the population of Pakistan (48.6 percent) doesn't have access to sufficient food for active and healthy life at all times. The report comes up with substantial evidences that inter and intra provincial disparities exist in terms of food security. FATA has the highest percentage of food insecure population (67.7 percent) followed by Balochistan (61.2 percent), and Khyber Pakhtunkhwa (KPK) (56.2 percent). The lowest percentage of food insecure population (23.6 percent) is in Islamabad. Among the districts, Dera Bugti has the highest percentage of food insecure people (82.4 percent).
But the most dangerous of all is the degradation of land resources by water-logging and salinity. In Pakistan, a total of 5.88 million hectares of land is unproductive due to these two problems. Pakistan has one of the world's largest canal-based irrigation systems. Although the importance of this irrigation system cannot be denied but everything has its disadvantages too, and in this case it is water-logging and salinity.
It is tragic that in a country where billions of rupees are made on a daily basis in speculative transactions in real estate and shares, tax-to-GDP ratio is pathetically low. The Government seems least bothered to tax undocumented economy and benami transactions. The mighty sections of society are engaged in these transactions and FBR seems to have no will to tax them...Our tax-to-GDP ratio can rise to 20pc in one year if we tax speculative dealings in real estate. This will also help in promoting construction industry as prices of land will come down and bring black economy into the tax net... FBR is levying indirect taxes and not imposing progressive taxes -- thus favouring the rich and over-burdening the poor. Indirect taxes are collected from the people but not deposited in government treasury -- courtesy unholy alliance between tax machinery and business community.
Friday, August 6, 2010
The ones who could not turn up for work missed their wages while those who could not go home worked for hours on end filling in for their absent colleagues, he said. “I have learnt that there were some workers who could not go home after their shifts and so they worked in the factories for 50 to 55 hours in the last three days to deliver the shipment on time,” Ali said.
Pakistan would have collected Rs800 billion in additional revenues last year, if the tax-to-GDP ratio had been maintained at over 13 percent, which was achieved some years back, Federal Tax Ombudsman (FTO) Shoaib Suddle said on Thursday. “The amount equals to $9 billion is enough to maintain the fiscal position of the country,” he said at a seminar organised by Transparency International, Pakistan.
Despite increase in utility prices, wages and continuous rupee depreciation against the Japanese Yen and the US dollar the domestic auto assembling industry is moving ahead full throttle fuelled by rising demand, industry executive said. “The auto industry is leading the large-scale manufacturing (LSM) sector growth by continuously increasing capacity through investment and productivity to meet recovering market demand,” said Raza Ansari, Head of Marketing and Corporate Planning, Indus Motor Company.
Under a condition of the IMF, Pakistan was bound to levy Value Added Tax (VAT) from July but it failed and then announced a reformed GST from October by scrapping tax exemptions on goods and netting services. Technically, the IMF’s $11.3 billion bailout package for Pakistan has come to an end as the government failed to impose VAT. The reason was Sindh’s stance that GST collection on services was a provincial subject and it will not give up its right. Other three provinces have agreed to hand over their tax collection right to the Centre for a certain period due to administrative constraints. Nevertheless, the sources said, the Sindh government has shown some flexibility of late. It has offered to the Centre four main areas – financial services, construction, advertisement and franchises – mainly because these fall under the category of inter-provincial services.
This elegant design, excellent comfort and cutting edge technology however, will set you back by Rs. 7.5 million, making the car highly exclusive. When asked about the BMW’s potential market in Pakistan, Mazhar Khan told us that the manufacturer caters to a select group of 280 families in the country. He was optimistic about the car’s future and said that it is “in a class of its own”.
Anwar explained that at present only 14 per cent of Pakistan’s population is banked and Islamic institutions have an enormous potential to grow since many people in the country are opposed to the concept of interest.
One of the principal reasons for the low tax-to-GDP ratio of Pakistan, which stands at just 10 per cent, is the under-taxation of over 70 per cent of the economy, consisting of the agriculture and services sectors, which contribute less than 30 per cent to tax revenues. Any sensible tax reform, therefore, would attempt to spread the tax burden more evenly in the economy by reducing taxes on industry and raising them elsewhere in the economy. The objective of the move towards a broad-based VAT, now known as the reformed GST, is precisely to accomplish this. The reform will lead to a standard rate of 15 per cent, down from 17 per cent, and reduce the burden on existing taxpayers, primarily from manufacturing.
At this critical juncture, what was needed was for the SBP to step in and restore a measure of discipline. It needed to counter the excess demand pressures coming from the fiscal side. Given the state of the economy there was certainly no room to cut interest rates. The SBP policy rate was barely positive in “real” (inflation-adjusted) terms so one could argue that monetary policy was not tight enough to begin with. Of course, some will say that we should not be looking at present inflation but expected inflation to judge whether monetary policy is tight enough, should be tighter, or whether it needs to loosen. While that is technically correct, the path of expected inflation at this moment is highly uncertain. As noted above, the macroeconomic framework has been thrown off-track. The consolidated (federal and provincial) fiscal deficit for this year could be headed towards 6 per cent of GDP rather than the desirable four per cent of GDP because that four per cent figure assumed that the provinces would deliver a combined fiscal surplus of 1.5 per cent of GDP. This year’s inflation target of 9.5 per cent – disappointingly un-ambitious to begin with – was consistent with the four per cent deficit target. What might be the likely rate of inflation this year that would follow from a consolidated fiscal deficit out-turn of six per cent of GDP or more?
The SBP monetary policy announcement comes in the wake of the IMF delaying disbursement of its next tranche – due almost entirely to weaknesses on the fiscal side of things – and the money markets’ demand for a premium on long tenors in the failed PIB auction of mid-July. So now the money markets, the IMF and the State Bank are all saying the same thing: we don’t believe you will be able to raise the kind of revenues you have programmed into your budget.
profit reports
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http://www.brecorder.com/index.php?id=1088215&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1088217&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086294&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086018&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086020&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1088217&currPageNo=1&query=&search=&term=&supDate=
Pakistan would have collected Rs800 billion in additional revenues last year, if the tax-to-GDP ratio had been maintained at over 13 percent, which was achieved some years back, Federal Tax Ombudsman (FTO) Shoaib Suddle said on Thursday. “The amount equals to $9 billion is enough to maintain the fiscal position of the country,” he said at a seminar organised by Transparency International, Pakistan.
Despite increase in utility prices, wages and continuous rupee depreciation against the Japanese Yen and the US dollar the domestic auto assembling industry is moving ahead full throttle fuelled by rising demand, industry executive said. “The auto industry is leading the large-scale manufacturing (LSM) sector growth by continuously increasing capacity through investment and productivity to meet recovering market demand,” said Raza Ansari, Head of Marketing and Corporate Planning, Indus Motor Company.
Under a condition of the IMF, Pakistan was bound to levy Value Added Tax (VAT) from July but it failed and then announced a reformed GST from October by scrapping tax exemptions on goods and netting services. Technically, the IMF’s $11.3 billion bailout package for Pakistan has come to an end as the government failed to impose VAT. The reason was Sindh’s stance that GST collection on services was a provincial subject and it will not give up its right. Other three provinces have agreed to hand over their tax collection right to the Centre for a certain period due to administrative constraints. Nevertheless, the sources said, the Sindh government has shown some flexibility of late. It has offered to the Centre four main areas – financial services, construction, advertisement and franchises – mainly because these fall under the category of inter-provincial services.
This elegant design, excellent comfort and cutting edge technology however, will set you back by Rs. 7.5 million, making the car highly exclusive. When asked about the BMW’s potential market in Pakistan, Mazhar Khan told us that the manufacturer caters to a select group of 280 families in the country. He was optimistic about the car’s future and said that it is “in a class of its own”.
Anwar explained that at present only 14 per cent of Pakistan’s population is banked and Islamic institutions have an enormous potential to grow since many people in the country are opposed to the concept of interest.
One of the principal reasons for the low tax-to-GDP ratio of Pakistan, which stands at just 10 per cent, is the under-taxation of over 70 per cent of the economy, consisting of the agriculture and services sectors, which contribute less than 30 per cent to tax revenues. Any sensible tax reform, therefore, would attempt to spread the tax burden more evenly in the economy by reducing taxes on industry and raising them elsewhere in the economy. The objective of the move towards a broad-based VAT, now known as the reformed GST, is precisely to accomplish this. The reform will lead to a standard rate of 15 per cent, down from 17 per cent, and reduce the burden on existing taxpayers, primarily from manufacturing.
At this critical juncture, what was needed was for the SBP to step in and restore a measure of discipline. It needed to counter the excess demand pressures coming from the fiscal side. Given the state of the economy there was certainly no room to cut interest rates. The SBP policy rate was barely positive in “real” (inflation-adjusted) terms so one could argue that monetary policy was not tight enough to begin with. Of course, some will say that we should not be looking at present inflation but expected inflation to judge whether monetary policy is tight enough, should be tighter, or whether it needs to loosen. While that is technically correct, the path of expected inflation at this moment is highly uncertain. As noted above, the macroeconomic framework has been thrown off-track. The consolidated (federal and provincial) fiscal deficit for this year could be headed towards 6 per cent of GDP rather than the desirable four per cent of GDP because that four per cent figure assumed that the provinces would deliver a combined fiscal surplus of 1.5 per cent of GDP. This year’s inflation target of 9.5 per cent – disappointingly un-ambitious to begin with – was consistent with the four per cent deficit target. What might be the likely rate of inflation this year that would follow from a consolidated fiscal deficit out-turn of six per cent of GDP or more?
The SBP monetary policy announcement comes in the wake of the IMF delaying disbursement of its next tranche – due almost entirely to weaknesses on the fiscal side of things – and the money markets’ demand for a premium on long tenors in the failed PIB auction of mid-July. So now the money markets, the IMF and the State Bank are all saying the same thing: we don’t believe you will be able to raise the kind of revenues you have programmed into your budget.
profit reports
http://www.brecorder.com/index.php?id=1088187&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1088215&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1088217&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086294&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086018&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1086020&currPageNo=1&query=&search=&term=&supDate=
http://www.brecorder.com/index.php?id=1088217&currPageNo=1&query=&search=&term=&supDate=
Thursday, August 5, 2010
He said that Pakistan has added almost $12 billion to external debt during the last two years, as against $2.6 billion in the previous seven years, which shows our reckless approach in piling up external liabilities. He said with the increase in external debt, the debt servicing liability is mounting leaving hardly anything to spend on improving the country's physical and human infrastructure and reducing poverty.
Pakistan's total cultivated area is 52.4 million acres where wheat (22 million acres), cotton (7.4 million acres), rice (6.9 million acres) and sugarcane (2.6 million acres) are the major crops and contribute 7 percent of GDP. According to reports, so far 0.1 million acres of cotton crop have already been wiped out in KP and Punjab and flooding is expected to now enter Sindh as well. "While we await release of official numbers by the Ministry of Agriculture, our theoretical calculations are based on per acre losses where we estimate that loss of crop on every 0.1 million acres would lower annual production of cotton by 1.4 percent, sugarcane by 3.8 percent and rice by 1.5 percent," he said.
The PPP-led government increased power tariff by 63.6 percent during last two and a half years. This was stated by sources in the Ministry of Water and Power while presenting an alarming picture before the Ministry of Petroleum and Natural Resources to compel it to make the entire gas available at Kunar/Pasakhi gas field for power generation... "Natural gas from Kunar/Pasakhi gas field has been identified as a major intervention to make power tariff more affordable," the Ministry of Water and Power said, adding that, at present, electricity cost on fuel oil stands at Rs 11.37 per Kwh, diesel at Rs 15.88 per Kwh, and natural gas at Rs 2.86 per Kwh.
Wheat production in Pakistan was recorded at 23.5 million tons in the March harvest. Historically wheat consumption in the country has hovered around 18 to 20 million tons for the year. When wheat was procured from farmers, price was set at Rs950 per maund. Add to that the carrying cost of storage, interest payments and transportation costs, thats another 20 percent. At the time, the price in Pakistan was non-competitive in the international market but with the recent spike, wheat held up in make shift storage is ripe to be exported.
Due to the poor performance of major crops, Pakistan missed agriculture growth target, which grew by 2 percent, against the set target of 3.8 percent, according to Economic Survey 2009-10. The Survey said that the sector showed positive growth only because of 4.1 percent growth in livestock sector, which contributed 53.2 percent to agricultural value-added-more than the combined contribution of major and minor crops (43.9 percent)... Rice was sown at 2,883,000 hectares, 2.7 percent less than last year's area under the crop. Its production was 6,883,000 tons, which was 1.0 percent less than last year. Wheat was cultivated on an area of 9,042,000 hectares, showing a decrease of 0.04 percent over last year's area of 9,046,000 ectares, but its estimated production was 23.864 million tons against target of 25 million tons, which was 0.7 percent less than last year.
The State Bank of Pakistan (SBP) has said that the economic reform programme, initiated under the International Monetary Fund’s (IMF) standby arrangement, should continue even after the country ends its dependency on the global donor agency.
In the biggest stock market of the country, which made headlines by becoming the worldÃs best performing bourse in 2002 and 2008, merely 135,000 people, or less than 0.01 percent of the population, actively invest in shares, a fund manager revealed on Wednesday.
The devastation caused by the recent floods in Pakistan has compounded the infrastructure deficiencies of the country as the government added only 580km roads during two years (2008/10) against 5,052km roads in 2006/07 alone.
Pakistan's total cultivated area is 52.4 million acres where wheat (22 million acres), cotton (7.4 million acres), rice (6.9 million acres) and sugarcane (2.6 million acres) are the major crops and contribute 7 percent of GDP. According to reports, so far 0.1 million acres of cotton crop have already been wiped out in KP and Punjab and flooding is expected to now enter Sindh as well. "While we await release of official numbers by the Ministry of Agriculture, our theoretical calculations are based on per acre losses where we estimate that loss of crop on every 0.1 million acres would lower annual production of cotton by 1.4 percent, sugarcane by 3.8 percent and rice by 1.5 percent," he said.
The PPP-led government increased power tariff by 63.6 percent during last two and a half years. This was stated by sources in the Ministry of Water and Power while presenting an alarming picture before the Ministry of Petroleum and Natural Resources to compel it to make the entire gas available at Kunar/Pasakhi gas field for power generation... "Natural gas from Kunar/Pasakhi gas field has been identified as a major intervention to make power tariff more affordable," the Ministry of Water and Power said, adding that, at present, electricity cost on fuel oil stands at Rs 11.37 per Kwh, diesel at Rs 15.88 per Kwh, and natural gas at Rs 2.86 per Kwh.
Wheat production in Pakistan was recorded at 23.5 million tons in the March harvest. Historically wheat consumption in the country has hovered around 18 to 20 million tons for the year. When wheat was procured from farmers, price was set at Rs950 per maund. Add to that the carrying cost of storage, interest payments and transportation costs, thats another 20 percent. At the time, the price in Pakistan was non-competitive in the international market but with the recent spike, wheat held up in make shift storage is ripe to be exported.
Due to the poor performance of major crops, Pakistan missed agriculture growth target, which grew by 2 percent, against the set target of 3.8 percent, according to Economic Survey 2009-10. The Survey said that the sector showed positive growth only because of 4.1 percent growth in livestock sector, which contributed 53.2 percent to agricultural value-added-more than the combined contribution of major and minor crops (43.9 percent)... Rice was sown at 2,883,000 hectares, 2.7 percent less than last year's area under the crop. Its production was 6,883,000 tons, which was 1.0 percent less than last year. Wheat was cultivated on an area of 9,042,000 hectares, showing a decrease of 0.04 percent over last year's area of 9,046,000 ectares, but its estimated production was 23.864 million tons against target of 25 million tons, which was 0.7 percent less than last year.
The State Bank of Pakistan (SBP) has said that the economic reform programme, initiated under the International Monetary Fund’s (IMF) standby arrangement, should continue even after the country ends its dependency on the global donor agency.
In the biggest stock market of the country, which made headlines by becoming the worldÃs best performing bourse in 2002 and 2008, merely 135,000 people, or less than 0.01 percent of the population, actively invest in shares, a fund manager revealed on Wednesday.
The devastation caused by the recent floods in Pakistan has compounded the infrastructure deficiencies of the country as the government added only 580km roads during two years (2008/10) against 5,052km roads in 2006/07 alone.
Wednesday, August 4, 2010
Acting chairman of Site Association of Industry (SAI) Ahsan Arshad Ayub said that 60-70 per cent industries out of 3,500 units were remained completely closed. He said about 80 per cent were export-related industries whose shipments failed to reach the ports. Around 600,000-700,000 people work in the Site industrial area in which 80 per cent are on daily wages. Chairman F.B. Area Association of Trade and Industry (FBATI) Shahid Ismail said that 80-90 per cent of the industries were shut as labour could not turn up for want of public transport. The F.B. Area has over 2,000 units in which 150,000-200,000 people are working on daily wages, contract and permanent basis.
A National Assembly panel on Tuesday unanimously approved a bill aimed at capping the federal government’s borrowing from the central bank to 10 per cent of total revenues and kicking the finance ministry out of monetary policy business.
The International Monetary Fund (IMF) will meet a Pakistani delegation in Washington on August 5 for a review of the domestic economy. The meeting is expected to pave the way for release of over $1.8 billion from the IMF, the second last tranche of the $11.4 billion bailout package. Sources pointed out that talks for the fifth review would be quite delicate as the government had not only breached the budget deficit target and central bank borrowing ceilings but was also unable to demonstrate any concrete development on the reformed General Sales Tax (GST) system aimed at abolishing all tax exemptions extended on political grounds. The government has set October 1 as the new deadline to overhaul the sales tax regime after failing to implement Value Added Tax on July 1.
Under the IMF programme which was agreed to in November 2008 for a two-year emergency package amounting to a total of $10.66 billion, Pakistan agreed to zero net borrowing from the State Bank of Pakistan (SBP). According to central bank data released on Friday, the government overshot that target by Rs41.93 billion ($490 million) in the 2009/10 fiscal year, a cause for concern among economists and analysts in Pakistan.
Chairperson of the national assembly’s standing committee on finance, Fauzia Wahab of the PPP, said the central bank is not accountable to anybody and has framed such a monetary policy which does not reflect ground realities and retards economic growth. “New enterprises are not coming up because of the tight monetary policy,” said Wahab. Acting Governor of the SBP, Yaseen Anwar, said inflation is a persistent phenomenon. “If interest rates go down the exchange rate stability will be hurt and the rupee will depreciate against the dollar to unimaginable levels.”
“My experience shows that about 80 per cent of the industries do not meet the minimum wage criterion,” said Karamat Ali, executive director of the Pakistan Institute of Labour Education and Research (Piler).
The country's domestic debts surged by Rs 792 billion to Rs 4.6 trillion in fiscal year 2009-10 due to significant rise in fiscal deficit, revenue shortfall, and slow-down in privatisation process. The State Bank said that during the last fiscal year the government had raised its reliance on domestic debts to meet its financial requirements, and the massive borrowing had put the domestic debt at all-time high level by the end of June this year.
The increase in the deficit in 2009/10, sources said, would have been considerably higher if the government had not slashed development budget by over Rs 180 billion and saved about Rs 24 billion from the Rs 70 billion allocated for Benazir Income Support Program (BISP). Analysts say that given the scale of the destruction wrought by the floods in the country it is unlikely that the budget deficit for the ongoing fiscal year would be less than 8 percent and not even close to the 4 percent target announced by Dr Hafeez Sheikh during his budget speech.
Irfan Qaiser Sheikh also urged the State Bank of Pakistan to immediately announce cut in interest rate, which is a prerequisite to enhance productivity. He said that at the time when business community was expecting some relief, SBP had increased the interest rates and dashed the hopes of the business community, which was expecting a remarkable cut in the existing rate of mark-up.
The government has set a production target of 14 million bales, to be cultivated on 3.2 million hectares for the year 2010-11. This target was set after the introduction of eight kinds of certified seeds of cotton. "According to initial estimates, the country would hardly achieve 11 million bales mark, because of the monsoon rains and floods that have badly hit the crop in the major cotton producing provinces - Punjab and Sindh," sources maintained. Industry sources claimed, the value-added textile industry of the country might also face a difficult situation in the current fiscal year as the price of cotton would go up due to its low production. "Total consumption of the local industry is about 15.5 million bales of cotton against the targeted production of 14 billion bales, showing a shortfall of about one million bales. However after the flash floods, the shortfall might well be around 4.5 million bales. The country would need to import 4.5 million bales to meet the domestic requirements," sources said... The country also failed to increase the exports of textile during 2009-10, which stood at $10.5 billion, they also said. Sources said the government has failed to achieve the cotton-sowing target, and except Punjab, all the remaining three provinces have missed the sowing targets.
The high turnover, he explained, is a result of the high prices of yarn and because the textile business is one of high-volume and of low profit, he added. Gandhi said a yarn trader, paying a three and a half percent withholding tax, means that he must be making at least a ten percent profit which is almost impossible in case of textile business. At average, normal profit margin of a yarn trader is only about one or two percent.
The Chairman All Pakistan Bedsheets & Upholstery Manufacturers Association (APBUMA), M. Anees Khawaja has showed deep concerns over the increase in Policy rate by the SBP and said the textile industry is already under extreme pressure due to consistent energy shortage. He said that industrialists were repeatedly demanding to cut down the interest rate to single digit in order to save injured country's economy, but policy makers at SBP were ignorant of ground realities has further tightened the monetary policy, thus took the decision to increase the policy rate. Now both trade and industry are facing multiple challenges, and in dire need of some financial package.
However, this malaise of non-payment is not limited to the generating companies and PSO, but extends to all those engaged in the power sector giving rise to what is referred to as the circular debt: from customers, specifically the provincial and federal governments who routinely default on their monthly bills, to utility companies that default on payment to their supplier, to the oil marketing companies who default on crude oil payments. This circular debt has disabled the country's generation system from operating at full capacity, leading to massive load shedding for over two years now. The International Monetary Fund (IMF), as well as the federal government, has been fully cognisant of the need to eliminate the circular debt and its elimination was one of the conditions of the Stand-By Arrangement (SBA), as noted in the first Letter of Intent, submitted by the government to the Fund on November 20, 2008.
Inflationary pressures, according to the SBP, are not likely to abate due to further upward adjustments in electricity prices, the increase in GST and a revision in government employees' wages to compensate for the current high inflation. Rising domestic demand, relative to weak productive capacity, also suggests that inflation was likely to persist in FY11. Incorporating all these factors, inflation was projected to remain between 11 and 12 percent during the current fiscal year, or almost at the same level witnessed in the outgoing year. This estimate compares very unfavourably with the inflation target of 9.5 percent announced by the government for FY11...However, it needs to be mentioned that the SBP had to make a choice between containing inflation and inciting the growth impulses in the economy and it seems to have opted for the former due to a peculiar situation prevailing in the country that calls for the suppression of inflation to alleviate the suffering of the ordinary people and block the chances of a tumult in the country, while the objective of growth could take a back seat for the present.
A National Assembly panel on Tuesday unanimously approved a bill aimed at capping the federal government’s borrowing from the central bank to 10 per cent of total revenues and kicking the finance ministry out of monetary policy business.
The International Monetary Fund (IMF) will meet a Pakistani delegation in Washington on August 5 for a review of the domestic economy. The meeting is expected to pave the way for release of over $1.8 billion from the IMF, the second last tranche of the $11.4 billion bailout package. Sources pointed out that talks for the fifth review would be quite delicate as the government had not only breached the budget deficit target and central bank borrowing ceilings but was also unable to demonstrate any concrete development on the reformed General Sales Tax (GST) system aimed at abolishing all tax exemptions extended on political grounds. The government has set October 1 as the new deadline to overhaul the sales tax regime after failing to implement Value Added Tax on July 1.
Under the IMF programme which was agreed to in November 2008 for a two-year emergency package amounting to a total of $10.66 billion, Pakistan agreed to zero net borrowing from the State Bank of Pakistan (SBP). According to central bank data released on Friday, the government overshot that target by Rs41.93 billion ($490 million) in the 2009/10 fiscal year, a cause for concern among economists and analysts in Pakistan.
Chairperson of the national assembly’s standing committee on finance, Fauzia Wahab of the PPP, said the central bank is not accountable to anybody and has framed such a monetary policy which does not reflect ground realities and retards economic growth. “New enterprises are not coming up because of the tight monetary policy,” said Wahab. Acting Governor of the SBP, Yaseen Anwar, said inflation is a persistent phenomenon. “If interest rates go down the exchange rate stability will be hurt and the rupee will depreciate against the dollar to unimaginable levels.”
“My experience shows that about 80 per cent of the industries do not meet the minimum wage criterion,” said Karamat Ali, executive director of the Pakistan Institute of Labour Education and Research (Piler).
The country's domestic debts surged by Rs 792 billion to Rs 4.6 trillion in fiscal year 2009-10 due to significant rise in fiscal deficit, revenue shortfall, and slow-down in privatisation process. The State Bank said that during the last fiscal year the government had raised its reliance on domestic debts to meet its financial requirements, and the massive borrowing had put the domestic debt at all-time high level by the end of June this year.
The increase in the deficit in 2009/10, sources said, would have been considerably higher if the government had not slashed development budget by over Rs 180 billion and saved about Rs 24 billion from the Rs 70 billion allocated for Benazir Income Support Program (BISP). Analysts say that given the scale of the destruction wrought by the floods in the country it is unlikely that the budget deficit for the ongoing fiscal year would be less than 8 percent and not even close to the 4 percent target announced by Dr Hafeez Sheikh during his budget speech.
Irfan Qaiser Sheikh also urged the State Bank of Pakistan to immediately announce cut in interest rate, which is a prerequisite to enhance productivity. He said that at the time when business community was expecting some relief, SBP had increased the interest rates and dashed the hopes of the business community, which was expecting a remarkable cut in the existing rate of mark-up.
The government has set a production target of 14 million bales, to be cultivated on 3.2 million hectares for the year 2010-11. This target was set after the introduction of eight kinds of certified seeds of cotton. "According to initial estimates, the country would hardly achieve 11 million bales mark, because of the monsoon rains and floods that have badly hit the crop in the major cotton producing provinces - Punjab and Sindh," sources maintained. Industry sources claimed, the value-added textile industry of the country might also face a difficult situation in the current fiscal year as the price of cotton would go up due to its low production. "Total consumption of the local industry is about 15.5 million bales of cotton against the targeted production of 14 billion bales, showing a shortfall of about one million bales. However after the flash floods, the shortfall might well be around 4.5 million bales. The country would need to import 4.5 million bales to meet the domestic requirements," sources said... The country also failed to increase the exports of textile during 2009-10, which stood at $10.5 billion, they also said. Sources said the government has failed to achieve the cotton-sowing target, and except Punjab, all the remaining three provinces have missed the sowing targets.
The high turnover, he explained, is a result of the high prices of yarn and because the textile business is one of high-volume and of low profit, he added. Gandhi said a yarn trader, paying a three and a half percent withholding tax, means that he must be making at least a ten percent profit which is almost impossible in case of textile business. At average, normal profit margin of a yarn trader is only about one or two percent.
The Chairman All Pakistan Bedsheets & Upholstery Manufacturers Association (APBUMA), M. Anees Khawaja has showed deep concerns over the increase in Policy rate by the SBP and said the textile industry is already under extreme pressure due to consistent energy shortage. He said that industrialists were repeatedly demanding to cut down the interest rate to single digit in order to save injured country's economy, but policy makers at SBP were ignorant of ground realities has further tightened the monetary policy, thus took the decision to increase the policy rate. Now both trade and industry are facing multiple challenges, and in dire need of some financial package.
However, this malaise of non-payment is not limited to the generating companies and PSO, but extends to all those engaged in the power sector giving rise to what is referred to as the circular debt: from customers, specifically the provincial and federal governments who routinely default on their monthly bills, to utility companies that default on payment to their supplier, to the oil marketing companies who default on crude oil payments. This circular debt has disabled the country's generation system from operating at full capacity, leading to massive load shedding for over two years now. The International Monetary Fund (IMF), as well as the federal government, has been fully cognisant of the need to eliminate the circular debt and its elimination was one of the conditions of the Stand-By Arrangement (SBA), as noted in the first Letter of Intent, submitted by the government to the Fund on November 20, 2008.
Inflationary pressures, according to the SBP, are not likely to abate due to further upward adjustments in electricity prices, the increase in GST and a revision in government employees' wages to compensate for the current high inflation. Rising domestic demand, relative to weak productive capacity, also suggests that inflation was likely to persist in FY11. Incorporating all these factors, inflation was projected to remain between 11 and 12 percent during the current fiscal year, or almost at the same level witnessed in the outgoing year. This estimate compares very unfavourably with the inflation target of 9.5 percent announced by the government for FY11...However, it needs to be mentioned that the SBP had to make a choice between containing inflation and inciting the growth impulses in the economy and it seems to have opted for the former due to a peculiar situation prevailing in the country that calls for the suppression of inflation to alleviate the suffering of the ordinary people and block the chances of a tumult in the country, while the objective of growth could take a back seat for the present.
Tuesday, August 3, 2010
“In such a situation where the government is a desperate borrower the high-ups of domestic banks will happily provide funds to the government with 100 percent guarantee to get back the loan amount,” the official said. The banks had started giving cold shoulder to the government, which is evident from the thin participation in the last T-bill auction. “There was no other option before the SBP but to jack up the discount rate to lure the banks to provide financing to the government throughout the financial year 2010/11,” said the official. This rate would continue to rise in case of further slippages on fiscal side in months ahead.To bridge the financing gap of fiscal deficit, the government possessed option of getting investment into National Saving Schemes (NSS) and the government can generate Rs270 to 300 billion through this venue, the official said.
“Usually, the textile mills operate 365 days a year, but due to the rationing system they would be deprived of gas for at least 70 days a year, causing a loss of billions of rupees to the mill-owners, said Ejaz Gohar, Chairman, All Pakistan Textile Mills Association (Punjab Zone).
Munir criticised the existing banking policy for concentrating on profits instead of facilitating industrialisation. “Banks are not providing finance to industries, especially the Small & Medium Enterprises, but to the easy earning sources.” The high interest rate regime in the country forced many industries out of business and turned several into sick units, he added. “Government should revise interest rate regime downward to make industrialisation viable,” he added.
The manufacturing sector registered a 4.17 per cent growth by the end of last fiscal year compared to a contraction of 8.2 per cent in FY08-09. This came about despite a number of severe constraints faced by the economy, such as power outages, high discount rate and inflation... The other point of concern is the decrease in share of manufacturing in new fixed investment. It declined sharply from 22.0 per cent in 2005 to 16.2 per cent in 2010. The contributory factors were deteriorating law and order situation, inflation, high discount rate and government borrowing crowding out private sector... In case any such message is conveyed to the market on June 30th by either increasing the discount rate or keeping it unchanged, it would negatively impact the prospects of investment in the manufacturing sector. FDI during last fiscal year stood around $2.0 billion, slightly higher than the previous year but most of it was invested in sectors other than manufacturing.
The electricity tariff has been increased by more than 70 per cent since March 2009, translating into over Rs200 billion, the federal government has taken over Rs301 billion debt and parked it in the newly-created Power Holding Company Limited for recovery from tax payers and paid about Rs71 billion to Pepco. A senior government official said the financial gap stood at Rs179.4 billion on June 30. According to Pepco, the major reason for the increase in circular debt is the non-payment of electricity bills by the Karachi Electric Supply Company and provincial governments, particularly of Sindh and Khyber Pakhtunkhwa.
“Usually, the textile mills operate 365 days a year, but due to the rationing system they would be deprived of gas for at least 70 days a year, causing a loss of billions of rupees to the mill-owners, said Ejaz Gohar, Chairman, All Pakistan Textile Mills Association (Punjab Zone).
Munir criticised the existing banking policy for concentrating on profits instead of facilitating industrialisation. “Banks are not providing finance to industries, especially the Small & Medium Enterprises, but to the easy earning sources.” The high interest rate regime in the country forced many industries out of business and turned several into sick units, he added. “Government should revise interest rate regime downward to make industrialisation viable,” he added.
The manufacturing sector registered a 4.17 per cent growth by the end of last fiscal year compared to a contraction of 8.2 per cent in FY08-09. This came about despite a number of severe constraints faced by the economy, such as power outages, high discount rate and inflation... The other point of concern is the decrease in share of manufacturing in new fixed investment. It declined sharply from 22.0 per cent in 2005 to 16.2 per cent in 2010. The contributory factors were deteriorating law and order situation, inflation, high discount rate and government borrowing crowding out private sector... In case any such message is conveyed to the market on June 30th by either increasing the discount rate or keeping it unchanged, it would negatively impact the prospects of investment in the manufacturing sector. FDI during last fiscal year stood around $2.0 billion, slightly higher than the previous year but most of it was invested in sectors other than manufacturing.
The electricity tariff has been increased by more than 70 per cent since March 2009, translating into over Rs200 billion, the federal government has taken over Rs301 billion debt and parked it in the newly-created Power Holding Company Limited for recovery from tax payers and paid about Rs71 billion to Pepco. A senior government official said the financial gap stood at Rs179.4 billion on June 30. According to Pepco, the major reason for the increase in circular debt is the non-payment of electricity bills by the Karachi Electric Supply Company and provincial governments, particularly of Sindh and Khyber Pakhtunkhwa.
Sunday, August 1, 2010
The broad money expanded at a rate of 12.46 per cent in FY10 against 9.56 per cent in FY09. The SBP said the total investment as a percentage of GDP had declined for three consecutive years, falling to 16.6 per cent in FY10. However, it said that national saving had improved because of an increase in workers’ remittances by a 0.5 percentage point to 13.8 per cent of GDP in FY10.
The debt, the sources said, stood at around Rs115 billion, of which about Rs100 billion pertained to the provincial governments. If this amount was cleared, the requirement for tariff increase would come down to about 24 per cent. The official said that provincial governments had given an undertaking to the prime minister that they would curtail their non-salary expenditures this year “in the interest of national cause” in order to provide a saving of about Rs166 billion as envisaged under the federal budget. However, the federal government would also have to reduce its current expenditure, including security-related spending, and find some other avenues for savings.
Inflation averaged 11.7 percent in the 2009/10 fiscal year ending in June, 2.7 percentage points higher than the central bank's target and Anwar said current trends and expected developments indicated that inflation risk would continue through the 2010/11 fiscal year. This is due to a rise in electricity prices, an increase in the general sales tax and a revision in government employees’ wages. Anwar said Pakistan missed its fiscal deficit target of 5.1 per cent for 2009/10 and it could be higher than six per cent. Under an IMF programme agreed in November 2008 for a two-year emergency package totalling $10.66 billion, Pakistan's government also agreed to zero net borrowing from the state bank. According to official data, the government overshot that target by 41.93 billion rupees ($490 million) in 2009/10, a cause for concern among economists and analysts. “Clearly, such developments are inconsistent with the objectives of macroeconomic stability,” Anwar said, adding that a deficit target of 4 percent of GDP for the 2010/11 fiscal year already seems challenging. The deficit could exceed 5.0 percent of GDP, he said. The central bank also stressed the need to “urgently” increase the tax-to GDP ratio and boost revenue for sustainable economic growth.
The crux of the finance ministry’s presentation was that the new NFC had created a big problem and robbed the provinces of incentives for additional revenue mobilisation. “When they get additional resources from the centre without any effort, they need not take unpopular decisions in their own constituencies to raise new taxes,” a federal government official said, adding that the provinces had not fulfilled commitments made under the NFC award to impose taxes on real estate and agriculture. The provinces have also been reminded that transfer of additional resources to them under the NFC award is linked to the transfer of responsibilities under the 18th Amendment. Therefore, they would have to foot the bill for federal public sector development programmes at the provincial level or even at the district level.
Upward revision in the prices of electricity, gas and POL products has already affected the business and industry. Maqbool said the government should promote a business friendly environment by reducing utility tariffs and interest rate.
The debt, the sources said, stood at around Rs115 billion, of which about Rs100 billion pertained to the provincial governments. If this amount was cleared, the requirement for tariff increase would come down to about 24 per cent. The official said that provincial governments had given an undertaking to the prime minister that they would curtail their non-salary expenditures this year “in the interest of national cause” in order to provide a saving of about Rs166 billion as envisaged under the federal budget. However, the federal government would also have to reduce its current expenditure, including security-related spending, and find some other avenues for savings.
Inflation averaged 11.7 percent in the 2009/10 fiscal year ending in June, 2.7 percentage points higher than the central bank's target and Anwar said current trends and expected developments indicated that inflation risk would continue through the 2010/11 fiscal year. This is due to a rise in electricity prices, an increase in the general sales tax and a revision in government employees’ wages. Anwar said Pakistan missed its fiscal deficit target of 5.1 per cent for 2009/10 and it could be higher than six per cent. Under an IMF programme agreed in November 2008 for a two-year emergency package totalling $10.66 billion, Pakistan's government also agreed to zero net borrowing from the state bank. According to official data, the government overshot that target by 41.93 billion rupees ($490 million) in 2009/10, a cause for concern among economists and analysts. “Clearly, such developments are inconsistent with the objectives of macroeconomic stability,” Anwar said, adding that a deficit target of 4 percent of GDP for the 2010/11 fiscal year already seems challenging. The deficit could exceed 5.0 percent of GDP, he said. The central bank also stressed the need to “urgently” increase the tax-to GDP ratio and boost revenue for sustainable economic growth.
The crux of the finance ministry’s presentation was that the new NFC had created a big problem and robbed the provinces of incentives for additional revenue mobilisation. “When they get additional resources from the centre without any effort, they need not take unpopular decisions in their own constituencies to raise new taxes,” a federal government official said, adding that the provinces had not fulfilled commitments made under the NFC award to impose taxes on real estate and agriculture. The provinces have also been reminded that transfer of additional resources to them under the NFC award is linked to the transfer of responsibilities under the 18th Amendment. Therefore, they would have to foot the bill for federal public sector development programmes at the provincial level or even at the district level.
Upward revision in the prices of electricity, gas and POL products has already affected the business and industry. Maqbool said the government should promote a business friendly environment by reducing utility tariffs and interest rate.
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